The Irish government's plan for a code of practice to oversee relations between suppliers and retailers in the country must be made statutory, the Irish Farmers Association (IFA) said today (11 August).

Ireland's grocery sector is one of the most competitive in the EU and retailers including Tesco, Aldi and Musgrave Group have all cut prices during the downturn.

The moves have drawn heavy criticism from manufacturers and farmers and Dublin today insisted there needed to be "transparency and balance" in the food sector.

IFA deputy president Derek Deane said the move by Enterprise Trade and Employment Minister Mary Coughlan towards a code of practice is a "clear acknowledgement" that supermarkets are abusing their dominant position in the food chain. Farmers, he claimed, are being forced to accept prices below the cost of production.

"[Coughlan's] proposals for a code of practice are a positive development, but to be effective in eliminating abuses by supermarkets, the code must be established on a statutory basis and enforced by a properly-resourced ombudsman," Deane said. "The legislation must outlaw threats of delisting and other strong arm tactics by supermarkets which compel suppliers to fund price discounting."

The IFA said it had already submitted draft proposals to Coughlan's office for a supermarket code of practice and ombudsman.

Deane said the code must "enshrine the principle of fair trade" in the grocery sector, "outlaw below-cost selling" and provide a means for "a more equitable shareout" across the food chain of the consumer price.

"Retail concentration in Ireland is extremely high, with just three retailers - Tesco, Dunnes and Supervalu/Centra (Musgrave Group) - controlling over 70% of the grocery market. This provides retailers with huge power over suppliers and producers, creating a major imbalance in the food chain."

The IFA deputy president highlighted the example of a litre of milk costing EUR1.15 (US$1.63) where the farmer price is only 22 cent, which it says is below the cost of production. The processor gets 43 cent and the supermarket is taking a share amounting to 50 cent.

In response to the bill, Musgrave Group said it remains "committed" to Irish suppliers and producers and has also invested EUR200m this year to deliver price reductions to consumers across its Irish chains including SuperValu and Centra.

"Unlike other retailers' price-reduction initiatives, these reductions have been introduced without compromising Irish jobs or Musgrave's commitment to purchase from Irish suppliers," a spokesperson said. "Currently 75% of everything sold through Musgrave's retail brands is sourced or produced in Ireland and this is set to continue."

A "draft outline" for a code of practice has been published, alongside a consultation document. Interested parties have until 30 September to respond.