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The effect of new rules to protect farmers

Bad news for EU supermarkets and possibly consumers

Europe's supermarkets are having a terrible end to 2018 and are warning that new EU rules could lead to more expensive turkeys and Brussels sprouts next year. Brussels on Wednesday agreed on sweeping new laws designed to help EU farmers fight off supermarkets, such as Germany's Aldi and France's Carrefour, and big food processors, which are accused of squeezing farmers.

The legislation was put forward by Agriculture Commissioner Phil Hogan in 2017 to protect farmers against a list of so-called unfair trading practices such as abusive contracts and late payments.

While the plan was originally designed to help farmers, it was later expanded to take in mid-sized food manufacturers, with annual turnover of up to €350 million per year. Supermarket chains argue the legislation will do little to benefit farmers and will instead benefit food manufacturers that already enjoy higher margins than retailers.

The EU applauded the new rules as a significant step in ensuring that the most vulnerable sections of the food chain are better protected. EU countries still have to provide a final agreement on the text in January before it is fully adopted.

Supermarket chains point out that 95 percent of what they buy comes from processors and not farmers. Instead, supermarkets argue, retailers buy very little directly from farmers and deal with large processors such as Arla, Nestlé and Danone. Retailers also complain that margins among supermarket chains are down at only 1 percent to 3 percent due to extensive spending on wages, transportation and refrigeration.


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