I move:
That Seanad Éireann condemns the failure of the Government and, in particular, the Minister for Industry and Commerce to ensure that savings made from the drop in prices paid to farmers for basic food products have been passed on to the consumers.
I thank the Minister for coming to the House but I regret she cannot stay for the debate.
This is a very appropriate time to consider this issue, as we face a reform of the Common Agricultural Policy which will result in very significant cuts in prices to farmers. It was hoped that some of the benefit of those cuts would be passed on to the consumer. The country benefits from high prices for food that is exported but the consumer benefits if there are low prices at home or, at least in theory, should benefit. The history of the past 15 years, or of the past five years, does not give me much confidence that the consumer will benefit to the extent he should. In a perfect world it could be expected that consumers would benefit in proportion to the farm share of the retail price for food. This varies from product to product but overall it is about 40 per cent. However, when trends in farm product prices and retail prices for the food products covered by the Common Agricultural Policy reform are analysed for the past five years using official CSO statistics, it is clear that the relationship between farm gate prices and consumer prices is far from perfect.
I am concerned that there appears to be an ever increasing gap between the prices which farmers receive for their produce and the prices consumers pay. This concern arises for three broad reasons. First, less and less of the consumer's pound is being passed back to the primary producers as the processing, distribution and retailing sectors increase their margins. Second, food consumers should obtain reasonable value for money and not be exploited through excessive marketing margins in the food distribution chain. Third, for many products — particularly pigmeat, liquid milk, milling wheat, potatoes and eggs — the domestic market is the most important market. For other products, such as heifer beef and lamb, the domestic market is a very significant market.
The fact that Irish farmers get the lowest prices in Europe is not reflected in the price of food to the Irish consumer. Comparision of food prices across the Community are difficult not only because of the differences in currencies but also because most countries have VAT on food at various rates while Britain and Ireland have no VAT on food. However, we can at least look at the consumer prices in Northern Ireland and England and see that they get better value on most items and the farmers there also get better prices.
The floor prices of most of our main farm products are now determined in Brussels, but substantial variations above floor prices regularly occur. When prices to our farmers increase that is reflected immediately and fully in consumer prices but when prices to the farmer drop there is a time lag in the fall of food prices, and the drop is never fully reflected. Amid all the ups and downs in prices there is one disturbing underlying trend, the proportion of what the consumer pays going to the farmer is in continual decline and the margin to the distribution chain is on the up and up.
If we take a few examples over a five year and a 15 year period, using CSO figures, it is easy to see the consumer is getting less than good value for money and the trade is taking an ever increasing margin. Comparing 1985 and 1990 we find, for instance, cattle prices were 10 per cent lower in autumn 1990 than in autumn 1985, but beef prices to the consumer were 18 per cent higher; milk prices in 1990 were 7 per cent above the 1985 level but butter and cheese prices were almost 40 per cent higher than in 1985; cereal prices were roughly the same in 1985 and 1990, yet the price of bread was roughly 25 per cent higher in 1990. If we take a 15 year timescale between 1975 and 1989, inclusive, and compare the ratio of the price the farmer received with what the consumer paid over a range of products, we find the marketing margin has increased by over 30 per cent. Let us take some examples: the meat marketing margins went up as follows: steak, 32 per cent; lamb, 46 per cent and pigmeat, 56 per cent. The marketing margin increases for other items were: liquid milk, 28 per cent; cheddar cheese, 26 per cent; butter, 11 per cent; bread, 18 per cent and eggs, 33 per cent.
The greatest rip-off of all is liquid milk sold in retail outlets. In Britain, milk sold in supermarkets is 11p (sterling) per litre cheaper than doorstep delivery. If that price difference were applied here to all the milk sold through the supermarket checkouts and other shops it would save the consumer roughly £20 million per annum. In other words, the multiples are creaming off excessive profit of the order of £20 million at the expense of the consumer. That is partly due to the behaviour of the bottlers because when Ben Dunne tried to reduce the retail price of the litre of milk the processors denied him supply, which was a rather foolish move. They did so in the belief that if too much milk was sold through supermarket outlets we would cease to have doorstep delivery and in that case it was felt that there would be a decline in the consumption of liquid milk.
