The Prime Minister asked manufacturers and large retailers on France 2 on Thursday to “reopen negotiations”, to pass on the price cuts on raw materials, with effects by the end of the 100-day deadline.
Will prices soon drop on the food shelves? The Prime Minister ELisabeth Borne wants “concrete reductions”, “by the end of June”, since raw materials now cost less. Guest of France 2 Thursday, April 27, the head of government therefore asks manufacturers and large retailers to “reopen negotiations”to pass on these declines.
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This goal ofELisabeth Borne is optimistic. Commodity prices are indeed falling: soft wheat is currently at its pre-war level in Ukraine, like corn, rapeseed, and feed barley. Sunflower is now selling well below where it was a year ago.
Price drops rather expected at the end of July
One would therefore expect to see prices fall for all food products that use these crops. But inflation remains high on these products. On food, it was close to 16% last month. Price increases are also seen in March for bread, cereals and meat. Insee estimates for the month of April are expected on Friday.
There is actually an inertia effect. In-store pricing comes from annual trade negotiations. These discussions between large retailers and manufacturers ended on March 1, with an increase of nearly 10% which was to partly offset the surge in energy prices last year. This energy inflation is now slowing down.
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The law provides for “review clauses”: new negotiations in the event of a sharp rise or a sharp drop, which is therefore possible if the actors respond positively to the Prime Minister’s request. But that would take time: it takes nearly three months. If the discussions resumed tomorrow, we would rather arrive at the end of July, while Élisabeth Borne foresees reductions by now “end of June”. Emmanuel Macron himself warned, in an interview with the newspaper Le Parisien/Today in Franceat the start of the week it was going to be “hard until the end of the summer”for food prices.
Not the government’s first request
Can the government act to obtain these price reductions? He can exert pressure and he is, with the request from the Prime Minister on Thursday morning which is in fact a new request. Already at the beginning of the month, the Minister ofEeconomy Bruno Le Maire and the Minister Delegate for Trade Olivia Grégoire wrote to the industrialists to ask for new negotiations.
So far, the actors respond that the renegotiation clauses are quite restrictive. We need price cuts “proven and objective for companies” and the contracts are for a certain duration. It would therefore be, for example, in the second half of the year that we could lower the prices
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Some of these companies point out that other lines of their budget are increasing: for wages for example, with the revaluations of the Smic and those of other products, such as eggs. Others also argue that the price increases on the shelves last year did not cover all the increase in their production costs, for example with energy. These small and medium-sized enterprises therefore need to rebuild their cash flow.