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Farming

Farmers and SMEs concerned by supermarket merger

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Merging?: Mike Coupe (L) with Judith McKenna (Walmart) and Roger Burney (Asda)

THE TENANT F​ARMERS ASSOCIATION (TFA) is calling for the Government to rethink its refusal to extend the remit of the Groceries Code Adjudicator (GCA) in light of the proposed merger between Asda and Sainsbury’s.

The planned merger, which will probably be referred to the Competition and Mergers Authority, would create the UK’s largest supermarket chain. However, a merged company would still not be as big as Tesco was only a couple of years ago, when that company had over 30% of the UK’s supermarket retail share.

The combined strength of the merged business poses a threat to suppliers, who could find their margins squeezed as the company would be able to depress prices paid to primary producers by manufacturers. That prospect was well flagged up during a BBC News interview with Sainsbury’s CEO Mike Coupe.

Mr Coupe told the BBC that there will be no store closures and no in-store staff redundancies, the inference that can be drawn is that jobs will go both in administration and back office operations, as well as logistics. The most likely way to deliver savings would be to increase the company’s margin or arrangements with producers and suppliers. Mr Coupe told the BBC that the merged company would have the potential to reduce prices through supply chain efficiencies.

Unfair practices within the retail supply chain led the Government to establish the GCA in 2013 to oversee direct supply contracts between retailers and suppliers. However it recently refused to extend the remit to include oversight of relationships further upstream between farmers and processors which could be impacted by the dominance of retailers.

TFA Chief Executive, George Dunn said “The merger between Asda and Sainsbury’s announced this week should cause the Government to rethink its strategy here. When Sainsbury’s boss Mike Coupe pledged to cut prices on everyday products by 10%, alarm bells rang out across the industry. It is suppliers who will be expected to shoulder the cost of these savings.

“There is a growing recognition that the food supply chain in the UK is dysfunctional and all too often it is the farming community which bears the brunt of the problems that this produces. Poor returns, last-minute changes in orders and specifications, unfair competition from abroad and poor labelling are all contributing to the pressures at farm level,” said Mr Dunn.

“Given that the vast majority of farm produce passes through at least one processor, if not more, before it hits supermarket shelves, the Adjudicator is therefore unable to consider the impact of retailer activity on many farmers,” said Mr Dunn.

Speaking in the House of Commons on Monday (Apr 30), Business Minister, Andrew Griffiths MP, referred to the work of the Groceries Code Adjudicator, but failed to address why the Government had decided to do nothing to protect primary suppliers. This was despite being challenged by Labour’s Shadow Agriculture Minister, David Drew MP on how the Government planned to tackle further potential supply chain abuse between farmers, processors and retailers.

“The TFA agrees that the GCA has had a positive impact on the groceries market by ensuring that there is a greater focus on the principles of fair trading. Retailers are now more aware of the need to ensure that they are not using their dominant position within the supply chain to engage in inappropriate practices. However the extent of the influence of the GCA is limited by its current legislative powers both in terms of the scope of its remit and its ways of working. The Government needs to act now to ensure that appropriate mechanisms are in place to guard against future abuse in the light of further concentration in the retail sector,” said Mr Dunn.

“Well-meaning initiatives aimed at improving supply chain relationships on a voluntary basis have failed to have the necessary traction across the board. We must deepen and broaden the GCA’s powers to allow it to look at the whole of the supply chain and not just direct supply contracts to ensure fairness in supply chains.​”​

Federation of Small Businesses (FSB) National Chairman Mike Cherry, said: “A merger of this size will concentrate a lot of power in the hands of one giant company, and it’s important that power isn’t misused to coerce small suppliers into accepting unfair contracts and poor payment terms.

“Those at the top of Sainsbury’s and Asda should explain how they plan to merge these two supply chains fairly, and give reassurance that cost savings won’t be achieved simply by milking their small suppliers for all they’re worth.

“When investigating this proposed merger, the Competition and Markets Authority should be looking for cast-iron commitments that a positive standard will be set for working with smaller suppliers.”

FUW President Glyn Roberts said: “The proposed merger will raise many concerns for farmers given the huge power a new mega company could exert over the supply chain.

“If the government were to allow such a merger, we would need to see a step change in regulation of the supply chain and the powers of the Groceries Code Adjudicator, otherwise there is a risk of severe abuses taking place which further undermine farmers and suppliers.”

