Distribution chains and intermediaries paying prices below cost

Spain destroys iceberg lettuce

"Desperation." This seems to be the word best defining the mood of Spanish iceberg lettuce producers, taking into account the results of a survey conducted by the technical services of the Association of Fruit and Vegetable Producer Organisations of the Region of Murcia (PROEXPORT- OPFH).

In this survey, conducted individually and confidentially among growers representing about 80% of the Spanish production, these claim to have foreseen the destruction of 7.6 million pieces of lettuce in week 49, and another 6 million in week 50; highly relevant figures, considering they represent 28 and 21% (respectively) of the exportable production for those weeks of the companies and cooperatives that took part in the survey, and therefore representative of the entire sector. For example, of the nearly 14,000 tonnes that these companies expected to harvest this week, only 9,980 tonnes will end up in the market. The rest will remain in the field as food for goats and other livestock.

Sales at a loss

The cause for taking such a drastic measure is the extremely low level of prices at origin registered over the past four weeks, which has resulted in unbearable losses for many. 2.5 Euro for a box containing 10 lettuces and even less is what certain chains and European intermediaries are paying, knowing that production costs range between 1 and 1.5 Euro/box above that figure. As stated by the manager of a large manufacturing company, who prefers to remain anonymous, "it is better to lose everything invested and spent on the product in the field than adding harvesting and handling costs just to ship the product to a market that speculates with it, causing even further losses for us."

Several producers point to the German market as the most aggressive in these circumstances and complain about the lack of negotiating power that European producers have against such a concentrated distribution and the very aggressive pricing policies of many intermediaries working with such distribution chains. "It would be one thing if we all worked to supply the consumer with a quality product by getting small margins so that they could enjoy attractive prices, and another to allow prices at origin to fall non-stop, leading producers to ruin and to the destruction of thousands of jobs," said the marketing director of a cooperative that responded to the survey.

However, it is also acknowledged that there are factors outside the market that contribute to timely excesses in productive capacity. This is the case of the good autumn weather registered in south east Spain, the main producing area in Europe at that time, which has resulted in the harvest starting between 9 and 15 days earlier than usual, depending on the area. In any case, it appears that certain European retail chains, even in those conditions, have the policy of buying produce below production costs, while many others do exactly the opposite, even though laws are very clear on this point.

The Director of Proexport, Fernando Gómez, admits that "the sector's representative organisations are receiving numerous complaints. We have considered raising them to the authorities, but neither of these act at European level, which is where the bulk of our production is shipped at this time, and producers are afraid to put their export business in jeopardy. It is no wonder that eventually they choose to destroy part of their production in the fields, rather than selling it at a loss in Germany or the Netherlands."

Proexport-OPFH is confident that self-regulation of producers at origin and an improvement in demand during the pre-Christmas period will help bring balance to the horticultural markets and restore normality in producer-distributor relations.




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