How growers joining forces could save the UK’s fractured food supply chain from collapse

Although the insights in the report are both timely and welcome, the fact that one should even question whether the UK’s supply chain is broken should ring alarm bells. How have we got to the stage that such a report is even deemed necessary?

To get the inside track on the report, its findings, and dig deeper into the factors endangering UK Food Supply chains, we spoke to the author of the report itself, Ged Futter, and Ali Capper, who developed the concept for the report.

Futter is the Director of the retail mind Limited, a retail consultancy business that works with supermarket suppliers to provide deep insights into supermarket retailer behaviours among other things. He has decades of experience in the retail industry, including over 14 years at Asda as a buyer and supply chain analyst.

Capper, who has a Nuffield Farming Scholarship and co-runs a hop and fruit farm in Worcestershire county, is Chairman of British Apples & Pears, board member and previous chair of NFU Horticulture & Potatoes Board, as well as Director of NFU Mutual.

Read on to find out:

• Why farmers will have to cooperate to ensure fair pricing and commercial viability
• Why over dependence on imports represents a significant supply chain risk
• How climate change could make the UK fertile ground for farming
• The problems presented by incoming SPS checks on plant and animal products
• Why the UK’s food security is more at risk compared to countries in mainland Europe

Why farmers must work together for common good

First and foremost, one of the prevalent themes in the report, as well as the related discussion held at the Oxford Farming Conference, was the relationship between retailers and farmers, and how farmers will need to cooperate for the benefit of the whole industry.

The concern for the future of the UK’s food supply chain is that farming is becoming increasingly risky. Retailers with strong bargaining power have been able to negotiate especially low prices, resulting in an imbalance in the risk vs reward equation. This has even seen some farmers opt to scale back their growing and use their land for solar panels or caravan storage instead.

If the trend continues, the country’s agriculture sector will inevitably shrink – hitting food security in the process. Given the significant supply chain disruptions we have seen in recent years, this is an alarming prospect. Moreover, with the geopolitical landscape becoming more fractured and unstable, sourcing food from far afield will not be easy either.

Despite this worrying prospect, the view from industry is that the UK Government is not taking food security seriously enough. In light of this, the onus is very much on the farmers to cooperate on pricing and supply. By doing so, they can keep their operations commercially viable and prevent a significant decline in agricultural activity in the UK.

This is very much the view of Ged Futter, who emphasised during our discussion that a continuation of the ultra-competitive status-quo will only benefit the retailers:

“As long as farmers don’t work together, and undercut each other, which they do in many sectors, then it’s happy days for a supermarket buyer. All you have to do is wait for other farmers to come and offer a cheaper price. In many sectors there’s been overproduction too,” says the retail expert.

It’s often the case that retailers are able to secure such low prices from farmers due to the superior negotiation skills at their disposal, as Futter explains:

“Last year Tesco took all their buyers out and trained them on negotiation skills for a whole week. If you asked most farmers, growers or producers if they’d had any negotiations or skills training in the time that they’d been working, I’d say probably 80% of them would say no. So what do you expect?”

Although some farmers may be swayed by the hope of being “the last man standing”, Futter believes they would be better off working with others in the industry. He also stresses that there are existing examples of cooperative farming working:

“Over 18 months ago, some farm egg producers said they needed a price increase. The retailers didn’t listen. So the farmers stopped producing, and there was an egg shortage that continued until the retailers agreed to pay prices that were sustainable across the whole sector.”

Ali Capper also supports the idea of farmers coming together and forming cooperatives.

“We’re no longer in a low interest rate, low inflation period. We’ll need to think and do things differently. More than half the sector is in a producer organisation or cooperative at the moment. This exempts them from competition law so they can talk to each other and agree prices. They can negotiate with retail as a group rather than as an individual. This means they can buy better, plan and invest better – so it’s a very good mechanism,” says the Chairman of British Apples & Pears.

In Futter’s view, actions such as those taken by the egg producers send a message to retailers. Moreover, he emphasises that the onus is very much on the farmers to do something; the nature of the market means nobody can expect supermarkets to change their tune on moral grounds.

“Retailers need to see that they actually don’t have an alternative. So as long as there’s an alternative, they will continue to do what they do. They will not change out of a moral responsibility. That will never happen,” says the retail expert.

The influence of post-Brexit trading relationships on food supply chains

In theory, alternatives can be found in foreign markets. For instance, readers may recall UK pub chain Wetherspoons sourcing eggs from abroad during the aforementioned egg shortage.

New trade deals signed in the post-Brexit period could also see retailers cast their nets wider to procure cheaper produce from far afield.

On the question of whether supermarkets would likely take advantage of this, Futter makes it clear that the wheels are already in motion:

“They’re already doing it and we’ve seen it happen, whether it’s blueberries from Peru or salad products from Morocco. They started off with Spain, then Morocco was cheaper, so they moved there. One of the interviewees in the report said that basically they will continue to chase the sun. That won’t change.”

