Stephen Cadogan: Hard to get food industry fairness in an unequal battle

Farmers won’t hold their breath waiting for a better share of what EU consumers spend on food, even if European Commissioner for Agriculture and Rural Development Phil Hogan has claimed progress on this issue, in the form of the Slovak EU Presidency securing unanimous Council of Agriculture Ministers conclusions on strengthening the position of farmers, with Ministers also signing up to greater transparency on margins and prices, and agreeing clearer ways to achieve farmer co-operation.

There’s no shortage of high-level support for farmers on this issue, with a European Parliament vote by an overwhelming majority of 600 to 38 in June, calling for EU legislative action to tackle unfair trading practices.

Mr Hogan says farmers are being continuously squeezed by the clear imbalance of power between them, retailers and other links of the food supply chain.

He says the food production equation in Europe has been out of synch for some time, not allowing farmers a fair price for their work or a decent living.

He is doing farmers a service with his high-profile emphasis on unfair trading practices between the farm gate and the consumer.

But what about trading practices between the farm gate and the supplier of farm inputs? Are these above-board in the EU? What share of the price the farmer gets is the supplier of farm inputs entitled to get?

Figures for arable farming in the US indicate that suppliers of farm inputs are queuing up to grab what the farmer gets for his crops.

The figures from Rabobank, the Dutch-headquartered leading global agri-bank, are that the seed, agrochemical, and fertiliser industries collect 40-45% of crop value in US row crop agriculture, with equipment suppliers getting 10-15%.

So that inadequate share of the consumer’s spend on food that finds its way back to farmers in the EU is probably halved again, before it goes into the farmer’s pocket, if suppliers of farm inputs are as successful in the EU as they are in the US.

It’s an unequal battle, with farmers dwarfed by giant corporations both on the farm inputs side and the consumer food side.

On the farm inputs side, it is becoming even more unequal with, for example, four major mergers in the US farm inputs sector over the past two years, in deals representing more than $200bn, as input manufacturers reposition themselves to compete in an environment of lower farmer profit margins, and more efficient use of inputs, after a third consecutive year of economic farming stress due to record grain production and rising stocks, according to Rabobank.

The bank also reports venture capital investment of USD 4.6bn in US food and agricultural technology companies in 2015, almost double the amount of 2014, and ten times more than spent in 2010, 2011, and 2012.

This investment is likely to transform US agriculture, with a lot of it going into digitalising agriculture, the least digitised industry, and therefore said to be ripe for disruption, the business term for innovation that creates a new market and value network, by disrupting the existing market and value network, displacing established market leading firms, products and alliances.

Theoretically, this is all about improving farm productivity, so farmers should make gains.

But one cannot be blamed for picturing giant corporations of farm input manufacturers and retailers and food processors quarreling over how to divide up the dollars or euros farmers get back from the consumer spend.

Getting back enough to thrive, or even to survive, depends on a fair balance of power — which we are told does not exist in the EU, at least between farmers and consumers. There’s little reason to think things are fairer on the farm input side, other than it’s a market that depends on farming surviving at its current scale or better.

We wish Phil Hogan good luck in working towards that fair balance of power.


Lifestyle

OUR fascination with interiors inspiration (in print, online and of course in the likes of social media sites like Pinterest and Instagram) is not going anywhere any time soon.Clutter is a symptom of the housing crisis

All your gardening news.Gardening Notes: Your guide to what's on

Get ready for Stir-Up Sunday with this classic recipe.How to make Bake Off finalist Steph’s Great Grandma’s Christmas fruitcake

I’ve written about Puglia, Sicily, and even Calabria frequently but much less about Basilicata and Campania, both small wine regions but not to be dismissed.Wine with Leslie Williams: The white grapes of Southern Italy

More From The Irish Examiner