Why size matters when it comes to making Spanish farm incomes fairer
Before COVID19, the whole Spanish agri-food sector — producers, cooperatives and marketers — protested as a single man demanding fair prices that could at least cover their production costs.
The perception of Spanish producers is that food prices are built from the end of the food chain to the beginning, from the consumer to the producer, and that farmers generally only receive what is left.
The protest marches in February led to an amendment to the Food Chain Law by the Spanish Ministry of Agriculture. Now, the price of anything sold by a commercial farming operation must be above the cost of production.
Putting pricing laws into practice
This is relatively easy to put down on paper, but not so simple to do in practice.
This is because production costs are not homogeneous among all the producers, and setting prices is forbidden by Spain’s National Commission on Markets and Competition.
Furthermore, these strategies could jeopardise market freedom and the competitiveness of food production.
This situation is not new, as perhaps it is a consequence of how the Spanish agri-food value chain is structured: producers are many and scattered, while other stages of food industry and supermarkets are much better organised.
If there are five people buying and thousands of producers selling, it’s clear that the one who holds the pan’s handle is the one who buys.
The power of cooperation?
One potential solution being touted is Spanish agri-food cooperatives, who represent two thirds of the value of final agricultural production in Spain, and almost 30% of the value of net sales of agribusiness.
However, there are more than 3500 cooperatives in Spain already — nearly 1000 of which are producers of olive oil.
And with large quantities come less power and lower prices: For example, four of the most powerful Dutch agri-food cooperatives bill the same as the 3500 Spanish ones.
The average turnover of an agri-food cooperative in Spain is €7m, while in other northern European countries this figure is between €300m and €400m. There is clearly much to be done.
Growing for the future
But it would be unfair not to recognise that in recent decades the Spanish cooperatives have also been transforming to focus the challenges of the new economy, advancing in the integration processes as their social and economic impact has grown.
This has been the case of success of several second-degree cooperatives in the fruit and vegetable sector, bringing together thousands of producers who have seen the need to gain dimension in a globalised economy where they are now world leaders.
Therefore, although the Spanish Food Chain Law, with its price control tools will be important in the short-term to avoid abuses, perhaps in the medium and long-term it will be more useful the Agri-food Cooperative Integration Law, which promotes the union of small cooperatives that alone would have a difficult future.
Jesús López, group editor of Agricola, reporting for Farming Unearthed. Listen to this story on the Farming Unearthed podcast here.
