My understanding is that farmers are getting the fair market price. It is the supermarkets that engage in below cost selling after this fact - am I off the mark? Tbh, this looks like they are seeking a reintroduction of the below cost selling legistlation by another means and that was a disaster for consumers.
"90% think legislation should force supermarkets to pay a fair price to farmers"
- Thread starter Brendan Burgess
- Start date
I don't think so either, at least in those terms: how on earth would you implement a "fair price"?
However, there are two significant issues that the "free market" people seem to be ignoring here:
1. It's not a free market: there are very significant distortions caused by having a very few companies exploiting their dominant position. Hence some form of regulation is needed to counteract this.
2. Food is not like other products. Personally, I wouldn't be that bothered if I went to the shops and I couldn't get a TV or particular car or whatever, but it would be pretty serious if food wasn't available, or it was priced beyond most people's means. Thus, for example, it is not a good idea to become totally dependent on imported food, and it's important to maintain a locally sourced food supply.
I'll come back to a point I made earlier: it's naïve to think that selling items at what is clearly an uneconomic price is somehow good for consumers in the long or even medium term.
T McGibney
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1. There are more big players in the retail sector than ever before. Aldi, Lidl and Musgraves have joined Dunnes & Tesco at the top table this century, although admittedly Superquinn is no more. Meanwhile, since the abolition of the Groceries Order that previously banned below cost selling, the farming & food production sectors have not suffered to any degree, in fact they have boomed.
On that basis I'd argue that the case for regulation is no greater nowadays than it was at the time of the abolition of the Groceries Order.
2. Like it or not, our retailing sector is utterly dependent on imported food. The notion that all the food we eat is of domestic origin is a fantasy.
So price promotions (early bird discounts, free samples, buy one get one free, x% off, etc) are bad for consumers?
Brendan Burgess
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I got this information from AgriAware
I think I will commission Ipsos to ask 1,000 people a question:
"Do you welcome price wars among supermarkets which gives consumers fair prices for their food?"
I think I will commission Ipsos to ask 1,000 people a question:
"Do you welcome price wars among supermarkets which gives consumers fair prices for their food?"
Absolutely not: as I said, if any business wants to discount or do whatever promotion they like, then fair enough.
That's completely different to a retailer forcing a supplier to sell below the supplier's costs by (ab)using their dominant position. As I said, it's naïve to think that can continue for any length of time without long-term damage to consumer interests.
T McGibney
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Competition law is specifically geared to deal with companies abusing their dominant position in a market.
So why do we now need even more legislation (along with the added compliance cost & bureaucracy)?
I never said we did: the only points I am making are that the current grocery market is distorted and not functioning as a normal competitive market, and that food is not like other products. Hence special provisions may be required in relation to supply and cost.
Maybe just enforcing what's there already would be sufficient. If it isn't, then we should introduce more legislation. Like many things in this country, though, we'd be better off enforcing what's there rather than the government patting itself on the back for introducing yet more legislation that is promptly ignored.
Speaking to a friend in the industry and from my understanding of the Aldi / Lidl basement vegetable prices - Aldi / Lidl take a profit equalization view which works something like this :
- At Start of year they set an average target profit per piece of vegetable / fruit for the year
- Know how much they can buy the vegetable as the seasons proceed and supply/demand varies
- Set the price point for various times of the year, keeping the average target profit in mind
At end of year they will have balanced the very low 5c prices with higher prices which allows them to meet their target profit.
Simples really and they get loads of customers through the doors by varying their veg bargains.
- At Start of year they set an average target profit per piece of vegetable / fruit for the year
- Know how much they can buy the vegetable as the seasons proceed and supply/demand varies
- Set the price point for various times of the year, keeping the average target profit in mind
At end of year they will have balanced the very low 5c prices with higher prices which allows them to meet their target profit.
Simples really and they get loads of customers through the doors by varying their veg bargains.
SlurrySlump
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Absolutely !
T McGibney
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It's easy to make those points but maybe less easy to prove them. Is the grocery market really distorted?
The facts suggest otherwise:
1. There are more big players in the retail sector than ever before.
2. Farming & food production are booming, despite an economic recession.
3. Most of our food product is exported while most of our food consumption is imported.
So our producers are far less dependent on domestic supermarket chains than they were say 20 years ago.
Where's the problem?
Brendan Burgess
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Hi Tommy
Three good points, but that one is startling.
If Irish supermarkets don't pay the farmer a fair price, let the farmers export their produce.
Come to think of it, how could the legislation work? Would it force the Irish supermarkets to pay a "fair" price for the food imports as well?
