EU Task Force Recommendations to Improve Farmers’ Position in the Supply Chain

In November, after a year of research, an EU Agricultural Markets Task Force published its report and recommendations on “Enhancing the Position of Farmers in the Supply Chain”. Commenting on the report, SAOS Chief Exec, James Graham, said: “Our concern is that the level of volatility and risk affecting the viability of farming appears to be getting more extreme. At some point, this could threaten continuity of production and food supplies from impacted sectors, and afflict real disruption on farming families and rural communities. Better ways to mitigate and manage risk are required.”

“The fact that retail prices, which are determined by food retailer competition, can be so disconnected from farm prices, which are determined by global supply/demand commodity dynamics, presents real challenges in supply chain relationships and has resulted in asymmetric pricing. New supply chain thinking and models are required that acknowledge and better accommodate commodity volatility, perhaps by examining ways to share commitment and risk at least to some degree. This requires the willingness of all involved in the chain to participate. Fears in some parts of the chain, that commerciality might be compromised, all too frequently prevents meaningful discussion. The recommendations merit careful consideration in respect of EU and potential post Brexit UK policy.”

Some of the key recommendations are summarised below.

Market transparency
• Mandatory price reporting for selected products
• Modernise and improve data collection and forum for information exchange
• Incorporate consumption information
• Enable farmers to use more market information in decision making

Risk management
• Map all relevant data linked to occurrence of risks
• Harmonise use of tax averaging across the EU
• Improve farmer knowledge of risk management business strategies
• Facilitate information exchange of best practice in risk management
• Shift CAP resources to develop a strategic EU risk management policy

Futures contracts and derivative instruments
• Fund training for farmers and co-ops and promote available tools
• Provide technical advice and share best practice outcomes
• Mobilise funds for new futures markets
• Set up credit guarantee schemes for events of difficulty in covering margin calls

Trading practices in agricultural markets
• Introduce, and provide for enforcement of, EU framework legislation on specified prohibited ‘unfair trading practices’ at both domestic and transnational levels
• Remove the ‘fear factor’ from reporting an unfair trading practice (involve producer organisations and co-ops)
• Facilitate EU platform for information exchange on trading practices

Competition law
• Clarify the exemption for competition law of farmers jointly planning and selling production collectively in co-ops and producer organisations
• Revise EU regulation introducing standard competition law derogations across all sectors (retaining the specific dairy sector derogation in the meantime)
• Provide a procedure for farmers (with their organisations) to obtain legal security up-front, in the form of a “comfort letter” from the Commission.

The full report can be found at: http://ec.europa.eu/agriculture/agri-markets-task-force/improving-markets-outcomes_en.pdf

UK Grocery Code Adjudicator – should the remit extend to farmer/processor relationships?

A consultation is currently underway by the Department for Business, Energy and Industrial Strategy (BEIS) calling for any evidence on the case for extending the remit of the Groceries Code Adjudicator. BEIS states: “This is in response to concerns from groups in the groceries supply chain not covered by the Code, in particular farmers, who are indirect suppliers to retailers. These groups argue that they face the same, or similar, behaviours as those which the Code prohibits. They consider the Code – and therefore the GCA’s remit – is too narrow to protect them. The government recognises these concerns and has decided it would be appropriate to consider extension of the GCA’s remit”, but is not making any specific proposal at this stage, other than to seek evidence.

The closing date for the consultation is 10 January 2017. The consultation documents can be found at: https://www.gov.uk/government/consultations/groceries-code-adjudicator-extending-its-remit

 

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