Tougher, legally binding codes of practice for all participants in supply chains, not just supermarkets, are needed as soon as possible to bring farmers and growers a fairer share of food industry profits, says Sustain, the alliance of food, health and environmental bodies.
In its report Unpicking food prices, published at the end of November, it calls for government backing to create ‘new and better routes to market’, through an action plan to increase the market share of shorter ‘farmer-focused’ supply chains; and public investment in local agri-food infrastructure, such as storage, packing and processing hubs.
It also wants to see an overhaul of public procurement systems that would draw on a wider pool of growers to supply them.
The report analyses the typical costs and profits for five foods and how they are allocated between growers, intermediaries and retailers, with carrots – often used as a loss-leader sold at close to the cost of production by supermarkets – representing the vegetable sector.
It calculates carrot growers receive 26% of the supermarket retail price of a 1kg prepack bag (selling at 54p) but that is almost completely eroded by the cost of growing (8% of the retail price), labour (6%) and other overheads (11%). This year growers were being asked to supply at below their 14p break-even point, it says.
By contrast, the grower’s return from 1kg of organic carrots sold for £2 through a not-for-profit food hub could make 45% of the retail price and a 3% profit.
Sustain head of farming Vicki Hird said growers need better returns, not least because they are being expected to do more to protect the environment and cut emissions. “That money should not leach out of the system into the coffers of food industry intermediaries and supermarkets,” she said.
“Our report shows that paying farmers more need not mean higher food prices so retailers cannot use that excuse – there would be little impact on many products’ retail prices if farmers were paid more.”
Sustain’s report comes as the government undertakes its three-yearly review of the role of the groceries code adjudicator (GCA), responsible for overseeing the groceries supply code of practice (GSCOP) which aims to make relationships between supermarkets and their suppliers, including growers, fairer and more transparent.
As part of its review the Department of Business, Energy & Industrial Strategy has mooted merging the GCA with the Competition & Markets Authority.
Both Sustain and the NFU have defended the adjudicator’s status, fearing fresh produce supply chains would be low on the list of the CMA’s priorities. “Proposals to transfer the GCA’s functions into the CMA or removing it altogether would have hugely damaging impacts,” said NFU director general Terry Jones.
“The effectiveness of the policing of GSCOP could be diluted, with the proactive and focused approach no longer a priority among all other competition issues.
“Supply chains are currently under huge pressure which places even more importance on the GSCOP. To dilute or weaken the role of the GCA puts both suppliers and shoppers at risk and would erode our national food resilience at a time when the sector is highly vulnerable.”
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