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On your radar > Food prices

Commission tackles food price transparency and fair practices

By Jess Halliday , 29-Oct-2009

The European Commission has laid out a series of steps to improve supply chain relations in the food chain, and has launched a new tool to help ensure price transparency between actors.

The European Commission started an exercise of monitoring food prices two years ago. Prices have been under particular scrutiny since mid 2008, when commodity prices soared and the knock-on effect was seen throughout the throughout the food chain.

In Europe, shoppers noticed some products were notching up higher price tags; in some developing countries, meanwhile, staples became unaffordable for many and food security has been seriously undermined.

But while commodity prices have since sunk back to lower levels, the European Commission points out that the decline “has failed so far to fully translate into lower prices at producer and consumer levels”. It says this holds particularly true for the dairy sector.

The Commission has now set out a series of steps it sees as important to improving commercial relations in the food chain – and ultimately making the whole system more efficient. Its new monitoring tool for European food prices, available online here http://epp.eurostat.ec.europa.eu/portal/page/portal/hicp/data/database , is intended to give greater visibility to how prices are evolving.

Joaquin Almunia, economic and monetary affairs commissioner, said the new tool is an important step towards actors in the food supply chain, consumers and policy makers increasing the transparency of prices.

Contractual strife

In its new communication, the Commission highlights the capacity for contractual tensions between supply chain actors, which stems from differences in bargaining power.

In an earlier report on food prices published last December, the Commission noted a number of ways in which retailers could act unfairly in their dealings with manufacturers. These include cartels, purchasing agreements between competing buyers, resale price maintenance, certification schemes, tying, and single branding.

The Confederation of Food and Drink Industries of the EU (CIAA) said other claims could be added to the list, such as chronically late payments, long payment periods for suppliers, ‘forced’ discounts to meet buyers’ targets, and ‘forced’ contributions to finance mergers and acquisitions.

But it’s not just between retailers and manufacturers that there is scope for aggravation. There is potential for problems at all stages of the supply chain. Agriculture and rural affairs commissioner Mariann Fischer Boel said: “There is too often a disconnection between the price the farmer gets and what the consumer pays in the shops.”

Proposals

The new report sets out three main areas for action, the first of which is the need to promote sustainable and market-based relationships between food chain stakeholders. To this end, it will work closely with member states to root out unfair practices and make actors more aware of the issues; it will also carry on monitoring competition issues with the National Competition Authorities.

In addition to its own food prices monitoring tool, the Commission suggests parallel web-based tools be set up by member states to increase transparency. Measures are also foreseen to help contain volatility and speculation in the agricultural derivatives market.

Finally, there is a need to foster integration in the EU’s internal market to ensure competitiveness, the Commission says.

It plans to review some of the environmental and origin labelling schemes that may impede cross-border trade; and look at territorial supply constrains like local sourcing.

Farmers, too, can put themselves in a stronger bargaining position by forming producer organisation, it says.

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