Vol. 576 No. 2
57 Mr. Gogarty asked the Minister for Agriculture and Food the way in which he intends to address the reduction in percentage terms in the retail price of food which goes to the producer; and the conclusions which farmers draw from this that they should take any opportunity possible to get out of farming. [29332/03]
We do not have a direct role in determining the prevailing prices charged for food products on the retail market. In the European Union Single Market, food products are traded freely and Governments do not have the authority to set the levels of mark-up at different stages of processing and sale.
I take it the Deputy is alluding to the recent report jointly commissioned by RGDATA, IBEC and the grocery wholesalers organisation, IADT, which found that the main influences on increasing food prices, albeit increasing at less than the rate of inflation, were processing and distribution costs and exchange rate fluctuations rather than farm gate prices.
The food sector has adapted to changing consumer preferences brought about in the main by changes in lifestyle and eating patterns. The product which leaves the farm gate does not simply appear on the retail shelf. Continual change in consumer demands has driven the increase in ready to go meals, prepared foods and a range of end products which are much more extensive than were available 20 years ago. A huge range of choice is available to the consumer in prepared foods, meat and dairy products, farmhouse cheeses, preserves, craft beers and confectionery.
The report also highlights the importance of the sector as the largest employer in Ireland, accounting for some 135,000 jobs in manufacturing, distribution and retailing. Given the national importance of the food and drinks industry to the producer as well as to the consumer, it is vital that it is well placed to compete effectively in an increasingly global marketplace. The food sector's challenges are those of economic success.
Significant funding has been and is being provided to the food sector under the national development plan to improve competitiveness, market orientation and innovative capability. These initiatives cover capital investment, marketing, promotion and research measures and are expected to increase sales of food and drink products by €2.5 billion by the end of 2006. One of the main reasons for the existence of these measures is to provide farmers with a ready market for their produce and in many cases, for example, co-operatives, to strengthen the marketing capability of producers.
The retail channel represents the most important route to market for Irish producers. Our Department, in co-operation with the relevant State agencies, has consistently assisted the food industry to establish new markets for Irish food produce and to consolidate our presence in existing markets.
A growing area of importance for some producers is that of direct marketing to consumers – farmers' markets. Farmers' markets continue to grow in popularity and now operate under various arrangements in 22 locations throughout the country.
Additional information not given on the floor of the House.Such local markets give producers an opportunity to sell directly to local consumers and to test-market varieties of product.
An Bord Bia, under the aegis of our Department, has identified the importance of this as a route to market for small food producers. Its web-based guide, Pioneering Routes to Market, identifies the benefits of farmers' markets to producers, consumers and local economies, lists the location of markets and trading days, offers clear advice on what makes for a successful market and outlines the benefits and expansion opportunities in farmers' markets. While this will cater for some producers, the vast majority will have to rely on the routes to market available via the processor and retailer. It must be remembered that the vast bulk of the food we produce is exported to 130 countries worldwide.
While the farm gate price is vital for farmers, and this will be increasingly so in future, it cannot be overlooked that prices are only part of the returns to producers. Prices cannot be seen in isolation from the direct support paid to producers under the Common Agricultural Policy. My Department, for example, will pay €1.6 billion under EU funded agricultural measures in 2004. This expenditure mainly consists of direct payments to farmers worth on average €13,000 per farmer.
The decision to decouple payments, which I have taken recently following extensive consultation with the agricultural stakeholders, will give farmers greater choice in deciding what to produce. They will be freer than before to focus on the demands of the market and the final consumer. Research conducted at my request by FAPRI Ireland shows that the policy of full decoupling will impact positively on farm incomes.
The Minister of State is correct. I was referring in part to the Tansey report commissioned by IBEC and RGDATA which confirmed that farm gate prices do not contribute to food price inflation and that the costs arise beyond the farm. However, that is another day's work and is not a question for the Department of Agriculture and Food per se.Is the Minister of State aware, however, that there is a problem in some quarters with the retail sector, that none other than Mr. Ben Dunne has informed us that there is now a 26% gross margin on food compared with an 11% gross margin he claims was the norm when he ran his family business in the 1990s, and that farmers are paid less than €2.30 per kilo for beef while the shopper pays more than €7.40 for stewing beef?
On milk prices, a farmer I know in west Cork has informed me, and perhaps the Minister of State knows this, that there is a 30% mark-up on food in supermarkets where it was once 20%, and that while milk prices to farmers are higher now than they were 15 years ago, farmers' inputs have increased considerably due to inflation. What more can the Minister of State do to help direct sales given that marketing in the global context will not bring further comfort to farmers if the retail price is squeezing them?
The reports to which the Deputy refers clearly show that consumer prices have increased on average by 15.9% since 1999 and food prices by 13.6%. That is a difference of 2.3%. When we take into account that this is a primary food producing country and that the food industry is worth €13 billion per annum and employs 135,000 people, directly and indirectly, it would be expected that food inflation should be less than the ordinary consumer product inflation because we produce volumes of food and export up to 90% of it to 130 countries worldwide.
We have discerning consumers who demand greater choice than ever before and a competitive European Union market which will grow from 350 million consumers to more than 405 million when the new members join next May. In addition to that, in the global marketplace we have won major niche markets and An Bord Bia, through the Department's funding, does tremendous work in marketing.
The Deputy must realise that, in that type of environment and taking into account the competition, the discerning consumer and the fact that we are a major food producer, there must be a difference between primary consumer price increases and food price increases. If that were not the case, there would be something seriously wrong with the industry. How we can increase the markets and get a greater return—
I draw the Minister's attention to the one minute time limit.
My apologies.
Is the Minister of State aware of reports that one of the multiples had indicated to its suppliers that, if they supplied to other groups, they would lose their contract with it? If he is aware of these reports, would he like to express a view on them? Is he aware of reports that farm unions across the EU may form a cartel? Ultimately, the only way they will get their fair share of the cake, so to speak, is by combining their forces and using those as a bargaining chip.
I have a huge interest in marketing. I spent 14 years in livestock marketing before I entered politics. At that time all the different customers were in the ring but that has changed since. Farmers' co-operatives have changed their policy and, as matters evolve, there is a huge change in the procurement system which has a major impact on the prices paid to farmers. It is important that farmers, as the primary producers, receive the maximum return on their product.
There is some hearsay evidence that the problems to which Deputy Timmins refers exist. We have repeatedly sought written documentary evidence to pursue that. We have yet to receive one documented case but, if we do, we will pursue it. Other State agencies have responsibility in this area. Nothing can be done to ensure equity, fairness and a full return to the primary producer if there is a difficulty, latent or otherwise, within the system. We must have documentary evidence of the problem which we still await. It is not available. When it is, we will pursue it.
