Below Cost SellingHorticulture

Ban on Below-Cost Selling Needed to Safeguard Future of Horticulture Sector

Launching a report on the horticulture sector – Retail Price Compression Threatens the Viability of Irish Horticulture – by economist Jim Power this morning, IFA President Tim Cullinan said the Government should move quickly to restore the ban on below-cost selling of food.

“The price compression at retail level has forced growers out of business. The most recent National Field Vegetable Census, which is now out of date, showed that the number of field vegetable growers fell from 377 in 1999 to 165 in 2014, a reduction of nearly 60%. It is clear from anecdotal evidence that this trend has continued in recent years,” he said.

Tim Cullinan said the inputs crisis at farm level has become far more severe as a result of the war in Ukraine.  “We’re on the farm of Matt and John Foley, who grow tomatoes. Their gas bill is running far higher than this time last year. Like all growers, they can only recover their costs from the price they are paid,” he said,

The analysis contained in the report shows very clearly the intense pressure on primary producers of food in general, but horticultural produce in particular. Retail price compression has forced many producers out of business and many more will be forced out of business if the imbalance in pricing power in the supply chain is not addressed.

The price compression is due to significant competition from imports, and the growing concentration and inordinate market power of a small number of very powerful retailers.

Jim Power said since 2011, CSO data shows that the average retail price of food fell by 9% in real terms. Over the same period, overall consumer prices increased by 13%. Over the past 12 months, food prices increased by just 1.6%, while aggregate agricultural input prices increased by 9.2%.

He said the growing market share of the two discounters – Aldi and Lidl – has fundamentally impacted on the price that primary producers receive for their produce. Many farmers have been forced out of business and many more will follow, unless strong intervention in the market occurs.

The EU directive on Unfair Trading Practices (UTPs) was adopted in April 2019 and was transposed into Irish law in April 2021. It is now essential to set up a National Food Ombudsman with strong powers that will guarantee farmers a fair share of the retail price.

There is a strong need for a significant rebalancing of power in the food supply chain, to deliver a price for primary producers that would ensure their future viability. The powers given to the National Food Ombudsman should include:

  • Full powers of investigation of margins in the various components of the food supply chain. A ‘retail charter’ should be signed up to by all retailers that would guarantee primary producers a certain margin above the cost of production. If retailers were not willing to sign up to such a charter, then it should become part of the regulatory environment.
  • The tendering process must be changed in order to give certainty to primary producers and enable them to deal with the impact of unpredictable seasonality on food production.
  • Retailers should not be allowed put their supply up for tender every year, as this causes unsustainable uncertainty for primary producers. The regulator should have the power to examine tenders to ensure that primary producers are paid a fair price.
  • It must have regulatory oversight on labelling to ensure that mislabelling that confuses the provenance of product is not allowed happen. –
  • A ban on below-cost selling must be introduced. It’s rarely in the best interests of the market to have a considerable level of regulatory intervention, but if market failure occurs, then it is necessary.

“The importance and potential of horticulture is recognised in official policy strategy, but if proper supports are not given to the sector, then the plans will not materialise and a considerable opportunity will be lost for rural Ireland,” he said. Please find full report on horticulture sector here.

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