Farmers feeling pain of price war

The National Farmers’ Union said that farmers and food processors are at risk of being caught between a rock and a hard place as signs of downward pressure from supermarket price wars coincide with record rises in the cost of farm inputs.

The latest Defra Agricultural Prices Index (API) figures show a 13 per cent rise in the cost of fuel, feed and fertiliser in the last year with prices now above the previous 2008 peak – a time widely reported to have been a crisis period for the industry.

Farmers are currently feeling the pain of a major grocery price war between the large retailers, which many fear will cause lasting damage to the competitiveness of the supply chain.

The NFU’s director of corporate affairs, Tom Hind, said: “These figures illustrate that variable and fixed costs for fuel, feed and fertiliser have all been on the rise over the last two years with this sheer combination of factors pushing the index to its record high.

“It contrasts with the fall in the cost of food to consumers and bears out comments by some producers that they are being asked to ‘share the pain’ of the well-documented supermarket price wars.”

Mr Hind question reports from the supermarket industry that retailers are cutting thin margins to hold down shop prices.

“We know that consumers are feeling the pinch from the weak economy and higher levels of inflation.

“Fair competition to ensure consumers get the best deal is all well and good. But there are two big risks.

“The first is that excessive bargaining power exerted for short-term pressures will undermine the already feeble state of investment on farms and in food manufacturing. In the long run this will affect our ability to compete and to offer consumers a choice of high quality, affordable British food. The second is the very real risk that some companies may resort to the underhand tactics of the past to recover lost margins, protecting shareholder dividends whilst undermining farming families.

“To address this, it is vital that the government comes forward swiftly with formal plans to introduce a Groceries Code Adjudicator with meaningful powers to investigate claims of breaches of the GSCOP.”