ONS data confirms the trend, with UK imports of fruit and vegetables from Morocco doubling between 2017 and 2022. UK Imports of fruits and vegetables from all Non-EU countries also increased 8% in 2022 compared to 2020 (full data from 2023 is not yet available at the time of writing).

Futter nonetheless warns that suppliers of fresh produce from more exotic climes could easily be put off by border disruptions or UK retailers’ stringent demands.

When it comes to the latter, Futter’s report details how UK retailers not only negotiate hard on pricing, but also burden suppliers with several audits. In the report, Futter stated he had spoken to one supplier that had been audited 40 out of 52 weeks in 2022, with over 190 audits in total.

“Over time, these suppliers will find out how expensive and difficult UK retailers can be to deal with. Then they will look at the UK and reconsider what they’re doing. When they do say no, the retailers won’t have that option,” warns Futter.

Such a scenario actually played out last year, in part contributing to the shortage of salad products in UK supermarkets.

“It’s a choice that the retailers are making, but the further afield they go, the more risk they’re putting on their food supply chain. Last year we saw it with supplies from Morocco. When the country ran short of salad, the government halted exports until they knew they could feed their own population. What was left ended up going to retailers in Europe as they were less difficult to deal with compared to their UK counterparts,” adds the retail consultant.

If a number of foreign suppliers were to look elsewhere just as Britain’s farming sector began downsizing, the country would inevitably face a daunting food supply chain challenge.

In any case, should such imported goods do make it into supermarkets without any hiccups, the imports will naturally have a direct impact on the British farmers who provide the same fresh produce.

Despite the added cost of shipping, fruit, vegetables and meat can still be sourced for noticeably lower prices in many foreign markets. Lower labour costs and favourable exchange rates can help here, as well as the fact that regulatory standards can often be lower than in the EU or the UK.

This disparity in regulatory requirements and standards, says Ali Capper, is simply unfair to British farmers.

“What we need is a level playing field. If the standard of meat production in the UK means that we don’t put birds in cages, and that we need very clear stocking density levels and emission requirements, then we must apply the same to anything we’re bringing in.”

Although Capper considers herself an advocate of the free market, she has come to the view that a degree of protectionism and state assistance is required in order to maintain the UK’s food security:

“Most first world economies recognise that their land and labour costs, as well as their own high standards, mean their food tends to be more expensive than what’s produced in developing economies. So they tend to put protections in trade deals and provide some sort of subsidy.”

According to Capper, fruit and vegetable growers have not greatly benefited from the EU’s common agricultural policy historically, apart from the PO regime. However, the little subsidies that were available no longer apply post-Brexit, and have since been replaced by the Environmental Land Management scheme.

The scheme is designed to encourage rewilding and other actions seen to help the environment, which many would see as a good thing.

Even so, given the possibility of climate change curtailing agriculture in North Africa and Southern Europe, Capper believes the scheme should be amended to help UK-based farmers to continue growing.

Climate change and the future role British agriculture could play

The UK farming industry will of course have its own climate change troubles to deal with. A 2019 report by the Climate Change Committee states that more frequent weather extremes could cause damage to crops, livestock and fisheries in the UK.

However, if long-term climate forecasts turn out to be accurate, it could still be the case that a contraction in the UK’s farming industry would represent something of a lost opportunity. This is because other nations may end up with far greater agricultural challenges.

Regarding the potential for climate shifts to influence agricultural activity, Capper refers to the book “Nomad Century” published in 2022 by award-winning author and environmental journalist Gaia Vince.

“The UK is actually going to be in quite a good place. We’re going to get difficult periods with torrential rain and we will get more droughts, but enough water will fall on our island. We’ve just got to put the infrastructure in to cope with it, and we are going to continue to have a really nice climate to grow food,” says Capper.

The findings in the book suggest that Britain could become more attractive to farm on compared to countries closer to the equator, which are expected to suffer from more extreme heat and desertification.

This view is shared in a report published in 2022 by the Intergovernmental Panel on Climate Change.

“At 2°C or higher global warming level in the mid-term, food security risks due to climate change will be more severe, leading to malnutrition and micro-nutrient deficiencies, concentrated in Sub-Saharan Africa, South Asia, Central and South America and Small Islands,” states the report, titled ‘Climate change and its economic consequences’.

Labour supply and the concept of a “high skill, high wage economy”

Another issue that farmers are having to grapple with at the moment is the supply and cost of labour, which naturally has a knock on effect on supply chains.

The pandemic, followed by Brexit, made it more difficult to quickly recruit workers from Europe. Although the UK Government has implemented a temporary visa scheme to help, recruitment still remains more challenging than it was prior to the pandemic and Britain’s exit from the European Single Market.

Less workers in the field naturally means less output, while any doubts as to whether enough workers can be hired can also impact planning.

In spite of this, some government politicians, political commentators and think tanks appear less than concerned.

