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The final purchase price won't be allowed to fall below the effective cost of production

On February 26, the Spanish Ministry of Agriculture, Fisheries and Food (MAPA) published Royal Decree-Law 5/2020 on urgent measures in agriculture and food, which amended the Food Chain Law. One of the consequences is that it has become compulsory to include an estimation of the “effective cost of production” of each fresh or processed food in the contracts, at any link in the chain, so that the final purchase price will never fall below it.

"It is not an option, it is a legal obligation," said Planas in late June. He stated that production costs will now be the basis for the negotiation of written contracts in the agro-food sector.

The organizations Asaja, UPA and COAG have positively appreciated the Executive's legislative response to their demand for fair prices.

For its part, Cooperativas Agro-alimentarias of Spain has refused to make an assessment of the legal reform, which also regulates commercial food promotions, but their representatives in Andalusia believe that forcing sales above production costs may entail "more harm than good. It may lead to the end of the least profitable farms or the replacement of Spanish products by more competitive ones in the domestic and foreign markets, as is the case in Spain with Moroccan tomatoes."

The director of Fepex, José María Pozancos, foresees no problems as long as the market price remains above the effective cost of production, but he believes that in crisis situations and with the supply from foreign markets where this requirement doesn't exist, the law's enforcement will be "unfeasible".

In Almería, Luis Miguel Hernández, manager of the Coexphal fruit and vegetable producer-exporter association, does not reject the law, but he does question its applicability, He believes that it needs “more development in regulatory terms.”

Both Fepex and Coexphal prefer a model like that of France, where prices are not imposed, but are recommended, and where there's an after-sales price regime in case the market prices fall below those resulting from taking the costs at each link into account.

In October, the MAPA wants to finalize the second and last phase of the reform of the Chain Law 12/2013 with the transposition of the European directive on unfair commercial practices, which will expand the range of penalties and protect national operators involved in international trade relations.



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