Too little too late to reform inequalities in grocery sector
But inequalities which have built up over decades won’t be easily solved.
In the EU, they are combined with market trends which have resulted in record beef prices and near-record pork prices throughout most of 2012. As a result, meat bills are inevitably going to be very high for consumers.
Here, Jobs, Enterprise and Innovation Minister Richard Bruton plans to merge the National Consumer Agency and the Competition Authority, which will allow for the introduction of a statutory code of practice in the grocery sector. The necessary legislation is promised before the end of the year.
The food and drink industry has welcomed the move, saying a code of practice is vital for the Irish agri-food and grocery businesses, noting similar moves in Spain, Italy and the UK.
The food and drink industry sees this as a clear acknowledgement that over-accumulation of power by one group in the supply chain — retail — can have a negative impact on others.
However, in the depths of an EU-wide recession seems the wrong time to try to correct any abuses which have built up.
Here is Ireland, the average amount spent on grocery products has fallen to its lowest level in seven years — hardly the best time to look for reform, and for a better deal for both suppliers and consumers.
The damage has been done, and certainly won’t be solved overnight.
Industry analysts believe inability to fully pass on rising pork and beef prices to the retail sector is the root cause which has left EU meat industry profit margins under pressure in recent years.
That pressure fed down to farmers. For example, pig farmers were forced by financial pressures to reduce the EU sow herd by 2.5 million head between 2006 and 2011.
A livestock census last May showed the EU sow herd had declined by an extra 3.9%.
A further 2% decline in pork production is predicted in 2014.
Due to continuing lower profits, many smaller producers of piglets are expected to cease production. Instead of helping the farmers get a better share of the retail price, the EU concentrated on animal welfare, and will enforce a sow stall ban next January. That will reduce production further. Very high feed costs due to the US drought will also reduce production.
Already, shortage has driven EU pigmeat prices to near record high levels for the 21st century, averaging almost €1.90 per kg for most of 2012.
But the supply of pigs will remain tight (both in the EU and globally) until at least 2013, say analysts at Rabobank — so consumers will have to pay more, unless retailers absorb losses while paying back enough to the pig industry to keep it above water.
The pig industry gets little help from the EU.
In contrast, a lot of subsidisation goes to the beef industry, but that is equally depressed, and supply will remain very tight into at least 2014. Again, this shortage can be traced back to inability to pass back better prices from the retail sector.
That has happened worldwide, so there is nowhere to turn to for cheap supplies of beef (or pork).
For example, in the home of beef, the US cattle herd is at a 40-year low.
EU beef production is heading for its lowest output since the 1960s.
Cattle farmers get income supplement from the EU, and they can at least survive economically while reducing their loss-making farm work (unlike pig farmers).
The EU suckler cow herd was down 3.3% in the summer livestock census — because farmers are still not getting enough for cattle to compensate them for ever rising production costs, so they cut numbers and fall back on their single farm payments from the EU.
The European Commission expects poultry to be the only meat where production will increase, in the short term.
However, that increase won’t be enough to keep meat prices down, because of the high feed costs, due to the US drought.
Even in 2011, before feed prices started rising, the Northern Ireland-based chicken processor, Moy Park, saw profits fall due to spending £70m extra on raw materials, mostly grain for chicken-feed.
