As French supermarkets increase food prices, will farmers benefit?
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The price of hundreds of food items in France is going up on Friday as a law comes into effect aimed at redistributing supermarket revenue so that farmers are paid more for what they produce. Supermarkets are no longer allowed to sell popular items, like Nutella or Coca-Cola, at a discount to attract customers. And they are encouraged to put the extra revenue into increasing the amount they pay farmers.
Stores are now required to sell hundreds of products at least ten percent more than the price they paid for them. The extra money will, in theory, allow supermarkets to increase what they pay farmers for basic foods like fruits and vegetables, milk and meat – products on which they make a 30 to 40 percent margin, according to French agriculture minister Didier Guillaume.
"What I ask of supermarkets is to find a way to spread their margins differently, to better distribute things,” said Guillaume on Wednesday. “The goal is that agricultural products are sold at their proper value."
Guillaume said four percent of supermarket products would be affected by the price increases, which would result in an increase in food costs for households of between 50 cents and 3 euros a month.
Will it help farmers?
Most [farm] sectors are not able to cover the cost of production. This cannot last.
The measures are part of a food and agriculture law passed at the end of October 2018, and which was a campaign promise of President Emmanuel Macron, to address concerns of farmers – an important voting bloc – who have been suffering in price wars between supermarket retailers.
The competition has lowered the price of food for consumers, but has hurt farmers’ ability to earn enough to cover costs.
“For several decades, administrative regulations aimed to increasingly lower prices, which put farmers in an impossible situation: today, most sectors are not able to cover the cost of production. This cannot last,” said Patrick Benezit, deputy general secretary of the Fnsea, France’s main farmers’ union, which supports the law.
He says he is confident that the measures will work, as long as they are enforced and retailers act in “good faith”. But good faith is all there is, as there is nothing to force supermarkets to reduce profit margins on agricultural products.
French consumers have long said they would be willing to pay more for food if it goes to farmers.
And yet, Lionel Maugain, a journalist with the consumer advocacy magazine, 60 million de consommateurs, doubts farmers will see more money because of the new measures.
“This 10 percent [increase on the cost of certain products] will be taken and returned to consumers, probably in the form of lowering the cost store brands," he tells RFI. "The problem is that farmers will probably not see this money.”
The only way for farmers to get paid more, he says, is through the annual negotiations between retailers and suppliers that take place between November and February: “That’s the only way it can work. It’s not through raising prices with the hope that the new margin will go back to French producers. That won’t work.”
Yellow vest delay
Farmers have participated in protests in the last few weeks, without officially joining the anti-government Yellow Vest movement. And the government delayed the supermarket measures by several weeks (they were to come into effect in December) because of the protests, which are partially against the high cost of living and consumers' lack of purchasing power.
Maugain says consumers will unlikely see their overall food costs go up, because will reduce prices on other products, but the timing of these changes “is coming at a bad time when people are questioning their purchasing power”.
In addition to the price floors, discounts on food products have been limited to 34 percent of a product’s price as of 1 January (which puts an end to two-for-one deals), and as of 1 March, the volume of promotions will be limited to 25 percent of sales of what distributors buy from suppliers.
All these measures will be tracked for two years.
(With Patricia Lecompte)
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