{"id":890,"date":"2024-04-17T13:45:27","date_gmt":"2024-04-17T11:45:27","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=890"},"modified":"2024-05-27T19:46:33","modified_gmt":"2024-05-27T17:46:33","slug":"fair-prices-for-farmers-it-also-depends-on-us","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/04\/17\/fair-prices-for-farmers-it-also-depends-on-us\/","title":{"rendered":"Fair Prices for Farmers: it also Depends on Us"},"content":{"rendered":"

Rising final prices and declining remunerations for agricultural companies: a paradox that farmers attribute to large-scale distribution and competition from low-cost products. In a globalized world, however, alternative solutions require a cultural shift from both consumers and producers.<\/span><\/i><\/p>\n

The Concept of a “Fair Price” for Agricultural Products<\/b><\/h3>\n

The notion of a “fair price” for agricultural products has become a recurring mantra on the front pages of newspapers. What farmers complain about, often quite strongly, is the <\/span>discrepancy between the price at which their products are purchased and the final price at which they are sold in supermarkets<\/b>, pointing the finger at major players in the food supply chain. Although this accusation may be well-founded, the phenomena determining agricultural prices are numerous, heterogeneous, and interconnected, and require the analysing of data and facts in order to understand the underlying causes and thus take appropriate action.<\/span><\/p>\n

Product Value<\/b><\/h3>\n

In a jar of hazelnut spread, hazelnuts account for between 2% and 4% of the shelf price; a bagged salad\u2019s final price is three to five times higher than the price at which it is sold by the producing farm, based on my professional experience. Generally, for every 100 euros spent by consumers on food products, farmers retain a share varying between 6% – for processed products – and 22% for fresh products (figure 1), which is effectively reduced to 2% and 6% respectively after deducting the farm\u2019s production costs.\u00a0<\/span><\/p>\n

It would be reductive to attribute this margin solely to the industry\u2019s and organized large-scale distribution\u2019s unfair practices, which indeed put great pressure on agricultural companies due to their negotiating advantage\u2014there is, in fact, a specific decree that identifies and prohibits such practices. The real reason is structural, dependent on the nature of the sector and consumption styles.<\/span><\/p>\n

How the Food Supply Chain Works<\/b><\/h3>\n

In production chains, each player adds value to the raw material or product by transforming, modifying, or moving it towards the final customer. <\/span>The food supply chain is typically comprised of five stages: technical equipment suppliers, farmers, wholesalers or industries, retailers, and finally, consumers.<\/b> In an advanced economy like ours, most of the value moves along the chain, from the farm to the industry and distribution services. This is not due to unfairness, rather, it\u2019s a response to our consumption habits that place value on properties such as taste, variety, ease of preparation, shelf availability, producers\u2019 and distributors\u2019 reputation, and the location of the store. <\/span>This modifies the added value along the chain<\/b>, reflecting an economy where convenience and variety guide choices. If there\u2019s someone to blame, it should be ourselves.<\/span><\/p>\n

There is also another aspect to consider: in the industrial process, standardization is crucial. Technical equipment suppliers provide farmers with standardized seeds and instructions to ensure the required quality. This makes agricultural products indistinguishable if not for price and quantity, turning them into actual <\/span>commodities<\/span><\/i>. As this depends on external technologies, the farm loses part of the value.<\/span><\/p>\n

Completing the Picture: Rising and Volatile Production Costs for Farms<\/b><\/h3>\n

Energy and fuel costs significantly promote price increases. Synthetic fertilisers, of which the European Union is a net importer, are equally critical. To give an idea, according to Fertilizers Europe data, in 2022, European urea production was cut by about 70% due to gas costs, and imports increased by 247%: in actual fact, Europe imported 95% of its needs, 40% of which came from Russia.<\/span><\/p>\n

It is not surprising, then, <\/span>that many farms find themselves in a condition of great economic and financial fragility<\/b>. What is the way out of this trap? The simple answer proposed by many is direct selling. However, those who make this claim do not consider that only a very few farms are capable of implementing this form of sales: it depends on the product, the location of the farm, as well as its managerial and financial capabilities. Unfortunately, the real solution is neither simple nor immediate, as it involves <\/span>changing the way we produce and consume.<\/b><\/p>\n

Regenerative Agriculture<\/b><\/h3>\n

Let’s start with the ways in which we produce. If the volatility of production costs for farms\u2014due to energy, oil, and fertilizers\u2014is uncontrollable, we need to rethink their structure. Although it may be feasible, it requires a paradigm shift: agriculture must change their approach from an industrial to an agroecological one, one that works with the ecosystem. A solid possibility for change comes from <\/span>regenerative agriculture<\/b>\u2014not to be confused with other types of agriculture, such as organic. Based on today\u2019s deeper understanding of how ecosystems function, it includes a set of techniques aimed at enhancing what each ecosystem can autonomously offer. This approach is <\/span>not only<\/b> more efficient as it minimizes the use of synthetic fertilizers and fuel, but\u00a0 it also helps absorb CO2 from the atmosphere by storing it in the soil as nutrient for the plants.<\/b><\/p>\n

