Scotland's farming union has told MSPs that the huge growth in supermarket power, twinned unsustainable prices being paid to farmers, represents a huge threat to family farms, the local food industry, rural communities and, ultimately, consumers. 

NFU Scotland has told a Holyrood inquiry that urgent political action is required to ensure fair trade between farmers, food processors and the major supermarkets.  The Scottish Parliament's Environment and Rural Development Committee is conducting an inquiry into the food supply chain, following meetings between NFUS members and MSPs.  NFUS has highlighted a number of key areas that must be addressed.  These include:

• Ensuring competition authorities allow farmers to co-operate to the same degree as those in other countries.  There is clear evidence that the Office of Fair Trading's interpretation of competition law is stifling the growth of farmer co-operatives.  In other countries, such groups have been allowed to flourish into large, efficient and competitive businesses.
• The introduction of a supermarket 'ombudsman' to ensure fair trade in the food supply chain.  The current Supermarket Code of Practice, introduced to ensure fair trade between supermarkets and suppliers, has failed.  NFUS has obtained evidence that supermarkets continue to abuse their negotiating power.  An ombudsman could proactively enforce a strengthen Code and protect suppliers from reprisals.
• Tackling the increasing burden of regulation, particular where it is 'gold-plated'.  The increasing raft of red tape is particularly damaging to farm businesses.  Their weak position as price-takers rather than price-setters means they must absorb these costs with no means of recouping them from the market-place.
• Other issues include enforcing wider and tightened food labelling laws and ensuring public procurement of food considers factors other than price, particularly the health and environmental benefits of sourcing food locally.

Speaking ahead of giving evidence to the Parliamentary Committee today, NFUS Deputy Chief Executive James Withers said:

"Scottish farms are producing world class food to the highest standards, yet many are receiving prices which barely cover the costs of production.

"There is no doubt that farmers have a responsibility to strengthen their own position.  Yet, the outdated attitude of the UK competition authorities has hampered these attempts.  Scottish farmers watch their counterparts in Scandinavia and New Zealand form co-operatives that account for between 80-100% of their domestic market.  In this country, the OFT has come down on the industry like a tonne of bricks when it gets near a 25% market share.  

"The fact is the Scottish and UK farming industry operates in an EU and global market place.  Market share must be judged on that basis, in the same way as it is in other countries.

"The OFT's stifling effect on farmer co-operatives is made all the more galling by the completely contrasting approach to the huge growth in supermarket power, which has continued unchecked and without any effective mechanism to deal with abuses of power.  The Supermarket Code of Practice has largely been a waste of time.  The fear amongst supermarket suppliers of complaining means it will never be meaningfully used in its current form.  Rather than the OFT sitting back and waiting for complaints that will never arrive, it is time for the proactive enforcement of a strengthened code with clear protection for those brave enough to complain.

"Scottish farmers are not looking for any special favours, simply a fair trading environment.  The market and political environment is failing these family businesses and it will ultimately have huge knock-on effects for the countryside, rural communities and consumers.

"We are hopeful that the Committee will compel the Scottish Executive to address these issues.  The Executive's agenda for rural areas is largely dependent on tackling this fair trade problem.  It has in its direct control issues such as public procurement and labelling and it has an obligation to represent the industry's concerns with the competition authorities."

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