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Wednesday, 26 August 2015

Is the ongoing war for fair prices between farmers and large retailers the first signal of capitalism defaulting?

What does it matter to ya
When you got a job to do
You gotta do it well
You gotta give the other fellow hell

A few weeks ago French farmers were on strike… again. Their actions were targeted against the end of the milk quota and in particular against the lacking minimum price for dairy, which makes it almost impossible for French and all other European farmers to produce milk profitably.

As the French in general and French farmers in particular showed a certain preference for striking in the past, this strike did not sound so alarming initially. Especially many Dutch and German people will have thought: “Oh, my God. The French are on the loose again”.  

Nevertheless, their strike was alarming. Especially as Belgian farmers followed in the footsteps of their French peers soon and even Dutch farmers were spilling their guts in the media on the same topic.

This is the problem: In order to produce a metric ton of milk (i.e. 1000 kg), a farmer spends around €400 in expenses on food, housing, animal care, interest and other expenses connected to his farm and his animals. Yet, the yields for a ton of milk are currently around €350, as a consequence of the ongoing price wars between the large retailers all over Europe and the fact that the minimum price for milk has disappeared. The consequence is that a farmer loses in average €50 per 1000 kg of milk.

While most farmers can hang in there for a while, it is obvious that these farmers cannot outlast such low prices for their milk forever. On the other hand, it is obvious that the retail wars between the large supermarket chains in Europe will not be solved overnight.

Large producers of food and non-food products, like Coca Cola, Heineken, Proctor & Gamble and Unilever have the relative luxury of selling products that are indispensable for even the largest supermarket chains – except perhaps for German retail behemots Aldi and Lidl). This means that they can refuse to participate in all too outrageous price wars between the large retailers; consequently they are able to keep their prices more or less at a level, where healthy profits can be made.

No, it are the producers of farm products, housebrands and ‘brandless’  goods, like brandless daily household products, cheap dairy, bread, cheap meat, wheat flour, rice etc., who foot the bill eventually. Because they are easily replaceable and no large retailer will shed a tear when they leave, to be replaced by a dozen others.

These producers are forced at gunpoint to give even the most minute margins away for the sake of the latest price war, or else… “For you there are ten others, so you give us the price that we want, or you can get lost!”

In particular farmers have an extremely vulnerable position here: if they don’t sell their agricultural produce, meat or dairy, they won’t earn one cent of revenues, while their lifestock or farmland and produce require respectively expensive food or water, storage space and fertilizer every day.

When they don’t earn any money, they will default within a few months. So they have to follow the quirks of the large supermarket chains and offer their products at sales prices that lie below cost price, for as long as they can sustain these losses. In the meantime they try to raise their margins.

There are roughly two ways in which cattle farmers can raise their margin:
  • Using the cheapest possible cattle food in order to reduce the cost price of their meat and dairy to the bare minimum;
  • Creating a much bigger live stock in order to achieve economies of scale,  while keeping their cattle inside all year long and aiming at the most industrial way of farming from the cradle to the slaughterhouse.

Suffice it to say that both solutions are neither in the interest of the animals nor of the farmer himself. Most farmers care deeply for their cattle and their products and want their lifestock to live under optimal circumstances. Unfortunately, they are forced to produce their meat and dairy in a way that lies below their own lowest quality standards and violates all concepts and notions that these farmers had in the days that they decided to become farmer. They are simply struggling to survive and left their ambitions a long, long time ago.

For horticulturists and agricultural workers, the situation is hardly better. They are also forced to produce at absolute bottom prices, forced upon them by the large retail chains, in order to survive.

These are the reasons that the French dairy farmers went on strike and that their colleagues in other European countries already followed or might follow their example soon.

Especially in a country like France, where tradition and artisanial production is very important and where they generally dislike (or hate) the industrialized farms that become common in other countries like The Netherlands, this battle for the lowest possible price became a struggle for life and death.

And in my opinion it is even more. It seems almost that capitalism itself is on the line in this particular and many other situations.

In their war against cartels on behalf of the (perhaps utopian) ‘free market’, it seems that the EU and its member states have created a small number of ‘untouchable’ brands and retail store chains. Brands and store chains, equiped with almost absolute power in the market, who only play for keeps, while trying to obliterate their competition.  No more live and let live for these brands and store chains, but live and let die.

These are brands and store chains, who “enslave” their numerous, nameless suppliers at the price of expulsion and bankruptcy, in order to get the lowest price possible. Humans all over the world and animals suffer for their desire to annihilate the competition and offer the holy grail (i.e. absolute bottom prices) to their consumers, who – battlestruck from the enduring economic crisis – got used to the fact that many things are much cheaper now than in their childhood, twenty or more years ago.

What is this capitalism worth when it victimizes so many humans and animals in order to achieve a Pyrrhic victory for a few suppliers and retailers, “on behalf of the holy consumer”?! And what it is worth, when it puts the food supply for whole nations under jeopardy, as farmers who can’t survive the battle for the lowest price anymore ‘perish in their battle against the oligopolists’ and look for another profession of which they cán live eventually?!

So please let us not dismiss the French and Belgian farmers and look with disdain at them… for simply being “strike-hungry” French and Belgian farmers. Let us instead support them in their battle for fair prices for produce, meat and dairy.

And let us not follow the Utopian free market, as if it is a divine power that must be worshipped at all costs. Let us use our minds and stop the mindless price wars in the retail industry. And let us consumers pay fair prices for our daily groceries, clothes and other daily consumer products. If we refuse to do so, this could be the beginning of the end for capitalism as we know it! 

Sometimes, the price of having the lowest price at all costs, is simply too high!

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