Retailers bearing down on suppliers but taking a hit on behalf of consumers? It just doesn’t add up, says Peter Kendall

Over recent weeks there have been references on these pages to my call for a government 'food plan' to pick up the five key challenges set by Sir John Beddington's Foresight report on the future of food and farming.

Judging by the recent Budget, there is much to do to ensure food and agriculture are at the heart of the government's agenda.

In recent years, the improving working relationship between the NFU, FDF and BRC has meant that we often share the same vision and we have been able to work together to change attitudes towards the sector within government.

"The fact that regulators should have to step into this market at all is depressing, but it's the only way"
But when Justin King is reported as saying that he will bear down on suppliers seeking to recover escalating input costs at the same time the BRC is making the ludicrous claim that its members are taking the inflationary 'hit' on behalf of consumers, I have to say loud and clear that the market is not working. The race to the bottom being prosecuted by grocery retailers creates a very real risk that essential productive capacity will be lost forever.

Analysis in almost every sector of agriculture paints the same picture: food prices up, retailer margins up, farmgate share down and farmers being hammered down on price (to absorb input inflation). Is this what is meant by "bearing down"?

At the NFU, we receive reports of many different demands being placed on farmers and processors who have little or no choice but to pass on payment demands, reductions in price, guaranteed margins or postponed payment terms to their farmer suppliers. I hear a staggering array of excuses: we've been too soft in the past and lost market share, our retiring CEO needs to leave behind a great set of accounts, our share price is under pressure...

The Competition Commission was crystal clear in its 2009 report when Peter Freeman said "our inquiry clearly revealed problems that require action and which, if left unchecked, would damage the consumer". For a sector that has such an important role to play in future sustainable economic growth, the imbalance and exploitation in the food supply chain are insane.

We should be working together to develop supply chains that deliver a fair share for all, with everybody making a margin. When we find ourselves, as we do today, with soaring commodity prices everyone should take a share of the pain. Not as today where poultry sheds are left empty, pig farmers are shutting up shop and dairy farmers are seeking extensions to overdrafts.

There are parallels to the banking sector. Mervyn King has been talking about banks chasing short-term profits on the back of consumers and the need for further regulation. We need to wake up. The food industry has so much to offer yet we are still locked into short-term thinking.

The government has and will continue to regulate to remedy the adverse effect on competition, but the extent is still to be determined. The fact that regulators should have to step into this market at all is depressing, but sadly this is the only recourse when everything else has failed.

I am certain that the food and farming sector can be even more central to future economic growth. Our primary production is the platform that generates a massive £80bn of GVA. Now is the time for collective responsibility, a new era for retailing and genuine fair shares for all, or we will not realise that vision.

Peter Kendall is president of the NFU.