Brendan
OK, a couple of examples:
1. Company A supplies product to supermarket X. They get a call one day saying if they want to continue to supply to X they have to drop all their other customers.
2. Company B is supplying product to supermarket Y. Periodically, they are told they must supply that product, at below the cost of B's production, so that Y can offer it as a promotion.
Do you think that these are market distortions and the supplier is simply free to go elsewhere? Keep in mind that the concentration of market power in a very few large retailers means there's little in the way of options to sell to an independent wholesale market.
Your facts are of limited relevance. Yes, most produce is exported because it is focussed in a small number of areas (beef etc.), and we simply couldn't consume the amount produced. Yes, production in some (export-led) sectors is booming, based on increases in global food prices. The exact numbers of big players fluctuates, but their combined market dominance continues to increase.
The supermarket's PR machines have done a good job if people think all is rosy and we're well served by a competitive market. It's so much easier to indulge in some headline grabbing promotions than have some real competition.
If all was well with competition, one would expect prices to lower and align with other markets: the fact is margins are much higher here. Of course, it's next to impossible to find out what they actually are at a detailed level; as the supermarkets would say: move along here, nothing to see......
T McGibney
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These examples are not evidence of market distortion.
The fact that our food industry is booming amidst a recession has nothing to do with supermarket PR.
Do you really think that Agri Aware want "real competition"?
Prices have lowered and aligned with the UK - that's why the cross border shopping boom came to an end. Even the likes of Asda have found it hard to beat Aldi or Lidl on price.
Gerry Canning
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Well folks;
True Ireland exports a lot of agri produce.
Beef, milk, lamb and then more beef,milk, lamb.
We import a lot of veg/fruit that we could/should produce at home.
So if we let the market decide and we at some stage may have to live on Beef,Milk and Lamb.
I am just suggesting, lets make sure we keep Farmer Carrot, Farmer Apple etc alive.
I think I would prefer some control over variety.
True Ireland exports a lot of agri produce.
Beef, milk, lamb and then more beef,milk, lamb.
We import a lot of veg/fruit that we could/should produce at home.
So if we let the market decide and we at some stage may have to live on Beef,Milk and Lamb.
I am just suggesting, lets make sure we keep Farmer Carrot, Farmer Apple etc alive.
I think I would prefer some control over variety.
T McGibney
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How do we do that if we make it more difficult for retailers to purchase from them, relative to foreign competitors? Serious question.
I guess it depends on what you call market distortion. I'd say it's a distorted when suppliers don't have an effective choice of where to sell their products due to market dominance and cartel like practices in the market.
Your statements are increasingly bizarre - I never suggested it did. Quite the opposite: I gave the reason (increase in world food prices, leading to export business booming).
My point about supermarket PR was that it was clearly working if they have people believing there is a competitive market working to consumer's interests.
The facts are otherwise. Household spending on groceries is still significantly more here than the UK, so either we're indulging ourselves with more expensive items, or the cost of those items is higher.
T McGibney
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You're saying there's a cartel even as Aldi & Lidl have grown their business hugely in recent times, in a shrinking market?
You're saying suppliers don't have an effective choice of where to sell their products, even as their profits are rocketing, and export (and domestic) markets are crying out for their produce?
Does the increase in Aldi & Lidl market share not indicate competition in the market?
Why have people stopped shopping north - even in border areas?
>> introduction of price protection is likely to lead to more problems than solutions
Yes.
The actual question asked in the survey was not going to yield a useful answer, because most people are completely ignorant of the laws of economics, but rather a predictable answer to satisfy an agenda.
Do a survey asking people any question of the following formula:
Do you think the government should introduce laws to make sure that [INSERT GROUP THAT EVOKES SYMPATHY] receive a FAIR wage/price for what they DO/PRODUCE?
You will probably get 90% YES if you are true to the scheme I gave. It means nothing.
With words like 'fair' built in, the question is like asking people if the government should pass laws to stop people hurting puppies! I hope we don't have anyone here who would say 'no' to the question, do we?
Yes.
The actual question asked in the survey was not going to yield a useful answer, because most people are completely ignorant of the laws of economics, but rather a predictable answer to satisfy an agenda.
Do a survey asking people any question of the following formula:
Do you think the government should introduce laws to make sure that [INSERT GROUP THAT EVOKES SYMPATHY] receive a FAIR wage/price for what they DO/PRODUCE?
You will probably get 90% YES if you are true to the scheme I gave. It means nothing.
With words like 'fair' built in, the question is like asking people if the government should pass laws to stop people hurting puppies! I hope we don't have anyone here who would say 'no' to the question, do we?