The evidence for that is not at all clear. In the United States, where about 95 per cent of all milk is sold through supermarket checkouts, the decline in milk consumption is roughly the same as here. In Finland, where there is no doorstep delivery they have the highest consumption of liquid milk in the world. In Denmark, where the doorstep delivery ceased some years ago, the decline was not all what was predicted. It was partly offset, of course, by an increased purchasing at the supermarket, because of reduced prices.
The lesson from this is that we must be much more vigilant about prices. Competition is not always a sufficient safeguard, especially when the bulk of the grocery trade is handled by a very small number of companies. I know there have been price wars between these companies but they are largely phoney wars. Price cutting occurs on a very small range of products, probably three or four out of perhaps 3,000 products. Consumers are led to believe that competition is taking care of them — it is anything but that.
If we go into these figures in more detail, we discover what percentage the producer gets nowadays compared to some time ago. I will just take a small number of items. In 1975, for instance, the egg producer was getting 66.2 per cent of the purchaser's price; and by 1989 that percentage to the producer had dropped to 49.7 per cent. If we take the sliced pan, in 1975 the producer's share of the retail price was 21.9 per cent; by 1989 it was 17 per cent and by 1990 15.4 per cent. The liquid milk producer's share of the retail price of liquid milk in 1975 was 58 per cent, and by 1989 it was 45 per cent. Also in the milk sector, in 1975 the producer's share of the retail price of cheddar cheese was 59 per cent, and by 1989 it had fallen to 46 per cent.
Another way of looking at this is the retail producer price ratios. In all these the proportion going to the retailer has increased. If we compare the ratios to one cut of meat it can be misleading, so if I will take examples of different cuts over different years we find as follows: in the case of beef, round steak, the percentage increase in the ratio between 1989 and 1975 was 29 per cent but more significantly between 1975 and 1990 it was 42 per cent; for sirloin steak from 1975 to 1989 the increased percentage margin was 39 per cent and between 1975 and 1990, 53 per cent; for rib steak the ratio between 1975 and 1989 was 27 per cent and from 1975 to 1990 it was 42 per cent. On average, between 1975 and 1989, a 32 per cent increased marketing margin occurred and between 1975 and 1990, a 40 per cent increase. The same kind of analysis for lamb will show that for a whole leg of lamb the increase from 1975 to 1989 was 36 per cent and from 1975 to 1990, 53 per cent; for loin chops the figures were 59 per cent and 69 per cent and for gigot chops, 44 per cent and 48 per cent. It is in relation to pigmeat that the greatest rise took place: pork loin chops showed an increase between 1975 to 1989 of 66 per cent and from 1975 to 1990, 83 per cent; back rashers, 50 per cent and 65 per cent and ham, cooked, 51 per cent and 63 per cent, or an average between 1975 and 1989 of 56 per cent and between 1975 and 1990 of 70 per cent. The big jumps between 1975 and the latter part of the eighties is due to the fact that there was a drop in the price to the farmer which was not reflected in the price to the consumer.
I would like to summarise these changes without going into too much detail on figures. For food items covered in this analysis, the weighted average increase in the marketing margin was 32 per cent between 1975 and 1989; in the case of meat products the weighted average increase in the marketing margin in the first half of 1990 alone was 10.75 per cent. For the 15 food items analysed all but two, namely butter and potatoes, show a substantial increase in the marketing margin between 1975 and 1989, in other words, the farmers' share of the consumers pound has diminished continuously and significantly. Of the 13 food items which had an increased marketing margin, the increase in all cases was in excess of 25 per cent between 1975 and 1989. For all three sheepmeat products the increase in the marketing margin was in excess of 35 per cent and for all the pigmeat products was in excess of 50 per cent.
We must be especially careful the consumer gets the benefit of reduced prices to the farmer. The evidence to date over a period of 15 years or more would not indicate that that is likely to happen to the full extent at least. It is very important that at least the consumer sector of our society should get some benefit from reform of the Common Agricultural Policy. I formally recommend this motion to the House and urge the Minister for Industry and Commerce to be more vigilant about ensuring that the consumer benefits from any drop in farm gate prices.