NFU Cymru President John Davies said: “NFU Cymru and the NFU will be examining the details of this proposed merger between Sainsbury’s and Asda carefully and the further concentration of retail power it creates within the food supply chain. We will also seek clarity on what the structure of any merger will be.

“We will be requesting a meeting with Sainsbury’s and Asda to ensure that the commitment of the new business to British sourcing will not be affected. First and foremost the NFU Cymru and the NFU will be seeking to understand what potential impact a merger would have on our members – both those farmers who are directly part of these supply chains and those who could be affected by wider connotations.

“With just over 31% of the market potentially being held by one company the Competition and Markets Authority (CMA) is likely to consider the impact on shoppers – but that must also take account of changes to supply arrangements that could give rise to a reduction in choice and availability over the long term. The impact of the whole supply chain, all the way down to farm level, needs to be carefully assessed.

“NFU Cymru and NFU support any investigation by the CMA and we would aim to feed into this if approached.”

Welsh Liberal Democrat Spokesperson for Agriculture Cllr William Powell said: “Welsh farmers will be justifiably concerned this merger will produce a supermarket that is simply too powerful, leaving suppliers at its mercy.

“Farmers already work with tight profit margins and face the multiple challenges of Brexit, including diminishing farm support and obstacles to accessing the vital EU Single Market. This merger must not be allowed to threaten them further.”

Farming

Economic value of red meat sector rises

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THE VALUE of the iconic beef, lamb and pork sectors to the Welsh economy rose in 2020, as consumers turned to local, sustainable, quality food during the COVID pandemic, according to analysis by Hybu Cig Cymru – Meat Promotion Wales (HCC).New figures from the Welsh Government ‘Aggregate Agricultural Output and Income’ report show that the total value of agricultural output in Wales for 2020 is projected to stand at £1.7billion – a 6.2% (or £99 million) increase on the provisional figure for 2019.


Cattle and sheep account for 44% of this total at £750million; the highest proportion recorded since 2016. The agricultural output value for Wales’s pig sector also increased (by 34.3% or £2 million) to a value of £8 million.
The figures reflect the strength of the livestock sector in Wales and sit in contrast to Total Income From Farming (TIFF) figures for the UK as a whole newly released by Defra. Although the TIFF figures are a different form of measuring farm production, the UK data concurs that the livestock sector has had a strong year, but in other parts of Britain, this was more than offset by poor harvests in the arable sector.


Demand for beef and lamb have been strong in the domestic retail market since the immediate aftermath of the first COVID lockdown in spring 2020. After initial market volatility, marketing campaigns by HCC and other bodies encouraged consumers to recreate restaurant meals at home.


Over the past 12 months, domestic retail sales of lamb and beef have trended consistently higher, with spending on lamb 20% higher than the previous year. Sales at independent high street butchers are also strong.


Research shows many demographic groups, including families with children, buying more beef and lamb than previously, and turning to quality home-grown produce.


HCC Data Analyst Glesni Phillips said, “The strong demand for red meat from the domestic consumer has helped drive market prices for beef and lamb at Welsh livestock markets in the second half of 2020 and into the early months of 2021.


“It’s no surprise, therefore, to see that the overall value of the industry is projected to have grown. We have seen inflation in the costs on farmers, which offset some of the gains from improved market price; however, it’s heartening to see consumers’ support for quality Welsh produce.“Welsh Lamb and Welsh Beef remain key drivers of our rural economy, and given their excellent brand reputation, they act as flagship products for the growing Welsh food and drink sector.”Further analysis of the aggregate output and income figures for Welsh farms are available in HCC’s latest monthly market bulletin.

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Farming

Ian Rickman: 2021 is a critical year for Wales’ farming future

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THE INCREASINGLY negative narrative around livestock farming and its portrayed impact on the environment and climate change has led to farmers in Wales standing up to tell their stories and highlight the positive impact livestock farming has.


Through the Farmers’ Union of Wales’ campaign ‘Guardians of the Welsh Land’, farmers are addressing misleading claims by various groups about the role livestock farming plays in relation to climate change and the environment.  Launching the campaign, FUW Deputy President Ian Rickman said: “The FUW has consistently recognised the threat represented by climate change and the need to take action. This is clear from a cursory look at our manifestos and policy documents published over the past twenty years.

