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Record Farm Inputs Costs: Supply Chain Strain

by 5m Editor
24 November 2011, at 6:45am

UK - Farmers and food processors are under increasing pressure hard place as supermarket price wars coincide with record rises in the cost of farm inputs, the National Farmers Union (NFU) warned.

The organisation also called for the Government to speed up the process of creating the Groceries Code Adjudicator, following the latest Defra Agricultural Prices Index (API) figures that show a 13 per cent rise in the cost of fuel, feed and fertiliser in the last year with prices now above the previous 2008 peak.

It comes as farmers and food manufacturers are pressured into sharing the pain of a major grocery price war, which could see lasting damage to the competitiveness of the supply chain should the current situation continue.

NFU director of corporate affairs, Tom Hind said: “These figures illustrate that variable and fixed costs for fuel, feed and fertiliser have all been on the rise over the last two years with this sheer combination of factors pushing the index to its record high.

“It contrasts with the fall in the cost of food to consumers and bears out comments by some producers that they are being asked to ‘share the pain’ of the well-documented supermarket price wars.

“When you add this to reports in the Financial Times and other journals about the pressure being passed back by retailers, it calls into question the reliability of the British Retail Consortium’s message that supermarkets are cutting their already thin margins to hold down shop prices.

“We know that consumers are feeling the pinch from the weak economy and higher levels of inflation. Fair competition to ensure consumers get the best deal is all well and good. But there are two big risks.

“The first is that excessive bargaining power exerted for short-term pressures will undermine the already feeble state of investment on farms and in food manufacturing. In the long-run this will affect our ability to compete and to offer consumers a choice of high quality, affordable British food. The second is the very real risk that some companies may resort to the underhand tactics of the past to recover lost margins, protecting shareholder dividends whilst undermining farming families.

“To address this, it is vital that the government comes forward swiftly with formal plans to introduce a Groceries Code Adjudicator with meaningful powers to investigate claims of breaches of the GSCOP.”