Letter from Europe: Will price pressures lead to more acceptance of GM foods?

Tuesday, March 2, 2010

Politicians – and farmers – say it's time to say goodbye to cheap food policies in Europe. But consumers still continue to seek low prices – and the biggest supermarket chains are making sure they get them

by NORMAN DUNN

The era of cheap food in Europe is over. That was an announcement from the European Parliament in 2009. Trouble is, no one has told the union's 500 million consumers.   
Let's take milk as an example. Supermarkets almost everywhere looked like they were responding to pressure from farmers for more money. They added around 10 per cent to retail milk prices in mid-2009. But the real reason was a shortage of milk in the summer.

It's true that a commendable number of retailers – in Germany and Austria, for example – started "fair price" programs last year. These added the equivalent of up to C$0.15 to the cost of a litre of drinking milk, with similar additions for yogurts or cream. This extra money was handed over to farmers. While such arrangements still continue, they represent only a fraction of total sales.

Discount prices for dairy products have been roller-coasting up and down through 2009, but generally at levels low enough to cause widespread demonstrations from angry farmers who see pressure from the retailers as a major cause of their low incomes.
Average processor payments throughout 2009 levelled out at $0.38 per litre in Germany and a few cents more or less in neighbouring countries. Meanwhile, full production costs per kilogram of milk (but not counting costs of buying production quota) in the same period have been put at around $0.53, a figure reached by analysis of 231 dairy farms by the club of European Dairy Farmers.

By the end of 2009, discounters had again reacted by hoisting dairy product prices by at least 10 per cent. Now 3.4 per cent fat drinking milk is retailing at around $0.80 per kilogram. But low-fat yogurt prices have in fact slumped by around 10 per cent in some outlets to the equivalent of $1.20 per kilogram. The same goes for cream cheese at $1.36 per kilogram.    

In this whole development, it is plain to see that the battle for customers has first priority with food retailers. Survival of the producers – the farmers – is being left to the politicians. But what about the customers? Price of food is still the main criterion, that's clear. "Buy local food" campaigns in north European countries have been winning some friends and supporters.    But, in this respect, the north and south of Europe are completely different. Down south in Spain, Italy, Greece and some parts of France, consumers have a tradition of buying locally. They pay more this way maybe, but there's usually better quality control, smaller production and distribution carbon footprints and local social infrastructure can be boosted.

Plenty of studies indicate that the power and influence of supermarkets in food sales is generally much less in the south. It's also widely agreed that consumers there are willing to take much more trouble in getting the quality of food that they want. Normally, this attitude cannot be found further north. 

So-called luxury foods have an especially hard time in this economic climate. Just take a look at what happened this winter with the famed jamon Iberico – quality hams from Spanish black pigs – or with the equally well-known French delicacy of pâté de foie gras from goose and duck liver. The economic crisis led to jamon Iberico sales falling by 20 per cent throughout Europe in December 2009, usually the top sales time. Around four million hams were still unsold in early January according to Julio Revilla, chairman of the Spanish meat industry association "Iberaice."

Admittedly, some Spanish producers have to bear at least a portion of blame for this debacle. They increased production of cheaper hams from grain-fed cross hogs and were selling them as "special" – at the expense of the high quality black hog meat produced out in the countryside, mainly on a diet of acorns.

But the French producers of foie gras have been innocent of such marketing malpractices and still suffered dramatic drops in sales this festive season with producers reportedly having to give away 14 tonnes of the delicacy – normally retailing at up to $120 per kilogram – after failing to sell it either at home or abroad. 

But, to get back to "normal" food, the logical result of the continuing low price pressure from supermarkets and consumers could very well be acceptance in Europe, after years of resistance, of genetically-modified (GM) crops and the resultant feeds and foods. After all, the major argument for GM crops is that they can be grown more efficiently and at least slightly less cost than conventional production. On these arguments alone, we should see more crop bioengineering accepted very soon in Europe. BF

Norman Dunn writes about European agriculture from Germany.