“We know that farming is already responsible for a critical carbon resource in soils, woodland and semi-natural habitats and I’m pleased to launch the FUW’s environment campaign – ‘Guardians of the Welsh Land’ from my home farm here in Carmarthenshire today. As farmers are the most trusted link in the supply chain, they are best placed to communicate their stories, helping to address consumer concerns and influencing political agendas. Members can also look forward to a variety of webinars over the coming months, which will focus on the different challenges ahead for the industry and how to overcome them.


“There is no question in our mind that we need to counteract the continuation by the anti-farming lobby of their campaign to vilify and belittle domestic food producers.  These attacks are corrosive and grossly misleading, negatively influencing consumer perception of the industry and influencing political agendas on a global scale.”
Mr Rickman added that 2021 is an important year for these types of conversations.

“Knocking on our door are the United Nations Food Systems Summit and COP26. The FUW has been engaging with these conversations at an international level and shares some concerns with other industries across the globe about the wider narrative and ambitions set out in inconspicuous looking documents. Plans, we and the general public don’t support.  Telling the positive story of the guardians of our Welsh land is now more important than ever,” he said.


Starting in the first week of June, the campaign introduces four farmers all of whom tell the story of how they are addressing environmental and climate change needs in their unique ways: Carmarthenshire organic sheep farmer Phil Jones, the Roberts family from Meirionnydd, Ceredigion dairy farmers Lyn and Lowri Thomas and FUW President Glyn Roberts who farms with his daughter Beca at Dylasau Uchaf in Snowdonia.
“The campaign will further highlight that Welsh farmers are rising to the challenge of improving soil health and increasing organic matter in soils, improvements which represent further opportunities for sequestering more carbon. These improvements, the campaign will highlight, are achieved through specific livestock grazing patterns and rest periods. The campaign is also clear that the correct options, guidance and rewards are required to encourage more farmers to adopt such systems,” said Mr Rickman.
Soil, the campaign will stress, is a long term investment and at present, around 410 million tonnes of carbon is stored in Welsh soils and 75,700 hectares of Wales’ woodland (25%) is on farmland, representing an important and growing carbon sink.
“As acknowledged in Natural Resources Wales’ State of Natural Resources Report, using land for food production is an essential part of natural resource use and management.  Whilst we acknowledge that  agricultural intensification has undeniably had negative impacts on some species and ecosystems, there is overwhelming evidence that other factors, including reductions in agricultural activity and afforestation, have also had severe negative impacts,” he added.

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Farming

Excellent Easter for lamb sales

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Lamb proved a popular choice for consumers over Easter with retail sales soaring above the last two years. This demand has been reflected at livestock markets where farmgate prices are still standing strong.

At a time when lamb is always a firm favourite, this year people of all ages were both buying and spending more as a result of a renewed interest in sourcing quality, local produce and cooking at home.

In the 12 weeks to 18 April 2021, the total volume purchased was up 14.8% on the year, and 6.0% higher than in 2019. Consumer spend on lamb reached £190.0 million, which was 18.7% more than in 2020 and 14.6% higher than the same period in 2019.  

Lamb leg roasting joints were the most sought-after cuts despite the fact that Covid-19 restrictions on large gatherings remained, followed by chops and mince.

Hybu Cig Cymru – Meat Promotion Wales’ (HCC) Data Analyst, Glesni Phillips said: “Lamb performed exceptionally well over the Easter period this year. It saw a 10.2% increase in the number of buyers engaging with the product and a rise of 3.3% in the frequency of which lamb was bought.

“The average price of lamb was also higher, but this obviously did not deter new buyers. The figures show that there are new buyers in all age categories, but this is especially true for shoppers aged under 45 years and those with children.

“The pandemic has led to more consumers cooking at home, giving many the opportunity to realise and enjoy the exceptional qualities and versatility of Welsh Lamb, and at the same time, support the local economy.”

Butchers also benefitted from the popularity of lamb in the run-up to Easter with total spend increasing by 16.1% on the year. The volume sold also increased, by 12.6%.

Glesni Phillips added: “As we approach the end of Spring, the consumer demand for lamb is continuing. This can be seen in the liveweight lamb prices which remain strong when compared to historical averages, with the average SQQ in Wales standing at 329.7p/kg in Wales for the week ending 15 May 2021.

“New season lambs are now entering the market – they accounted for over 70% of lambs at auction in Wales during the latest week – but the supply is still relatively tight. HCC is looking forward to working with retailers over the coming months on new activity, which will include in-store marketing, press and targeted digital communication to maintain this growth in sales. Butchers, who demonstrated their key role in the community during the pandemic, will also be offered training on a number of key skills to boost their sales even further.”

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