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Euro Parliament pledges investigation of retail prices

The European Parliament yesterday voted to investigate retailers’ responses to the hike in food prices, but maintained that the increased demand for biofuels is not the main reason for the current situation.

The debate, which took place this week, was the first time food prices were up before the parliament - although the issue has been causing much consternation throughout the food chain, in the media and for consumers. It was called to discuss regulatory action to ensure retailers do not take advantage of the rising cost of raw materials, thereby protecting consumers and farmers from feeling the brunt of the problem.
Speaking at the debate, Neil Parish, MEP for the Group of the European People’s Party (Christian Democrats) and European Democrats in the European Parliament (EPP-ED), said: "Cereal prices have risen threefold this year; the livestock sector is having a huge problem, having seen its feed costs going up by perhaps 50-60% and we are extremely concerned about this." The motion for a resolution was adopted in the House by an overwhelming majority of 464 votes in favor, to 30 against and 44 abstentions.

In adopting a joint resolution of food prices, MEPs called on the Commission and Member States to analyze the discrepancies between farmgate prices and the prices charged by the major retailers. The rise in the cost of raw materials affects every process in the food industry, with the increased price of feed getting transferred from farmers onto ingredients’ producers, then onto manufacturers and retailers. Retailers now face the dilemma of whether they should increase prices it asks of consumers or swallow the costs themselves. UK supermarket Asda declared it would swallow many of the costs, as it was still committed to keeping consumer prices low.

Meanwhile, Germany-based retailer Metro took Kellogg’s products off its shelves earlier this month after the cereal company attempted to pass on higher commodity costs through price hikes. MEPs also urged the Commission to authorize direct payments to livestock farmers, especially to those affected by disease outbreaks, as they may face financial difficulties as a result of the increased feed prices. But Michael Mann, EC Spokesman for Agriculture and Rural Development told that the recent rise in food prices is not as surprising or serious as some may think. He said: “Recent rises in food prices must be seen in context. For years, prices have been at historically low levels. We have seen a knock-on effect on retail prices, but food inflation has remained limited so far. Some foods are increasing in price, others have actually declined.”

There are a number of reasons for the change in food prices. Biofuels have been repeatedly blamed, as use of feed crops for energy means that livestock farmers have to pay more to feed their animals and therefore have to raise their prices to cover costs. But MEPs claimed that the increased demand for biofuels make only a small contribution. “It is not biofuels that are causing the steep increase in prices,” said Commissioner Fischer Boel at the plenary session this week. “We use, today, less that 2% of cereal production for ethanol in Europe, but the reasons are different: adverse weather condition…, increasing demand from India and China, and restricted exports out of Russia and Ukraine. Then, of course, there is a snowball effect from the very strong focus on ethanol in the US and, therefore, a certain influence on the increase of prices in corn.”

The House said that meeting the EU’s biofuel 10% minimum targets by 2020 would still require the use of only 15% of the EU’s arable land. It nevertheless said that more should be done to promote the use and production of second-generation bioenergy, which involves processing manure and agricultural waste materials rather than primary agricultural products. Other areas debated in the plenary session were imports and exports and global food insecurity.

MEPs rejected any moves to impose export quotas and tariffs on EU agricultural production. The House demanded that third-country operators be subjected to the same stringent controls as EU producers. The Commission was also called upon to undertake a stocktaking exercise of possible supply management and food security measure which could avoid further extreme volatility of feed and food prices and unsustainable competition between food and fuel production. In connection with global food insecurity, the Commission was asked to analyze the effects of supply shortages of cereals and oil seeds on the most vulnerable food producers and consumers, while also analyzing in depth world market trends. (foodnavigator)