10 commentslast update:7 Aug 2012

Who profits from higher feed costs?

Dick Ziggers
The EU finally begins to understand that their rigid market policy is not benefiting the farmers in these times of scarcity. The long expected proposal to have set-aside land back into agriculture again came on September 13. This could be a relief for the grain market's next harvest.

It is not only the shortages in raw materials and thus the higher prices that make pig, cattle and poultry breeders across Europe struggling to stay afloat. Farmers are also lacking the power to pass costs on to consumers.

Globalisation has encouraged feed and food companies to grow, merge or take over. Even if 90% of these mergers and takeovers do not bring what is promised by their CEOs and managing directors, the growing big continues.

The same has happened with the retail business. Farmers face a small group of supermarkets that determine what is bought, where it is bought and against what price. If these supermarkets cannot buy food cheap locally, they import it from elsewhere.

Supermarket price wars have held meat prices down, while feed costs have soared. In Germany, the European Union's No. 1 pork producer, animal feed prices have doubled this year, but retail meat prices rose only 3% in the first six months. In August, meat prices fell 1.7% from a year earlier. Farmers so far have been unable to pass on these higher costs. In Spain, meat prices have fallen this year.

Consumers are also to blame for their ignorance. Marketing people have told them constantly that they were paying too much for their food and consumers started to believe that because prices were going down all the time. Now that markets have changed supermarkets still try to buy for the same prices as they were used to.

And the farmers – disunited in union – risk going out of business. When that happens supermarkets have a clear story to tell: there is not enough produce, so prices go up – the laws of supply and demand.

If prices of oil go up we still keep driving our car, instead of choosing alternatives. However, if food prices go up we go for discount stores. Consumers should realise that if they pay a fair price for their food and this price is passed on to the primary producers (and not disappears in the pockets of other parties in the chain) farmers also can make a decent living and not only supply quality food, but also provide jobs, cultivate the land and not turn it into a national park.

An organic food store in Germany did the right thing. German organic retailer Basic suspended the sale of the company to discount retailer Lidl. Customers and suppliers left Basic, because they did not want to be identified with one of the largest discounters in Europe.

Strangely enough the European commissioner of agriculture, Mariann Fischer Boel, warned retailers on increasing the prices of staple foods. "The contribution of the raw material to the final price of foods like bread is relatively small, so I hope the supermarkets and discounters will act responsibly," Boel wrote on her blog. And she is the commissioner for agriculture!


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    Howard Blackburn

    It is interesting to not that whilst the price Marks & Spencer pays to farmers for milk has risen, the price they charge to their customers has gone up by 6-7% more than has been paid to the farmer-higher prices are an obviously an opportunity for increased margins!

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    Rod Tuck

    For the first time since 1945 there is a world shortage of food that is likely to continue over the next decade and beyond through a number of issues outside the remit of individual governments and global traders. Certain continents such as Africa food shortages will worsen. Therefore the sensible politians and retailers (if there are any) will have to bring agriculture back to the top of their agenda, hopefully before its to late. Rod Tuck

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    Luis Valente

    what will hapen if all of us - feed producers, farmers, slaughter houses, the productive chain at the end, ALL OF US, STOP PRODUCING??? LET'S TRY!

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    Mike Spandern, Germany

    Dick, blaming consumers is too easy. The consumer is THE customer of agriculture. Blaming the customer for your own failures is a big no-no!!

    Cosumers demand cheap food to have enough money for luxury good and other expenses that increase their quality of life - in their vison.

    If animal products were not able to position themselves in this high profit category, then failiure and ignorance are on the producer side.

    Why are milk and egg batteling hard while Getorade & Co are taking off

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    noni ward

    May be the world farmers needs to ban together to have more of a control over what goes on. At the end of the day we all need food, water and air to survive and we cannot survivie on just one of those alone.
    Farming is the largest trade in the world and we should all be getting together on this one.

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    Manfred Schmidt

    Consumers were " educated" last decades to spend less and less money for their food - other things like holidays, cars ...becoming more important. Now consumers need (new ) to define their priorities of life...

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    andrew angelino

    Why do we allow the supermarkets to dictate to us. They have undercut everybody not just farmers, the local cornerstore, the local butcher, baker, pubs, other non edible merchandise like cd's, stationary, clothing etc. Who wants to support them! What would be wrong with farmers bandying together worldwide to create super co-op's in their own countries. Something along the lines of 'farmers own' supermarkets. We'd have the ability to undercut the the large supermarkets (take their margin), reduce or stop their supply and simply take them head on! Working together on imports and exports quarranteeing fresh food worldwide ironing out seasonality issues as against undercutting each other.

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    Marcel CHERMAT

    Politician deciders have two speeches :in the first one they declare the importance of the feed and animal industry and the neccesity of supporting this activity(plants,farms...) ,in the second the aim is the consummers interests and consequently the inflation rate .So where is the truth?Aren't they close to supermarkets strategy?

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    Trevor Kershaw

    Yes farmers should unite,they never have will they ever?

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    tony louwrens

    You could be talking about South Africa, a handful of cartels control it all and the farmer is on the short end here however we even add a middle man that leeches off the farmer and that is the so called representative organization that serves no purpose but convinces a government that a levy should be paid to a stabilisation fund.

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