NPA: Retailers must be held to account when it comes to supply chain fairness
Lizzie gave evidence to the Environment, Food and Rural Affairs Committee as part of its inquiry into Fairness in the Food Supply Chain, alongside Ali Capper, executive chair, British Apples & Pears, Guy Singh-Watson, founder of Riverford Organic Farmers and NFU dairy board chair Michael Oakes.
The cross-party committee is exploring the balance of power within the chain, particularly regarding price setting, and looking into how the structural relationship could be improved to provide greater fairness and transparency.
Lizzie explained how a perfect storm of events, including Covid and Brexit, resulting in Labour shortages, war in Ukraine, exacerbating already elevated costs, and bans on exports to China, hit the pig sector between 2020 and 2023. The crisis highlighted the vulnerability of producers and the imbalance of power that persists within the supply chain, leaving producers facing a devastating pig backlog and crippling financial losses over a crisis that lasted more than two years.
The industry lost about a quarter of its breeding herd as a result and is still in the process of an ongoing restructuring, with many independent producers leaving the sector, reducing herd size or linking up with the bigger integrated producers. Confidence and trust within the supply chain are yet to fully return, despite a better year financially in 2023.
Lizzie said the crisis highlighted how the market ‘functions fine’ when it is ‘business as usual’ and there are no external pressures. But once the sector encounters unusual circumstances, as seen during the pig crisis, it was producers that suffered.
"Abattoirs weren't able to slaughter and process the usual number of pigs. Producers had to hold those pigs back on farm, so they had to shoulder the burden of risk and increased cost.
"They had to feed those pigs for an extended period and when they were finally required by the abattoir, they'd grown quite large and out of specification. Then, the producers were quite heavily financially penalised for those pigs and paid a lot less for them than they were actually worth.
"We got to 200,000 pigs backed up on farm at any one time and around 60,000 healthy pigs culled because we just couldn't get them to the abattoir and into the supply chain".
Asked whether the same scenario could happen again if the industry suffered further shocks, and how the Government could help prevent a repeat, Lizzie said the industry remained 'vulnerable'.
"The crisis really highlighted that contracts, if they were in place, weren't robust, weren't fit for purpose, weren't really legally binding and actually, in a lot of circumstances, there weren't contracts in place at all.
"It meant that the producers were left in an extremely vulnerable position because when the abattoirs couldn't take their pigs, they were expected to shoulder the burden.
“So, we hope that the government review produces something tangible, and soon, to ensure that producers are well protected."
"But we also need something that holds retailers to account, as well. It's the entire supply chain – if there is abuse of power, it starts from the very top", Lizzie added.
"The Agriculture Act’s powers don't include retailers. Processors are vulnerable as well and it just cascades all the way down really so I would ask you to help us by ensuring that retailers are also accountable and their behaviours accountable.
"We need to put pressure on them to give a fair price to the producer".
Lizzie pointed out that retailers are 'constantly requesting more and more from our producers, whether that’s environmental credentials, sustainability, welfare etc, and all these elements cost money'.
"And that’s got to be recognised by retailers when they’re paying down the supply chain", she said.
She also highlighted how, with the UK only between 40% and 50% self-sufficient in pigmeat, retailers always have leverage to bring in cheaper EU pork, especially with a current price EU-UK differential of around 30p/kg.
Lizzie expressed hope that the government review on contractual practice will produce 'something tangible that will help promote fairness within our sector'.
The NPA is pleased with progress so far, particularly after Defra shared its latest outline version of the regulation for consultation with NPA members.
"Virtually everything that producers and we have requested is actually within that policy document,” she told the MPs. "It’s not perfect, and some additional detail needs to be thrashed out, but it does look pretty robust".
The MPs were told by the panel about the fear across the farming sector, including pigs, that often prevented producers from speaking out.
The responses to Defra's consultation on the pig supply chain review showed some independent producers were 'uncomfortable sharing their experiences for fear of commercial retaliation'.
Mr Singh Watson, who is campaigning against supermarket abuses of power, said he was only able to speak out because his business no longer supplied retailers.
Ali Capper told the committee that 'Government policy around a cheap food policy is driving poor buyer behaviour and an increase in imports'.
She urged EFRA chairman Goodwill to write to the chief executive of every major retailer to call for a recognition of farm input inflation and for fair pricing.
Mr Goodwill said the committee appreciated the nervousness some people felt about speaking out in public and revealed it will be holding private sessions to enable anyone within the supply chain to do so without fear of reprisal.
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