The Competition Commission has been in informal talks with farming groups and major retailers for the last few months on the subject with retailers still reluctant to allow the appointment of such a figure.

The talks follow recommendations made in February by the Competition Commission that an Ombudsman be appointed to arbitrate between farmers and retailers over prices paid to farmers.

Although there is no formal time limit for these negotiations, the Yorkshire Post has learned if no formal agreement can be struck by early next year it will be referred to the Government's Department for Business, Enterprise and Regulatory Reform (BERR) for a decision.

A spokesman for the Competition Commission said: "As far as the ombudsman plans and the other measures we are in the midst of informal consultation with the parties not just the retailers but parties interested in the outcome.

"It's slightly fragmented in the sense that there are things we can introduce ourselves and other things that can only be introduced by agreement with retailers.

"Clearly we have a situation where the producers are very interested but retailers are not so keen. We do not take sides in these situations but there was enough evidence to suggest that some action was needed."

He added that he expected a decision to be made by early next year at the latest.

The National Farmers' Union has been vocal in its support for the appointment of an ombudsman, with its president Peter Kendall being critical of the practices of supermarkets when dealing with producers.

In a recent speech in Cardiff he called for a fair and responsible pricing structure to be placed at the heart of British retail.

Mr Kendall said: "We are receiving all to many complaints from suppliers, frightened of talking up their issues direct, who have had unilateral price cuts and demands for back payments and over riders.

"While we fully recognise the plight of consumers and their need to buy good value food during the credit crunch, there is enough flexibility in the margin taken by retailers to offer competitive pricing without reducing the price paid to farmers, growers and other suppliers.

"A continuation of this policy will see the agricultural production base in this country irreparably eroded with diabolical consequences for suppliers.

"The contribution farming makes beyond that of food production – shaping the environment, contributing to biodiversity, for example – is too important to throw away because of short term pressures, however great they are. A longer term view is what is needed, for farmers and for consumers."

A spokesman for the British Retail Consortium said: "We have always made it clear that we do not see any reason for an ombudsman as it will add extra burden, bureaucracy and cost to the supply chain which would ultimately feed through to higher retail prices."

The spokesman added that there was no evidence to show that an ombudsman would improve the situation for British farmers.