The Daily Telegraph’s Matthew Lynn, for example, suggested back in 2021 that the UK should simply downscale its food production and turn to imports instead. As he puts it, “it makes more sense to take the work to the people than to move the people to the work.” The UK could then focus on “higher-value” industries.

Could policies based on this school of thought threaten the resilience of the UK’s food supply chain? Both Capper and Futter clearly think so.

“Yes, there’s a big theme of that going through Westminster,” says Capper. “They’re getting their comeuppance though. We’re starting to see empty shelves and we’re going to see more of them.”

In Futter’s view, relying on imports for food supply is also a strategy that involves huge assumptions:

“Some say, ‘we’ll just import cheap produce’. Well, who says that they [the suppliers] are going to want to send that cheap produce to the UK? That’s a massive assumption to make,” says Futter, referring to the fact that some suppliers could easily decide to sell their produce elsewhere.

The retail expert also disagrees with how it is being implied that staff who work in farms and production lines are “low-skilled”.

“What they’re saying is that people picking cauliflowers or working meat production abattoirs are low-skilled. I would say that they’re not low skilled at all. They’re often migrational, seasonal workers who are skilled at what they do and can work around Europe because they’re good at what they do.”

Meanwhile, the economic situation in recent years has also led to increases in the minimum wage. This in turn puts additional cost pressure on farmers and contributes to rising food prices.

“They’ve increased the national minimum wage by 28% over the past 3 years; it’ll be £11.44 from April 1st. If you look at some of the produce sectors, apples for example, or soft fruit, labour is 51% of your cost. With Asparagus, it’s 71%. So if your costs have gone up by 28% in the past three years you have to recover that, you end up with food inflation,” says Futter.

Impact of SPS checks due this spring

Besides the long-term impact that a smaller domestic farming sector could have on UK food supply chains, the imminent arrival of SPS checks means there are more immediate challenges as well. Some checks will begin at the end of January, with more to come in April and October.

As Capper explains, growers bring tomato plants from Europe into their glass houses at the beginning of the year. Strawberry plants are also imported from the continent. The reason for this is predominantly soil quality and soil types, as well as appropriateness of soil for different jobs.

“There’s a lot of really good soil in places like the Netherlands and Germany and France; flat, low lying, silty ground that we don’t have huge amounts of here,” says Capper.

Capper also points out that young trees and plants have been placed in DEFRA’s high or medium risk category for plant imports. This means they’ll be subject to checks at the border from April 30th.

Naturally, there are concerns that delays could see some of these young plants perish before they are planted on British soil.

“If, for example, tomato or strawberry plants coming in for the season do perish at the border, it isn’t as simple as just replacing that consignment with another. They won’t be there for us to buy because they’re all planted to order,” adds Capper.

The situation adds yet another risk factor to an industry already subject to a lot of jeopardy. Moreover, the manner in which the impending checks have been tweaked and/or delayed has left some businesses worn out, casting doubt over the level of preparedness when the inspections do happen.

Renowned customs expert Anna Jerzewska warned of such an outcome in her reaction to the Border Target Operating Model in October, writing on X:

“As a consultant working closely with UK businesses, I really don’t know what to say when I’m being asked “how likely is it that this time it’s for real” or “why should we start preparing”. Part of the implementation effort with any policy or change is getting businesses on board. And yes, following the previous version of BTOM there was an effort to consult the industry on the effect of the proposed changes. But most of the problems raised by the industry will not be resolved by the time the new deadline arrives.”

The VGB, the Dutch association of wholesalers in floricultural products, is one European industry body that had called on the checks to be delayed due to a lack of preparedness. The association has since warned its members to be prepared given that January’s checks will now clearly go ahead as planned.

Could European Countries end up experiencing similar problems?

Is there a lesson for European countries here? Recent weeks have seen farmers’ protests take place in a number of European nations, including Germany and France. In some cases, the motivation for protests has been imports from countries with lower operating costs. Clearly, not everything is rosy in the garden on the continent either.

Comparatively speaking, however, Futter maintains that despite those protests, countries in mainland Europe are better off as far as food security is concerned:

“In Europe, they don’t have the food security issues that we have in the UK. We are an island and we think we’re bigger than we are. Whereas in Europe there is far more collaboration between farmers and growers.”

The retail consultant says that France is independent with its food production and growing. Meanwhile, Germany adopts a more basic but long-term approach that involves agreements between farmers and growers.

Embracing the approach seen in the UK at the moment is thus something other European countries would be best to avoid.

“There’s far less horse trading on a monthly basis. They shouldn’t be looking at the UK and thinking “let’s have a go at that” because if they do, they’ll just add more risk to their food supply chain,” concludes the Director of the retail mind.

Why action needs to be taken

None of this is to say that the UK’s food supply chain is literally broken, though a continuation of the status quo could still bring things to breaking point.

Futter is not convinced by some dire predictions that the country’s farming sector could be halved, but warns that farmers are struggling and will need to embrace cooperation.

“It’s not broken, but it is hanging by a few threads which are fraying at the end,” says Futter.

---