Supermarkets such as Tesco PLC (LSE:TSCO) and J Sainsbury PLC (LSE:SBRY) need tougher regulation as they are making billions of pounds of profit but farmers are getting less than 1% of the profit from the food they produce, according to a new report.
UK farmers are often left with far less than 1p profit from the food items they produce, a report from charity Sustain has found.
Researcher examined the profit made from five foodstuffs – apples, bread, cheese, carrots and beefburgers – and found that farmers were left with “far less than 1% of the profit”, after intermediaries and retailers took their cut.
This ties in with reports from egg producers, who recently complained that while shops have increased prices of eggs by around 45p per dozen, most farmers only received a fifth to a tenth of that rise, with the British Free Range Egg Producers Association saying many of its members were operating at a loss as the cost of energy and feeding have both rocketed this year.
Sustain’s report found, for example, a loaf of sliced bread selling for £1.14 would cost a cereal farmer roughly 9p to make yet they would receive 0.09p of profit from supermarkets, while a loaf of ‘real bread’ sold in an independent bakery would make them 0.5p profit.
For a pack of four beefburgers, Sustain noted that processors make ten times the profit of the beef farmer, while a carrot grower spending 14p per bag and selling to the supermarket supply chain gets “almost negligible returns”.
The charity called for tougher regulation to help “redress the imbalance of power between farmers, processors and the supermarkets”, including maintaining the Groceries Code Adjudicator, introducing new, legally binding, sectoral supply chain codes of practice, better labelling to ensure transparency and planning rules to curb local retail dominance.
It also demanded more transparency in supply chains and greater mandatory reporting.
Vicki Hird, head of farming at Sustain said, “It is astonishing how little of the money we pay for our food ends up in the hands of the farmers and growers.
“Farmers carry a lot of risk and work in difficult conditions to put food on our table. We also expect them to look after our landscape and our nature – and want them to do more of that in the future including protecting nature and helping to cut 30% of food based climate changing greenhouse gas emissions. If they are to do that, they need more money in their businesses. That money should not leach out of the system into the coffers of food industry intermediaries and supermarkets.”
She said intermediaries and food buyers should not be allowed to “hold all the bargaining chips”, with the report showing that paying farmers more “need not mean higher food prices so retailers cannot use that excuse – there would be little impact on many products’ retail prices if farmers were paid more.”
The report’s researcher, Professor Lisa Jack of the University of Portsmouth, said: “Our food systems have very high production and overhead costs, yet what profits there are, could be shared more fairly along the supply chain, supporting not just affordable food but better incomes for those working in the industry.”
In the first half of 2022, Tesco made £1.25bn of retail operating profit, while Sainsbury's made a profit before tax of £340mln and Marks and Spencer Group PLC (LSE:MKS) generated an operating profit of £71.8mln from its food business.
Asda's profits topped £1bn last year, while Morrisons made roughly £388mln.