Potato growers in South Australia have reached a price deal with McCain Foods to reflect the volatility of fuel and fertiliser costs.
A levy has been added to this year’s contract between McCain Foods and south east SA potato growers
It will allow for price adjustments depending on fuel and fertiliser costs
Growers say those costs have been highly volatile over the past six months
McCain Negotiating Committee Chair for the South East Potato Growers Association Tim Heysen said they negotiated a reasonable base price rise as well as an additional levy arrangement.
This is the first time that south east SA growers have had a levy in their contract.
The system means the processor will pay a price that reflects changing fuel and fertiliser prices.
The price adjustment is based off any changes to those input costs from 2020 to now.
Mr Heysen said that meant if the price of fuel and fertiliser rose, the payment to growers would too.
“It’s really been the only way to address the volatility that we’re seeing,” he said.
“We’ve seen fertiliser prices triple, we all know what fuel’s been doing.”
He said the payment would be in addition to the base price growers were paid.
“The base price is there permanently and that covers increases that are happening all the time,” he said.
Contracts are negotiated annually between growers and processors.
“When you’re growing on a contract basis, you’re not getting the benefit of the higher prices that some other commodities are getting,” Mr Heysen said.
The agreement comes as growers in Ballarat demand a significant pay rise to reflect rising input costs.
A spokesperson from McCain Foods said it was still in ongoing discussions with growers in Victoria and Tasmania.
Basis for levy
While trying to farm in a global pandemic is a new experience for growers, dealing with rising input costs is not.
Around 15 years ago, farmers experienced a spike in the cost of fertiliser due to a mandate on ethanol requirements in the United States leading to fertiliser shortages.
“It didn’t last very long and it hurt the industry because there wasn’t a mechanism to react to it when it came back down again,” Mr Heysen said.
“That’s what we’re hoping will happen here, that if our costs go up, they’re covered.
“If they go down, well that’s income we won’t receive but similarly we won’t be paying the cost.”
Mr Heysen said it had not been decided whether this levy would be added to future contracts.
“We’d like to think that this time next year, we will have returned to much more normal trading conditions,” he said.
“I think that’s unlikely but if that was the case, then there probably wouldn’t be a need for the levy.”