Bad Harvests for Swiss Farmers Mean Cheaper Tomatoes for Shoppers

(Bloomberg) —

Bad news for Swiss farmers is good for consumers who pay the highest food prices in Europe.

A system of tariffs designed to protect Switzerland‘s agriculture industry effectively shuts out imports if a product can be produced domestically. Conversely, if bad harvests or a surge in demand mean there isn’t enough meat, fruit and vegetables, levies can be slashed on cheaper goods from abroad.

“In the summer, when domestic products hit the market, prices rise,” said Maxime Botteron, an economist at UBS. “It’s exactly the opposite of what happens in the surrounding euro zone, where prices drop if internal supply rises.”

The result is that crops such as cherry tomatoes are usually cheaper when they’re out of season.

What sounds like a paradox is kept in place by the government, under pressure from the country’s strong agriculture lobby, to protect local farmers and ensure food independence. Consumers have largely been willing to accept the tradeoff, especially as inflation has remained far below the level seen in the euro area.

“Swiss products are associated with high quality, and high environmental and social standards,” said Stefan Legge, head of tax and trade policy at the University of St. Gallen. “A large part of the Swiss population is just ready to pay those high prices for that.”

The government regularly cuts the levies, but only for specific situations. This was the case last week for eggs, as Swiss chickens are unable to meet demand despite a 35% increase in domestic production over the past decade. Authorities opted to raise the annual quota of reduced-tariff imports by 43% to almost 25,000 tonnes to ensure supply leading up to Christmas.

Despite the protection afforded by the system, Swiss farmers say they still struggle at times to make a living. This led the government to pay out some 2.7 billion francs ($3.1 billion) in direct subsidies to agriculture last year.

During a visit on Friday to a farm in Wileroltigen, a village of 379 inhabitants set against the backdrop of the Alps, most of the complaints addressed to Economy Minister Guy Parmelin were about overwhelming bureaucracy and strict pesticide rules.

He acknowledged prices are a problem but said Swiss groceries meet tougher standards and underlined the need for food security.

“We produce in a country where the costs are high,” the former wine maker told reporters. “We have to maintain the border, that’s our insurance to keep production in Switzerland.”

The wish to be independent from others is deeply rooted in the 220 kilometer-wide (140 mile-wide), landlocked country, which was neutral through two World Wars and is the only major state in central Europe not to have joined the European Union.

High local wages mean many Swiss consumers may not realize they’re paying around 50% more for food than their neighbors, said Legge of St. Gallen university. 

And as for those who do, they can always pop over the border and do some of their shopping in France, Germany, Italy or Austria.

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