Farm Ireland

Tuesday 12 December 2017

Independent view: EU sacrificing beef job with more imports

Declan O'Brien

Declan O'Brien

The increase in global food prices is certainly exercising the minds of politicians. High food costs are being blamed for everything from inflation to political instability.

According to the latest figures from USDA, food prices have increased by close to 10pc in Britain and 12pc across mainland Europe over the past six months.

The figure for the US is 7pc, while it has hit 25pc in Mexico and Brazil, the most populous countries in Latin America.

Worryingly, the level of increases for China is 33pc, while in India the figure stands at 35pc. Across North Africa, the rate of food inflation ranges from 36pc to 38pc.

The price hikes have resulted in talk of 'burn out' of buyers, while at EU level there is talk of the necessity of action to control feed costs.

However, should such action start with the multiples and commodity speculators -- or are we asking for too much?

Farmers are price takers; they are not price setters. The sale price for milk, wheat or beef is generally set either by supermarket buyers or by the trends on commodity markets.

The fickle nature of the commodity market was evidenced by the North African crisis. Speculators jumped out of food commodities almost as soon as the crisis struck, in the belief that there were larger short-term gains to be made in oil.

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Ironically, an event which should have led to increased food costs actually resulted in a price drop.

There is no management in such a market -- everything is driven by sentiment.

Similarly, supermarkets work off a basic pricing system. Suppliers are pushed to the pin of their collar to deliver at the lowest possible margin while, at the same time, meeting stringent quality standards.

The biggest margin in the food chain is now being harvested by the multiples, with the producer and the consumer being forced to subsidise their profits. If Europe is serious about tackling food prices then the power of the multiples and commodity traders must be challenged.

A more even share-out of the eventual sale price should be a priority for Commission officials.

However, instead of tackling the small share of the final food sale price which primary producers actually secure, it appears the EU is intent on further undermining their margins.

The Mercosur negotiations are a case in point. Europe's farmers are now being asked to compete with beef imports which don't come near those required by EU producers.

With massive imports on the cards, the viability of Europe's beef sector is being sacrificed.

Indo Farming