20/08/08
NFU Scotland has written to the major retailers in order to highlight to them increasing concern over the potentially damaging effect that recent pricing strategies could have on farmgate prices and the future supply of Scottish food and drink.
The Union has requested meetings with each of the four largest retailers following public and aggressive moves to cut supermarket shelf prices on a number of staple foods, aimed at helping customers to combat the ‘credit crunch’. NFUS means to ensure that these moves do not adversely affect farmgate prices and thus its members.
Food producers nationwide are facing rocketing input costs against a background of challenging and, in many cases, unsustainable farmgate prices. Where there have been farmgate price rises, these have not kept pace with rises in production costs.
This is most notable in the red meat and dairy sectors, where spiralling fuel, fertiliser and feed bills have eroded almost non-existent margins and there is now clear evidence of a significant amount of de-stocking taking place.
After years during which food price inflation has been well below the retail price index, there is now a reversed position with significant rises in staple food items affecting every household in the country.
NFU Scotland President, Jim McLaren, said:
“Within the last few weeks, the large retailers have begun to adopt aggressive marketing and price cutting strategies in order to keep their customers coming through the door. However, NFUS is extremely concerned that these strategies may have a damaging impact upon farmgate prices.
“I welcome the commitment from Tesco that farmers will not bear the costs of their recent ‘Fresh n Lo’ milk pricing initiative. However, from the farming perspective, the history of initiatives like this has not been good, particularly where it sparks tit-for-tat moves by other retailers.
“The rise in food prices in the UK is obviously part of a global phenomenon, driven by reduced supply and increased costs. However, in the absence of improved market returns for Scottish farmers, the danger is that supplies will tighten even further and that aggressive pricing strategies, whilst alleviating some price pressures on consumers in the short term, may exacerbate the problems over the longer term.
“If continued aggressive price cuts by retailers spill over into price cuts at farm level, we may well find ourselves in a position, as a nation, where some farmers will cease production of some products altogether, and demand will not be met by local supplies.”
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