Urban Food Chains

the links between diet and power

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Brexit's legacy UK economy

Pounds, pence and Euros

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If current headlines (week 24, 2023) about the turmoil in the Conservative party appear serious, wait until the parlous state of the UK’s unfinished Brexit arrangements come home to roost. History will judge those responsible, but the UK population will pay the price. Having copied and pasted the Common European Tariff into the UK economy, ministerial hands have been fiddling with some of the detail, but not with any visible signs of understanding what they were about.

As one might expect, the Common European Tariff is haunted by a number of ghosts in the machine. These are mainly mechanisms that protected former cornerstones of the Common Agricultural Policy from third country imports. With some dating back to the 1970s, these tariffs were supposed to make subsidised EU agricultural products competitive on the internal market against third country goods. Many of the tariffs are ad valorem percentages, but most of the politically sensitive sectors supported by the CAP are made up of an ad valorem percentage and a flat rate payment per 100kg in Euros, redenominated in GBP.

Third country olive oil arriving in the EU still faces a flat rate duty of EUR 124.50 per 100 kg. For some years now, there have been trade deals with third countries such as Tunisia, which establish a duty-free quota for EU packers. This olive oil can then be traded freely within the EU.

Under Rules Of Origin (ROO), however, any third country olive oil arriving in the UK is liable for duty at GBP 104 pro rata in blends, converted into sterling at around 85p to the Euro. Now the UK has no indigenous producers of olive oil to protect from competitive pricing of third country oils and ministers could have cheerfully set the duty to zero.

All the schedule XIX money values appeared in Euros before Brexit, as they did when the document first appeared in the summer of 2018. For its UK enquiries, HMRC works in pounds and pence. The transfer of Schedule XIX to Sterling was carried out by the WTO (World Trade Organisation) but there remain a lot of unresolved issues that will take a lot longer to resolve than Brexit. With more than 160 members, the WTO’s insistence on consensus makes bluster and confrontation counter productive. Brexit negotiations were shot through with contempt for consensus on the British side. In Geneva it doesn’t wash.

food manufacture food production raw UK

Investigating hydrogen

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For the past eighty years scientists have been rolling up their sleeves at the Glensaugh research farm and finding robust answers to the problems facing the agricultural sector. Perched on the east coast of Scotland not far from Aberdeen, the site is set to become a carbon neutral farming environment once its building programme comes on stream, pencilled in for 2025.

BBC journalist Nancy Nicolson visited Glensaugh for an edition of On Your Farm, which aired on April 30 and is still available on BBC Sounds. Water is the key to the project, using an industrial scale electrolyser to generate hydrogen that will power tractors and heavy machinery. This will in turn be powered by an array of green energy sources, such as turbines and solar panels.

A headline figure for the project is four million pounds: this is explained in part by the additional cost of being early adopters of technology that is still in development. This project will cast a light on the current operational energy needs of a one thousand hectare estate. Investment on this scale in one agricultural location is based on the assumption that the rest of the national economy will still be functioning in the future, in a recognisable form. We are still a long way from converting urban centres into sustainable economic entities.

Listen to Nancy Nicolson here: https://www.bbc.co.uk/sounds/play/m001lhz1?partner=uk.co.bbc&origin=share-mobile

UK economy

Real economic power

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The economy often appears to be a large, ramshackle institution, a law unto itself. This is partly due to the skills of those who really control it and partly because it is both a large ramshackle institution and a law unto itself. If the economy was only made up of money, it might be easier to make a case for saying that it can be controlled, if not managed, at some level. The truth is that the economy comprises much more than mere money and is constantly manipulated by economic factors that strengthen the relative strengths of one component over another.

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retail UK

Pricing experts?

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Ask any economist and they will tell you that economics is a science, founded on mathematics and using none but the most reputable methodologies known to  data science. The acid test of any scientific discipline is to be able to replicate previous experiments and repeat the results to within an acceptable margin.

To be sure, if you take the same data and crunch the numbers using the same calculations, you will get the same results as the previous economist. But economists are a diverse bunch, not to mention the smørgesbord of economic policy recommendations to be shared as the opportunity arises.

If this sounds less than serious in its tone or intent, it may be that it is not written by A Proper Economist (always spelt out in full, never abbreviated).  A Proper Economist can be relied upon to analyse market data and forecast the likely price trends within a given sector. If, on the other hand, you wanted to know the retail price of a grocery line for the coming year, that would be a closely-guarded secret between a supermarket buyer and her (or his) supplier.

