WRITTEN QUESTION P-3407/98

by Sirkka-Liisa Anttila (ELDR) to the Commission

(9 November 1998)

Subject: Serious operational problems in the foodstuffs marketing system in the EU

The producer price in Finland has generally been among the lowest in the EU, which together with the highest production costs in the EU has been a particularly difficult equation for farmers to solve. The poor functioning of remote markets is our problem, but the same operational problems can be found throughout the EU.

The producer prices paid to farmers have fluctuated significantly in recent years in the EU. Because of overproduction, producer prices for pigmeat are now falling to record lows. Why have even these major changes in producer prices not been passed along the food distribution chain to the consumer and led to lower consumer prices for pigmeat? A reduction in prices should directly increase consumption and reduce the overproduction of pigmeat. If this does not happen, it will cause serious damage to the normal operation of the market.

Many examples from the Member States show that changes in producer prices are not passed along the food distribution chain to the consumer. The higher levels of consumer prices have not been reflected in producer prices either, which runs counter to the normal operation of the market system. The same problem can also be seen in the formation of prices in connection with production investments, particularly in Finland.

The Commission should investigate as a matter of urgency the operation of the distribution chains in the EU and eliminate the factors which disturb and distort the normal operation of the market. Are the major retail firms too dominant, or do the producers need more negotiating power? The matter has already been noted, for example, by the French government which called in its draft framework law on the countryside for a fairer distribution of the added value arising in the food distribution chain, which in turn requires greater negotiating powers for the producers.

Is the Commission aware of the problems with pricing in the food distribution and marketing systems in the EU, and does it propose to draw up a comprehensive study on this question?

Answer given by Mr Fischler on behalf of the Commission

(9 December 1998)

The Commission is very concerned by the fact that the recent decrease in producer prices seems to be poorly reflected in consumer prices.

It is clear that the retail price of food consists not only of the raw material cost but also of processing costs, transport costs, and labour costs. Therefore, if there are no reductions in the other costs, it cannot be expected that retail prices would decrease as much as the producer prices. The Commission has also analysed the developments in producer prices and consumer prices of the most important agricultural commodities over the last 25 years. It appears that about half or less of the producer price changes are transferred to the consumer prices. As this is the case when the producer prices have either decreased or increased, it shows that retailers want to keep food prices fairly stable despite the greater fluctuations in producer and wholesale prices.

The Commission and, where appropriate, national competition authorities may look into prices only where their level is due to an abuse of a dominant position or the imposition of a restrictive practice.