The growing market share of discounter supermarkets has fundamentally impacted on the price farmers receive for their produce, according to a new report on the horticulture sector.
Jim Power Economics’ report ‘Retail Price Compression Threatens the Viability of Irish Horticulture’ on behalf of IFA, which was launched today, states that over the past 11 years CSO data shows the average retail price of food fell by 9pc, while consumer prices rose by 13pc.
Further, it states that while food prices increased by 1.6pc, agricultural input prices rose by 9.2pc.
“This is completely unsustainable and, without a reversal of this trend, will lead to irreparable harm to Irish farming,” the report says.
“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.
“The growing share of the two discounters — Aldi and Lidl — has fundamentally impacted on the price that primary producers receive for their produce.”
The report says the viability of horticulture production is now under “serious threat” and that farmers are the weakest link in the supply chain and are being squeezed by rising input costs, and compressed output and retail prices.
Further contraction of the sector will mean increased imports of foods, according to the report, and profit margins are being squeezed in an environment where input cost inflation from inputs such as labour, packaging, fertilisers, energy and electricity is totally outpacing farm gate output price and retail price inflation.
“All consumers must be made aware of the importance of locally produced product from the perspectives of promoting rural economic sustainability, rural social sustainability, the environment and the reduction of food waste,” says the report.
“A cheap food policy is not a sensible policy to pursue.”
The most recent National Field Vegetable Census, which is now out of date, showed that the number of field vegetable growers fell from 377 in 1999 to 165 in 2014, a reduction of 56pc, with Power’s report stating that it is clear that this trend has continued in subsequent years.
After beef, dairy and pigs, the horticulture sector is the next most valuable agricultural sector, the report found, worth €477m in 2019 and employs 6,000 people in full-time primary production. A further 11,000 are employed in downstream businesses.
Since 2010, the market share of Aldi and Lidl has grown from 9.5pc to 25.5pc.
“This price compression has caused and continues to cause intense problems for primary producers and threatens their survival,” the reports says.
Since 2010, the average retail price of vegetables has dropped by 8.5pc, with potato retail prices dropping by 14pc.
Meanwhile, there has been a dramatic rise in the cost of inputs, the report states, with fertiliser costs up nearly 90pc in 2021.
The report also calls for a food ombudsman to be granted full powers of investigation of margins, and for a guarantee of a certain margin for primary producers above the cost of production.
It also recommends that retailers should not be allowed to put their supply up for tender every year and that the ombudsman should be able to examine tenders to ensure primary producers are paid a fair price along with a ban on below-cost selling.
It also calls for greater oversight on labelling to ensure mislabelling that confuses the provenance of product is not allowed.
“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”.