UK retailers must raise prices if they wish to continue to stock Scottish produce, the head of the Scottish farmers union has said.
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Jim McLaren, president of NFU Scotland (NFUS), said livestock farmers need to see an “urgent lift” in prices to ensure supplies to retailers as cereal prices continue to rise.
The NFUS pointed to growing demand in China and India for meat and milk, weather conditions and the increased production of biofuels for increasing food production costs for its members.
Such factors are increasingly being seen as the central causes of the rise in commodity costs; in recent weeks, the heads of Nestlé and Finnish food group Raisio have sounded warnings on rising costs.
McLaren said the Scottish livestock industry is “facing a meltdown” and warned UK supermarkets that farmers could leave the sector, similar to the recent exodus from the dairy market, which has led to tight milk supplies.
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By GlobalData“The pigs and poultry sectors are staring into an abyss at present,” McLaren said. “Pig farmers are losing money on every pig they sell and the story is no better for egg and chicken producers.
“This unprecedented rise in costs has led farmers to question their future and I believe it could spell the end of guaranteed supplies of Scottish meat and meat products on supermarket shelves. That is obviously not what farmers want and, crucially, it is not what consumers want.”
McLaren added: “Supermarkets must now stand up to their warm words of commitment to local food production. They must also meet their responsibility to their customers by securing future supplies with higher prices for suppliers.”
Retailers, however, are facing calls to avoid passing on higher supplier costs to consumers. EU Agriculture Commissioner Mariann Fischer Boel has called on Europe’s retailers to avoid raising prices excessively despite rising raw commodity costs putting pressure on suppliers.
However, McLaren insisted that higher prices paid to suppliers would not necessarily lead to higher prices on supermarkets shelves.
“Substantial rises in the prices farmers receive do not have to mean big hikes at the tills,” McLaren said. “Food sold by retailers incorporates a significant mark-up and, for example, a 25% increase in the price a farmer receive for pigs – which would just cover rising costs – would only equate to about four pence on a packet of ham or 10 pence on a packet of bacon.
“However, it is for retailers to decide whether they want to charge their customers more or absorb these costs within their own significant margins.”
