19/01/2015 - 14:56

When crunch time comes, carrots are tops

19/01/2015 - 14:56


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The state’s carrot sector has undergone a period of major export growth.

The state’s carrot sector has undergone a period of major export growth.

I learned in school that sometimes the most complex problems are solved with most simple approaches; and who could forget the most basic classroom exercise of them all – to compare and contrast.

While it might seem like a typical English question, I’ve learned as a business journalist that it can also be applied to more objective fields where numbers play a more crucial role.

Prompted by the increasing acrimony around the role of the Potato Marketing Corporation, I was led to inquire as to how the local production of these humble tubers compared and contrasted with their most popular nearest cousin in the root vegetable sphere – the carrot.

I was quite surprised at the differences. Logic suggests it’s because one industry is heavily regulated and the other isn’t. Let me explain.

Last year we had a crack at peeling back the surface of potato regulation in this state with a piece that wondered aloud about how this anachronism had outlived so many bigger versions. Perhaps scale has something to do with it; after all Australia’s wool growers managed to lose billions and destroy their industry with regulated hubris, and wheat farmers finally gave up on their export monopoly after international corruption was exposed.

Potato farmers, it appears, are just very good at subtle lobbying; at least until recently, when our questions and (and now those of others) have started to put the heat on this agrarian fossil.

The root vegetable/tuber business is not as transparent as I’d like it to be, but I have pieced together a quite interesting story – one that suggests the unregulated carrot sector has forged ahead with investment while potatoes have stagnated. At least that’s what the numbers tell me, along with a small amount of background knowledge about these two industries.

Let’s start at 2001; a time when it seems publicly available data was richer and more plentiful than it is today.

Back then, according to the Australian Bureau of Statistics, Western Australia produced about 75,500 tonnes of potatoes worth $31 million and 80,300t of carrots worth $43 million. The biggest difference between the sectors was that more than 60 per cent of the carrots, worth a hefty $37 million, were exported while only 8 per cent of potatoes were exported for an unknown value.

Readers with a strong memory of that period might recall that Sumich Group was listed and had big plans to export carrots and various carrot-related products. The group failed financially but was later revived in private hands by food entrepreneur Nick Tana, and the Sumich brand remains a big export player today.

Both potato and carrot production expanded over the next few years; although the period with the best comparable figures (ABS figures for 2004-05) shows that both had comparable sales values at around $35 million. However carrot production was well below the previous few years, suggesting it was a poor season, perhaps.

Since then, though, it would appear that the carrot sector has taken off, driven by exports, while the potato sector has drifted. I say this cautiously because carrot export figures are easy to come by, while domestic market figures are not.

The opposite is the case for potato production.

But there are strong hints that carrots have a robust, if less valuable, domestic market.

For instance, in 2010-11 carrots were WA’s 15th biggest agricultural export at $48 million, compared with potatoes, ranked 30th at $14 million, a number published by the WA Government in 2012.

Carrot production, from what I can gather, has been consistent at that level – almost $50 million for approximately 60 per cent of local production that is exported. Even if that other 40 per cent, or approximately 45,000t, doesn’t carry the same premium, carrots appear to be a bigger industry from the growers’ point of view, and from the state’s – and with growth prospects too.

In 2012-13 the domestic potato crop (that which PMC oversees and reports on) was about 52,000t of ware potatoes (for direct sale to the public) worth $36.4 million (this most recent financial year figures are broadly similar). A further 34,000t worth $23 million was grown for processing and seed. Those figures suggest the potato industry grows only slightly more product than it did a decade ago and exports very little. The WA Department of Agriculture and Food highlights $3.8 million in seed potato exports in 2012-13 without suggesting there were any other overseas sales. That is a tiny part of the 86,000t production that year and compares with more than 81,000t in 2004-05.

Maybe potatoes don’t travel so well? More likely, the cosy arrangement between most growers and the government acts as a disincentive to invest in the kind of production and processing that has made WA the nation’s leading carrot exporter, with more than 90 per cent of the market.

The Economic Regulation Authority certainly thinks the latter. In its report on microeconomic reform it said that the PMC used export surpluses until rule changes in 2006 licensing growers to production tonnage quotas rather than area cut the amount of excess stock to sell overseas.

Another interesting contrast was the large-scale investment in the vertical integration in the carrot sector. Sumich and rival Center West Exports have invested heavily in their brands and plant. I can’t see the same outcome in the potato business, with the exception of the Galati family’s controversial and regulation-flouting Spudshed, which has developed a much wider food business beyond the potato.

Tony Galati may well be using his anti-regulation rhetoric as theatre to promote his brand and business, but what choice does he have? The potato grower clearly wants to invest in developing his business and he is being held back by competitors that prefer to cling to ridiculous laws drawn up at the time of the WWII for reasons that no longer exist.

I hope we can all learn something from this exercise.


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