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Mango farmers' margins squeezed as crude oil hits seven-year high

One mango producer is changing the management of his orchard to reduce costs. (ABC Pilbara: Michelle Stanley)

The price of crude oil has hit a seven-year high this week, leaving consumers and primary producers significantly out of pocket at the pump. 

Over the past few decades, mango growers such as Carnarvon's Eddie Smith have seen stagnant pricing for their produce while input costs are continuing to rise.

"A really premium class, large R2E2 mango was worth $5 16 years ago — it's still worth $5," Mr Smith said.

"And yet all our input costs, our fertilisers, our fuels, everything has gone up significantly, extremely.

"I think previously it was probably a 5 or 6 per cent [increase] every year, but this time it's a significant jump.

"We're struggling. We don't have that expendable cash at the end that we used to have."

Carnarvon mango grower, Eddie Smith, says mango prices have barely risen for growers in the past 16 years. (ABC News: Evelyn Manfield)

Cold winter drives prices: economist

Demand for crude oil had increased faster than expected in the aftermath of the COVID-19 pandemic, according to Curtin University energy economist Roberto F Aguilera, which, alongside reduced supply and geopolitical tensions, was a factor in the seven-year high price.

Dr Aguilera said the northern hemisphere winter had also increased crude oil demand, as a result of natural gas charting "spectacular highs" over the past six months.

"Crude oil is not usually used for electricity generation and for heating but currently there is some of that going on because the usual source for those markets, natural gas, is experiencing very high prices," he said.

Petrol and diesel prices have also risen, alongside the jump in crude oil. (ABC Pilbara: Michelle Stanley)

But Dr Aguilera believed the oil price was perceived to be more significant than in reality because of recent low prices. 

In some positive news for consumers, Dr Aguilera did not believe the oil price would go above US$100 per barrel and would not remain high for long.

"In my view, we may have seen the high for crude prices already … the demand growth we've seen recently is not sustainable," he said.

"After the winter subsides in the north, demand growth should level off and then importantly on the supply side there are huge amounts of production expected in 2022 from all the important producing regions.

"So I think that an oversupplied market and lower prices are coming in 2022, and it'll persist through 2022 even 2023."

Eddie Smith says R2E2 mango prices have not increased in 16 years while operating costs have. (ABC Rural: Melanie Groves)

'Happy height' solution for orchard

In the meantime, at Calypso Plantations, Eddie Smith said he had been trialling ways to reduce diesel consumption in an effort to bring down costs.

"One of the things you can see in the orchard is we're reducing the height of our trees significantly," he said.

"What I'm calling 'the happy height'. So we'll phase out the use of cherry pickers, so that's a significant cost saving there.

In addition to reducing diesel consumption, Mr Smith said he would also focus on quality over quantity. 

"What we intend to do is reduce the volume but try and increase the quality, so that we're producing more premium fruit than the other," he said.

"So we'll pick less fruit — less harvest costs, and get a better return on what we do send." 

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