This change is already underway, and more and more farmers are acknowledging the multiple benefits of regenerative agriculture, which include the reduced exposure to input price volatility. Obviously, the transition process is slow and does not yield the same results on all crops. To break free from the conventional supply chain structure, a further change is required. We are used to thinking of the food supply production chain as a sequence of actions that place on the shelf whatever the customer wants. Thanks to research, logistics networks, and widespread retail outlets, the industry and distribution can now meet very complex and articulated needs. However, aside from the material aspect, there is a social need that supermarkets fail to fulfill: the connection with the producer of the item found on the shelf. In the current consumption model, the chain acts as a kind of insulator, preventing small farms from connecting with the consumer.<\/span><\/p>\n

Reinventing Direct Sales<\/b><\/h3>\n

Over the last forty years, various initiatives have emerged with the aim of addressing this structural flaw: direct sales at the farm, home delivery, community-supported agriculture, farmers’ markets, urban gardens, and zero-mile stores. However, none of these models work except on a very small scale. Other than the difficulties faced by agricultural companies, which result in steeper prices than large-scale distribution, the main reason for its failure is that all these models require an awareness and “active behavior” by part of the consumer. Consumers who put thoughts, values, and beliefs into action, are all but many. In the United States and the United Kingdom, the first countries in which alternative forms of distribution spread, the majority of products are still distributed through conventional channels (97% in the United States). It has thus become very easy to call the efforts to shorten the supply chain a fad of the “ZTL elite”.<\/span><\/p>\n

Therefore, we must change course and <\/span>leverage another value recognized by consumers, the “root” of the product; the intangible value we place on a product if it originates from a specific place and community.<\/b><\/p>\n

From this perspective, the fundamental reason to shorten the supply chain is not just to cut out the middleman, but rather to offer a differentiated product to the consumer through its origin\u2014a product with an identifiable quality, freshness, sustainability (in this instance, regenerative agriculture allows for even more value), and local origin.<\/span><\/p>\n

Creating an alternative market is possible, but it can\u2019t be done by multiplying the producers’ markets we know today. To overcome their intrinsic inefficiency\u2014both in terms of available product volume and the infrastructures needed to meet the demand for local and sustainable food\u2014we must envision large aggregations of producers who share physical structures for distribution and processing.<\/span><\/p>\n

For farmers, aggregations are not a new concept: from producer organizations to consortia, cooperatives, and networks. Unfortunately, not all of these have been successful. Some function very well, ensuring a more equitable distribution of margins along the supply chain and recognizing the products\u2019 value. Others have proved completely ineffective in pursuing these goals, oftentimes because the aggregation\u2019s pursuit of higher sales volumes and economies of scale do not cover the higher costs. Successful initiatives, however, are based on the principle of creating a short supply chain centred on the intangible value of the product, its roots.<\/span><\/p>\n

In a strategic approach that aims to create short supply chains, cooperatives, consortia, and producer organizations can act as coordinating structures. They must, however, apply a federative principle that allows farms to maintain their individuality, organizational independence, brand identity, and management approach: organizations that work on entering the market by sharing physical assets of adequate size with a shared strategic agenda. In other countries, such initiatives are called food hubs. There are very few like this in Italy, the closest examples being <\/span>Campagna Amica <\/span><\/i>by Coldiretti and <\/span>Il Buon Gusto Veneto.<\/span><\/i><\/p>\n

From a logistical standpoint, a food hub is nothing more than a center for aggregating local production, which is then distributed to customers or directly to end consumers\u2014a function already largely fulfilled by the general markets present in all cities. What sets them apart, however, is an <\/span>alternative business model<\/b>, one in which agricultural companies do not standardize products to customer standards, but rather <\/span>make diversity their strength.<\/b><\/p>\n

For example, <\/span>il Buon Gusto Veneto<\/span><\/i> is an aggregation of 30 associated companies with a total turnover of almost 500 million euros, which owes its success precisely to the heterogeneity of products and producers, with the centralization of only managerial figures. Inevitably, the success of initiatives such as this one is also linked to the ability of each entrepreneur to self-assess and build interrelationships within the network.<\/span><\/p>\n

Perhaps the secret of a real food hub is precisely this: the ability to interact and coordinate among equals within the framework of a common supra-company strategy. An ability that is rarely found in the Italian agricultural landscape.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Rising final prices and declining remunerations for agricultural companies: a paradox that farmers attribute to large-scale distribution and competition from low-cost products. In a globalized […]<\/p>\n","protected":false},"author":5744,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[],"coauthors":[61],"class_list":["post-890","post","type-post","status-publish","format-standard","hentry","category-non-categorizzato"],"acf":[],"yoast_head":"\nFair Prices for Farmers: it also Depends on Us - Rivista Eco<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rivistaeco.com\/en\/2024\/04\/17\/fair-prices-for-farmers-it-also-depends-on-us\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fair Prices for Farmers: it also Depends on Us - Rivista Eco\" \/>\n<meta property=\"og:description\" content=\"Rising final prices and declining remunerations for agricultural companies: a paradox that farmers attribute to large-scale distribution and competition from low-cost products. 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