Farmers getting ‘rough end of the stick’: New pricing model targets sustainable food chain transparency

By Flora Southey contact

- Last updated on GMT

(Image: Getty/Andrii Yalanskyi)
(Image: Getty/Andrii Yalanskyi)

Related tags: Farmers, Sustainability, Netherlands

Methodology for calculating a ‘true’ and ‘fair’ price across the food chain is being developed to help industry transition to a socially inclusive, sustainable food production system.

The Echte en Eerlijke Prijs (True and Fair Price) study, which launched in the Netherlands last week, aims to provide price transparency at every step across the sustainable food chain. The end goal is to create an open-source clear methodology for determining what is true and fair in sustainable food production.

The project is the result of a public-private partnership between sector organisations, banks and research institutes, including the Wageningen Economic Research, Rabobank, the Dutch Potato Organisation, and organic pig farmer association Vereniging Biologische Varkenshouders.

By establishing a ‘true price’, producers will be encouraged to create products as sustainably as possible. Calculating a ‘fair price’ will help to better distribute costs, benefits, and risks among stakeholders across the chain.

At present, the primary producers are getting the ‘rough end of the stick’, as farmers fight to keep costs down, according to Wageningen Economic Research.

In the European Union, production costs can be slightly higher than consumption, Wageningen researcher Willy Baltussen told FoodNavigator. “This keeps the prices low at farm gate.”

“Farmers, on the other hand, are in a rate race to reduce costs,” ​he continued. This can lead to relatively low incomes for farmers, as well as huge variations in income between farmers.

From ‘financially efficient’ to ‘sustainable, fair and affordable’

Ultimately, the project aims to help consumers and industry transition from a ‘financially efficient’ food system to one that champions sustainability, fairness, and social inclusiveness.

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Establishing true and fair pricing can encourage sustainable food practices (Getty/ipopba)

As Wageningen Economic Research points out, “the transition to sustainable production is not free”. ​Indeed, if true and fair pricing leads to the increased consumption and production of sustainable food products, consumers may need to be prepared to pay more, Baltussen told this publication.

However, “the externalities will be lower and societal costs to avoid the impact of climate change will become lower, reducing income tax.” ​Other perks cited include cleaner water, lower health-related expenses, less child labour, fewer pesticides and less emission of CO2/CH4/N to groundwater.

A growing movement

The True and Fair Price study comes as the European Commission and certain Member States look to eliminate unfair trading practices (UTPs) and encourage sustainable practices across the food chain.

In December 2018, the European Parliament, the Council and the Commission agreed on a new set of rules designed to protect EU farmers against practices ‘contrary to good faith and fair dealing’.

The proposal, first announced last April​, lists a number of UTPs, including late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products. As of December, Member States have the power to penalise those that do not comply.

In France, a new bill was also announced to address a perceived imbalance of power in the supply chain. Announced by France’s Minister for Food and Agriculture Stéphane Travert in January 2018, the bill will see producers propose contractual terms, and prices be determined by production and market cost indicators.

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In 2018, France passed a bill to address a perceived imbalance of power in the food supply chain (Getty/agustavop)

At the time, French President Emmanual Macron threatened to make public those brands that “do not change their practices” ​to make sure “the right price [is] paid for farmers”.

Across the Channel, the UK has been working with suppliers and retailers for at least the past six years to ensure business is regulated, fair and lawful. The Groceries Code Adjudicator (GCA), created in 2013, has the power to launch investigations where there is suspicion a retailer has breached the Code, and arbitrates in disputes between the two parties.

Related topics: Policy

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