Agricultural Show: Who sets the price of agricultural products?

At the initiative of Karine Le Marchand , some bosses of the large retail sector are meeting this Wednesday at the Agricultural Show, in order to propose initiatives for fairer remuneration for French farmers.

In a sector in crisis , it is not easy to understand who sets the price of agricultural products. Many players have a responsibility in this price setting: large-scale distribution, public authorities, slaughterhouses, etc. Prices are mainly set according to supply and demand. For Philippe Chalmin, economist and founder of CyclOpe, direct sales "remain very marginal".

"We consume very few unprocessed products," he explains.

For agricultural raw materials such as rapeseed, wheat or corn, the price will be set by international markets, according to the law of supply and demand. In Europe, the market managed by Euronext is the reference. In the United States, it is the Chicago Board of Trade. For example, in the case of wheat, according to Arthur Portier, senior consultant at Argus Media, "the French origin is difficult because the production costs of wheat in France are higher than in the Black Sea countries for example." Price setting is very influenced by geopolitics:

"For example, in 2018, 50% of French wheat exported outside the EU went to Algeria. But with the cooling of relations, Algeria will instead go and buy from other countries like Ukraine or Romania. This has a direct impact on the farmer," explains Arthur Portier.

The price of pork is determined in Brittany, more precisely on the Plérin auction market, where 60% of the national pork production is carried out. On this market, farmers offer their production to slaughterhouses via a system of decreasing auctions: the buyer puts forward a price offer, which the farmers can accept or refuse.

This Plérin market serves as a reference for the price trend at the national level. The slaughterhouses then resell the meat to large retailers, negotiating prices directly. Finally, the meat is sold in supermarkets and hypermarkets, where the brands set the prices, as Le Monde explains.

For beef, breeders will negotiate the price with traders or the slaughterer. Then FranceAgriMer, based on the purchase price declared by the slaughterer, will calculate an average trend. Large-scale distribution can also buy in large quantities at a fixed price, and thus put pressure on the price proposed by the slaughterer.

For poultry and veal, contracts are made directly with manufacturers, without any quotation principle.

Fruit and vegetable prices in France are largely set by supply and demand, and by structures such as the Réseau des Nouvelles des Marchés (RNM), which will play a key role in their pricing. This logic will not be followed by the organic market, as Pierrick de Ronne, president of Biocoop, explains on Franceinfo . At Biocoop, "the price is set on the basis of the producer's production cost and not on stock exchanges, in Chicago or elsewhere," he explains.

The price of milk will obey complex rules. There are two models of dairy companies in France: private industrialists and cooperatives. This leads to "two methods of fixing" the basic price, describes François-Xavier Huard, head of the National Federation of the Dairy Industry to Ouest France . The price of milk will be fixed according to indicators determined at the global level, such as butter, milk powder, cheese. But also according to the sale price in other countries, such as Germany. The price can also vary depending on the quality of the milk.

"There is no regulation of prices on global and local markets, which is why we find ourselves in situations where the price does not cover the reality of what has been spent," explains Philippe Chalmin, describing "unstable" prices.

Furthermore, nothing prevents a large retail brand from sourcing from abroad, even if actions have been put in place, via labels.

These pricing methods fuel tensions. Everyone is trying to get their own way, whether it is the breeder, the consumer, the mass retailer, the trader, etc. As for the breeders, they criticize an increase in their production costs and a fall in product prices. Climatic difficulties add to these problems.

In order to address these issues and protect the farmer's income, the Egalim laws were adopted. Producers, manufacturers and distributors must develop a cost indicator that serves as a reference. But these laws are criticized due to a lack of effective application depending on the sector.

This is why a year ago, Emmanuel Macron wanted to make the fixing of these indicators systematic thanks to the floor price. The principle is simple: define the minimum cost of an agricultural product, which must be sufficient to cover production costs, labor, charges and social protection. A measure that was not followed but which Emmanuel Macron confirmed he was maintaining on February 22.