With the digitisation of the retail checkouts in the early 1990s came a tidal wave of sales data that  probably paid for itself in months, if not weeks. For the first time in recorded history the multiples knew exactly how many units of which lines they were selling; where they had multiple suppliers of own-label products, the multiples could start to make direct comparisons between suppliers and the margins they were generating. Individual suppliers knew what volumes each was shipping to retail customers, but only the category managers had the whole picture.

The supermarket buyers’ secret weapon of choice in those days was a miniature tape recorder and microcassettes, to which verbal contracts worth millions of pounds were recorded. If any hard copies were ever made, these would have been kept in a safe. Supermarket buyers and category managers are overlapping roles. They were always instantly recognisable at trade fairs, leaving suppliers’ stands with their tape recorder pressed to their ear, playing back the small print as it was wrung out of the supplier. There was no question of suppliers passing  on price increases arising from higher prices on the international markets: the standard response in those days was: “find cost savings in your business…”

Not that buyers ever applied that principle to their own dealings with suppliers. Food manufacturers presenting new ranges and products to multiple retailers would face requests for a listing fee and, often as not, a request for special offer stock. Listing fees were also referred to as hello money or  shelf money, among other names. They used to start around £5000 per SKU for listings in an agreed number of outlets. Shelf money was never refunded if a product was delisted, but would be requested for years to come during the life of the listing.

Special offers were not what they might have appeared to be, either. The retailer charges the consumer for the special offer part of the price. But does the multiple give away the offer component of the price? Hell no! They recovered that from the suppliers, who systematically funded the offers, providing free stock directly or having the equivalent money withheld from invoices for other products. Either way, the retailer banked the full price on special offers. From the retailer’s point of view, it is having your cake and eating it. Even though the Grocery Code Adjudicator’s office has cleaned up the retailers’ act, the industry is still haunted by the ghosts of past sales targets.

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Europe UK

The value of money

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Before we roll up our sleeves and dig into the serious business of food pricing, we need a way of converting LSD to pounds to two decimal places, among other things. Here is an inline WordPress calculator courtesy of the Calculated Fields wonder plugin. My first idea was to provide a digital scratchpad with which to convert one-off figures.

[CP_CALCULATED_FIELDS id=”7″]

As part of the process, I also wrote a spreadsheet to do more heavy lifting, which is now available to logged-in users using the download link in the housekeeping menu box.

However, we need to do more than calculate the face value of old prices, we also need to translate the value of the currency of the day. The problems arising from trying to apply a one-dimensional measurement to a multidimensional world range from the practical to the arcane and I quite understand that not everyone will be keen to engage with them. One of the first is to decide which parameters are relevant and whether any of them are of universal application, regardless of whether or not such parameters are measurable.

What the official data looks like

Western currencies recorded centuries of relative stability until the latter years of the twentieth century. The 1944 Bretton Woods agreement maintained an appearance of exchange rate stability in the postwar period. But the Vietnam war and US foreign policy made the gold standard unsustainable and by 1976 the Bretton Woods agreement had been dismantled and (most of) the world’s currencies were floated on open markets . Labelling the result as inflation is only half the story: there has to be something else in the mix to explain the steepening gradient on the graphs.

Ian Watson, who developed the website Official Data [dot] org, has assembled government data from western economies in a bid to quantify the huge losses in their currencies’ historic spending power from the 1970s on. Working from national government data, Watson plots the value of 100 pounds from 1925 to the present day and found the 1925 hundred pounds to be worth around 7,700 pounds in today’s money. He found a similar pattern in the US, Australian and other major industrial economies. The graph for the UK is dramatic: clicking it will take you to the relevant page on Watson’s website.

customs clearance haulage lorry ship UK

Food pricing 100 years ago

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The 1925 Royal Commission on Food Prices was tasked with investigating food industry prices. Urban Food Chains is running a series of analytical case studies for subscribing members, drawing on the detailed statistical evidence that was heard by the commission during its deliberations.

Board of Trade statistician Mr A W Flux* told the hearing that the UK food economy grew by about two billion pounds (thousand million) in 1907. This comprised goods consumed in the UK , which were valued at between 1,248 and 1,408 million pounds; services between 350 and 400 million pounds and additions to capital of between 320 and 350 million pounds.

2. Of the goods consumed, some passed directly from producer to consumer (e.g. bread), and in some cases the produce was consumed by the producer (e.g. farm and garden produce consumed by the families of the cultivators). A second class of goods, while passing through merchants’ hands, was not the subject of retail trade, while, of the goods that passed though merchants’ and retailers’ hands, it was estimated that the charges of distribution, including cost of transport, amounted to something between one half and two thirds of the value of the goods at the place of production or importation.

