The figures on price disparity are in fact quite public. We also
know a great deal about final profit margins etc. Woolies
work on around 4%, Coles on around 3%, its commonly discussed in
the financial press. On some lines they work higher, others lower.
Perishable goods, where alot of stuff is thrown out, usually has
higher margins.

There was an interesting article about wine exports in the Weekend
Australian. More and more of our wine is being exported in bulk
22'000 litre bulk container tanks, for 50c-1$ a litre. By the
time they bottle it, label it, pay tax, distribute it, it'll cost
consumers overseas about 7.50 a litre.

Fact is we have built these expensive supply chains, where everything
along the line and everyone involved, costs money. Wholesalers and
other middlemen, rents, insurances, freight, wages, various
Govt taxes, rules to be complied with, they all cost money.

Farmers are right on the bottom of this chain and are basically
price takers. So by the time everyone else has taken their share,
there is often not much left. Even if farmers gave away their
produce for nothing, things like meat would still be expensive.

A loaf of bread contains a few cents worth of wheat. Milk is worth
maybe 30c to the grower. Lamb 3$ a kg if he is lucky, etc. etc.
Everyone simply passes their costs on, in those supply chains,
except for farmers, who can't. Thats why owning bank shares
or owning shares in Woolies, is far more profitable then farming :)

Yabby,
Yup, I am a hobby farmer, as I don't depend on farming for a living
anymore. I got wise, owning shares in other industries is far more
profitable then farming :)

Perhaps you were not doing it well.

Rojo, hehe good point! On the other hand it also pays
to stand back and look at the figures.

Woolies and say Westpac both traded for around 3$ a share
in the early 90s. The Woolies dividend was 12c a year fully
franked. Today the share price is around 23.50, with a
60c ff dividend. Westpac has gone from 3$ to 24$, with
a 1.20 dividend, fully franked.

3$ invested in farmland in this district in the early 90s
would now be worth 4.50. This last season was a bit of
a write off for most, the season before that was a good
one. Last I saw, returns from farming averaged around
8%. 1% was from farming the land, 7% from increase in
land prices.

Those who charged in and bought more and more land,
now find themselves stressed out from more and more
work and little labour to do it with. Many farm kids
don't want the stress their parents had and are going
mining and other careers.

So those who sat back, saved their pennies and bought
a few Westpac and Woolies shares, have turned out to
be the smart ones :)

So I'd say what will happen is that eventually the
super funds with their bulging wallets will land
up owning alot of farmland one day.

You made a useful point Yabby, probably without realizing it.

>>...final profit margins etc. Woolies work on around 4%, Coles on around 3%, its commonly discussed in the financial press. On some lines they work higher, others lower. Perishable goods, where a lot of stuff is thrown out, usually has higher margins.<<

Wastage of course accounts for some of the price disparity between the "farmer's gate" and the supermarket checkout. If you buy a dozen pallets of strawberries and only half of them make it to the checkout, you have effectively doubled the wholesale purchase price.

And I have to take issue with the glibness of:

>>Fact is we have built these expensive supply chains, where everything along the line and everyone involved, costs money. Wholesalers and other middlemen, rents, insurances, freight, wages, various Govt taxes, rules to be complied with, they all cost money.<<

Leaving aside the tax aspect, every aspect of a supermarket's supply chain is optimized to the nth degree. Far from being "expensive", they represent the cheapest way known today to shift product from where it is grown to where it is sold to the consumer. Tomorrow, it will be optimized further, and even more the day after that.

No-one, least of all a major retailer, loads a single cent into the supply chain that isn't absolutely 100% necessary.

Businesses only survive by paying for only those resources that are absolutely necessary in order to generate revenue and profit.

Only government departments pay for stuff they don't need.

Hi Mungo, I guess our opinions vary greatly but I'll give you my take on some stuff anyway.

"If our local farmers are provided with a level playing field to compete with O/S farmers then I would perhaps have less problem." - Me too

"Yes I would have major issues with fast food outlets" - While I don't think it is good(for their own health) that people stuff themselves silly with unhealthy food, I think that the government can't play nanny to everything that people do. The government can't go around stopping people from sitting at home watching TV all day, and it can't go around stopping people from doing things that are 'bad for them', example going out and buying a new TV that they can't really afford. To be the fairest we possibly can, we have to allow people to do what they want.

"You have a bent view of profit generation" - not at all, I have a rational one :P Earning money alone is not a bad thing to do. In fact, it reflects how well you serve your community because that's how highly they prize your services. It's how you use your money that matters. "it is to everyone's self-interest to maximize his monetary income on the market. But this maximum income can then be used for "selfish" or for "altruistic" ends." - quoted from Ten Ethical Objections to the Market Economy http://www.mises.org/story/1469 - It's quite a good read I'd recommend it to anyone with queries about 'those evil capitalists'.

Alright then, I concede that integrity is a consistent set of values, but I don't feel that businesses/consumers should be made to pay any sort of 'living wage' or some arbitrarily set notion of "enough money" to live on. It is not a value to 'pay fairly' and it's impossible to set a 'fair' wage/price for anything. All we have is the price that demand/supply gives us. After all, if you don't like an exchange that is offered to you, you DO have the option of refusing.

Yabby, I was being a little cheeky, sorry. Land values in my area have trebled since 1990, and water values 5 times. Most would expect a 5-8% return on capital. Drought years excepted, made up for in "bumper" years.
But you are correct in saying these assets still aren't keeping up with some share prices. So far. The world has gone through an agricultural revolution since WWII and more so since the sixties. This led to oversupply and depressed prices. Conversion of feedstocks to energy seems to be changing some of the demand dynamics. Hold on for the ride, ag has some catching up to do.