Quest for whole truth on food prices in France
June 7, 2011
Leave it to the French to make food pricing not just an economic issue, but a philosophical and political one as well. After all, it is French farmers who assert that their protests about prices helped not just to fire the French Revolution in the 18th century but also the uprisings now under way in North Africa and the Middle East. It is French farmers who recently blocked delivery of dairy products to retail stores in protest of firm retail prices and falling farm prices. Consumer agitation about food prices has been stirred across France by this past year’s price increases at retail, especially for dairy and meat products, colliding with constant complaints by farmers about inadequate returns and losses due to rising costs, especially for feed.
Constant ferment about food prices not surprisingly prompted the government of Nicolas Sarkozy, France’s president, to create a new office, which is best described in translation as an “observatory.” Unlike those institutions equipped with telescopes looking to the sky, this observatory will give attention to “the relationship between food prices at the farm level and in supermarkets.” Its director is a professor of economic history who has emphasized what he hopes to accomplish by this statement: “Collecting agricultural prices is not a problem, collecting food prices is not a problem. Putting the finger on what happens in the middle is the problem.” He further warned, “The market economy, the free economy cannot function in opacity.”
Mr. Sarkozy, who faces a battle for re-election next year, has made his views known through Bruno Le Maire, his minister of agriculture. “There are strong tensions in the agri-food industry,” Mr. Le Maire said, adding words that are uniquely French, “From the point of view of social cohesion, it’s important that we have the whole truth on food prices.” It is likely that this is one of the few times that national social stability has been tied to discovering what accounts for food price moves. In making these issues central to domestic tranquility, the minister declared, “Transparency, the whole truth, will allow for easing of this tension.”
Yes, differences between changes in grocery store prices and returns of farmers have been a major issue in the American food business from the nation’s start in the 18th century when George Washington became embroiled in debating what he paid for wheat and the flour prices charged by the mill his family owned. Coinciding with the work newly under way in France, the Economic Research Service of the U.S. Department of Agriculture happened to publish a comprehensive study of wheat, flour and bread prices as well as livestock and meat. This study, which ought to be a model for the French, reflects remarkable transparency in the American food industry. The U.S.D.A. has compiled for years data and detailed analyses of different movements in retail and wholesale food prices.
This latest E.R.S. study reveals the complexity at work in the farm-retail food price arena, as well as the largely inexplicable time spans that often rule between price changes at various levels. This study is particularly revealing in the way it establishes that the degree of profitability along the entire food supply chain has as much to do with pricing decisions as do the changes in basic markets. Lags in price changes at retail, as compared with great volatility in recent years in ingredient markets, are a focus also deserving of attention in France.
One senses that the “whole truth” the French observatory will be seeking is readily available without creating political attention. Indeed, it is probable that the Sarkozy government may only be seeking to underscore its commitment to helping French farmers who face reduced agricultural supports from the European Union’s Common Agricultural Policy. Targeting food manufacturers and retailers as the scapegoats for cuts in government spending does not assure the transparency supposedly being sought.