Supermarkets don't pay farmers a fair share of retail prices
Thousands of farmers and farmworkers are forced to leave agriculture each year because of the low prices they receive for their produce. Farmers' organisations believe that a major contributory factor to this crisis in British farming is the increasing buying power of supermarkets and their ability to squeeze suppliers. According to the 2009 Competition Commission Report the buying power of the major supermarkets means that the burden of cost increases in the supply chain has fallen disproportionately heavily on small suppliers such as farmers. These lower prices are not necessarily passed onto shops and often have a “detrimental effect on consumers”.
Focus on the 'Supermarket Wars' have shown that supermarket prices and discounts are paid for by reducing payment to suppliers. The National Farmers' Union have claimed that due to price squeezes, one dairy farmer has gone out of business every day for the past decade. Pig farmers claim that they lose £3m per year effectively subsidising Tesco. Supermarkets merely increase their profit margin.
Farmers have to bear the burden of unfair trading practices imposed by supermarkets.
Supermarkets control nearly 80% of the British grocery market and as the most powerful players along most food supply chains are able to dictate terms, conditions and prices to suppliers. If suppliers complain, supermarkets can simply move their business elsewhere, and their dominance of the food retail sector is such that there may simply be no one else for farmers to sell their produce to.
In November 2010 NFU President Peter Kendall launched a stinging attack on retailers, accusing them of creating a climate of fear in the dairy sector through ruthless and erratic negotiation. He accused retailers of forcing processors to sign confidentiality agreements to ensure negotiation details remained under wraps, keeping the supply chain "dangerously in the dark".
More details about the damage caused to farming by supermarkets:
The National Farmers' Union (NFU) conducted an in-depth investigation into the dairy market and their June 2010 report revealed that millions of pounds are not being passed back to farmers.
Friends of the Earth research in 2007 highlighted how dairy farmers are struggling to break even and are unable to invest in greener farming, despite increased consumer demand for more environmentally friendly produce. This coincided with the Office of Fair Trading (OFT) allegations of dairy price fixing showing how supermarkets profit while customers, producers and the environment suffer.
Farmers and the Supermarket Code of Practice, Friends of the Earth, 2003 - This briefing revealed that farmers did not feel that the voluntary Code of Practice had changed how supermarkets treated suppliers, based on a survey of farmers.
Supermarkets: A report on the supply of groceries from multiple stores in the UK, Competition Commission 2000. The Competition Commission's investigation looked at the impact of increased supermarket buyer power on consumers, retailers and suppliers, including the apparent disparity between farmgate and retail prices for some products.
A survey of farmers conducted by Friends of the Earth in 2003 showed that many farmers were 'being asked to pay a rebate on an agreed price, waiting over 30 days for an invoice to be paid, incurring additional transport or packaging costs due to changes in supermarket specifications and meeting the costs of unsold or wasted products where quality of the product was not an issue'.