Groceries Code Being Introduced

Opposed on line 5 = proposed

I followed yesterday’s post on the related topic and was left bemused by some of the comments. In particular @Edgar who suggested that we’re approaching perfect competition! My understanding of perfect competition involves a certain symmetry of power among a large number of operators (infinite buyers and sellers). The IFA gripe is that a very small number of powerful grocery retailers have their udders in a vice! albeit indirectly. This is an understandable matter of concern for the IFA, its members and rural communities around the country. We shouldn’t ignore or obstruct from the realities of this situation.

What can the IFA do about it? Well they can hardly be blamed for going down the road of market regulation nor should we be surprised that there is political support for these initiatives, as indicated in the new statutory code of conduct.

Strategic market co-ordination is not what rural self-employed farmers specialise in; they’re keeping their end of the [competition] deal here. Even their regional co-ops are essentially powerless in the face of international retail behemoths. We can appreciate this. The market solution is to build-up and strengthen their co-ops and take on more wholesale and retail activities which, in a theoretical sense, actually moves us in the opposite direction of perfect competition! The ESRI report might make for interesting reading in this regard.

Aside for this there seemed to be a lack of understanding of the many reasons why protecting Irish Agriculture is a reasonably sensible thing to do; even if it ostensibly diverges from economic theory. One of the original ideas was that of security – we don’t live off toothpaste or bio-medical devices – and having a local supply of essential goods makes good political and economic sense in turbulent times. Then there is the new economics of carbon to consider; the current international appeal for carbon sensibilities makes locally sourced goods naturally attractive now and more so in the future. Finally, the political economy of rural and regional development require some appreciation of the logistics associated with a ‘creative destruction’ approach to development – is it economically sensible to want to make obsolete thousands of people with agricultural skills and machinery? and then further to expect they will find more productive rural enterprises?

I think we should be careful in considering these issues here and appreciate the breath of economics associated with them before we hammer in the nails on agriculture.

So, at a time when wages are being cut, measures are to be introduced which according to the Competition Authority will result in higher prices for consumers?

Why stop at food though? Why not have a “Code of Conduct” for property? As a home owner, I’d would really appreciate measures which reduce the deflationary pressure in property prices. 🙂

“It is generally expected that when the National Asset Management Agency is established and house prices start to recover, they will do so only very slowly and steadily. But this means that thousands of us may be stuck in negative equity for quite a number of years. This may not be an issue for you if you plan on staying where you are for the foreseeable future.”

http://www.independent.ie/business/personal-finance/property-mortgages/home-sweet-home-2012999.html

Oh Good! Now we know why everyone will be taxed to pay off loans taken to found NAMA.
It is to keep Paul out of negative equity!!!! I swear I was joking in my previous comment, but I suspect the Indo isn’t?

@Pat Donnelly
Irish Times Article quoted by Michael Hennigan. IFA opposition helped keep billions in poverty around the world:

“Prof. Alan Matthews rejected the IFA claim that a WTO deal would put 50,000 farmers out of business:

He wrote in the Irish Times: “Farmers now depend on the decoupled single farm payment for 50% of their income.

A further 25% comes from payments for agri-environment services and other public goods (Reps, forestry, less favoured area payments).

In addition, around 42% of farmers have an off-farm job and 82% of farms have off-farm income from either the farmer or spouse. Thus the income obtained from farming – the element affected by a WTO outcome – only accounts for about 8%, on average, of farm household income,”

@ALL
Delete the last two lines – point already made.

There was a political party in Ireland many years ago called Clann Na Talmhan. It failed because it was devoted to remedying farmers grievances, a task, Brendan o’hEithir said, beyond human, or even divine competence.
http://en.wikipedia.org/wiki/Clann_na_talmhan

Back then farmers were farmers – now they are public sector workers with a hobby. I’m fine with that, so long as we and they are honest about it.
But we need to make a distinction between them and the large farmers.
We can’t afforded these farming John “Kingpig” O’Donoghue’s any longer.

@ Peter
I need to clarify what I meant by perfect competition – there are lots of farmers selling essentially a homogenous good and none of them has any market power – I was not referring to the relationship between farmers and processors/wholesalers (i.e. there is perfect competition between farmers). The problem for farmers is that market power is with the wholesalers/processors who then deal with retailers. They do not observe what goes on between the wholesalers/processors and the retailers but they end up seeing the retail price.
If farmers think they get diddled by those up the foodchain then they can get involved in the processor/wholesale area but as we know they sold their stake in coops. Provided there are a sufficient number of players in the market who are actually competing then this is ok. Lets think of the hypothetical example of farmers all selling to one farmer owned coop – that coop would face international competition and if one thought that given its ownership it would pay above the odds it would be broke pretty quickly.
The issue of food security is only one if you seriously think that at some point nobody will sell food to us.
If we worry about carbon, given the inputs into certain products, we would be considerably better off sourcing them in far way countries.
The fact that ‘creative destruction’ has been resisted for so long makes the pain of it more severe – this is what happens if you do not take your medicine early.
It is time the IFA accepted that they are in a world market into which they are more than happy to sell and argue for barrier removal. You can’t have it both ways although some seem to be trying to make that happen for them.

In terms of this ‘code of conduct’ I find it incredible that there appears to be a claim that “The payments have been blamed for inflating the cost of groceries for the consumer”. I would be very surprised if retailers in other EU countries were not doing the same, yet prices there are massively lower.

Of course one could also think of it in this way – after slightly tilting the balance against shopping in the North with the reduction in excise on alcohol the scales have to be tilted the other way again. Higher grocery prices are certainly not going to reduce shopping north of the border.

I think your blog entry should read “It is also being INTRODUCED despite opposition from ESRI … “