COMMENT / The Antimonopoly Office published the results of the price control of five basic foods. He thus put an end to disputes over who contributed the most to their increase in price. The key share is not held by shops, but by agro-corporations linked to food production. At the same time, the agrolobby threatened poverty and food shortages.
The Office for the Protection of Economic Competition (ÚOHS) has completed the investigation of price formation of selected commodities (milk, butter, eggs, flour, chicken meat) in the timeline from 2018 to February 2023. The reason was the sixth fastest increase in food prices in the European Union, which in the spring they rose by an average of 27 percent year-on-year.
At that time, polemics began as to who is to blame for the increase in food prices, which became the biggest driver of inflation, in the agricultural primary production vertical, food manufacturers and traders.
Disputes over expensive food have been grist to the mill for supporters of draconian regulations who want to close the domestic market to cheaper foreign competition and cap prices following the failed Hungarian model. They invoke the communist mantra of food self-sufficiency, which was actually self-sufficiency in scarcity.
The main culprit stores?
Influential agrolobbies managed to create the main culprit in the media – multinational business chains. The attitude of the Minister of Agriculture Zdeňko Nekula, who for an unclear reason omitted the essential role of the group of agrobarons led by the owner of Agrofert, Andrej Babiš, also reflected this image.
“The influence of large food processing operations (butchers, dairies, bakeries), directly connected to the ownership of large primary production agricultural enterprises with acreage of several tens of thousands of hectares of land, is a significant driver of food prices,” said Jaroslav Šebek, chairman of the Association of Private Agriculture. His words were confirmed by a number of economists.
Now the findings of the antimonopoly office have confirmed these voices. Inspections of more than two hundred companies in the entire chain did not detect violations of competition or cartel agreements. Nevertheless, the final report paradoxically states that an oligopoly has been created on some food markets, where only a few strong players dominate the market.
Fresh milk is a significant oligopoly, where the three largest processors together have 60 percent of the market. The largest dairy company Madeta is owned by Milan Teplý, a vocal critic of the current situation, who last year predicted the collapse of the food industry if the government did not intervene, and butter for 80 crowns would only be for the rich. He let it be known that “in two years there will be nothing to eat”.
The report stated that the highest margin is on the side of primary producers. He attributes this to rising costs following Russian aggression, however many used pre-stocked raw materials and had fixed energy prices. This corresponds to last year’s record profit of the agricultural sector of 22 billion crowns.
Let’s take a look at the statistics of the ÚOHS comparing the movement of the average prices of five basic foods (without VAT) in the period from March 2020 to November 2022, when prices peaked.
The price of full-fat shelf-stable milk rose from 13.59 crowns per liter to 17.61 crowns (by 29 percent). Farmers increased their prices from 9.18 kroner to 13.08 kroner (by 42 percent), processors increased their margin from 1.60 kroner to 2.20 kroner (by 37 percent), while traders’ margin fell from 2.81 kroner in the same period to 2.34 crowns (by 20 percent).
The price of a cube of butter rose from 36.90 crowns to 56.31 crowns (by 53 percent). Agricultural primary production increased prices from 24.29 crowns to 44.18 crowns (by 82 percent), processors increased the margin from 5.55 crowns to 5.76 crowns (by 4 percent), traders’ margin fell from 7.06 crowns to 6, 38 crowns (by 11 percent).
The price of chicken meat rose from 52.55 crowns per kilogram to 78.62 crowns (by 49 percent). Processors had the largest margin, which they increased from 10.61 crowns to 19.11 crowns (by 80 percent). Let’s add that Agrofert is the largest breeder and processor of poultry in our country. The ÚOHS stated that the increase in the price of feed compounds increased the costs of breeders. Agrofert is also the largest producer, producing 893,000 tons annually.
Egg production has only two links in the chain – producers and traders. The average price of one egg rose from 2.35 crowns to 4.19 crowns (by 78 percent) in the monitored period. The vast majority of the increase goes to producers, from 1.95 crowns to 3.52 crowns (by 80 percent), while traders’ margins grew by only 27 pennies.
A comparison of the prices of wheat flour, which rose in price from 10.82 crowns to 17.77 crowns (by 64 percent), turned out similarly. Input prices of primary production rose from 6.42 crowns to 11.76 crowns (by 83 percent), processors (mills) increased their margins from 1.61 crowns to 2.51 crowns (by 62 percent). The store increased its margin from 2.79 crowns to 3.51 crowns (by 23 percent).
In this way, the Antimonopoly Office broke the constructions of the agrolobby and militant nationalists about the multiple repetition of foreign business chains at the expense of domestic farmers. The summary spread in the media that everyone was involved in the price gouging. This is nothing new, but a closer look reveals the key share of agroholdings and connected large-scale food production.
In this context, it is enough to recall the hysteria of representatives of the agrolobby. Trade unionist Bohumír Dufek called for a blockade of supermarkets. The former president of the Agrarian Chamber and senator for Zemanovce, Jan Veleba, warned last year of an economic explosion, food poverty, a wave of price increases and food shortages.
Agrobaron Jiří Milek, who owns the Úsovsko holding with billions in sales, strongly warned the government to take the spreading dissatisfaction of agrarians seriously. “Otherwise, nothing less than social unrest in the Czech, Moravian and Silesian countryside threatens.”
Similar to Milek, Zdeněk Jandejsek, whose Rabbit holding company copies Agrofert’s production structure, is referred to as “little Babiš”. Agricultural expert Trikolora and a supporter of mandatory quotas for Czech food a year ago predicted the price of bread at 200 crowns and one roll at 15 crowns.
Andrej Babiš, who has business interests in all controlled commodities, remains the unattainable king in the agricultural and food market. The activities of the agrobarons serve as a battering ram. They can thus repay him for the fat years when together with the Minister of Agriculture Toman in the government they promoted state support tailored to large enterprises.
The result is the key share of agro-corporations in the formation of food prices, efforts to limit cheaper foreign imports, trampling domestic competition and scaring people with famine. As the ÚOHS report showed, it was not traders who profited the most from price increases, but aggressive agricultural lobbies reaching out for billions in subsidies.
Vrabel, Rajchl, Dufek, Středula, Konečná and others like them should organize the next demonstration against poverty in front of Agrofert headquarters. Why don’t they ever do that?
Tags: agrolobby money expensive food threatened lack poverty-