Australia’s large supermarkets are charging some fruit and vegetable growers hefty fees to receive quicker payments for their produce, heaping financial pressure on farmers already under strain from cashflow problems.
The “rebate charges” can be as high as 4% of a farmer’s invoice, according to agricultural sector representatives, and are levied on growers who might already be selling their produce below cost and need quick payment to stay afloat.
Michael Crisera from Fruit Growers Victoria said many members had little choice other than to agree to the terms set by the major supermarkets.
“They have to pay a rebate depending on how quickly they want to be paid,” Crisera said.
“It’s pretty cheeky, to put it mildly.”
The commercial contracts are not uniform and often depend on the size of the supplier, which affects the payment terms a supplier can negotiate. Charges are imposed if a farmer requires payment faster than their contract terms, which vary widely across the industry.
The charges are mainly levied on the horticultural sector, according to Crisera.
Many suppliers enjoy reasonable payment periods of 14 or 21 days, while others may have to wait up to 120 days, according to the National Farmers’ Federation (NFF).
Australian supermarkets are under scrutiny from multiple inquiries opened amid growing concerns that they are increasing prices by more than necessary. There are concerns too that there is a power imbalance between the big chains and their suppliers.
Coles and Woolworths, which control about two-thirds of the grocery sector, have consistently defended their pricing strategies and their relationships with farmers.
A Coles spokesperson said the payment terms were agreed with each supplier.
“We are committed to paying our suppliers within the agreed terms,” the spokesperson said.
“Where a supplier may want to be paid earlier they can work with the Coles team on mutually agreed terms specific to their needs.”
A Woolworths spokesperson said almost all of the company’s fruit and vegetable suppliers were paid within 14 days of the supermarket receiving an invoice.
“We understand that regular cashflow is critically important for growers to provide them certainty of income to manage their own costs,” the spokesperson said.
The existence of rebate charges feeds into the debate about Australia’s voluntary food and grocery code of conduct, with many in the agricultural sector calling for it to be mandatory. There’s also a push to increase transparency on produce pricing and provide insight into the negotiation process between major chains and suppliers.
The former Labor minister Craig Emerson is leading a review of the code.
The supermarket sector is also subject to state and federal parliamentary inquiries and a 12-month probe by the competition regulator.
Jolyon Burnett, the horticulture chair at the NFF, said charging small businesses a rebate of up to 4% for an earlier payment is a questionable practice.
“We encourage supermarkets to pay their fresh produce suppliers as soon as possible, given cashflow is incredibly important for these small businesses during the busy harvest period,” Burnett said.
He said the reasonableness of the rebates should be investigated by the parliamentary and regulatory inquiries.
