Input costs and trends

Despite some growth in retail sales dollar value, Australian vegetable growers remain under extreme cost pressures, with recent data also revealing a significant drop in farmgate returns.

Last month AUSVEG released its latest Vegetable Industry Sentiment Survey results, where two thirds of growers indicated they would stop growing vegetables if the right exit strategy arose.

Half of the growers surveyed said they were financially worse off than a year ago, and 40 percent said they expected to be even worse off next year. The relentless margin squeeze created by the rising cost of production and challenges securing viable returns is a leading cause.

As growers continue grappling with major cost challenges, the most recent NielsenIQ figures, show total vegetable retail sales value rose 7.3 percent in the year to the end of January 2025, or $457m in dollar terms, against a 0.6 percent drop in volume. Retail prices were 8.1 percent higher than the year before on a month-by-month basis.

As vegetable growers know, higher retail prices do not necessarily equate to higher returns for vegetable growing businesses.

The recently released Horticulture Statistics Handbook affirmed the major cost pressures affecting vegetable growers, revealing a $140 million decrease in the overall farmgate value of vegetables produced in Australia during 2023-24, despite an increase in production volume. That translated to an 8 percent drop in returns to growers for 2023-24.

ABARES is forecasting the vegetable industry’s farmgate value will rebound to $5.88 billion in 2024-25 – just over 2022-23 levels in dollar terms. However, in real terms after CPI this equates to a 6 percent or $355 million decrease compared to 2022-23.

While ABARES has forecast dollar value increases in vegetable industry production for successive years until 2029-30, it does not predict farmgate value will return to 2022-23 levels in real terms within that timeframe.

AUSVEG has continued to publicly advocate on this issue, featuring in recent high profile media, emphasising that the cost-of-production crisis and poor returns are continuing to threaten vegetable grower viability and Australia’s future supply of fresh vegetable produce.

Fertiliser

Strong demand for nitrogen fertiliser has pushed up prices globally, particularly from India, as have rising natural gas prices, which have risen on the back of cold weather in the Northern Hemisphere.

The high price of phosphorous fertiliser driven by supply limitations has limited purchases, meanwhile. IFPRI predicts exports from China will remain limited through to at least the end of the first quarter, meaning no significant changes to global phosphate markets in the next few months.

Seasonal demand from Australia, Ethiopia and elsewhere, along with potential changes in trade policies, will be the most influential factors to watch on fertiliser pricing in coming months.

Global fertiliser prices (FOB) Sept 2024 to Jan 2025 (USD)
Source: International Food Policy Research Institute (IFPRI)

Natural gas prices (FOB) Sept 2024 to Jan 2025 ($/MMBtu)
Source: International Food Policy Research Institute (IFPRI)

Diesel

Diesel prices have eased slightly since the start of the year, and this trend looks set to continue.

Singapore, whose massive refineries and fuel trade essentially sets the price of diesel on the Australian market, hit a two-year high of diesel imports in February at 6.7m barrels, but diesel exports were at a one-year low of 3.9m barrels, according to Reuters.

Large volumes have been redirected into Singapore from South Korea, Taiwan and India due to low demand from traditional markets in Vietnam and the Philippines. February diesel imports in both countries were at three month lows, the Reuters report said.

The graph below shows Australian wholesale diesel prices (National Diesel TGP) against the Singapore wholesale price (Gasoil).

Australia imports almost 70 percent of diesel, predominantly from Asia, and Gasoil sets the price benchmark for Australia. A prediction of Australian diesel prices can be found by following the Singapore Gasoil price; Australian pricing lags 1-2 weeks behind. You can follow the Australian Institute of Petroleum’s diesel price reports here.

Australian wholesale diesel price (TGP) vs Singapore diesel price (Gasoil) Feb 2023 to Feb 2025
Source: Australian Institute of Petroleum

Energy

After a significant spike in November driven by hot weather, high demand and tight supply, the wholesale price on the National Energy Market (NEM), which supplies power to the east coast, has come back down to more reasonable levels.

A contributing factor has been the increasing generation capacity of renewables. This summer saw solar output records continuously broken, hitting a new maximum instantaneous solar record of 7.643GW for the NEM on 27 February 2025. That was 14.6 percent higher than the record set last summer.

In the last quarter of 2024, renewables contributed a record 46 percent of the electricity in the NEM, and hit daily records of 75 percent on the NEM on 6 November 2024, and 85 percent in Western Australia on 17 November 2024.

An additional 7.5GW of renewable generation came online in 2024 – another record – largely made up of wind generation and rooftop solar.

But after a year with high wholesale prices, the Australian Energy Regulator has just released a draft decision to increase price caps for customers on electricity companies’ default offers in most part of the country, starting from 1 July. It said prices would increase 2.5 and 8.9 per cent for customers in NSW, South East Queensland and South Australia. There will also be a small increase from the Essential Services Commission for customers in Victoria.

National Energy Market Volume Weighted Price ($/MWh)
Source: Open Electricity

Retail market data

CPI

The all-group Consumer Price Index (CPI) was at 2.5 percent in January, a level the RBA appears to be reasonably confident won’t jump back up given the recent reduction in interest rates.

Fruit and vegetable CPI is still tracking significantly higher than total CPI, however, landing at 7 percent in January. That gives fruit and vegetables the highest CPI of all the ABS’s food and non-alcoholic beverage categories, beating out meat at 4.7 percent

The January fruit and vegetable figure was a reversal of a steady decline seen in the fruit and vegetable CPI since August.

The graph below shows the Australian Bureau of Statistics (ABS) monthly CPI indicator for fruit and vegetables, which represents each month’s percentage change on the same month the year before.

The significant negative CPI for vegetables and fruits in the second half of 2023 reflects a falling price due to the high supply volumes available compared to the shorter market in 2022.

Monthly CPI Indicator – fruit & veg vs all groups
2023-2025
Source: ABS

Retail sales

The charts below show NielsenIQ Homescan data for potatoes, onions, carrots, lettuce, broccoli and celery, provided through Hort Innovation’s levy-funded Consumer purchase and retail data (MT21004) program.

The data is presented in four-week periods, with the below period ending on 26 January 2025.

Average vegetable retail prices over the past year have been consistently higher than the same period a year earlier – an average of 8.1 percent higher over the past 12 months, a growth of $0.42 per kg. While that has been accompanied by a lower sales volume, for total vegetables it was only a drop of 0.6 percent in the 12 months to 26 January 2025.

Over that period, total retail sales value rose by 7.3 percent, according to the NielsenIQ data.

All the major vegetable categories shown below increased in retail sales value. Of these, broccoli led the way with value growth of 17.6 percent, despite a drop in volume of 7.4 percent.

Carrot value grew 12.4 percent, with volume growth of 1.4 percent. Lettuce value grew 11.1 percent with a 3.4 percent growth in volume. Tomatoes grew 6.6 percent in value, while volume dropped 1.3 percent. Onion value grew 4.2 percent with a volume growth of 1.6 percent.

Potatoes, the largest vegetable category by volume, grew 2.6 percent in total value, but volume grew by only 0.3 percent. Last but not least, celery value grew 2.4 percent, but volume dropped 0.9 percent.