Over the last few months, EU consumers have probably felt from time to time that they’ve been watching a kind of “magic trick”.

They get the car and the kids back from the weekly food shopping, and turn on the TV to see images of demonstrating farmers. Their own wallets just got a lot lighter in the supermarket – more so than a couple of years ago – but the farmers’ wallets are apparently not getting any heavier. So where did the money go?

There’s been a lot of talk in recent months about the food supply chain – the line of people stretching from the farmer in his field to the consumer buying a product in the supermarket.

If prices paid to farmers are low while food prices in the shops are high, we potentially have a problem. Because although farmers get substantial help of various kinds from the EU, they basically make their money by selling what they produce.

And we’ve seen problems in recent months. Following the now-famous spike of 2007, farmgate prices began to fall sharply as early as the second quarter of 2008. On the other hand, prices in the shops started to come down only recently.

A Communication published this week by the European Commission sets out steps to help solve this problem and others in the food supply chain.

I strongly encourage readers to have a look at the Communication for themselves, and I don’t want to go into all the detail here. But I’ll make a few points.

First, if we want to spot unfairness and do something about it, we need good information.

That’s why we’re launching a European Food Prices Monitoring Tool. This will help us to see what a kilogramme of pork costs in one country compared with the country next-door. It will also show us how the price of that pork develops as the meat moves along the supply chain – from the farm, to the slaughterhouse, to the processor, and finally to the customer’s shopping basket.

Secondly, we must do what we can to boost farmers’ bargaining power in the supply chain.

This is a complex issue, because different parts of the agri-food sector work in different ways. For example, in some cases farmers use contracts, and in some cases they don’t.

Regular readers of this blog will already know that a High-Level Expert Group is already looking at related issues in the case of the dairy sector.

This week’s Communication has some more general suggestions. Among other things, we need to step up our efforts at EU level to ban unfair contractual practices: for example, powerful businesses should not feel that at the drop of a hat they can just rewrite contracts which they have already signed.

But thirdly, the issue of bargaining power – whether in the situation of signing a contract, or otherwise – leads me to a wider point: farmers need to work together.

This is not hot news. Many European farmers have been successfully co-operating for decades. But I’m saying it again because I see such different approaches across the EU.

For example, in the fruit and vegetable sector, in some countries farmers club together into producer organisations. These give farmers more muscle in negotiations with processors and the retail sector, and they also help farmers to organise their work in other ways. In other countries, most fruit and vegetable farmers choose to go it alone – and they suffer as a result. This is why, in the reform of this sector agreed in 2007, we took steps to boost membership of producer organisations.

What’s right for one part of the farm sector may not be right for another. But in any case, in the years ahead we need to think carefully about how to help farmers stand up strong together.

In the meantime, this week’s Communication should make a strong contribution to ironing out problems in the supply chain. And there will be a follow-up report in November 2010 to make sure that we’re really delivering solutions.

Magicians who make people’s money vanish with a wave of the magic wand don’t normally last long in their profession. Shoppers who pay good money at the check-out till want to know that they’re paying a fair price and that everyone is getting a fair share of it. The steps announced by the Commission will help to achieve that.

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