Farmers’ protests: German Greens put blame on supermarket chains

As farmers continue to stage huge traffic-blocking protests across Germany, a growing number of voices within the Greens, who are part of the ruling three-party coalition, are blaming major supermarket chains’ pricing policies for many farms’ dire economic situation.

Read the original German article here.

Since the start of the week, farmers, led by the German Farmers’ Association (DBV), have been blocking the country’s streets, intending to pressure the government into keeping subsidies on agricultural diesel.

Though many areas have been blocked as a result of the tractor-heavy protests, the Greens, a partner in Chancellor Olaf Scholz’s coalition, oppose further changes to the hard-won budget compromise meant to close the fiscal gap, for which changes to soothe farmers were already announced last week.

To shift the focus away from the diesel subsidies, a growing number of Greens are now blaming supermarket chains, saying they force farmers into accepting low prices and making them dependent on subsidies.

“The market power of supermarkets is particularly high in Germany,” Green MEP Anna Cavazzini, head of the European Parliament’s internal market committee, told Euractiv, adding that in Germany, three-quarters of the market is divided among just five companies.

“This leads to price squeezes and undercutting competition,” she added, pointing to “unfair contract conditions or retroactive contract changes, short-term purchase agreements and thus a lack of predictability for producers”.

German Agriculture Minister Cem Özdemir, also from the Greens, has earlier made similar comments, accusing the previous conservative government of “weakening the market power of farmers while strengthening others”.

Özdemir’s ministry is currently looking into how dairy farmers could be supported through market intervention to “achieve better prices”, a spokesperson for the ministry said on Wednesday.

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A diversion?

As part of the so-called Common Organisation of Agricultural Markets (COM), the EU provides numerous detailed rules on how the state can intervene in what is otherwise a private-sector market organisation.

The low number of supermarket chains is also a recurring topic in competition policy, particularly in the case of planned takeovers or mergers of supermarket chains.

Farmers are also protected under EU laws: A 2019 directive protects them from “unfair trading practices” by buyers, which, among other things, include short-term cancellations or unilateral changes to contract terms.

Unlike many countries that have been subject to infringement for not implementing the rules of the directive, Germany is considered to have a stellar implementation record.

“Significant improvements” have already been made, said Cavazzini, noting that more needs to be done to ensure that “farmers no longer have to sell their produce below cost”.

However, according to competition economist Justus Haucap of the Heinrich Heine University in Düsseldorf, speaking of the market power of supermarkets in the current debate is more likely a “smokescreen”.

“The price is not set in the German food retail sector, but on European or even global markets,” Haucap told Euractiv, adding that “we tend to have overproduction in Germany, fuelled by years of subsidies”.

For instance, Germany exports half of its pork and dairy products, he said.

“If domestic supply is significantly higher than demand, and foreign producers are also happy to sell to the German market, and farmers, therefore, do not get as high a price as they would like, this has little to do with the market power of food retailers,” he added.

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‘Greedflation’

But pointing the finger at supermarket chains is a “transparent diversionary tactic to divert attention from their own failures in agricultural policy and to find someone else to blame”, Haucap added.

Haucap also noted that the debate reminds him of the “recently promoted fairy tale of ‘greedflation’ when the ECB [European Central Bank] also seemed quite grateful to have another scapegoat for eurozone inflation”.

Last summer, ECB President Christine Lagarde pointed out that some sectors had passed on price rises fully, and sometimes excessively, to consumers, adding to inflationary pressures.

“Those sectors have taken advantage to push costs through entirely without squeezing on margins, and for some of them to push prices higher than just the cost push,” she told a hearing in the European Parliament last June.

This has led left-wing politicians to call for more significant intervention by competition authorities to combat so-called “greedflation”.

However, while some competition economists have since backed the left-wing call, the diagnosis remains controversial as evidence for profit-driven price increases remains shaky.

An amendment to German competition law last year gave the Federal Cartel Office more power to tackle anti-competitive “leverage” in markets, but the legal hurdles are high.

[Edited by Oliver Noyan/Zoran Radosavljevic, additional reporting from Nick Alipour]

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