Assembly of European Regions producing Fruit, Vegetable and Plants

Conference on the contribution of POs to the supply chain

On the 21st of September 2018, the European Commission organized a conference on the contribution of producer organisations to an efficient agri-food supply chain. The event was opened by Jens Schaps (DG AGRI) and by MEP Paolo de Castro, Parliament’s Rapporteur on the Unfair Trading Practices file. Both speakers underlined the key role of Producer Organisations in developing a level playing field between farmers and downstream actors in the food supply chain. In particular, MEP de Castro focused on the novelties brought by the Omnibus Regulation, which has clarified and secured the prevalence of POs and APOs role over competition law, provided new contractual typologies and contributed to reinforce their overall bargaining position.

During the morning session, the speakers explored which benefits producer organisations can bring to their members and the food chain, e.g. in terms of prices, better marketing possibilities (access to markets), development of quality products and including socio-economic benefits (e.g. role of POs in rural development and more deprived regions). Prof. Angelo Zago presented the main findings of his research concerning producer organization in the fruit and vegetable sector. He highlighted the fact that Producer Organizations are quickly becoming important players in the new EU Common Market Organization. After the F&V sector, they now are a transversal policy tool for other agricultural sectors as well.

In the F&V sector, however, POs have had a mixed success, with preliminary analysis highlighting that big POs (with many small farms as members) on average attract more farmers than other business models such as small, processing, or medium POs. Other findings show that different business models lead consistently to differences in performances, which highlights the importance of strategic choices and efficient management for the success of collective action. Also, the concentration of downstream sectors has proved to have a significant role in explaining participation rates in POs. Finally, POs appear to contribute positively to the rural development of poor regions, where participation rates appear to be more important than in richer regions.

The afternoon discussions were devoted to the interaction of producer organisations with their downstream partners. Presentations from academia and the retail sector explored how the vertical cooperation in the food supply chain can be organised in an efficient manner to create mutual benefits. Prof. Jos Bijman highlighted the dual role of POs as a tool to reinforce farmer’s bargaining power as well as to improve vertical coordination between actors in the supply chain: POs have allowed reduced transaction costs, better quality management and market information for consumers as well as logistic efficiency (storage, transport, packaging), sustainability and bio-innovation. Successively, he identified power imbalances, differences in risk attitude and in dependencies (due to size and specific investments) as the main reasons preventing POs and buyers from realizing their joint interest in cooperating.

According to Prof. Bijman, most POs do not realize their potential due to several factors such as low financial contribution, weak leadership capacity, lack of commitment, member heterogeneity or compliance with quality requirements. In conclusion, in order to strengthen the role of POs and improve cooperation with downstream actors along the supply chain, several factors need to be considered: addressing PO’s internal governance issues (competent managers and directors) is a central factor; taking advantage of niche markets made available by growing product differentiation in current markets; scale economies remain essential as they allow a stronger bargaining power; encouraging horizontal integration, key element to develop strong POs. Although price might be a recurrent source of conflict between POs and retailers, research shows that both actors have a strong interest in cooperating in many other areas.

Presentations will be made available (in the coming days) on the following link: https://ec.europa.eu/info/events/contribution-producer-organisations-efficient-agri-food-supply-chain-2018-sep-21_en

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