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BackA well functioning food supply chain is of paramount importance to consumers, the food industry and the food trade. High food prices are a particular burden for low-income households. Although, compared to the peak prices for raw agricultural products prior to the crisis, prices have come down, the effect for consumers was either delayed or did not benefit them at all. In a Communication this week, the European Commission has introduced proposals for improving the functioning of the food supply chain.
At an average of 16 %, the amount spent on food represents one of the largest budget items for private EU households. Expensive food puts particular pressure on low-income households, as these spend an even higher proportion of their income on food. The food supply chain combines three large sectors - agriculture, food production and the food trade - which together employ 7 % of the EU workforce. Since 1995, however, competitiveness and economic growth along the food supply chain have been trailing behind the overall EU economy.
Food prices remain high
Prior to the start of the crisis, the EU citizens suffered from high inflation, which was among others triggered by high agricultural prices, which in turn forced food prices upwards. The prices for raw agricultural products started to decline in the second quarter 2008. These lower prices had an impact on producer prices during the last quarter of 2008. The food prices, however, only have come down very recently.
A better functioning food supply chain is therefore of vital importance - not only for the consumers but also for ensuring a sustainable distribution of value added along the chain, thus contributing towards raising its overall competitiveness.
Insight into unfair contractual practices
One of the characteristics of the food supply chain is the fact that it combines a wide range of different actors: agriculture, food production, wholesalers and retailers - large-scale as well as small to medium-sized enterprises - with conflicting interests and with more or less bargaining power. Contractual imbalances resulting from this unequal bargaining power have a negative impact on the food supply chain. The Commission plans to launch awareness campaigns and to prepare sets of standard contracts to inform about unfair contractual practices in order to strengthen stakeholders with less bargaining power and to make them more aware of their rights.
Cooperation with national competition authorities
The Commission has also cooperated with national competition authorities and found a significant number of serious infringements against the Competition Law such as the formation of cartels or price-fixing. It has been determined that other common practices such as own brands but also procurement alliances have to be evaluated for individual local markets, as it is necessary to balance the increase of efficiency on the one hand against unfair competition on the other.
Increase of pricing transparency
Eurostat has developed a “food price monitoring tool” prototype. This tool provides a - currently still very incomplete - overview of the price development at each stage of the food supply chain from agricultural prices, via production prices to food prices and shall increase the food price transparency.
The Commission also proposes to set up websites in the Member States, where consumers are able to compare retail prices enabling them to select their most cost effective local supermarket.
Control also with respect to speculation
The speculation on the commodities markets prior to the crisis contributed significantly to the explosion of raw material prices. Within the scope of the overall concept for derivatives, the Commission also intends to present proposals for improving both supervision and general transparency of the agricultural commodity derivatives markets.
In the current situation, it can be expected that the prices of raw agricultural products will once again rapidly increase after the recession, which would not only result in a disproportionate increase of food prices for consumers but also slow down the emerging recovery of the European economy. That is why swift action to remove the existing asymmetries in the food supply chain is of utmost importance!
Further information:
Communication of the European Commission
Eurostat: Food Monitoring Tool
Food prices remain high
Prior to the start of the crisis, the EU citizens suffered from high inflation, which was among others triggered by high agricultural prices, which in turn forced food prices upwards. The prices for raw agricultural products started to decline in the second quarter 2008. These lower prices had an impact on producer prices during the last quarter of 2008. The food prices, however, only have come down very recently.
A better functioning food supply chain is therefore of vital importance - not only for the consumers but also for ensuring a sustainable distribution of value added along the chain, thus contributing towards raising its overall competitiveness.
Insight into unfair contractual practices
One of the characteristics of the food supply chain is the fact that it combines a wide range of different actors: agriculture, food production, wholesalers and retailers - large-scale as well as small to medium-sized enterprises - with conflicting interests and with more or less bargaining power. Contractual imbalances resulting from this unequal bargaining power have a negative impact on the food supply chain. The Commission plans to launch awareness campaigns and to prepare sets of standard contracts to inform about unfair contractual practices in order to strengthen stakeholders with less bargaining power and to make them more aware of their rights.
Cooperation with national competition authorities
The Commission has also cooperated with national competition authorities and found a significant number of serious infringements against the Competition Law such as the formation of cartels or price-fixing. It has been determined that other common practices such as own brands but also procurement alliances have to be evaluated for individual local markets, as it is necessary to balance the increase of efficiency on the one hand against unfair competition on the other.
Increase of pricing transparency
Eurostat has developed a “food price monitoring tool” prototype. This tool provides a - currently still very incomplete - overview of the price development at each stage of the food supply chain from agricultural prices, via production prices to food prices and shall increase the food price transparency.
The Commission also proposes to set up websites in the Member States, where consumers are able to compare retail prices enabling them to select their most cost effective local supermarket.
Control also with respect to speculation
The speculation on the commodities markets prior to the crisis contributed significantly to the explosion of raw material prices. Within the scope of the overall concept for derivatives, the Commission also intends to present proposals for improving both supervision and general transparency of the agricultural commodity derivatives markets.
In the current situation, it can be expected that the prices of raw agricultural products will once again rapidly increase after the recession, which would not only result in a disproportionate increase of food prices for consumers but also slow down the emerging recovery of the European economy. That is why swift action to remove the existing asymmetries in the food supply chain is of utmost importance!
Further information:
Communication of the European Commission
Eurostat: Food Monitoring Tool