Monday, February 11, 2013

Horsemeat scandal driven by cost-cutting and profit

The horsemeat scandal is easier to explain than to trace. What we have are profit-hungry, self-regulated major retailers using their power to force down prices paid to suppliers who in turn cut their own costs by sourcing raw materials more cheaply.

As the price of beef has risen – reaching a new high last year - the pressure on the suppliers in France and Ireland has grown. They were desperate to cut the price they were paying for what they thought would be beef.

Instead, horsemeat – which may itself contain traces of antibiotics dangerous to humans – entered the food supply chain throughout Europe. It was a disaster waiting to happen.

And the victims? Mostly poorer people who with food prices rising fast, have had little  choice but to buy “value” and other similarly labelled, comparatively low-priced, processed, frozen meat products they were led to believe contained beef.

The winners? Those who sold horsemeat under the label beef. Beef sells for around €4
kilo of beef costs while horsemeat fetches 90 cents.

A labyrinthine supply chain provided the opportunity. One investigation compared the chain to something money launderers would have been proud of. It involved “a  deliberately murky complexity of semi-regulated sources, abattoirs, suppliers, middlemen, imports, exports, labelling and relabelling”.

Originating in Romania, where cows are slaughtered and minced, some was imported to France and sold on to another French company before being despatched to a factory in Luxembourg. French government officials believe that another French company also bought the meat frozen from a Cypriot meat trader, who sublet part of the order to another trader in the Netherlands, who was supplied by an abattoir in Romania.

Of course, there was no testing despite strict rules on the traceability of meat that were imposed in France during the BSE crisis in the 1990s. In fact, there was no testing anywhere in Europe – apart from Ireland. The Irish authorities, acting on a tip-off, raided the firms that were supplying Tesco and discovered horsemeat destined for beef burgers.

A globalised, complex food chain dominated by a handful of retailers and suppliers, whose first concern is the bottom line, is the backdrop. Professor Karel Williams, at Manchester Business School, described the horsemeat scandal as  the inevitable result of processors “constantly ringing around to get the cheapest deal this week”.

The Food Standards Agency in the UK, set up in the wake of the BSE scandal, is generally regarded as being in the pockets of the supermarkets. They have lobbied for and succeeded in achieving what is known as “light-touch regulation”. This is essentially reduced to suppliers ticking boxes (New Labour also pioneered a similar approach in the banking sector and we know what happened there).

The ConDems have axed hundreds of meat inspectors and trading standards officers as part of the austerity cuts. Now the Coalition is saying the industry must sort itself out. Newspapers like The Observer are whistling in the dark with their call for more regulation. Well, it’s never going to happen and it’s bound to get worse as cost-cutting becomes more intense.

 “I think what we are seeing is just the tip of the iceberg,” says Professor Chris Elliot, director of the Institute for Global Food Security at Queen’s University in Belfast. “There are probably plenty of other problems lurking out there we aren’t aware of.”

The truth is that leaving food in the hands of a handful of retailers and suppliers is good for shareholders but dangerous for our health. Corporate control of food and agriculture is the problem. Successive scandals have shown that to be the case. No amount of regulation will alter that.
Paul Feldman
Communications editor

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