Both Sides of the Food Industry Ledger

To tell a good story you need a villain. When it comes to the food racket it's very tempting to focus on the big corporate names: Loblaws, Sobeys, Walmart, Monsanto, Maple Leaf, Cargill, etc, I do it myself all the time. It looks right because of all those zeros in the revenue column, and you know farmers are only getting a small percentage of the consumer dollar. These companies got to be making a bundle right??

I was reminded of the importance of getting the whole story this week. Steve Sharrett  wrote an excellent piece in the Guardian about farm income improvements. The part of the story on the front page had this:

"Stats Canada figures for 2010 indicate P.E.I. enjoyed a long overdue 23 per cent increase in cash receipts – including crop and livestock revenues – and 2011 might be just as good if Island farmers can harvest without problem this fall."






A casual reader would conclude things are looking pretty good down on the farm. It was the rest of the story on the next page that was was needed to get the full picture:



"But while the cash receipt increases are welcome, they pale in comparison to the “outstanding” in the field column. Liability receipts show farmers throughout Atlantic Canada have, since 2005, increased their amount of debt by almost $100 million. In many cases, net farm income on P.E.I. is zero."

PEI farmers, and others in the region,  took on tens of millions of dollars in debt to get through the last decade, and it will take several years of improved cash receipts to start chipping away at that mountain of red ink, and start building up equity again. It would be like refinancing your mortgage, then taking out a second mortgage, and refinancing again all tied to the value of your home. On the surface it looks like you're doing just fine, but as many are finding or will find out,  this house of cards can collapse pretty quickly.

So in fairness to the big corporate players mentioned earlier, a piece of the Globe's business pages about the challenges in the food retailing business. And after that an unusual discussion by two big players in the  food business in England on the future of organic food. It gives us all something to think about.


 http://www.theglobeandmail.com/report-on-business/international-news/global-exchange/globe-correspondents/grocers-check-out-of-the-old-economies/article2150113/

Grocers check out of the old economies

by eric reguly  •  Sept. 3, 2011

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If you want a proxy for the global economy, look at Carrefour and Tesco, the European-based supermarket chains competing with Wal-Mart for world domination. Making direct comparisons between the two giants is difficult because each has had its own special problems. There is one area, however, where the misery seems to be shared: Mature markets.

Tesco, Britain’s biggest retailer, is having no fun in Japan and the United States, where it owns the Fresh & Easy stores. France’s Carrefour, the second largest retailer, behind Wal-Mart, is getting clobbered in Europe, especially in ailing Italy. Both have been stock market duds in the 12 months, though Tesco’s 9 per cent loss makes Carrefour’s 52 per cent fall look like a couple of broken eggs in the dairy aisle.
This week Tesco finally said Sayonara to its Japan business after about a decade of struggling to gain market share and post profits. It didn’t work. Tesco’s market share in the greater Tokyo area is half a percentage point or less and analysts estimate the business lost about £20-million ($32.3-million) last year. The highly competitive Japanese retailing scene has been a graveyard for foreign retailers for as long as anyone can remember and the stalled economy isn’t making things any easier for the few outsiders that remain. Carrefour was another company with great ambitions for Japan; it gave up in 2005.
The question is whether Tesco, having made the tough decision on Japan, will do the same in the United States. Tesco rolled into the American food market in 2004 and, according to analysts’ estimates, has piled up losses of £700-million since then. The United States, like Japan, is a highly competitive retailing market. Like Japan, it is also a no-growth zone. While Tesco’s new boss, Philip Clarke, vows to stick it out in the United States, the country’s grim economic outlook is bound to ensure that Tesco’s 200-plus American Fresh & Easy stores struggle for some time.
Tesco’s problems pale in comparison to Carrefour’s. The French company issued its fifth profit warning of they year on Wednesday as it unveiled a €249-million ($355-million) first-half loss. Operating profit in the core European market was down 33 per cent, partly because the company made the mistake of raising prices when recession-weary customers were in no mood to pay more. Carrefour’s operations in Italy, where big-box supermarkets have never been popular, were a disaster. The deep loss was largely the result of an €884-million writedown on the Italian business.
The good news is that developing world is generally performing well for both Tesco and Carrefour.
Carrefour, with 9,500 stores worldwide, reported “good growth” in China and a “confirmed recovery” in Taiwan. It said it would open some 475 new stores in growth markets this year. Tesco is becoming a juggernaut in Asia, outside Japan. The British company has more than doubled its Asian sales in the last five years; its Korean division is booming. Tesco is still no making profits in China, but the high growth rates in that market suggest the break-even day will come soon.
You can see where this is going. Each company will probably defend its turf in developed-world markets but put most of its capital into emerging markets. For Tesco, that could mean bailing out of the United States to concentrate on China and other Asian countries. For Carrefour, it might mean downgrading or even abandoning dead-zone markets like Italy. With so much growth in Asia and Latin America, why not take the easy route?

http://www.guardian.co.uk/commentisfree/2011/sep/02/the-conversation-organic-food

Is it all over for organic food?

