Farmers subsidising consumer appetites for cheap food cannot continue, a new report for the 2024 Oxford Farming Conference has found.
In the ‘Is the UK Food Supply Chain Broken?’ report, published today ahead of the conference’s launch tomorrow, author Ged Futter wrote that recent global and climatic events had exposed supply chain weaknesses and “emptied” farming bank accounts.
Futter wrote that because of this, “the level of risk is at all-time high, there is consistent oversupply, and coupled with this, a deep understanding of a farm’s cost of production and its profitability is often lacking”.
The report is based on more than 40 interviews with business owners across fresh produce, eggs, poultry, pork, importers, frozen food manufacturers and consultants. It is sponsored by Horwich Farrelly.
It found that while retailers had been criticised by farmers and suppliers, retail to consumer was still the most sustainable and efficient distribution model.
However, Futter explained the risk versus reward ratio was out of kilter, which was pushing farmers to question whether they could continue, and was driving down investment.
“For some, it seems that it is the end of the road: glasshouses are being closed and orchards are being grubbed,” said Futter.
“Increasingly, farmers are leaving the sector and using the land for non-agricultural uses because they simply cannot afford to continue subsidising the cheap food that the UK consumer has been used to.”
The report centres on three retailer tactics that need addressing: fixed price, long-term agreements, the impact of inexperienced buyers and the audit burden as these three issues have squeezed profit from suppliers.
Insights from the report about retailer behaviour included instances of very inexperienced and arrogant buyers, limited or no acknowledgement or recompense for a farmer’s risk and multiple, intrusive audits, with one business conducting audits in 42 weeks of the year.
One analogy used in the report likened the negotiations landscape between retailers and growers as the equivalent of Premier League footballers playing against a pub team that complains when they lose 38-0 and that the other team didn’t play fairly.
“The retailers have become more sophisticated at finding ways of getting better prices and most farmers/growers/packers have not kept up,” Futter said.
“In some categories (mainly produce), the way that retailers and their grower suppliers do business has fundamentally changed from a trading model, based on short, often weekly prices, based on supply and demand, to long-term fixed price contracts,” said Futter.
“At their worst, these contracts can straddle more than one growing season,” a practice described as “destructive”.
This is not the first time these misgivings over contracts have been raised, with many growers expressing concerns over the future of their businesses due to retail contracts. Most recently, apple growers claimed costs were still being outpaced by returns.
Apple grower Ali Capper, director of the Oxford Farming conference, said the report built on 2023’s report that called for fairness, net zero cost-sharing and the recalibration of value-sharing throughout the supply chain.
She explained that costs of production for fruit & veg growing had increased by 20% to 27% depending on the enterprise, which she said was “simply unsustainable”.
“The new business landscape of today’s supply chains with volatility created by geopolitical challenges, unprecedented inflation, increased interest rates, climate change and the cost of living crisis require everyone responsible for feeding UK consumers to rethink their approach to supply chains before it is too late,” she said.
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