Recent allegations facing the likes of Tesco, Premier Foods and 2 Sisters have cast fresh light on the difficult relation between retailers and food processors and the companies that supply them. Though it's not a remotely new problem, the level of detail of controversial payment practices and 'pay to stay' demands has been eye-opening. Despite Dave Lewis's pledge to 'reset' Tesco's relationship with its suppliers, the big supermarket price war is unlikely to help farmers already struggling to keep afloat.
Yesterday the National Farmers Union (NFU) said the number of British dairy farms has halved since 2002, falling to 9,960 thanks to a combination of falling prices and rising costs. The price of milk is at 20p per litre, its lowest level since 2007, but production costs have increased by 36% over the same period. NFU's research found that 60 dairy producers gave up in December 2014 alone and that at the current rate there will only be 5,000 left by 2025.
‘Being a dairy farmer at the moment is like being a boxer - on the ropes and taking body blow after body blow – there’s only so much you can take before throwing in the towel,’ said NFU dairy board chairman Rob Harrison. ‘I... [am] completely appalled by the ongoing price cuts crippling our industry and we are working hard to support our members and their businesses in every way we can.’
The problem has been highlighted by the struggles of First Milk, a cooperative that makes cheese, yoghurt and sports nutrition products. Last week it said it would be delaying payments to hundreds of its member farmers for two weeks because of market volatility. ‘Our priority is to make the business and our processing assets as secure as possible in order that we can continue to process and market every litre of our members' milk,’ its chairman, the Tory MP Sir James Paice said.
That’s all well and good but it isn’t much comfort to farmers. ‘It doesn't help me one little bit because we're already producing below the cost of production and I've got bills to go out,’ Ludlow dairy farmer Stuart Rogers told Sky News.
And it’s not just udder squeezers that are being squeezed. A recent poll of all its members by the NFU found that the proportion negatively affected by low output prices doubled between 2013 and 2014 to 57%. ‘This year has seen farmgate prices falling across various commodity sectors – arable, dairy, livestock and mixed - and this increased volatility has clearly impacted on our members’ confidence,’ said NFU president Meurig Raymond.
Farmers have also complained of the impact of margin-squeezing discount stores on falling prices. But of course, it would be unfair to blame this all on supermarkets. According to the UN's food price index food prices fell throughout most of 2014, with an overall fall of 3.7% on the previous year. In Europe this was exacerbated by the Russian import ban which left a glut of eggs, meat and veg hanging around to deflate prices further. All the same though, supermarkets charging less for milk than for water on a pint-for-pint basis can’t exactly be helping matters.