THE BLOG

Tackling Obesity in Supply Chains

18/11/2014 12:46 GMT | Updated 17/01/2015 10:59 GMT

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Sadly the saying about 'living off the fat of the land' looks all too anachronistic: half of the world's hungry people are themselves farmers. But if you suggest that farmers in developing countries who grow our food should be paid more, people throw up their hands in horror and cry: 'What about consumers in Europe? How can they afford to pay more? We must keep food prices down for them'.

Fair enough: it's quite a conundrum given how many in Europe are indeed struggling to pay the bills. But why is it seen as inevitable that if farmers are paid more, consumers are the ones to pay the price? What about others in the supply chain: the traders, processors, brands and companies, the marketers and shareholders? For all along the path from farmers to shoppers a small number of significant intermediaries are operating, and making healthy profits: none of them are struggling to source clean water for their village or send their children to school. So perhaps we should take a look at tightening belts around that profitable bulge in the middle; that's where we can cut the fat - so as to release resources for the farmers, and reduce a concentration of power that has become too open to abuse.

A new report released today by an alliance of Fair Trade organizations (Fair Trade Advocacy Office, Traidcraft, Plate-Forme pour le Commerce Équitable, Fairtrade Deutschland and others) shows just how much power is wielded by those heavy-weights in the chain. 'Who's got the power? Tackling imbalances in agricultural supply chains' illustrates graphically how almost universally across agricultural chains, a tiny handful of traders, branded manufacturers and retailers control the terms of trade and make good business in the process. For example, just four corporations trade 90% of the world's grain, and 5 supermarkets control 50% of the market in Europe.

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The problem with this whole set-up is that when a company is powerful enough to be able to set the terms of trade, they not surprisingly set them in their own short-term interests and so don't set them fairly. The report describes how, in times gone by, farmers used to produce their crop and look for a market. Now large buyers decide what they want, how much they will pay, and organize their supply chains accordingly, often favouring larger producers and driving the small guys out altogether, or pushing them into ever more unsustainable practices to survive. The report shows how the big boys have become so dominant that they are almost inevitably taking the lion's share of the value. In cocoa for example the report shows how retailers and branded manufacturers are each taking 35-40% of the value each - leaving the cocoa farmers themselves with just 5%.

For too long, this power in our food supply chains has been a taboo subject, allowing the problem to fester in the dark. Now, from Europe to Australia, our newspapers are full of shocking examples of retailers caught operating unfair trading practices, squeezing prices down retrospectively, threatening to de-list if they are not given extra payments. Just this September, the German Bundeskartellamt published an inquiry into buyer power in the food retail sector, showing that decisive action is needed to prevent a worsening of competitive conditions.

Olivier De Schutter, former United Nations Special Rapporteur on the right to food (2008-2014), in the introduction welcomes the spotlight this report puts on the problem: 'The shifts in power in the agri-food sector have now become too significant, and their impacts too considerable, to be ignored....Indeed the need to improve the governance of food systems in order to avoid instances of excessive domination by a small number of major agri-food companies is hardly ever referred to in international summits that seek to provide answers to the challenges of hunger and malnutrition'.

To change that, the report outlines a comprehensive list of actions needed from Governments to shoppers - and everyone in between. In particular, the European Union and national governments need to update competition laws and to shift from their short-term focus on protecting the consumer from monopolies and the risks of price collusion, to considering long term sustainable solutions for all - including farmers and workers. At present the European framework considers each segment of the supply chain in isolation, remaining blind to vertical control that some companies have right through the value chain. While the European Commission has acknowledged that unfair trading practices are common and may have harmful effects, it needs to overhaul its fragmentary toolkit. For, the report underlines, we will only stop unfair trading practices, if we shift the balance of power, through organized farmers and workers backed by legislative support.

We ask for a lot - we always do - but a lot is clearly needed. If we do this, then we can have our ethical cake for the developing countries' farmers and it can be eaten by those on lower incomes here. But corporate shareholders may have to go on a diet.

'Who's got the power? Tackling imbalances in agricultural supply chains' is available at: www.fairtrade-advocacy.org/power

The report is produced by BASIC (Bureau d'Analyse Sociétale) and commissioned by Fair Trade Advocacy Office, Traidcraft, Plate-Forme pour le Commerce Équitable and Fairtrade Deutschland, in partnership with Fairtrade International and World Fair Trade Organization.

Illustration: Camille Poulie, Graphic: BASIC