Is it still worthwhile buying organic? Farmer Helen Browning and Michelin-starred chef Shaun Hill debate the pros and cons

Farming and purchase of organic produce is on the decline with sales falling by 5.9% in the UK last year. Oliver Laughland brings together Helen Browning, organic farmer and director of the Soil Assocation, with Michelin-starred chef Shaun Hill to discuss what's driving people away. Helen Browning: The big dynamic going on is that the price of non-organic food is rising very fast. The price that farmers could get for conventional grain or milk is much higher than it has been, so the gap between the two is closing rapidly and those people who aren't really committed to producing organic might well think they've got an easier life going back to standard production. I'm worried we're going to end up with some quite big shortages in the next year or two of our key ingredients, if we don't keep our farmers farming this way. Shaun Hill: I use quite a few small producers and for them it's not possible to pay the fees for organic certification inspections. I use them and it's fine by me, but isn't the organic movement maybe losing out a bit? HB: We've bent over backwards to try to make sure that it's affordable for very small producers, but that's hard. There's a limit to how affordable you can make it. In an ideal world, you wouldn't need to certify things because we'd all be visiting our farms and buying directly from producers. We're not living in that world. SH: I'm broadly in favour of the organic movement, I just don't think it covers all the options. The veg box movement, for example, was a pain for people such as me because I don't want somebody else to choose what veg I have on a weekly basis. The ingredients I buy specifically because they are organic are meats such as chicken where there is an enormous difference in the welfare and the feed that the animals get. But organic has been a bit of a victim of its own success, you can get Zimbabwean courgettes in January with thousands of air miles on them because they tick all the organic boxes. HB: We looked quite hard at banning air trade a few years ago and decided not to. We know that the developing world needs to generate cash. Air trade isn't perfect, but less than 1% of our food is air traded. Organic certification gives you the guarantee that even if it's come from Kenya, you know it has been grown in the right way, and that people are likely to have been rewarded fairly for growing it; the soil would have been looked after and it would have been a much better and more sustainable system. SH: Do you not think though, with the expansion of organic food, producers whose hearts aren't in it are able to jump on the bandwagon and tick boxes that aren't actually doing us much more good? A lot of the quality of a vegetable or poultry is to do with the breed or variety. I'm not sure under this system whether we're getting the right varieties of vegetable and the right breeds of pig and chickens with an organic label. HB: It's hard to specify, "You must grow this particular variety". It's one of the reasons we run the organic foods award. We're trying to showcase fantastic taste. SH: But the next difficulty is when you move away from production to manufacture of, say, organic wine. There's a lot of pretty awful organic wine out there that is presumably there because it's organic rather than because it's good. HB: I think a lot of the organic wines that were dreadful have gone because people stopped buying them. I'd be interested to think about how we could help. Is there a way that we could put up taste barriers? Whose taste buds do we use to evaluate? SH: You can borrow mine! HB: It's always in our interest to make sure that our produce is as great to eat as it can be. Anybody, whether they're organic or not, who doesn't think about the quality of what they're producing and whether people are going to eat it, is bonkers. It's common sense that's gone out of farming for a long time. If you look at what's happened to the pork industry over the past 30 years, we've bred lean, lean pigs that grow at a million miles a day and they don't taste of anything and so people have stopped eating pork. SH: They've stopped eating pork because pork is bloody awful. You can sometimes imagine that you're not cooking it properly but it's just rubbish materials. HB: They are. I run a farm and pub, and we produce and sell a lot of pork because once people come to eat great pork again, they love it. And I think there is a demand, you just need to introduce people to things and you need to build the market up. Oliver Laughland: What can be done to make organic and better produce more affordable? SH: I don't think it should be a more affordable option. I think the cheap food lobby has done a huge disservice to people by giving expectations of having chicken the same price as the packaging. HB: One of the things we're attempting to do is to launch a campaign that is very much about trying to make sure that people most in need will benefit from a better, more organic diet and are not prevented from doing that by accessibility and affordability. We've got schools in Hackney 40% organic on 60p a day. It can be done. I agree with you that the cheap food culture is one that has dogged us terribly, but we also need to be aware that there are people who are on really tight budgets and we need to make sure that organic food is accessible to them. OL: Do restaurateurs have an obligation to encourage awareness? SH: The main obligation of a restaurateur is to stay in business despite rocketing overheads. I manage but it's a tough call for anybody who's attempting to do anything a bit better than the rest because you're competing with people who are less scrupulous than yourself. You've got to hope for the best, really. But you still get people in restaurants looking for a children's menu full of alphabet spaghetti and chicken nuggets – how on earth do you think these poor devils are going to appreciate a decent meal 10 years down the line? HB: For all of us, wherever you're coming from, farming or owning a restaurant, it's quite hard to be doing something that's better, and to make a success of it. Luckily, I think the world is changing. More and more people appreciate the value of food in its widest sense. SH: Well, we'll live in hope!