Discounters lower farm gate prices and pose “a serious threat” to vegetable farmers

The growing market share of discounters has had a fundamental impact on the price farmers receive for their produce, according to a new report on the horticultural sector.

The report published today by Power Economics on behalf of the IFA, ‘Retail Price Compression Threatens the Viability of Irish Horticulture’, says CSO data shows the average retail price of food has fallen 9 per cent over the past 11 years, while the Consumer prices have increased by 13pc.

It also said that food prices rose 1.6 percent, agricultural input prices rose 9.2 percent.

“This is totally unsustainable and, unless this trend is reversed, will result in irreparable damage to Irish agriculture,” says the report.

“The price drop is due to significant competition from imports and the growing concentration and excessive market power of a small number of very powerful retailers.

“The growing share of the two discounters Aldi and Lidl has fundamentally impacted the price primary producers receive for their produce.”

According to the report, the viability of horticultural production is now “seriously threatened” and that farmers are the weakest link in the supply chain and are being pressured by rising input costs and lower output and retail prices.

Further contraction of the sector will lead to increased imports of food, according to the report, and profit margins will be squeezed in an environment where input cost inflation from inputs such as labour, packaging, fertilizer, energy and electricity completely exceeds the farm-gate output price and retail price inflation.

“All consumers need to be aware of the importance of locally produced products in promoting rural economic sustainability, rural social sustainability, the environment and reducing food waste,” the report says.

“A cheap food policy is not a sensible policy.”

The most recent national field vegetable census, now out of date, showed the number of field vegetable farmers fell from 377 in 1999 to 165 in 2014, a 56 percent reduction, with Power’s report finding that to be clear that this trend has continued in the following years.

After beef, dairy and pigs, the horticultural sector is the second most important agricultural sector, according to the report, which was worth €477 million in 2019 and employs 6,000 people in full-time primary production. A further 11,000 are employed in downstream operations.

Since 2010, Aldi and Lidl’s market share has grown from 9.5 to 25.5 percent.

“This price pressure has caused and continues to cause major problems for primary producers and threatens their survival,” the reports said.

Since 2010, the average retail price of vegetables has fallen 8.5 percent, with retail prices for potatoes down 14 percent.

Meanwhile, input costs have risen dramatically, the report says, with fertilizer costs rising nearly 90 percent in 2021.

The report also calls for a food ombudsman to be given full powers to investigate margins and for primary producers to be guaranteed a certain margin over production costs.

It also recommends that retailers should not be allowed to tender their supplies each year and that the Ombudsman should be able to scrutinize tenders to ensure primary producers are getting a fair price, along with a ban on selling below cost .

It also calls for greater monitoring of labeling to ensure false labeling that confuses the origin of the product is not allowed.

“A ‘retail charter’ should be signed by all retailers, guaranteeing primary producers a certain margin over production costs. If retailers were not willing to subscribe to such a charter, then “it should become part of the regulatory environment”. Discounters lower farm gate prices and pose “a serious threat” to vegetable farmers

Fry Electronics Team

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