The report 鈥� 鈥� states that years of 鈥榩ermacrisis鈥� fuelled by Brexit, the war in Ukraine, the Covid-19 pandemic and soaring inflation rates have left farming鈥檚 confidence and bank balances at an all-time, unsustainable low.
Ged Futter, Director of Retail Minds Limited and author of the report said these events have exposed 鈥減re-existing and fundamental weaknesses in the supply chain鈥� meaning that 鈥渢he level of risk is at an all-time high鈥�.
Mr Futter has more than 30 years of experience in the retail sector, 15 years of which were as a senior buyer in the world's largest grocery retail company. The report is based on more than 40 interviews with business owners across fresh produce, eggs, poultry, pork, importers, frozen food manufacturers and various consultants.聽
Key findings include:
- The risk versus reward imbalance is forcing farmers out of production; retailers need to share the risk.
- Retailer practices need to change 鈥� long term trade agreements, inexperienced buyers and burdensome audits are damaging suppliers鈥� profit and partnerships.
- Farmers鈥� accounting and negotiating skills need improvement.
Read: Supporting fairness in the supply chain 鈥� member toolkit.
Mr Futter explained that risk vs reward came up consistently for farmers and growers: 鈥淭he risk vs reward ratio is now out of kilter, more farmers are asking is it worth doing?鈥�
The report found that farmers are increasingly leaving the sector 鈥� glasshouses are closing and orchards are being grubbed.
鈥�We hear very regularly that food security has risen right up the agenda but I think we鈥檝e got a wonderful opportunity this year to make sure all political parties demonstrate that they recognise the strategic importance of domestic food production.鈥�
NFU Deputy President Tom Bradshaw
Retailer tactics need addressing
The report identified fixed price, long term agreements, the impact of inexperienced buyers and the audit burden as having, over the past 10 years, 鈥榮queezed every drop of profit from many of their suppliers鈥�. In one business, an audit was conducted in 42 weeks of the year, with the average cost of an audit with a UK retailer found to between 拢2000-拢5000.
鈥淩etailers would rather have empty shelves then break these deals,鈥� Mr Futter said.
The report calls for a change of mindset from all stakeholders. It suggests ways in which risk can be better redistributed across the supply chain, identifying long-term agreements with built in price mechanisms as a 鈥榢ey tool鈥� for reducing risk in the future.
鈥楺uick wins鈥� not working
Launching the report on the first day of the Oxford Farming Conference, Mr Futter debated the report鈥檚 findings with a panel of experts including: NFU Deputy President Tom Bradshaw, Senior Director of Sustainable Supply chains at Asda Chris Brown, Farmer at Farmlay Eggs Robert Chapman and OFC Director Ali Capper.
NFU Deputy President Tom Bradshaw said that a 鈥渉uge amount comes down to confidence鈥� when farmers are questioning whether they can afford to innovate. 鈥淚f there鈥檚 not the confidence that you鈥檙e going to generate that profit then you鈥檙e not willing to reinvest and take that risk,鈥� he added.
He said early adopters dealt with 鈥渁n abundance of risk鈥� and questioned whether there is a role for the government to step in and 鈥渉elp incentivise uptake of those really early innovations鈥�.
Ms Capper echoed the sentiment, adding that she would 鈥渕ake a plea to government to embrace the complexity of the sector鈥� and recognise that the risks differ so greatly. 鈥淲e need policymakers who can wrap their minds around that complexity and stop looking for quick soundbites and quick wins - quick wins are not working for our sector because we鈥檙e complex,鈥� she said.
On long-term agreements, Mr Chapman explained how buyers were warned of the egg shortage: 鈥淭hey didn鈥檛 listen...the only thing buyers understand is when there鈥檚 a shortage. We went back to our customers and said if you want to have UK eggs you鈥檝e got to invest in the sector.
鈥淲e have a three-year rolling deal now. It鈥檚 got to be fair to both parties. We鈥檝e got that now and review the price every quarter so everything is taken into consideration.鈥�
With a general election looming, the panellists also discussed whether politicians recognise the strategic importance of domestic food production.
NFU Deputy President Tom Bradshaw said: 鈥淭he language has certainly changed; we hear very regularly that food security has risen right up the agenda but I think we鈥檝e got a wonderful opportunity this year to make sure all political parties demonstrate that they recognise the strategic importance of domestic food production and have a real commitment to delivering more British food at home and abroad.鈥�
Tom warned that if politicians fail to recognise this, then 鈥渢he policies we need will never be delivered鈥�.
Ms Capper responded that she couldn鈥檛 see this shifting 鈥渦ntil food is seen as a public good鈥�.
