Bypassing the ‘middlemen’ is still a distant dream

AGRICULTURE Commissioner Phil Hogan recently launched an EU-wide public consultation on how to make the EU food supply chain fairer.

This is the latest in a series of activities co-ordinated by the Commission to explore the sharing of value along the food supply chain and to improve the position of farmers.

So what exactly can the Commission do to improve the plight of farmers strug- gling with a market price close to or below the cost of production?

The percentage of the final retail price of food stuffs that farmers receive has long been hotly debated.

Anecdotal evidence suggests that the growing power of giant retailers and food companies allows them to capture the lion share of profits and squeeze the farmers’ margins.

However, such anecdotes cannot and should not be used to influence policy or law in this domain and instead real evidence-based research is needed, but this is easier said than done.

The European Commission has attempted to analyse in this area by using various data sources to examine the sharing of value along the food supply chain across agriculture, the food processing sector, food wholesale and retail for food products in general.

This showed that the value added by agriculture in the food supply chain dropped from 31pc in 1995 to 24pc in 2005 and 21pc in 2011. Food retail and wholesale combined increased its share from 38pc to 51pc over the same period.

Taken at face value these figures seem stark and point to the diminishing power of farmers. Experts in the area, however, criticised the study for the data and methods used.

Even setting aside issues with the methodology, it must also be acknowledged that the types of food being consumed have changed over this period.

Demand for processed foods has increased and as such you would expect that the value generated by the processing sector would have grown.

Agricultural policy has also been transformed over the period with less support flowing to the farmer in the form of price subsidies and more in the form of direct payments which was not reflected in this analysis but which would change the result.

A more straightforward analysis would be to take a typical product, such as steak, and follow it backwards along the supply chain from the supermarket to the farmer to see what final share of the price per kilogram is delivered to the farmer.

Price data

Researchers in UCC were commissioned by the Department of Agriculture to conduct such an analysis but concluded that for many food products in Ireland, the difficulties in securing price information were “insurmountable”.

The lack of reliable price data for comparable products at different parts to the supply chain from the farmer to the retailer made it impossible to determine where value was being added and captured.

Without such hard evidence it is not possible to prove scientifically the power of the various players and indeed will be difficult for the EU Commission to ensure greater transparency.

One exception in the Irish context is the liquid milk market, which is relatively easy to analyse given the low level of processing, the relatively short supply chain (with liquid milk being mostly produced in Ireland and consumed locally) and the publicly available data on both the retail and farm-gate price of milk.

The National Milk Agency publishes annual retailer and