Producing vegetables for a market (or are vegetables an appropriate enterprise?)
1. Successful horticultural enterprises
Peter Deuter and Jerry Lovatt, Department of Primary Industries and Fisheries, Queensland.
On this page:
Introduction
Horticulture (and vegetables in particular) have often been perceived by people on the outside looking in, as the panacea of many ills:
- Some sugar producers and grain growers of recent years have also looked on horticulture in a similar light.
- For some cotton growers, vegetable production is seen as having the potential to return more dollars per megalitre (ML) of irrigation water used.
- The 'export push' by State and Federal Governments has fuelled much interest in horticultural crops.
- To the retired business person or white collar worker, horticulture has been seen as an ideal way to invest business profits or superannuation to provide an 'interesting' income.
- To the person who is sick of the 'rat race' it is seen as a means of coming to terms with life and earning a much 'easier' living.
- To the hobby farmer it is seen as the ideal way of life. To become 'self sufficient'.
- To the professional person with 'excess' money it is seen as a means of reducing the tax burden and still have the benefits of a high income.
All of these people exist, but very few of them achieve their original goal. This is mainly because this goal was either unrealistic or it was not very well thought through.
Most, if not all failures in horticulture occur because the investor has quite unreal expectations; and these unreal expectations have not been exposed because a thorough investigation was not carried out by or on behalf of the investor.
Successful horticultural enterprises
Successful horticultural enterprises have the following points in common. That is opportunities in horticulture exist only if:
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There is a market for the product.
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An appropriate production environment exists (i.e. soils, climate and irrigation are matched to the requirements of the crop).
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The investor has the expertise required to grow and market the crop (or can employ people who do have it).
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Suitable finance is available to establish and complete the enterprise.
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Production and marketing risks are understood and can be managed.
Production areas
The main vegetable production areas are the Dry Tropics (Bowen - Burdekin areas) and around Bundaberg, with smaller but significant areas grown in the Lockyer and Fassifern Valleys, on the eastern Darling Downs, around Gypmie and Mareeba and on the Granite Belt around Stanthorpe.
The majority of horticultural production is grown by reasonably large growers in districts where production costs are as low as possible and environmental limitations on yield and quality are minimal, for example:
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tomatoes at Bowen and Bundaberg
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potatoes in the Lockyer Valley
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bananas at Tully
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citrus in the Central Burnett.
Producers outside these areas have difficulty in competing with the efficient, usually lower cost production of the main growing areas, except where a specific market niche exists (e.g. summer tomatoes at Stanthorpe).
Markets
Australian domestic market
In general the Australian domestic market is well supplied with horticultural crops. The Australian vegetable industry operates in a very competitive environment. It is not a low cost producer and it is facing many challenges from imported products, especially from countries where labour costs are low.
Consumption of fresh vegetables domestically and overseas is growing, but Australia is losing market share to overseas growers. Imports have risen for the last four years and exports have fallen for the last three years.
The following are some of the facts of vegetable production in Australia:
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for many crops, particularly vegetables, overproduction exists
- prices paid to farmers are mostly influenced by supply and demand
- prices paid to farmers often bear no resemblance to retail prices paid by consumers
- oversupply leads to very low prices
- undersupply, mainly because of a disaster in another production district in Australia, can result in very high prices.
Vegetables are produced to supply different types of domestic markets, the main, high consumption, staple product markets such as potatoes, tomatoes etc., as well as smaller specific market niches and speciality horticultural products.
Specific market niches
| Examples |
lettuce in summer capsicums in spring beans in winter broccoli in summer cauliflower in summer |
grapes in October strawberries in May peaches in October avocados in December |
All of these crop and market combinations require 'out of normal season' production.
Growers who aim to produce at these specific market niches do so by careful planning, and by having a knowledge and understanding of all the risks associated with production and marketing, often based on years of experience. (Each farm and each year is often different, and only experience can come close to making allowances for these differences).
These specific market niches exist because efficient and effective production at these times is limited by the environment (mainly temperature and rainfall patterns). Therefore some districts and often only some farms in those districts are able to produce the crop for that specific time of the year.
For example, highland areas of southern Queensland (Toowoomba range and Stanthorpe) can produce good quality lettuce and broccoli in most summers. Production from other Queensland districts is of lower quality because of high temperature effects and return a much lower price. Yields from these other districts can also be lower and with higher costs (e.g. pest and disease effects).
Speciality horticultural products
A small and sometimes lucrative market exists for those producers who can grow some of the speciality horticultural products and supply to a rigid market specification. Some of these markets are now oversupplied for some of the year, for example:
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'exotic' fruit and vegetables
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herbs (fresh and medicinal)
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organically grown produce
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bush foods.
