Blog: Dean BestEU farm chief comments on food prices hard to digest

Dean Best | 31 August 2007

The latest comments from EU farm chief Mariann Fischer Boel on rising food prices are puzzling to say the least.

The EU Agriculture Commissioner spoke out against the threat of rising food bills in the EU and warned retailers to act “responsibly” when setting prices.

Fair enough, the Commissioner wants to protect the consumer being hammered in the pocket but what, in effect, could the EU do, should retailers want to raise prices (within reason)?

In any case, at least as far as evidence in the UK suggests, supermarkets are currently loathe to increase prices for fear of losing customers. The likes of Tesco and Asda have spent the summer locked in something of a price war amid fears that consumers’ spending power is being eroded by rising bills and interest rates.

What’s more, Fischer Boel notes the pressure soaring commodity costs is having on farmers and food processors but bizarrely doesn’t reflect on the impact the EU’s own policy has had on the current situation.

The EU’s decision to scrap export subsidies on dairy products has led to the likes of Arla Foods pushing up the price it pays to its farmers to ensure supply, thereby contributing to the increased cost of milk and milk powder faced by food processors.

With global prices for dairy commodities already high due, among other things, to the drought in Australia and weather conditions, the EU’s move puts further pressure on food manufacturers reliant on dairy products.

Secondly, Fischer Boel’s stance on biofuels has provoked raised eyebrows. Fischer Boel played down the impact increased biofuel production is having on rising corn costs, for instance. “Biofuels play a marginal role at most in the EU context,” she said.

However, biofuels are widely seen as a key factor driving up food production costs. It’s a view not just held by food processors staring at a falling supply of corn; a number of analysts also point to growing demand for biofuels as a key factor in the rising cost of corn.

Fischer Boel may say that biofuels have an insignificant impact on food prices “in the EU context” but with the European Commission setting a target for biofuels to cover 10% of EU fuel demand – while also drafting legislation that could force member states to increase biofuel production and consumption – the EU’s passion for biofuels will soon be hitting the bottom line of food processors.

And, consequently, pressure on retailers to raise the price they pay suppliers – and perhaps to raise prices on supermarket shelves – will grow.


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