Interview Mary Littles
Potato growers may create more market power
The Dutch Arable Farming Union is talking about setting up a producer organization (PO) for potato growers. But is that legally possible on a scale that actually has an impact? Boerenbusiness asks Maria Litjens, who is an independent legal agricultural consultant.
Is it legally possible for producer organizations to make price agreements?
"In general, there is a cartel ban in the EU. Companies in a chain are not allowed to agree on prices. However, the European Common Agricultural Policy (CAP) contains rules for producer organizations. It states that a producer organization may match supply to demand. , supply may concentrate by merging several companies and the price may stabilize. Because agricultural law takes precedence over competition law, these rules also take precedence over the cartel prohibition. So legally there are possibilities for price agreements within a producer organization."
So the legislation is in line with the political ambition to give the farmer a better position in the chain?
"This should be the intention, but the effect in the rules does not show that. The rules have always been vague. However, in 2017 the European Court gave an explanation about the producer organization rules in relation to competition law. I base this on the interpretation of the rules by the Court. It interprets the rules in the sense that the position of the farmer must be strengthened. It is stated that under the European priority rule, the PO rules take precedence over the competition rules. POs therefore fall outside the scope of the effect of the cartel ban. Farmers may make agreements within a PO about price and quantity. This way the position on the market can be strengthened and POs are an interpretation of the political call."
How is the Dutch interpretation of this European legislation?
"The legislation in the Netherlands is a lot more complex than in Germany. The Minister of Agriculture will present a bill on POs and competition law before the summer recess, but I don't expect these rules to make things better. They will probably offer less space. for producer organizations than the Court did in its ruling. Germany is doing better. There they simply state in the rules that the cartel prohibition does not apply to a producer organization. The same can be done in the Netherlands by setting competition law aside and agricultural rules And these rules take precedence over the competition rules."
"It must be added that these rules only apply to primary producers, because their buyers are so much more powerful and primary producers run the most risk. The officials at the ministry also want to cooperate, but they wonder how best to do this. The problem is not in the unwillingness, but in the complexity of the rules."
What are the experiences with producer organizations abroad?
"There are many more producer organizations in Germany and France than in the Netherlands. Little recent research is known about Germany, but 10 to 20 years ago they were reasonably satisfied with these organizations and they led to better prices. In 2012, research was done in France. It showed that growers were satisfied with the operation, although in France, just like in the Netherlands, it is difficult with regard to the rules."
What exactly is a producer organization allowed to do with regard to price agreements?
"A producer organization may make agreements about the price and, for example, an area limitation can also be implemented. The Court has said that only agreements may be made that are strictly necessary. Not all growers may be affiliated with such an organization, because that would constitute too much power. At the same time, it is important that a large part of the producers is connected in order to gain market power. Price agreements can be made in all kinds of ways. For example, only a minimum price could be agreed. We still have to negotiate what comes on top of that and there remains a lot of freedom for the grower."
Will growers through a producer organization not lose that freedom too much?
"First of all, you can ask yourself whether freedom is pleasant if you get a price that is too low for your product. If you do it together, you do indeed lose some freedom, but you cannot improve the price alone. Arable farmers do have to talk about it among themselves. how they want to give concrete form to price agreements and they retain the freedom to make that decision together."
Do you think processors see a producer organization as a threat?
"As a processor, you can also see opportunities in it. You can make good agreements with your buyers and that only needs to be done with 1 party. That can of course also be useful for processors."
Is it easy to set up a producer organisation?
"Yes, the NAV must complete a form from the Netherlands Enterprise Agency (RVO) and approval from the minister is required. There are a number of requirements: For example, a producer organization must have at least 15 growers and be democratic. Members must therefore have influence on decision-making.The point is not the difficulty, but more the agreements that are made internally at such an organization. It must be looked at how the number of participants can be as high as possible and so the type of agreements must suit the growers as best as possible ."
Anne-Jan Doorn
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.