News Sustainability
There is no fair price for the farmer
Although public opinion has often advocated a fair price for the farmer in recent months, Jack van der Vorst of Wageningen UR is clear: there is no such thing as a fair price for the farmer. However, the chain is moving more towards paying the farmer for the social impact he has with his product. Then a level playing field within the European Union would be useful.
This came to the fore at the 'Loss model or earnings model' seminar that ABN Amro held on Wednesday 29 January in Amsterdam. Discussions were held here about how the benefits and burdens towards sustainable food production can be fairly distributed in the chain. Such a fair distribution within a chain is also the only way in which major steps can be taken in sustainability, says Van der Vorst, general director of the Social Sciences Group of Wageningen University & Research. “That is only possible in chains in which all parties work together vigorously, but that has been discussed for 20 years.”
Market failure plays tricks
Paying a fair price for the farmer in any case, so that he can always produce in a cost-effective manner and preferably with a margin, is not possible according to Van der Vorst. The market of supply and demand is too variable for that. Moreover, as he describes it, other factors within a chain also play a role in this 'market failure', such as market power, incomplete market information, emotional trading and transaction costs. “As a result, a fair price cannot be determined.” Wageningen UR has on this subject also made a presentation.
What is clear is that the agricultural sector cannot fulfill society's wishes for sustainable food production if it is not rewarded for these efforts. Pierre Berntsen, director of agricultural affairs at ABN Amro, indicates that there is a great need among agricultural entrepreneurs to increase sustainability, provided that this is also matched by a reliable revenue model. The PlanetProof project at FrieslandCampina also makes this clear, says Frans Keurentjes, chairman of the cooperative. “In no time we had 600 dairy farms that now supply approximately 600 million liters of milk on an annual basis.”
Distinctive milk flow
The project, which is now 1 of the 23 different milk flows at FrieslandCampina, is going well, according to Keurentjes. According to him, PlanetProof has contributed to the fact that FrieslandCampina's products as a whole are also better valued on the supermarket shelf. His ambition is that FrieslandCampina's entire milk flow, in his own words about 1,5% of the total global milk production, will have distinctive added value on the market. “We are working towards that.”
Keurentjes does wonder how long PlanetProof will remain distinctive in the market in the current concept. “How long will the effect last until we have to take another step?” One of the new steps could be to start from the real price of agricultural products, says Michiel Scholte, director of the True Price & Impact Institute. His organization calculates the cost price of a product, including the costs of the impact on the environment such as CO2 emissions, energy, water and land use.
Calculate impact
By calculating these costs, the parties in the agricultural chain can limit the social impact and thus also generate a better position in the market. He presented an example to the audience, in which the 'real' price of a loaf of bread is half the price if a baker buys organic wheat in the Netherlands instead of conventionally grown baking wheat in France. The costs of, for example, CO2 emissions, transport and energy are much lower. “Then a product is really sustainable.”
Leon Mol, director of Product Safety & Social Compliance at supermarket chain Ahold Delhaize, also expects the impact of agricultural products to play a greater role in the purchasing of supermarkets. “We have always mainly looked at food safety, in other words the input from agricultural production. But we are moving more towards impact.”
Level playing field issue
However, the level playing field within the European Union remains a hot topic. All speakers at the seminar indicated that making agricultural production more sustainable can only really be lifted to a higher level if all European member states make agreements about this. Because not only do only 20% of agricultural products go to Dutch retail, 'cheap' imports from abroad make sustainability more difficult. However, there was no ready-made solution for this tough task in commercial policy.
Eric the Thrush
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