Picture credit: Friends of the Earth

Farmers have to bear the burden of unfair trading practices imposed by supermarkets. In 2001, Tony Blair claimed that British supermarkets had farmers in an 'armlock'. 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 2000, the UK Competition Commission (CC) reported on many of the supermarkets' unfair practices which were considered anti-competitive. It found 52 kinds of abusive trading practicies (See the CC report). The response by the Office of Fair Trading (OFT) was to introduce a voluntary code of practice, to be entered into by the large four supermarkets. Many of the 12 original provisions recommended by the Competition Commission were weakened. A later review by the OFT revealed that many practices identified in 2000 were still occurring, and 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'.

For further information on the Supermarket Code of Practice, please see the Tescopoly page.

Supermarkets fail to pay farmers a fair share of  retail prices
Thousands of farmers and workers are forced to leave the industry 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 2000 Competition Commission Report the buying power of the major supermarkets actually means that 'the burden of cost increases in the supply chain has fallen disproportionately heavily on small suppliers such as farmers'.

Supermarket buying power means that a supermarket like Tesco can obtain more favourable terms than other buyers. For example, the Competition Commission investigation revealed that Tesco consistently paid suppliers nearly 4% below the average price paid by other retailers. However when a supermarket squeezes its supplier, it merely reallocates profit margin from supplier to retailer and there should be no assumption that the retailer's saving will be shared with consumers.

• Read an interview with a strawberry farmer in The Times
• Read a case study on dairy farmers

Some further reading on the impact of supermarkets on farming:

• In June 2010 the National Farmers' Union released a report that confirmed that farmers have yet to see the full benefit of the rise in the dairy market. The NFU conducted an in-depth investigation into the dairy market and the report revealed that millions of pounds are not being passed back to farmers. Read the report " The Great Milk Robbery"
  
• 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. Read the report here. This coincided with the Office of Fair Trading (OFT) allegations of dairy price fixing demonstrating just how supermarkets profit while customers, producers and the environment suffer.
  
• Read the testimony of a British soft fruit farmer forced out of the market
  
• Farming industry marketing strategy, commissioned by the Tenant Farmers Association and the National Beef Association, January 2005 - a briefing explaining the need to refuel the UK's ailing agricultural system and looking at the way supermarket marketing influences food choices.
  
• The current economic state of British agriculture, Farm Crisis Network, 2005 - This paper shows some of the difficulties faced by farmers and farm workers, exploring reasons for the fact that many farmers on average incomes are poorly off.
  
• Farmers and the Supermarket Code of Practice, Friends of the Earth, 2003 - A briefing revealing that farmers did not feel that the voluntary Code of Practice had changed how supermarkets treated suppliers, based on a survey of farmers.
  
• Supermarkets and Great British Fruit, Friends of the Earth, 2002 - This briefing, based on a survey of apple and pear growers, shows the difficulties faced by farmers in meeting strict supermarket specifications about the appearance, price and quality of products.
  
• 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.