Late last month, a report by market analysts Begbies Traynor warned that supermarket price wars, which have upped tempo since the beginning of the year, are having a marked effect on farmers’ incomes.

The report showed that the number of small- to medium-sized (SME) farm businesses experiencing financial distress in April 2015 was 120 percent higher than a year previously, meaning the number of farmers facing insolvency has more than doubled over the period. Begbies Traynor found that 1,414 businesses were in serious trouble and warned that a “New savage landscape in the UK retail food industry” is seriously harming farm businesses and food suppliers.

Market analysts pointed to the turnaround strategies adopted by major supermarkets, in bids to attract defecting customers and recoup financial losses, arguing that these are negatively affecting suppliers.

Bread aisles have become the latest battleground in ongoing price wars, which have raged for over a year, since Tesco announced price cuts on a number of essential items in a bid to compete with discount retailers, whose market share has increased dramatically since the 2008 financial crisis.

Although Tesco led the way in cutting prices of fresh veg and milk last year, Sainsbury’s has slashed its own-brand bread prices, leading other retailers to follow suit. Market researchers revealed over the weekend that price wars are affecting larger food companies’ profits, too, with major bread brands estimated to have lost value as a result of the competition. 

The major supermarkets engaged in the price war have said they are taking savings out of their  own profits, and not passing costs on directly to farmer suppliers.

However, the UK’s supermarket adjudicator - which regulates relationships between the country’s ten largest retailers and their suppliers - opened an investigation in February into practices at Tesco between June 2013 and February 2015.

Adjudicator Christine Tacon’s office is looking into whether there have been breaches to the Grocery Supply Code, relating to the Code’s articles on delayed payments, fair dealings between buyers and suppliers and payments for better positioning of goods in stores.   

Last week, Sainsbury’s came under fire for failing to publish its income from suppliers, in response to a December 2014 request from the Financial Reporting Council. Arguing that the information was “commercially sensitive,” Sainsbury’s refused to disclose the amount it makes from charging suppliers for stocking their goods, asking for contributions towards marketing costs or demanding penalties for late delivery of goods.  

Duncan Swift, head of accountancy firm Moore Stephens’ Food Advisory Group said, “Given that both Tesco and Morrisons have both disclosed details of their supplier income in response to the FRC’s call, it is surprising that Sainsbury’s has chosen not to follow suit.

“It is hard to see how suppliers are going to start getting a more equitable deal from supermarkets unless they become more transparent on these issues.”

Swift added, “It is difficult to see how income from suppliers can simultaneously be argued on the one hand as ‘insignificant’ and on the other as ‘commercially sensitive’, and Sainsbury’s is the first supermarket to attempt to argue both sides.

“As we saw with the Tesco misstatement last year, income from suppliers can have a disproportionate effect on the profits of a supermarket, so shareholders and suppliers alike would have welcomed the opportunity to get a fuller picture of Sainsbury’s income and profitability.”

Last month, Julie Palmer, a Partner at Begbies Traynor, commented, “With £1 deals for fresh produce goods such as bread and milk remaining a firm feature at the major supermarkets, it’s no wonder that suppliers lower down the food chain are struggling to achieve a fair price for their produce.

“Meanwhile, wastage on farms continues to be a problem as suppliers are increasingly struck by last-minute order cancellations and overzealous cosmetic specifications set by the large supermarkets when it comes to the look of food that it will accept from farmers.”

Palmer added that, in spite of the investigation opened in February, “The introduction of the Prompt Payment Code and the powers given to the groceries code adjudicator to fine supermarkets… have only had a minimal impact.”

She warned that, given the procurement practices of discount retailers who have increased their market share, “Looking to the future, the picture only gets bleaker for small UK food suppliers,” claiming that, “As the majority of Aldi and Lidl’s packaged stock comes from overseas, struggling UK suppliers could find themselves squeezed even further, if not stamped out altogether.”

In comments made on Tuesday, following the election of the new Conservative government, NFU president Meurig Raymond said the union will “Lobby for an extension of the grocery supply code so primary producers are protected from unfair trading practice wherever it happens.”