The evolution of our food system has created massive power imbalances and economic inequity. It’s a system dominated by big businesses with significant financial resources and bargaining power. Farmers hold little sway when dealing with large multinationals and struggle to secure decent contracts, prices, or treatment. Despite shouldering much of the risk of food production, farmers are often left with a miniscule return from selling into supermarket supply chains.
Resources
NFFN’s UK Manifesto: Securing a fair and transparent supply chain
United Kingdom
Policy & Views
policy
Thank you to Sustain for their contributions to this blog.
Nearly half of farmers fear going out of business in the next year, with three-quarters placing the blame at the supermarkets’ door.
Recent research from Sustain shows that the margins for everyday products such as cheese, bread, apples and carrots are slim, to say the least, with farmers often making less than a penny per unit sold. By contrast, the UK’s largest supermarkets recorded combined profits of over £3 billion in 2022. The disparity between primary producers and supermarket behemoths only tells part of the story. Value is extracted at all stages in the supply chain, from processing, storage and transport, each taking a higher share of the profit beyond the farm gate.
The debate around farm gate prices has intensified as farmers navigate an intense period of economic insecurity and uncertainty. Nearly half of farmers fear going out of business in the next year, with three-quarters placing the blame at the supermarkets’ door. Clearly, the current situation contradicts the vision to secure a more sustainable and resilient food system with farmers at its heart.
The case for change
Restoring biodiversity, taking ambitious action on climate change, saving our rivers, regenerating our soils, and increasing countryside access depend on a fair return from the market. This principle was embedded into the UK Agriculture Act (2020), which provides Ministers with a range of powers to increase fairness and transparency. Yet, in the four years that have passed, sufficient action to address the failings of our supply chain has proved elusive.
Continued inaction will undermine an ambitious agricultural transition and, with it, our long-term food security. A better return from the marketplace can help farmers invest in practices that build resilience against the growing impacts of climate change and biodiversity loss. Without substantive supply chain reform, we’re seeing calls to bring back flawed area-based payments as a means to shore up farm incomes. Rather than returning to failed solutions, which have driven a dysfunctional system synonymous with economic and environmental vulnerability, we need something new that provides a fair return for public goods alongside a fair return from the market.
What’s needed
The statistics don’t lie, there’s profit in our food system, but it’s very unevenly spread, with farmers often at the bottom of the pile. We’re frequently told that profit margins are so tight across the system that paying farmers more for the food they produce would lead to a significant rise in prices. Yet evidence suggests that an increase in farm gate prices would not significantly impact the price people pay at the till. If other costs are controlled in the system, we can keep food affordable while paying farmers a fair price.
But achieving these goals requires better regulation of the supply chain to increase transparency and fair play, including:
Steps to strengthen the Grocery Codes Adjudicator (GCA): With responsibility for regulating the relationships between grocery retailers and their suppliers, the GCA has a vital role in creating a fairer supply chain. However, it has been subject to criticism for its inability to effectively compel retailers to adopt fairer dealing practices. There is a need for an empowered GCA that can effectively punish non-compliance with relevant policies aimed at securing fair dealing in the supply chain. Its remit should also be extended to cover a broader spectrum of actors in the supply chain, not just the largest retailers.
Reducing the fear factor: There is evidence that large farm businesses are reluctant to report wrongdoing by supermarkets over fears they will be delisted as a result. There is a need for a more proactive approach from the GCA to actively assess whether supermarkets are dealing fairly with their suppliers. This could be achieved through a system of randomised visits by the adjudicator to suppliers, encouraging suppliers to raise issues with less fear of retribution.
Introduce a comprehensive and joined-up set of sectoral Codes of Practice: Legally binding buying codes for each supply chain sector should be brought in as a matter of urgency. Defra has already introduced a code for dairy and has committed to introducing codes for pork, eggs and horticulture. Although a welcome step, there is a need for a broader set of codes to encompass a wider range of sectors alongside other actors in the supply chain. Steps must also be taken to ensure that independent adjudicators tasked with enforcing the codes work closely with the GCA.
Introduce reporting rules to improve transparency: Using the UK Agriculture Act's powers, new reporting rules on different supply chain actors could secure greater transparency. The regular publication of accurate and up-to-date data on pricing and costs would help increase farmers’ bargaining power when negotiating prices and deals.
Supporting alternative supply chains
Although the current supply chain will remain dominant, the upscaling of alternative supply chains and alternative routes to market can make a valuable contribution towards a nature-friendly transition. Such supply chains can help provide better returns for farmers and farm workers.
Research shows that there is scope to increase the market share of shorter, more sustainable supply chains to 25% by 2030. However, establishing and scaling up these alternative systems requires strategic investment such as:
Introducing a growth action plan for sustainable supply chains: This helps identify the barriers and opportunities to increasing market share and includes specific actions to achieve this.
Creating a Local Food Investment Fund: This will help provide strategic support across the UK for investment in local agri-food infrastructure, technology, and enterprises.
Upscaling dynamic procurement: This ensures that more diverse, sustainable produce is sourced from a wide range of SMEs into public sector food contracts.