The NFU, which has expressed concern that supermarket price wars sparked last month are putting untenable pressure on farmers in the UK, at a time when rising inputs is making life difficult enough, has today stepped up calls for an adjudicator to be appointed. Union officials today said farmers and food processors risk feeling the squeeze as intense downward price pressure from supermarkets coincides with record rises in the cost of fuel and raw materials.  

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In October, Tesco triggered a price war with its rivals by slashing prices of staple goods including dairy products and fresh produce as part of its £500 million ‘Big Price Drop’ campaign. Not to be outdone, other supermarkets, including Sainsbury’s and Asda, soon responded with their own schemes. As a result of these schemes, vegetable prices have fallen 2.4 per cent , fruit 1.6 per cent, milk, cheese and eggs 1.2 per cent and even meat has fallen by 0.7 per cent, according to the Office for National Statistics.

As well as widespread fears that the supermarkets, wishing to keep their margins intact, will pass on the cost of the price cuts to their suppliers, threatening farmers' returns, the latest Defra Agricultural Prices Index (API) figures revealed several rises in input costs. The API showed fuel costs and feed and fertiliser prices have risen 13 per cent in the past year. The rises put raw materials prices at record levels, higher even than their previous peak in 2008.

In response, the NFU has called for the government to speed up the process of creating the Groceries Code Adjudicator. The union claims farmers pressured into sharing the pain of the supermarket price war and suffering the effects of rising costs themselves could result in "lasting damage to the competitiveness of the supply chain" if the situation is allowed to continue.

NFU director of corporate affairs, Tom Hind said, "These figures illustrate that variable and fixed costs for fuel, feed and fertiliser have all been on the rise over the last two years with this sheer combination of factors pushing the index to its record high. It contrasts with the fall in the cost of food to consumers and bears out comments by some producers that they are being asked to ‘share the pain’ of the well-documented supermarket price wars."

Hind had previously voiced concerns that evidence has begun to surface indicating retailers have started to share the burden with their suppliers. He said the evidence had come from the poultry and horticulture sectors.

Hind stipulated, "We are concerned undue pressure is being passed back down the chain. It means there's an even more compelling case as to why the government has to move to introduce a grocery adjudicator and a system that allows third parties to submit evidence."

To address the risks posed by the situation farmers now face, the union has renewed calls for the supermarket ombudsperson to be appointed as soon as possible and furnished with more power to combat unfair practice. The government has promised to introduce a Groceries Code Adjudicator to investigate claims of breaches of the Grocery Supply Code of Practice, but farmers fear the adjudicator in its current form would be unable to effectively combat malpractice. Under current legislation, an ombudsperson could not accept evidence from whistleblowers and third parties or impose financial penalties on retailers found to be exploiting their suppliers.