despite tight agricultural markets, prices increased little in 2021

The players in the sector affirm it in unison: in terms of food inflation, France is a UFO. The president of the Observatory of the formation of prices and margins of food products, Philippe Chalmin, also noted this on June 29, on the occasion of the presentation of his Eleventh Report to Parliament.

“What is striking in the French case is that, like all European countries, we are faced with the instability of agricultural prices. (…) But in a country like Germany, there is a greater elasticity of food prices to this factor. In France, this is not the case. Finally, over these ten years, we observe a very great stability in food prices, at least with regard to those monitored by the Observatory: the major basic products in the household shopping cart”, he observed.

Thus, while in 2021 the tensions on the agricultural markets were already very strong, due to a few ” targeted climatic accidents » but also record grain imports from China, consumer prices rose very little, by 0.6%. However, the same year, increases in the prices of the means of production reached 9% and, consequently, those of the prices of agricultural products at the production 9.2%, underlines the last report of the Observatory. The increase in food prices also remained lower than that of consumer prices for all products, which amounted to 1.6%.

A rather spared consumer“

“In France, the adjustment variable is represented by the gross margins of industry and large-scale distribution, which act as a buffer, while the consumer remains rather a winner insofar as he benefits from a fairly large stability of food prices”, explains Philippe Chalmin, who specifies that in 2021 this phenomenon can be observed in almost all sectors.

Adopted unanimously by the members of its steering committee (which include representatives of all the links in the chain as well as parliamentarians), the Observatory’s report follows a panel of minimally processed products from “field to plate “. Its goal is to better understand everyone’s efforts. It therefore calculates the breakdown of the retail price of certain products.

Example: for one kilo of minced steak with 15% fat, while the raw material cost indicator rose from 4.14 to 4.45 euros between 2020 and 2021, the indicators for gross processing margins and large and medium-sized stores (GMS) fell, respectively from 2.99 to 2.90 euros and from 2.82 to 2.79. The retail price in supermarkets thus only increased from 10.50 to 10.69 euros.

Another example: for a kilo of pasta, despite an increase in the cost indicator for the raw material durum wheat from 0.39 to 0.49 euros, the retail price in supermarkets only rose from 1.35 to 1.37 euro, thanks to a contraction in the gross margins indicator for industry (from 0.69 to 0.58 euro). The GMS gross margin indicator rose from 0.20 to 0.23 euro. As for bread, the increase in common milling wheat (from 0.22 to 0.20 euro) was offset by a drop in gross milling margins, from 0.17 to 0.11 euro. The indicator of gross margins downstream of the milling industry increased slightly, from 2.95 to 3 euros.

A net margin of large and medium-sized stores of 2.3%

Regarding the food industry as a whole, the report also notes that on average the prices of its products increased by only 2.2% in 2021. For the large distribution, which was the subject of a survey original from the Observatory, it also provides overall figures on gross and net margins.

“For all the fresh food departments, the gross margin on purchase cost, compared to turnover, is 29.5% in 2020, down slightly compared to 2019 (30.1%)”, reads the summary of the report.

“After distribution of expenses between the departments, the net margin in relation to turnover stands at 2.3% before tax, a slight increase compared to 2019 (2.0%). It is 1.6% after tax,” he adds.

As for producers, they also play a buffer effect in the face of rising production costs, confirms the report.

“In general, a breeder today is someone who earns with difficulty between one and two Smic”, noted Philippe Chalmin.

A chronic situation since, in 11 years, never have breeders of suckler cattle covered the reality of their production costs by integrating two Smic per unit of human worker (UHT)”. But which, in other sectors such as wheat, is largely influenced by yields, he recalled.

In 2018 – the last year of availability of the statistical data necessary for the calculation -, out of the 63.1 euros of added value induced in France by 100 euros of food consumption, the food industry harvested 10.4, trade (inter- business and retail) 15.3 and agriculture 6.9.

A more uncertain year 2022

Will in 2022, while tensions on agricultural markets are exacerbated, agricultural producers, industry and distribution will continue to play a buffer role in order to protect consumers?, wonders however Philippe Chalmin. Nothing is less sure. The Egalim law, adopted in October 2021, requires producers and their first buyers to sign written contracts of at least three years, fixing the prices of agricultural raw materials and accompanied by an automatic revision formula according to the evolution of their costs. Moreover, it sanctuaries these prices in the successive negotiations between the industrial processors and the distribution: the share corresponding to the agricultural raw material can no longer be called into question. During the annual negotiations on the national brands closed at the end of February, it also resulted, for the first time in eight years, in an average increase in the prices paid to manufacturers, of more than 3%.

Faced with the generalized and unstoppable rise in their production costs, manufacturers have already been claiming for months that they have exhausted their absorption capacities.

“We are faced with a cost increase never seen in 30 years, which is now impossible for manufacturers to absorb”, again recalled on June 22 Patrick Falconnier, president of Syndifrais, a professional organization representing producers of fresh dairy products.

“Since January, our companies, which have absorbed these increases since September, have been in the red. The increases in our prices of 14-16%, which we ask distributors [dans le cadre des renégociations en cours depuis début mars, Ndlr] are vital,” he pleaded.

The renegotiations of their prices with manufacturers, which are still in progress, therefore remain extremely tense.. And inflation is starting to trickle down to consumer prices, which in June rose an average of 4.37% from a year earlier, according to NielsenIQ. In France, however, it remains more moderate than in the rest of Europe, underlines the research firm.

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