Research shows retail price squeezing has forced growers out of business

Launching a horticulture sector report this morning – Retail price squeeze threatens viability of Irish horticulture – by economist Jim Power, IFA chairman Tim Cullinan said the government should act quickly to reinstate the ban on selling food at a loss.

“The price squeeze at the retail level has forced producers to close their doors. The last National Field Vegetable Census, now outdated, showed that the number of field vegetable producers fell from 377 in 1999 to 165 in 2014, a reduction of almost 60%. It is clear from anecdotal evidence that this trend has continued in recent years,” he said.

Tim Cullinan said the farm-level input crisis has worsened as a result of the war in Ukraine. “We are on the farm of Matt and John Foley, who grow tomatoes. Their gas bill is much higher than this time last year. Like all producers, they can only recoup their costs on the price paid to them,” he said.

The analysis in the report shows very clearly the intense pressure on primary producers of food in general, but of horticultural products in particular. The retail price squeeze has forced many producers out of business and many more will if the imbalance of pricing power in the supply chain is not corrected.

The price squeeze is due to strong competition from imports, as well as the growing concentration and excessive market power of a small number of very powerful retailers.

Jim Power said that since 2011, CSO data shows the average retail food price has fallen 9% in real terms. Over the same period, overall consumer prices increased by 13%. Over the past 12 months, food prices have increased by only 1.6%, while aggregate prices for agricultural inputs have increased by 9.2%.

He said the growing market share of the two discounters – Aldi and Lidl – has had a fundamental impact on the price primary producers receive for their products. Many farmers have been forced out of business and many more will follow unless strong market intervention occurs.

The EU Unfair Commercial Practices (UTP) Directive was passed in April 2019 and was transposed into Irish law in April 2021. It is now essential to have a National Food Ombudsman in place with strong powers that will ensure farmers a fair share of the retail price. .

There is a strong need for a significant rebalancing of power in the food supply chain, to deliver a price to primary producers that would ensure their future viability. The powers granted to the National Food Ombudsman should include:

  • Full margin investigation powers in the different components of the food supply chain. A “retail charter” should be signed by all retailers which would guarantee primary producers a certain margin above the cost of production. If retailers were unwilling to sign up to such a charter, then it should be part of the regulatory environment.
  • The tendering process needs to be changed to provide certainty to primary producers and enable them to deal with the impact of unpredictable seasonality on food production.
  • Retailers should not be allowed to auction their supply every year, as this creates unsustainable uncertainty for primary producers. The regulator should have the power to review tenders to ensure that primary producers receive a fair price.
  • It must exercise regulatory oversight over labeling to ensure that mislabeling that confuses product provenance is not permitted. –
  • A ban on selling at a loss should be introduced. It is rarely in the interest of the market to have a considerable level of regulatory intervention, but if a market failure occurs, then it is necessary.

“The importance and potential of horticulture is recognized in official policy strategy, but unless appropriate supports are given to the sector plans will not materialize and a huge opportunity will be lost for rural Ireland,” did he declare. Please find the full report on the horticulture sector here.

For more information:

Irish Farmers Association

Irish Agricultural Centre, Bluebell, Dublin 12