Although prices of agricultural produce have tended to fall in recent years, threatening the livelihoods of European farmers, consumers have mostly failed to reap the benefits of cheaper food.
In a study, the European Commission notes that agricultural ingredients represent only 5% of the final cost of a loaf of bread, for instance.
Meanwhile, the final shelf price of foodstuffs is increasingly influenced by other costs such as energy, transport, processing and labour.
According to EU farmer's lobby Copa-Cogeca, unfavourable market conditions and rising input costs have led farmers' average incomes to drop to about half the earnings in other economic sectors over the last decade.
The EU executive has expressed concern about the situation and is investigating growing concentration in the food processing and retail sectors to see whether potential abuses by dominant players on the market are affecting farming incomes.
Brussels has also identified "weak transparency and price transmission across the food chain" as problems to be addressed in its November paper on the post-2013 Common Agricultural Policy (CAP).
Earlier this month, the European Parliament called on the EU executive to take action to ensure that the "abuse of market power is redressed".
Farmers want fairer return from market
Direct subsidies to farmers currently take up some 70% of the Common Agricultural Policy's budget, which is valued at around 53 billion euros a year.
Copa-Cogeca says this represents on average two-thirds of farmers' earnings, with direct payments under the CAP's first pillar representing half of farmers' income.
"Farmers are first and foremost entrepreneurs and would much prefer to earn a larger proportion of their income from the market," stresses Copa-Cogeca in its submission to the Commission's consultation on the CAP's future. "A priority must therefore be to reinforce the economic production role of farmers so that they can earn a fair return from the market," it says.
Parliament wants to legislate
In a resolution adopted on 7 September, the European Parliament called for new EU legislation to guarantee fair prices across the food supply chain.
The report, prepared as a response to a Commission communication on the issue, argues that "the bargaining positions of all players in the human food chain must be rebalanced, and fair competition enforced by law, to ensure fair returns to farmers and price transparency to consumers".
The report, prepared by José Bové, a controversial French militant farmer turned Green MEP, proposes the establishment of "codes of good commercial practice, including penalties and a complaint mechanism" to counter unfair behaviour by market players. This could be complemented by an "EU-wide instrument" to monitor trading relations between producers and retailers with the aim of rebalancing them "if necessary".
The Parliament also suggests launching an "EU farm prices and margins observatory" as well as analysing the possible misuse by retailers of their "own-brand" products.
The House also suggests using "standard contracts" between farmers and the food industry which could be made compulsory in some sectors, in order to prevent abusive practices such as forced discounts, late payments, resale at loss or alterations of contractual terms.
Milk sector showing the way
Following the recent milk crisis, an EU high level group on milk adopted a report on 15 June with several recommendations to stabilise the dairy market and ensure a fair income for producers.
The group proposed measures to enhance the use of written contracts in the dairy supply chain and recommended increasing the collective bargaining power of dairy producers (EurActiv 19/01/10).
Based on the recommendations, the European Commission is planning to present a package of legislative measures by the end of the year.
The proposed measures may set a precedent for similar action in other agricultural sectors (EurActiv 08/09/09).
