Uneven value distribution
The food supply chain or food system moves food in domino-like motion from where it is produced to the point of consumption or disposal. The final price paid by the consumer is determined by multiple participants in the food supply chain. By removing trade barriers single markets created more opportunities and larger reach for the supply chain participants. On the other hand, it resulted in increased international competition and structural changes that decreased the bargaining power of the less mobile actors in the chain, in particular, farmers.
The misuse of such differences may lead to the directive and unfair trading practices (UTPs) where the value is distributed exponentially and once each participant takes their share, the farmer ends up with less than 10% of the retail price.
According to the European Commission, the value added for agriculture in the food chain was 31% in 1995 and decreased to 24% in 2005, mainly for the benefit of other food chain actors. The available Eurostat data shows that in 2011 the majority of added value was taken by the food processing sector (28%) and food retail and wholesale (51%), leaving only around 21% share for the farmers.
The European Commission has an interest in improving the functioning of the food supply chain in the European Union and established an Agricultural Markets Task Force (AMTF) in 2016 that made in particular three recommendations, namely, to address unfair trading practices, increase market transparency, improve cooperation among farmers. These recommendations helped the Commission to introduce an inception impact assessment and a public consultation on the improvement of the food supply chain in 2017.
In April 2018, the Commission proposed to ban the identified specific UTPs: late payments for perishable food products, last minute order cancellations, unilateral or retroactive changes to contracts and forcing the supplier to pay for wasted products.
The Common Agricultural Policy (CAP) modernization proposal about improving farmer’s position in the value chain and addressing UTPs is now submitted to the two co-legislators, the European Parliament and the Council.
The coexistence of “large-scale” and “short-chain”
Evan Fraser is the Director of the Arrell Food Institute, the Scientific Director of the Food from Thought Initiative and holds the Canada research chair in Global Food Security at the University of Guelph. His food security initiative, Feeding the 9 Billion, provides insights around issues of our current food system. The proposed solutions to the global food crisis, as well as the supply chain problems, include science and technology, pro-active governmental policies, more equitable food distribution and local food systems.