Agricultural Markets Task Force

The Agricultural Markets Task Force (AMTF), which was set up in January 2016 in response to the growing crisis in the agriculture sector, has today presented its report to EU Agriculture Commissioner Phil Hogan.

The Task Force was chaired by Cees Veerman, former Minister for Agriculture in the Netherlands, and comprised of twelve independent experts. Their brief was to examine developments world-wide in the food-supply chain, focusing particularly on the supply side (the producer), and to develop suggestions to improve the conditions of those producers who, even if they are first in line in the food-supply chain, are last in line when it comes to getting their just rewards.

MEP Luke Ming Flanagan has long identified unfair trading practices in the food chain (UTPs) as one of the core issues affecting farmers’ returns.  These can be defined as practices that grossly deviate from good commercial conduct and are contrary to principles of good faith and fair dealing. Examples of such practices are unduly late payments, unfair shifting of business risk to the other party, unilateral changes to contracts and unfair termination of contracts.

Commenting on the report, MEP Luke Ming Flanagan welcomed some aspects of it, while expressing caution in several areas. Some of the key recommendations of the report, welcomed by Luke, are as follows:

•             No payment periods longer than 30 days;

•             No unilateral and retroactive changes to contracts (concerning volumes, quality standards, prices);

•             No contributions to promotional or marketing costs;

•             No claims for wasted or unsold products;

•             No last-minute order cancellations concerning perishable products;

•             No requests for upfront payments to secure or retain contracts.

To provide for effective enforcement the report puts forward the following proposals (also welcome):

•             Victims of UTPs should have the possibility of lodging anonymous complaints;

•             Producer organisations (POs), associations of producer organisations (APOs) and cooperatives should be allowed to lodge complaints;

•             Enforcement bodies should be able to conduct own-initiative investigations;

•             Sanctions for non-compliance should be possible and should have dissuasive character.

The report highlighted the potential of Producer Organisations (POs) and Associations of Producer Organisations (APOs) to strengthen the position of the primary producer; however – and an area of concern – the report also points out that while the intention was good, in establishing these structures the new provisions may have exacerbated the legal complexity.

It is recommended that the Commission should unambiguously exempt recognised Producer Organisation or Association of Producer Organisations from competition law. Safeguards should ensure that competition is not eliminated and CAP objectives – such as reasonable consumer prices – are not jeopardised.  These aims are compatible with Article 39 of the TFEU, the corner-stone of CAP, which includes references to the welfare of both consumers (in terms of reasonable prices for foodstuffs) and producers (in terms of a fair standard of living). It allows for the conclusion that the exclusive focus on consumers that is customary under classic competition law cannot be the only yardstick for the assessment of cooperation among producers in the agricultural sector and recognizes the unique position of the sector in the EU.

In respect of the use of futures markets and financial instruments, MEP Flanagan was less supportive. There must be a distinction made between low commodity prices due to the globalization of the food supply and short term price volatility.  Offering soft loans to mask this and encouraging unsustainable debt is not in best interests of farmers. 

Regarding the introduction of financial instruments in Pillar II, he stated that as it stands much of the funding is already being leveraged by the farmer, as many of the farm improvement carried out is backed up by bank loans. Crucially, however, this is done on the merit of the investment itself; changing it to include a mandatory element of bank lending to draw down funding goes against all norms of prudent lending and is not a road to go down.

Concluding, MEP Flanagan said that the Commission focus in implementing this report should be on tackling the imbalance in the food chain, which would allow farmers to invest in their businesses in a sustainable manner; he called on the Commission to implement in particular the measures in respect of unfair trading practices. This is the core issue, as all studies show that the farmer’s share of the final retail price has been steadily dropping year on year. Thus far, while “talking the talk”, the Commission has been reluctant to take the necessary regulatory action.

AgricultureJamie Cullinane