Clamping down on processors ‘gobbling up margins’

Tackling unfair trading practices and giving farmers a better opportunity to get more out of the food chain was highlighted as a priority for the EU by European Commissioner for Agriculture and Rural Development Phil Hogan.

Speaking to host Claire McCormack on the latest episode of AgriLand’s FarmLand, the commissioner outlined his thoughts on the matter.

He noted practices in the processing and retail industries which need to be clamped down on.

“We want to give more share of the transactions in the food chain,” he explained.

We want to give a better opportunity to the farmers to be able to get a better return from those transactions rather than processors and retailers gobbling up all the particular margin of profitability.

“So there is a lot of unfair trading practices that go on in marketing, in food waste not being paid for by retail chains – we have nine specific areas identified, but of course we can build on this in the discussions that are happening at the moment between now and the end of January to try and make this proposal better.

“But, this is the first time the European Commission – and I’m very proud of this achievement as Commissioner for Agriculture that I’m able to put forward a proposal in legislation to help improve the position of the farmer in the food chain.

Also Read: EU Commission’s plan to outlaw unfair trade practices unveiled

Back in April, the EU Commission’s white paper highlighted that smaller operators in the food supply chain – including farmers – are vulnerable to unfair trading practices employed by partners in the chain where they often lack bargaining power and alternatives to get their products to consumers.

The unfair trading practices to be banned include:
  • Late payments for perishable food products;
  • Last-minute order cancellations;
  • Unilateral or retroactive changes to contracts;
  • Forcing the supplier to pay for wasted products.

The commissioner said that Europe is making “substantial progress” on unfair practices, and expects to have a conclusion of the legislation between the parliament and the council by the end of January 2019, coming into effect on January 1, 2021.

It’s a directive so it’s up to every member state whether they wish to implement it or not – but this is banning unfair trading practices; I presume that every member state will wish to agree with us that this is necessary to do.

“Already we have agreement on the general approach from the council of ministers and the European Parliament are quite enthusiastic about making quick progress on this matter with a view to finalise early in 2019,” the commissioner asserted.

Fodder situation

On the more immediate concern of the EU-wide fodder situation, and the commission’s response to this, Commissioner Hogan said: “What Minister Creed and I have tried to do over the last couple of weeks is to ensure, as far as possible, that we can have enough fodder for farmers next February or March at the end of the winter season.

“We’ve relaxed a lot of the environment rules in order to allow more product to be able to be grazed as well as produced for fodder and we brought forward the advanced payments to 70% rather than 50% in October of this year.

“So hopefully the measures – between what the minister has announced and what I as European Commissioner have announced – will be able to mean that farmers’ cash flow will improve and that we will have more product cut to alleviate a potential animal welfare problem next February and March.

Farmers are worried but I hope these measures will help to show them that we are making every effort to ensure that their animals will have the amount of feed and fodder that they need next spring.

“The first thing farmers want to know is if they will be able to avail of financial resources or some assistance like we are in relaxing the environmental rules when times are difficult. And, that there is a buffer there and risk management tools available in the Common Agricultural Policy to help them at times of risk, whether that is a natural disaster, or whether it is flooding, or whether it is drought.

Hogan noted that the commission is looking in the post-2020 policy to make sure there are sufficient risk management tools and crisis reserve measures in place to be able to help farmers in such situations.

Brexit

Turning to the issue of Brexit, Commissioner Hogan outlined his thoughts on the topic.

“I thought that there was a lot of interesting proposals made by Prime Minister May in her Chequers whitepaper – especially in relation to agriculture and the trading of goods, including agriculture.

“And if we can build on those proposals it means that we will have the type of frictionless trade agreement on agriculture that we are all looking from Northern Ireland to southern Ireland and visa versa or from the island of Ireland to the United Kingdom.

The commissioner said that the negotiations will be decided in two parts in the coming months and years.

He said that the first part would be determined in October or November to establish what the final outcome would be on customs, checks of goods and where they are going to be checked, so that a “soft Brexit” and frictionless trading arrangement can be arranged.

“Then the second part will of course be the free trade agreement which will take a couple of years between the UK and the European Union and, if we get a duty-free, tariff-free agreement for example, well then we have resolved an awful lot of problems in relation to the trading of goods – like agricultural goods between the UK and Ireland.

“So, in the first part, hopefully we can get agreement – it will be unthinkable if we can’t get an agreement because it’s not in anybody’s interest including the United Kingdom – and then after that we will have a transitional agreement in order to work out the future relationship and the free trade agreement.”

Post-Brexit supports

The suggestion made by economist Ciaran Fitzgerald that more EU supports for the beef sector post-Brexit are needed was put to Commissioner Hogan.

Also Read: Irish beef exports will require EU supports post-Brexit – agri economist

In response, the commissioner said: “We need to look at sectors that are going to be under pressure for any particular reason and I’m giving that flexibility in the CAP strategic plan to every member state minister for agriculture to be able to do that in the future post-2020.

“Also there are support possibilities with operational programmes at the moment in fruit and vegetables and wine; it is exclusively for them at the moment under the common market organisation measures.

Now we are proposing that that particular model of helping a sector like fruit and vegetables is going to be extended to all sectors – so that in their planning post 2020 any member state will now be able to have a specific sectoral approach to help that sector that is under pressure at any particular time.

“So we’re giving all the flexibility along the lines that Ciaran Fitzgerald has advocated,” Commissioner Hogan concluded.