Unlock the “black box”: EU seeks to boost transparency in agri-food supply chain

23 May 2019 --- The European Commission’s (EC) is pushing for equal access to and greater clarity about crucial information on how prices are determined as agri-food products move along the food supply chain. The move follows earlier efforts to ban unfair trading practices (UTP) and improve producer cooperation.

Having access to timely and easily accessible information about market developments is key to compete effectively in global markets, says the Commission. However, there are often disparities in how information is accessed, which puts small-scale farmers at a disadvantage over bigger players in the food supply chain, such as retailers. 

Buying and selling price differences can provide information about intermediary costs (such as transport, insurance, storage, etc.) between seller and buyer. Greater transparency can support better business decisions and improve trust in fair dealing between the stages in the food supply chain.

Currently, there is a significant amount of information available about developments in agricultural markets such as prices, volumes of production, stocks, but there is almost no market information about other key markets in the agri-food supply chain, namely those that operate between farmers and consumers at the food processing and the retail level. 

This “asymmetry of information” between farmers and the other actors in the food supply chain puts farmers at a significant disadvantage in the market and “erodes trust in fair dealing,” notes the EC. 

Wider scope
The EC’s proposed measures build on existing data collection systems and procedures that are already in place and used by operators and Member States to report market information to the Commission, with a now wider scope. Under the proposal, they would cover the meat, eggs, dairy, fruit and vegetables, arable crops, sugar and olive oil sectors. 

“Strengthening the position of farmers in the food supply chain has been a priority for the Commission,”says EU Agriculture and Rural Development Commissioner Phil Hogan. “These new rules will complement the recently adopted directive banning UTPs in empowering weaker and smaller actors of the food supply chain and their introduction reflects the very significant public support that there is throughout the EU to strengthen the role of farmer in the food supply chain,” he adds. 

The EC continues to work towards a fairer and more balanced food supply chain since introducing new EU rules to protect farmers against UTPs by buyers. They are particularly relevant for small and mid-range suppliers who have long been at a disadvantage. The food supply chain is vulnerable to UTPs due to stark imbalances between small and large operators. Often farmers and small operators in the food supply chain do not have sufficient bargaining power to defend against UTPs.

The new rules, supported by 589 votes in favor and 72 against (with nine abstentions) during a vote in March, would blacklist practices such as late payments for delivered products, late unilateral cancellations or retroactive order changes, refusal by the buyer to sign a written contract with a supplier and the misuse of confidential information.

Other practices, such as returning unsold products to a supplier without paying for them, forcing suppliers to pay for the advertising of products, charging suppliers for stocking or listing of products, or imposing discount costs onto the supplier, would also be outlawed unless pre-agreed in the supply agreement.

The anti-UTPs directive needs to be formally endorsed by the European Council before it can enter into force which is likely to be some time next year. 

At the time, FoodDrinkEurope, an organization which has been supporting a fair agri-food chain for the past decade, welcomed the announcement. “The recent increase in retail concentration and the need for more harmonization in the Single Market have raised the issue of an EU-wide approach to fairness, making it a top priority. For the whole agri-food chain to operate successfully, we must ensure that all players are treated fairly,” said FDE’s Director General, Mella Frewen. 

The EC decided to boost transparency in the supply chain in 2016 when the Agricultural Markets Task Force (AMTF) was set up with the aim of assessing the role of farmers in the wider food supply chain and make recommendations on how it can be strengthened and improved.

Based on its recommendations, the EC launched its as­sessment and a public consultation on the improvement of the food supply chain in 2017. An EU-wide opinion poll published then followed in February 2018 which showed that 88 percent of respondents considered that strengthening farmers' role in the food supply chain is important.

Under the latest proposal – which is now open for a four week consultation period – each Member State would be responsible for the collection of timely and accurate price and market data and the Commission recommends that countries choose the most cost-effective approach and do not target small and medium-sized enterprises to reduce the administrative burden. 

Member States would then communicate the data to the EC, who will, in turn, make the monitoring available on its agri-food data portal and EU market observatories. 

Following the public consultation period, the proposal will then be adopted by the EC and is planned to enter into force six months after its adoption.