Italy’s implementation of the EU Directive 2019/633 on unfair trade practices, in the Italian agri-food supply chain, as noted above, is a long way off and has serious critical issues. (1)
A brief scenario analysis can stimulate some thoughts on the needs of farmers, ranchers, and food processors. As well as on the roles of unions and politics.
Agriculture in Italy, France, Spain. Macroeconomic scenario
Agriculture in Italy is second in the EU in terms of turnover (€ 57.829 bn), after France (€ 77.024 bn) and before Spain (€ 51.679 bn). And it is first in gross value added (€ 32.928 bn), followed by France (€. 31.920 bn) and Spain (€ 28.066 bn. Eurostat, 2019 data. See note 2).
Agriculture, forestry and fisheries in Italy employ 1.103 million annual work units (854.7 thousand in Spain, 726.1 thousand in France). ‘Young’ farmers, under-40, account for about 7.9 percent of the total in Italy (8.6 percent in Spain, 10.7 percent the EU average, 15.6 percent in France. Eurostat, 2016 data). Agricultural factor income per unit of labor has been declining across the board, already in 2019 compared to 2018 (Spain -3.3 percent Italy -3.9 percent, France -6.4 percent). (2)
Food industry, scenario
The Italian food industry ranks third in the EU with about € 135 billion in sales, after Germany and France, followed by Spain. Italian first and second food processing industries number 56.3 thousand and employ about 473 thousand people (ISMEA-Federalimentare, 2019 data). (3) At the European level,
– 290 thousand SMEs account for 99.2 percent of food ‘industries,’ 58.1 percent of employment, 42.8 percent of value added and 42.8 percent of turnover,
– microenterprises (0-9 employees) express 79.8 percent of the total number of enterprises, 14.2 percent of employment, 6.8 percent of value added and 5.3 percent of turnover(Food Drink Europe, data 2017). (4)
Moreover, the average size of Italy’s food industries-in the fragmented European context-is well below that of industries in other top-ranked countries. As noted by the average value added produced by each individual industry (€ 460 thousand in Italy, vs. € 730 thousand or so in France and Spain, € 1.7 million in Germany). (3)
Agribusiness production in Italy, basic criticality
The peculiar criticalities of agribusiness production in Italy reflect the other side of the ‘small is beautiful’ coin, with the aggravation of the demographic factor:
– the production fabric is extremely fragmented, with 1.145 million farms according to Eurostat. (2) Of these, according to ISTAT, the 415,000 active farms are overwhelmingly sole proprietorships (84 percent) and mostly (60.5 percent) without employees (5.6). One step down the supply chain, 57 thousand food processing enterprises and industries are added,
– the ‘seniorityofthe enterprise‘, in agriculture and food processing industry, ‘ranks in the danger zone‘ (ISMEA, 2020). (3) Coldiretti also boasts of being ‘the largest association of agricultural pensioners in Europe,’ with 800,000 members in its Federpensionati,
– the value chain highlights ‘from year to year a reduced marginality for farmers but also for Italian industrial producers.’ With an estimated net operating margin of <2 percent for agricultural entrepreneur, 2.3 percent for food processing, 12.6 percent for trade, distribution and transportation enterprises. (3)
Italian agriculture, further critical issues
Italian farmers are plagued by additional critical structural and contextual issues:
– logistics and transportation suffer from atavistic infrastructure deficiencies. (7) Which exacerbate costs, reduce business prospects and encourage the intervention of intermediaries,
– access to credit is so problematic that most operators give it up out of hand. (8)
– European public funds do not reach potential recipients as they are burned to the tune of more than 4 billion euros by the mismanagement of AGEA led by Gabriele Papa Pagliardini, business partner of the Coldiretti magic circle (9,10),
– the burdens of bureaucracy and legal uncertainty, unparalleled in Europe, force businesses to rely on organizations that operate under substantial monopoly conditions, such as Coldiretti’s CAAs. With serious detriment to the competitiveness of the industry, in the inability to make use of valuable professionals. (11)
Unfair business practices and agreements between ‘unions’. The ABCs of the bin
The ‘unions’ that claim to represent agribusiness production in Italy, Coldiretti in primis, claim authorship of Article 7 of the 2021 European Delegation Law (L. 53/2021. See footnote 1). A late rule that delegates the government to de minimis transposition of EU Directive 2019/633 on unfair trade practices in the agribusiness supply chain.
However, farmers, ranchers (and food-processing SMEs) are penalized by the aforementioned rule-which reflects agreements made in recent months between Coldiretti, Confindustria and Federdistribution (12)-in several respects:
A) payment terms, set in the EU at 30-60 days from the date of delivery of goods, are illegally extended to 30-60 days ‘end of month date of invoice’. And so tripled on perishable goods (90 days), doubled on non-perishables (120 days). The government is then given a 30-day delay on the payment of perishable goods,
B) it fails to expressly clarify the application of the rules
– To ecommerce operators wherever established. Neglecting € 2.7 bn food & grocery sales in 2020 (+70% over 2019, net growth € 1 bn) and tax exemption of foreign operators, (13)
– to the provision of services to operators and users in the food supply chain (e.g. para-subordinate workers and consultants in r.a. and VAT numbers, service cooperatives, catering establishments). Taking into account the risks of circumventing the rules through contractual changes (e.g., delivery services instead of food supply),
C) sales below cost continue, in the soft underbelly of Presidential Decree 218/01, albeit with some limits on agricultural products to be defined. And the need to ensure the constant balance of prices with respect to fluctuations-even significant ones, up or down-in production costs is completely neglected.