Many of these products are often sold outside the wholesale market and as a result the size of the market is not well known and the prices paid are not well documented. This market is assumed to be quite small and as a consequence is very vulnerable to dramatic price fluctuations, influenced by both quantity and quality of product supplied.
A high level of expertise is required to grow and maintain supply of the product to these speciality markets.
Export market
The market for vegetables in South East Asia (Malaysia, Singapore, Hong Kong and Japan) is very large despite the considerable production in countries like Taiwan, China and Malaysia. Australia is close to SE Asia, and has a wide variation in climates and a range of production districts capable of supplying product for most of the year. Therefore Australia is well placed to supply a range of vegetables to these countries by sea and air.
Where an export market exists, it can only be successfully supplied at a profit in the long term if the following requirements are met:
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The produce is grown and packed to a market specification. The export market has specific requirements in relation to product size, shape, colour and packaging. The best prices are paid for product which conforms to these specifications. Some markets will not accept product which is significantly outside this specification. Where will this product be sold ? - Can you afford to leave it on farm?
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The products are of consistent quality. In some instances the quality required is higher than that demanded by our domestic market.
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The product is grown in sufficient quantity to sustain the market. Most of the markets are quite large and exporters require reasonable quantities to obtain competitive freight rates and buyer interest in the product. This problem is most easily overcome by growers producing crops and marketing as a coordinated group.
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The product needs to be grown and supplied consistently to be able to stay in the market. The product needs to be available over an extended period of time, e.g. broccoli needs to be supplied consistently for 5 to 8 months of each year. Export markets are not dumping grounds for surplus production and supply commitments must be honoured regardless of domestic prices.
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A market must exist for product which does not meet the export market specification, or returns need to be high enough for this product to be left in the field. What will be the effect on domestic markets if increased supply occurs or product not meeting the export market specification is not sold?
Successful exporters are the ones who have made the commitment to supply the export market regularly and reliably with suitable product. Success is still not guaranteed, as many risks have to be faced and hurdles overcome.
Risks
The risks associated with attempting to grow vegetables are different for each of these markets. These risks are associated with:
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unpredictable weather conditions, e.g. frost, hail, cyclone, drought
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transport, e.g. availability of sea and air freight, temperature management in containers etc.
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marketing, e.g. payment for product supplied, competition from other countries etc.
Conclusion
If you are thinking of diversifying into horticulture because of financial difficulties in other enterprises, the chances of success are further reduced because finance is likely to be limited and a failure or near failure can be catastrophic.
When contemplating a potential horticultural crop, it is most advisable to spend a percentage of the total investment (up to 5% is suggested) on investigating the proposal. Spend this money on travel, sound professional advice and collecting and interpreting information.
Thoroughly investigate any 'schemes' which provide the plants, the markets and the expertise. These types of schemes have a history of failure, especially where above average returns are promised.
Disasters in horticultural production caused by adverse weather conditions, intense pest and disease pressure and low market prices, are possible and have occurred in recent years. An investor in horticulture must have sufficient financial backing to service such disasters.
Spend time and money gaining an understanding of the environmental factors which both limit and promote crop performance. Avoid locations and/or crops where the limitations cannot be managed.
Many failures in horticulture occur because the investor has quite unreal expectations, and these unreal expectations have not been exposed because a thorough investigation was not carried out by or on behalf of the investor.
There is money to be made in horticulture only if crop selection is based on a sensible and thorough investigation of the market and the production potential of the proposed district or site. If this is done properly, then horticultural enterprises can provide a most interesting and rewarding investment.
Further information
- Other DPI&F notes available in the 'Producing Vegetables for Market' series include:
2.The production environment
3.Matching crop requirements with the production environment
4.Sensible use of irrigation resources
5.Temperature requirements and limitations for a range of vegetable crops.
The above Notes and many others are included on the DPI&F's PrimeNotes CD-ROM.
DPI&F information and services
- To access DPI&F's information and services, Queensland residents can contact the DPI&F Business Information Centre on 13 25 23 for the cost of a local call. The Business Information Centre is open 8 am to 6 pm Monday to Friday (excluding public holidays); E-mail callweb@dpi.qld.gov.au. Non-Queensland residents phone (07) 3404 6999.
- Current national information on agricultural chemicals registered for use on all crops is available on the Infopest CD-ROM. Write to DPI&F, GPO Box 46, Brisbane, Qld 4001, E-mail infopest@dpi.qld.gov.au, visit the Infopest web page, or phone (07) 3239 3967 for further information.
Industry links
- Industry links is a page of links to various sites of interest to horticultural growers.
Information contained in this publication is provided as general advice only. For application to specific circumstances, professional advice should be sought. The Department of Primary Industries and Fisheries, Queensland has taken all reasonable steps to ensure the information in this publication is accurate at the time of publication. Readers should ensure that they make appropriate inquiries to determine whether new information is available on the particular subject matter.
Last updated 24 May 2007
