The deadline for public discussion of the methodology for calculating the so-called “fair value“ of food has expired. According to the Association for Modern Trade, the proposed formula contains errors, and some of the data used do not reflect the real situation on the market. How will the state determine what the “fair value“ of food is and will the new methodology lead to a real reduction in prices? These are some of the questions that remain unanswered after the end of the public discussion, reports bTV.
According to Nikolay Valkanov, executive director of the Association for Modern Trade, the methodology itself is difficult to explain in understandable language, since according to him, the state has not been able to clearly present how exactly the formula will work.
“I cannot simply explain what the state is proposing, since it itself cannot explain it in a simple and clear way“, said Valkanov.
According to him, during a working meeting at the Ministry of Economy, even the authors of the formula admitted that there are errors in it and that the initial data used are not sufficiently relevant to what is happening on the market.
Among the problems, he also pointed out the prices used by commodity exchanges, as well as import data.
“In the words of the Minister of Agriculture Abrovski and import prices are not very relevant, since according to him there are imports at low prices. If according to one minister the import data is not correct, how can according to another minister this be a reference for anything, on top of that with the claim to be called fair“, commented Valkanov.
Who pays the price?
According to him, the debate on prices should not be limited only to producers, processors and consumers, since traders also bear costs.
Valkanov gave an example with agriculture and compared the situation in Bulgaria with that in Greece, where according to him much more areas are cultivated and irrigated.
“How can we talk then and why should we shift the conversation towards some imaginary concepts such as “fair value“, instead of solving real problems“, he asked.
According to him, in Bulgaria less than 2% of agricultural areas are irrigated, which has a serious impact on production and agricultural product prices.
Traders warn of additional costs
The Association for Modern Trade claims that there are already operating private platforms that use price data submitted daily by retail chains to the Consumer Protection Commission.
According to Valkanov, these systems can be used as the basis for a more effective mechanism, instead of the state creating a new administrative system.
He also warned of additional costs for business.
„Each such administrative measure includes some additional commitment that the trader must fulfill. It is related to the further development of IT systems and the engagement of man-hours,“ he explained.
According to him, since August last year, traders have been submitting data to the CPC, which required special integration of their information systems.
“All this costs money, we pay for all this through food prices,“ said Valkanov.
“We are putting the cart before the horse“
According to the executive director of the Association for Modern Trade, the main problem is not in trade, but much further down the chain – in the low productivity and added value in Bulgarian agriculture.
„We have set out to fix trade, where there may be some mistakes, as in any sphere of socio-economic life, but we are still putting the cart before the horse“, he said.
According to him, productivity in Bulgarian agriculture is significantly lower compared to that in a number of other European countries.
Among the reasons, he pointed out the quality of the seeds, the lack of irrigation, the way the farms are managed and the high costs.
Why does a watermelon cost many times more in the store?
The conversation also raised the question of the large difference between the purchase and final prices of some products.
Watermelons were cited as an example – producers claim that they receive about 8-9 euro cents per kilogram, while in stores the price can reach significantly higher levels.
However, Valkanov expressed doubt that large retail chains buy watermelons at such low prices.
According to him, at the height of the season, large chains sold watermelons at prices of about 25-29 euro cents per kilogram, and depending on the variety, origin and method of delivery, prices can be even higher.
He explained that when the supply chain is longer, more intermediaries pass through it, who also have costs and add their own margin.
„Where the chain is longer, it inevitably passes through more hands. All those hands also want to put something on top of themselves. They also work hard and have to buy the same things that you and I buy from the store,“ he explained.
According to him, the small trader who sells quality Bulgarian tomatoes at a higher price cannot be automatically blamed, since he cannot sell huge quantities and part of the goods is inevitably discarded.
Why are foreign fruits and vegetables imported?
According to Valkanov, imports are not always a problem, but can be a natural mechanism for keeping prices lower when Bulgarian production is not enough.
“If Bulgarian tomatoes are not sufficient in quantity to satisfy our consumption, we obviously have to import. Not only do we have to import, but this is a natural mechanism to keep prices low on the domestic market“, he said.
According to him, a deficit of a given commodity inevitably leads to a higher price.
Over 2 billion euros for agriculture – but what is the result?
Vulkanov also questioned the effectiveness of the huge financial resources directed to the agricultural sector.
According to him, this year record funds are being spent on agriculture – over 2 billion euros from European subsidies and national funding.
According to him, the question is not just how much money is given, but what results are achieved with it.
„Let this person come out and say: we will give 200 million more. Will this lead to 5% more Bulgarian milk, 7% more Bulgarian peaches, something measurable?“, he asked.
According to him, the funds can be directed to specific goals – irrigation, modernization, cooperation, risk management and infrastructure improvement.
Will the price of vegetables continue to rise?
Regarding food prices, Valkanov pointed out that not all products have increased significantly compared to a year earlier.
He gave as an example dairy products, eggs, pork and chicken, where, according to him, prices are largely close to the levels of the previous year.
However, the situation is different for fruits and vegetables.
“I don't see how they will become lower. First, because you see what the situation is – "There is no water, there is no one to collect," he said.
As another serious problem, he pointed out the shortage of labor. According to him, the lack of enough people in agriculture, warehouses and trade increases costs and puts pressure on prices.
In his words, if production in Bulgaria continues to be insufficient, the easier option remains to import at a lower price.
Do Bulgarian producers have access to large chains?
Vulkanov rejected the claim that Bulgarian producers do not have access to large retail chains.
In his words, a significant part of the goods on the stands are Bulgarian, but not every producer can meet the requirements for the necessary quantities, quality and preparation of the production.
He pointed out that about half of the market consists of unorganized trade – small neighborhood shops, markets and direct sales, where producers also have the opportunity to offer their products.
„Basket with care“ does not solve structural problems
The conversation also discussed the initiative „Basket with care“.
Vulkanov stated that the Association for Modern Trade is not a party to the initiative and he personally does not believe that such measures can replace competition and free market behavior.
He also made a comparison with Greece, where, according to him, a different model has been introduced, covering not only traders, but also producers and processors.
According to him, such measures also have their price there and difficulties are already being observed for small traders, who are finding it increasingly difficult to compete with large companies.
„Fair price“ will not solve the problem
In conclusion, Nikolay Valkanov defined the idea of a “fair value“ as another experiment that will not solve the structural problems in the sector.
According to him, no administrative formula will be able to lower prices on its own if the problems with irrigation, productivity, labor costs, energy and the organization of agricultural production remain unresolved.
The main question, according to him, is not how the state will calculate the “fair value“ of a given food, but how it will create conditions for Bulgarian production to become more efficient and competitive.
“We need to do something that works to a significant extent when nothing further down the chain is as it should be“, summarized Valkanov.