Unions and conflicts of interest
Instead, the ‘double-down deals’ between Coldiretti’s magic circle, industry and large-scale retailers express the conflicts of interest of a self-styled ‘agricultural union’ that cultivates business relationships with:
– big industry(in Filiera Agricola Italiana SpA),
– high finance (in CAI SpA and CAI Real Estate Srl,, as well as in Nextalia SGR),
– banks and insurance companies(Nextalia, Green Assicurazioni Srl).
Ad memoriam
‘EU production costs are high in some sectors, due in particular to high labor and land costs, as well as environmental and health regulations. EU farmers face higher costs than third-country competitors for compliance with environmental, animal welfare and food safety legislation. Although this represents a small part of the total cost of production, it still affects farmers’ profitability. The industry is also threatened by high price volatility resulting from world prices and market uncertainty.’ (8)
#CleanSpades, increasingly needed.
Dario Dongo
Notes
(1) Dario Dongo. Unfair trade practices and the European delegation law, critical analysis. GIFT(Great Italian Food Trade). 4/24/21, https://www.greatitalianfoodtrade.it/pratiche-commerciali-sleali-e-legge-di-delegazione-europea-analisi-critica
(2) Eurostat. Agriculture, forestry and fishery statistics. 2020 edition. ISBN 978-92-76-21522-6. https://ec.europa.eu/eurostat/documents/3217494/12069644/KS-FK-20-001-EN-N.pdf/a7439b01-671b-80ce-85e4-4d803c44340a?t=1608139005821
(3) ISMEA, Federalimentare (2020). The food industry in Italy. Performance of enterprises to the test of Covid-19. http://www.ismeamercati.it/flex/cm/pages/ServeAttachment.php/L/IT/D/1%252F1%252F7%252FD.d228540cc46a1044693c/P/BLOB%3AID%3D10917/E/pdf
(4) Food Drink Europe. EU Food & Drink Industry. Data & Trends. 2020 edition. https://www.fooddrinkeurope.eu/uploads/publications_documents/FoodDrinkEurope_-_Data__Trends_2020_digital.pdf
(5) ISTAT (2021). 7th General Census of Agriculture, survey information. https://www.istat.it/it/archivio/252629
(6) ISTAT (2020). Italian agricultural enterprises in the Asia register. https://www.istat.it/it/archivio/250113
(7) Infrastructure and logistics: inefficiencies weigh up to 35 billion a year. Determinant role of ports. Digital 4. 4/23/19, https://www.digital4.biz/supply-chain/logistica-e-trasporti/infrastrutture-e-logistica-inefficienze-ruolo-porti/
(8) DG Agri (European Commission), EIB (European Investment Bank). (2018). Survey on financial needs and access to finance of EU agricultural enterprises. https://www.fi-compass.eu/sites/default/files/publications/Survey_on_financial_needs_and_access_to_finance_of_EU_agricultural_enterprises_0.pdf. Card-Country Italy, https://www.fi-compass.eu/sites/default/files/Annex_III_ITALY.pdf
(9) Dario Dongo. Report of the Court of Auditors on AGEA directed by Gabriele Papa Pagliardini. #CleanSpades. GIFT (Great Italian Food Trade). 12.3.21, https://www.greatitalianfoodtrade.it/mercati/relazione-della-corte-dei-conti-sull-agea-diretta-da-gabriele-papa-pagliardini-vanghepulite
(10) Dario Dongo. AGEA – Coldiretti, European Commission rejects conflict of interest. GIFT (Great Italian Food Trade). 3/24/21, https://www.greatitalianfoodtrade.it/progresso/agea-coldiretti-la-commissione-europea-boccia-il-conflitto-d-interessi
(11) Dario Dongo. Conflict of interest AGEA – Pagliardini – Coldiretti, questions to the European Parliament. GIFT (Great Italian Food Trade). 30.1.21, https://www.greatitalianfoodtrade.it/idee/conflitto-d-interessi-agea-pagliardini-coldiretti-interrogazioni-al-parlamento-europeo
(12) Dario Dongo. Unfair trade practices, double-down supply chain agreement. GIFT(Great Italian Food Trade). 7.3.21, https://www.greatitalianfoodtrade.it/mercati/pratiche-commerciali-sleali-accordo-di-filiera-al-doppio-ribasso
(13) Simone Fraternali. E-commerce and Food: shopping online in Italy. Observers.Net. 1.2.21, https://blog.osservatori.net/it_it/food-ecommerce-italia
Dario Dongo, lawyer and journalist, PhD in international food law, founder of WIISE (FARE - GIFT - Food Times) and Égalité.
