Vegetables (Hansard, 20 July 1977)

§ Mr. Maclennan

The House is aware that my right hon. Friend has asked the Price Commission to keep under review and to report periodically on the prices and distributors' margins of potatoes and other vegetables whose supplies and, therefore, prices have been seriously affected by last year's drought. The essential purpose of these reports is to ascertain whether, in a period when prices have unavoidably been exceptionally high, distributors are aggravating the situation by widening their margins unjustifiably.

I reported to the House on 22nd April on the Commission's report covering the period December 1976 to February 1977. I now have a further report covering the period up to May 1977, and I am arranging for a copy to be placed in the Library.

Potatoes.—The report shows that, from February onwards, monthly supplies of fresh potatoes have been higher than last year, and that, with consumption somewhat lower, stocks have risen and retail prices have accordingly begun to fall. It shows that the gross cash margin between the farmgate price and the retail price has remained on balance rather lower than last year, with the exception of May —the last month covered—when an increase appeared which may prove to have been exceptional. Looking back over the past potato season as a whole —September 1976–April 1977—the report shows that the average gross cash margin has been 4.1p per lb., the same as the previous season.

Other vegetables.—The Commission has continued to monitor also cabbages, cauliflowers, brussels sprouts, carrots and turnips. The details vary from one to the other, but the overall level of their supplies is shown to have been 22 per cent. lower during the past season—September 1976–April 1977—than in the previous year. Retail prices for each of them have in consequence been sharply higher than in the previous year: in the period February—April 1977 the weighted average retail price for the five taken together was about 60 per cent. higher than a year earlier. As for gross distribution margins, the weighted average of their cash margins, at 6p per lb., was 546W about 22 per cent. higher. Percentage margins have fallen substantially.

Overall view of distribution margins.— Drawing the threads together, the report also sets out the trends in the trade as a whole. Comparing the past season—September 1976–April 1977—with the previous one, it shows that, while the prices of potatoes and the other vegetables have risen, the volume of trade has fallen, the value of sales has been some 2 per cent. higher, and the overall gross cash margin on them has been 13 per cent. lower than in 1975–6, though 13 per cent. higher than 1974–5.

The future.—The report looks forward to substantial falls in the prices of most vegetables as supplies build up. All such predictions are dependent on the weather, but the present outlook is encouraging. My right hon. Friend is asking the new Price Commission to continue monitoring prices and margins of these vegetables until the autumn when the 1977 potato crop will be lifted.

Conclusions.—The Commission's study has covered a period of exceptional scarcity and high prices for these vegetables, and its findings on the behaviour of the distribution trade are fairly reassuring. I remain satisfied that the recent high prices of these vegetables has been due to the shortfall of supplies occasioned by exceptional weather and that market conditions have been such that distributors have not exploited the shortage. The findings demonstrate that there has been no tendency for distributors of these foods to maintain standard percentage margins. In cash terms, the overall margins of the trade have fallen in response to consumers' resistance to high prices. These are signs of a generally effective competitive market, and it is encouraging to note them.