Who’s got the power? New study confirms imbalances in agricultural supply chains

18 November 2014 (Brussels) – Have you ever wondered how come those local apples in season remain more expensive than bananas all year long? Why do poor farmers get poorer just as the international price of their products rise non-stop? Why is environmental damage increasing even as large companies prove they are implementing sustainability programmes? With city dwellers increasing and rural population dwindling, who will produce the food the hungry urbanites will demand?

The new study opens the door to the answers. “Who’s got the power? Tackling imbalances in agricultural supply chains”, released today in Brussels by the Fair Trade movement[1] reveals how the growing integration –and concentration of power- in the supply chain of agricultural products is having a serious effect not only on producers far away from the supermarket shelves, but all along the supply chain, the environment and onto the choices available to consumers. Unfair trading practices (UTPs)[2] appear, and they are not accidental but structural.

Olivier De Schutter, co-chair of the International Panel of Experts on Sustainable Food Systems and former UN Special Rapporteur on the Right to Food, says in the foreword to the study that “the need to improve the governance of food systems, in order to avoid instances of excessive domination by a small number of major agrifood companies, is hardly ever referred to in international summits that seek to provide answers to the challenges of hunger and malnutrition. This report helps to fill that gap”.

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The study identifies common patterns of concentration involving the main elements of the supply chain, the one exerting pressure on the other all the way down to the producers. The more these elements are integrated with one another, the stronger is the pressure exerted onto the next link in the supply chain:

  • Consumers
  • Retailers (supermarket chains)
  • Branded products manufacturers
  • Traders of produce
  • Processors/Refiners
  • Producers/Farmers
  • Input producers (seeds, fertilizers, etc.)

In sheer size, the Consumers (7 billion) and the Producers/Farmers (2.5 billion) are by far the most numerous. However, most of the value share of the transaction (up to 86%) stays with numbers two to five. But trying to present the problem as one between consumers on one side, and farmers and workers on the other, is meaningless. The degradation of the trading and living conditions of farmers and workers, whether inside or outside Europe, creates important risks of unavailability and unaffordability of products for consumers in the midterm, reducing their welfare in the end.

Addressing concretely the global nature of the problem and its consequences, the study emits no less than 16 practical recommendations to policy-makers, businesses and workers all over the world. The European Union has a clear responsibility to prevent and punish UTPs, considering the superior purchase power of its 550 million inhabitants, as well as the numerous trade agreements it has with produce exporting countries. Transactions do not occur in a legal vacuum but national legislation needs to be adapted to counter the power concentration trend, and it is clear that no solution will be found in isolation, which is why the study includes action proposals to all seven links of the supply chain as well as to multilateral instances such as the Food and Agriculture Organization (FAO).

BUYER POWER

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  • In order to address and resolve the issues the study recommends actions to adopt a comprehensive strategy based on:
  • A vision of consumer welfare that goes beyond purchasing power and recalls its inherent link with farmers’ and workers’ welfare.
  • Measures to rebalance business power in agricultural chains in the short term, currently the law of the strongest has the upper hand.
  • Mechanisms to enhance transparency in agricultural chains so that stakeholders can better identify the risks of abuse of buyer power and unfair trading practices.
  • A renewed European competition policy framework capable of better regulating such abuses.
  • Enforcement mechanisms to stop Unfair Trading Practices (UTPs) within food supply chains serving the EU market, with authorities able to investigate claims and punish abuses.
  • Initiatives to promote and widely spread fair trading practices in the mid to long run.

 

*END*

Notes to Editors:

[1]The report was commissioned by the Fair Trade Advocacy Office (FTAO), Traidcraft, the Plate-forme pour le Commerce Equitable and Fairtrade Deutschland, with the support of the European Commission, the Belgian Development cooperation, the Agence Française de Développement and the region Île-de-France.

[2] Practices that grossly deviate from good commercial conduct, are contrary to good faith and fair dealing and are unilaterally imposed by one trading partner on another.

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