I thank the Chairman and committee for the invitation to discuss retailers and retail legislation. Before I start, I want to speak about the Ukrainian people and, in particular, Ukrainian farmers. I want to pass on our sympathies to them on what is happening out there at the moment.
Again, I thank the committee for its invitation to discuss the issues facing the pig, poultry and horticulture sectors. I am joined by IFA poultry chair, Mr. Nigel Sweetnam, IFA senior policy executive for retail, Mr. Robert Malone, and IFA policy executive for horticulture, potatoes and organics, Ms. Niamh Brennan.
The challenges facing the sectors we are representing here, namely horticulture, poultry and pig farmers, are multifactorial but centre around the increasing costs of production and the dominant position of a small number of retail buyers, resulting in ever tightening margins. These three sectors are going through a very difficult time. Energy, feed and fertiliser bills are overwhelming for farm families trying to run their businesses. These same farmers are being squeezed from all sides with the added actions of retailers who are relentlessly pushing down the retail price of their products and embarking on unsustainable discounting to encourage store footfall.
Produce from these sectors is dependent on the Irish retail sector for routes to market. Apart from mushrooms, virtually all horticultural produce is for the home market. Poultry production is centred around servicing the home market, with some low-value offcuts exported. The Irish pig sector, while generating significant export value of close to €1 billion per annum, is reliant on the home market, predominantly the retail trade, for 50% of all sales.
Retail food price deflation from 2010 to 2020 is putting huge downward pressure on farmers’ margins. The falling price of food, and of fresh produce from the horticulture sector in particular, has resulted in squeezed margins for primary food producers and it now poses a significant threat to the viability of primary food production in Ireland in these sectors. The horticulture sector, similar to the pigs and poultry sectors, depends on getting a viable return direct from the marketplace as farmers in this sector generally do not receive direct payments under the Common Agricultural Policy, CAP. While there have been some moderate increases in food prices on the shelves in recent months, the reality is that between January 2010 and December 2021, the average price of all food declined by 9 %. Over the same period, the average level of overall consumer prices increased by 12.5%, according to the CSO. As a consequence, only a small number of horticulture growers have survived. They have been forced to scale up and all are extremely vulnerable today. This situation is replicated in the pig farming and poultry sectors.
The Department of Agriculture, Food and the Marine published a strengths, weaknesses, opportunities and threats, SWOT, analysis of the Irish agrifood sector in 2021 and clearly identified that the primary producers’ share in the value chain is very low and is well below the EU average of the total value-added share which is being passed back to farmers.
Today’s retail environment is dominated by five players, Dunnes Stores, SuperValu, Tesco and the two discounters, Aldi and Lidl. Together, these five retailers constitute 90% of the total grocery market in Ireland. It is the latter two, Lidl and Aldi, that have fundamentally had the biggest negative impact on the price that primary producers receive for their produce. These retailers have used fresh produce in particular as marketing tools to attract consumers into their stories, offering fresh fruit and vegetables at discount prices that do not relate to the production costs. Retailers may claim that the cost of special promotions is funded by them and while this may be accurate on a short-term basis, the cost of such promotions is built into procurement prices over time. The reality is that the price farmers get paid each year has consistently declined up until this year. Many primary producers in these sectors have been forced out of business and many more will follow unless strong intervention in the market occurs.
Retail discounters Lidl and Aldi, in particular, use local-sounding brand names and fake farms and creameries to market many of their products. The IFA called out this practice in summer 2021, only to be hauled into the courts by Lidl seeking a court injunction to stop IFA from highlighting this potentially misleading practice. However, the court rejected the application by Lidl and awarded costs against it.
The average price of food increased by 1.3% in 2021, the first year that food has increased in over a decade. The price of food will have to increase further in order for the producers to be paid for their work. The massive increase in energy and fertiliser costs in recent weeks are well documented. These costs cannot be borne by farmers without significant increases in the food chain being passed back to the farmer. While there has been some recognition by the retail sector of these cost increases in recent weeks, it is not nearly enough. We need the food regulator that has been long-promised by this Government and that regulator needs to be given real statuary powers of investigation and enforcement to ensure that there is equality in the food chain.
The EU directive on unfair trading practices, UTP, was transposed into Irish law in April 2021. This is a step in the right direction, but on their own, the UTP regulations will have minimal effect. There is no recognition of the price required to produce a head of cabbage, a kilogram of carrots, a dozen eggs, a whole chicken or a pound of rashers in the UTP regulations.
We are bombarded with talk about sustainability.
There are three pillars to sustainability: environmental, social and economic. Today in Ireland we have legislation underpinning two of these pillars, environmental and social sustainability. There is no legal protection for the economic sustainability of food producers. This has to change.
The Government has the opportunity today and must give the new food regulator office legal powers that go beyond the UTP regulations. It must have the authority to investigate and properly sanction those who breach the regulations. It must ensure the farmer’s position at the bottom of the food chain is not abused as it has been for many years. The Department has set up the UTP enforcement authority as required under the EU directive on UTPs. The Government has committed to setting up and funding a food regulator, or food ombudsperson, to ensure the implementation of the UTP directive and, going further, to provide greater transparency and reporting of where the value is being distributed in the food chain. Budget 2022 committed €4 million to the establishment of a food ombudsman office.
There were an estimated 350 commercial vegetable growers in Ireland in 2010. The IFA now puts this number at fewer than 100, only one third of what we had. This can be almost exclusively attributed to the reducing price being paid by the big retail buyers to their suppliers, forcing more and more of them out of business. The result is what we see on the shelves today: imported broccoli from Spain, imported tomatoes from Holland, strawberries from Egypt and raspberries from Morocco. All these crops can be grown and produced almost ten months of the year in Ireland, but only if the retailers pay the cost of local sustainable production.
Below-cost selling must be prohibited. The IFA is calling for this to be enshrined into Irish law and regulated by the new food regulator office. The discounting and degrading of food must be stopped. Retail buyers must be held accountable for the declining number of farmers in these vulnerable sectors of Irish food production that depend on the Irish domestic retail market. It is a sad state of affairs when farmers who are producing beef and dairy products, where over 90% is exported, are doing better in world markets than farmers suppling fresh fruit, vegetables, pork and poultry to be consumed here in Ireland.
I am calling on every Deputy and Senator here today to ensure legal protection is given to food producers. Legislation on the office of the food regulator must be prioritised and must be underpinned with statutory powers of enforcement. Below-cost selling must be banned. Fairness must be is returned to a fundamentally unfair food supply chain.