The First Report of the Royal Commission on Food Prices, Volume 3, Appendix 1, paragraph 2

*Mr Flux is not a made up name, it is for real.

Follow the links for subscription-only content about the core commodities of the day:

bacon
bread
butter
cheese
eggs
fish
flour
fruit
ham
milk
sugar
tea
vegetables
wheat
UK

Fighting over food

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The truth is unlikely ever to emerge from the rubble of world war two, but the British ruling class was convinced that there was a significant black market trading in the wartime British Isles. The obsession with even the possibility that spivs might be getting away with crimes against upstanding citizens is captured by William Sitwell in his book Eggs Or Anarchy.

At this time, the House of Lords could be relied upon to make the most fuss over the least incident supported by little or no evidence. The sensitivity of the establishment to the idea that people might be getting away with crime, be it real or imagined, beggars belief. One particularly paranoid peer accused Lord Woolton, then minister of food, of failing to act in a timely manner to pre-empt the spread of profiteering, which he now believed to be out of control.

Woolton was, of course, held responsible for this state of affairs, be it real or imaginary. A man of humble origins, his arrival in the upper house was a reflection on his achievements in business rather than his birthright. To be sure, he was as irked by tales of black marketeering as his fellow peers, yet he was to be judged on getting results that were far from being attainable.

cookery UK

The National Mark

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In 1934, the Ministry of Agriculture published a recipe collection based on ingredients produced to National Mark standards, a fundamentally flawed quality assurance scheme overseen by the ministry. In 1936, the ministry went on to publish a second National Mark booklet with a year’s worth of recipes and product information, couched in the most toe-curling and sexist language imaginable.

The National Mark Calendar of Cooking is a 128-page stapled booklet, published in 1936. It contained recipes compiled by cookery correspondent of the News Chronicle, Ambrose Heath and Good Housekeeping Institute director Mrs D D Cottington Taylor.

It addressed an affluent upper class readership, heaping unstinting praise on British-grown food and overlooking the fact that the UK depended — and still does in large measure — on imported food. As the rest of Europe prepared for war, the National Mark Calendar warbled and wittered on endlessly about products that were only available to a rich elite.

Recipes for June include such gems as semolina souflee and poached eggs in aspic.The souflee recipe gives instructions for cooking the dish in a hot oven or a steamer, should a suitable oven be unavailable.

food manufacture UK

Piece of cake?

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The food industry celebrates “meal occasions”, which are excuses to buy and eat food without necessarily qualifying as a meal in its own right. Irish food manufacturer Glanbia suffered a setback for the VAT status of its flapjacks in April when a tribunal decided that the range did not qualify as a cake and was henceforth to be taxed at 20%.

The case hinged upon the suitability of the chewy confectionery bars for serving at afternoon tea. Cakes qualify for zero-percent VAT and a substantial fruit cake would still be classified as cake even if its mouth feel is distinctly heavier than a Victoria sponge.

Many years ago, the makers of Jaffa Cakes mounted a successful case to argue that as the name implied, their product was eligible for a zero-rated VAT status. A patisserie chef was hired to make an oversize Jaffa Cake and field questions from the tribunal, which accepted the basis for the distinction.

Glanbia, it would appear, was not so fortunate. Members of the panel declared that the flapjacks did not earn a place on the table at teatime because they are too robust. English tea is where you have your cake and eat it.

Here is how The Guardian covered the story: https://www.theguardian.com/law/2022/apr/17/flapjacks-too-chewy-taxed-cakes-judges-rule-glanbia-milk

animal products livestock pigs UK

Pig sector still struggling

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Despite some welcome signs of change in the fortunes of the pig industry, there are some ominous long term indicators. slaughter weights are starting to ease off from January’s high point. But at about 94kg deadweight, this year’s slaughter pigs are still five kg a head more that this time last year.

Welcome news from Morison’s when the retailer raised its contribution to production costs (SPP) by 30p to GBP 1.80. Pig producers need more retailers to do likewise. More to the point, producers need a more reliable system for recovering their cost of production, just to stay in business.

January pigmeat imports totalling 83,000 tonnes were up over 20% in December, not to mention double the volumes imported a year ago. Bacon imports in January were 27,000 tonnes, compared to 9,500 tonnes a year ago and 17,500 tonnes in December.

Market trends like these spell trouble for UK pig producers.

Since writing this piece in the spring, the AHDB has reported a recovery in market figures to nearer normal levels. However, this does not mean that pig farmers are any better off than they were earlier in the year.

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