Big retailers are making big profits at the expense of farmers and suppliers, says Fen Tiger
There is no doubt that people have had cheap food for far too long – without appreciating that food prices are decided by the major supermarkets, not by farmers.
One big retailer has just reduced its prices on hundreds of items. Some are everyday necessities, others are luxury products. This supermarket wants to reduce its costs by up to 20% – enough to win back some market share from cheaper discounters.
While this is good news for customers, it is not good news for farmers and suppliers. The last time I was in a supermarket my grandson was pleased to see his favourite crisp range was on special offer: selling for half its usual price.
I explained that the supermarket was perhaps not being over-generous. Instead, they had probably beaten down the price paid to the supplier. That way it was the supplier who lost out, rather than the retailer. My grandson questioned whether this would be the case. Surely the supermarket would not renegue on a price agreement?
Profit margin
The UK’s biggest supermarket is running at a 4% profit margin while other less popular – and smaller retailers – have margins that are even slimmer. Little wonder that one supermarket chairman claims suppliers are profiteering by jacking up prices more than they need.
Some might say it’s a valid claim. After all, soaring inflation means food is becoming more expensive, with a basket of goods increasing by more than 16% in some cases.
But farmers are price takers, not price makers. It’s not us making the money – a point made well by our own local NFU county chairman agrees.
Farmers and other suppliers have had to cope with rising input prices and a huge rise in electricity and gas prices.
So who is right? The supermarkets or the farmers? Are farmers really the bad guys in this war of words?
The NFU says no – and readily available ag-inflation figures show that many growers and livestock producers have been taking a big hit on farmgate prices.
Yes, commodity prices have risen – but not by enough in many cases to offset huge increases in input costs.
Food security
If out government is really interested in food security, it would find a way to promote home-grown produce and allow UK farmers to become more efficient and profitable.
Instead, in my part of the world, a fair number of producers are scaling back.
The potato area here has been reduced due in no small matter to the cost of production and the cost to finance the growing crop.
Major buyers are limiting contracts and instead buying on the open markets and sourcing from abroad.
Depending on indiviual circumstances, it has been suggested that it costs more than £250 to grow a tonne of potatoes. With growers receiving much less than that, it’s no wonder fewer potatoes are being grown.
It is worrying to think that while food is in plentiful supply from beyond these shores, here at home nobody other than farmers and a few food fanatics seem to care.
Maybe more people will come to their senses when domestic supplies have dried up and import prices soar.
Farm support
Sadly, in today’s economic climate it’s hardly profitable to farm food. Hence why the majority of farms have other interests – rightly or wrongly, food production is often supported by an on-farm diversification or an off-farm job.
The government says it wants to support farmers – by encouraging them to undertake environmental work rather than producing food. Yet it is still failing to provide enough information and cash for any of Defra’s new environmental schemes.
It’s a wonder many farmers have the financial clout or enthusiasm to carry on. But carry on they do. It seems like a continual battle, although I have always been told that farming is a way of life without much financial reward.
Big retailers rule the roost, despite the Grocery Code Adjudicator who is meant to act as a supermarket watchdog and keep them in check. In my mind, the only answer is for farmers to work together and run their own supermarket. It has worked abroad, but has never been the case here.
