Dismantling myths

In a complex world where so many economic, technological, and human factors are involved, we often hear about the strong or weak party in a negotiation, a chain, or a production system. Nevertheless, reducing the complexity of processes to a mere adjective does not make things simpler, nor does it help improve the efficiency of such chains or processes.

It is also common to hear about fair or unfair relations between the parties. If we draw from a concept of justice, in which it is defined as a moral principle that encourages individuals to act and judge in a spirit of respect for truth and of giving people what they deserve, the question becomes even more awkward, as there are many parties, and many truths. Who knows what each person deserves when in twenty-one centuries of history human beings have never reached agreement on this point, nor on many others.

In the agri-food sector, various parties are involved, including suppliers (agri-food, logistics, technology and service companies, etc.), consumers, the primary sector, regulators, competitors, shareholders and employees, among others.

Establishing, in a general manner, who is the strong or weak party should be no simple task. However, there is one axiom that recurs constantly and persistently: the primary sector is the weakest link. Thanks to this axiom, the primary sector continues to receive considerable direct and indirect aid that other parts of the chain do not enjoy.

There is no mistaking the fact that a well-managed agrarian and livestock activity has a favorable and decisive influence on the maintenance of our habitats, and on avoiding or having the ability to avoid the deterioration of natural resources, which are becoming increasingly scarce. There is also no doubt that, in order for food to be available, it must be produced beforehand. Thus, the value of this part of the chain is unquestionable. However, what does seem questionable is that for this reason it has to become the weakest part. It is not a matter of generating a debate as to whether the effect of economic aid or subsidies enriches or impoverishes a certain sector, whether they favor competitiveness or not, or whether a sector that draws the attention of so many national and international bodies is weak, but of knowing whether “the objective of ensuring the consumer’s food supply at reasonable prices and ensuring equitable wages for farmers” can be met.” One thing that is clear is that the rest of the players are not guaranteed anything, nor is there any intention to provide them with any guarantees at all.

That is where the rest of the chain comes into play. Food processing companies may or may not be large, bit there is certainly a high concentration of consumer brands in the hands of very few companies, and this has an impact on the raw materials market. While it is also true that we have many medium-sized companies and cooperatives that invest in R&D, and that – with their own cost structure and subject to the upheavals of the markets – create jobs, compete, pay taxes and seek excellence in their processes.

The chain also includes logistics operators who efficiently contribute to placing the product where the consumer wishes to purchase it. They also have significant costs and risks inherent to their activity. They operate in a very competitive market. The distribution is looking to bring the product to the consumer in an increasingly easy and efficient way, with a complex cost structure that knocks on from the rest of the chain in line with free competition conditions. Some companies are also under pressure from financial markets, while others are not. Not only are there big companies out there, there is also an extensive network of micro-enterprises (franchises) taking risks and fighting for day-to-day sales.

Technology accompanies us all in this field, and requires investment, new jobs and, often times, disruptive decisions. It comes hand in hand with new competitive environments that very much need to be taken into account.

And let us not forget the regulators, who have different but equally legitimate goals.

Naturally, all parts of the chain generate employment. Now, if we refer to the figures, the weight of the service sector is far superior to any other.

And, indeed, the consumer comes at the end of the line, and we are all consumers. In general terms, consumers do not receive subsidies, but instead pay a price for the product and pay taxes, which, among many other things, cover subsidies. These are consumers who suffer from each artificial aid, and each market inefficiency that has a negative impact on their wallet. No one guarantees that, if the price of the shopping basket rises, the consumer will be able to buy the most basic products, and in fact, families have uneven access to food.

Without the first link in the chain there would be no food to process. Without the last link it would make no difference who produced or processed the food, it would be either impossible or very difficult to sell it, and it would not reach millions of people. There are foods that, even when produced and processed, are no longer sold or are hard to sell, and there are others that will stop selling.

Intervention in the food chain is always possible, and will be justified by political or economic arguments that will often no doubt be legitimate. But whether this intervention really leads to a fairer chain or a certain link is really the weakest do not seem to be proven statements. A chain that does not enjoy free competition will generate inefficiencies that consumers will pay for, just as they bear the costs of the subsidies and aid that they do not receive, and this will generate a greater number of people with worse access to staples or to better services.