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President's Blog 14 October 2016

Unilever and Tesco have been embroiled in a very public dispute over the prices of some well-known household brands.

While for most people this appears to be a negotiation between two massive, faceless, corporate giants, to us farmers there is another dimension – the impact of supermarket food deflation.

Unilever appear to be taking the stance, from an outsider’s perspective, that in a volatile global market, compounded by the currency impact of ‘Brexit’, price cannot constantly go one way – down.

Unilever, who produce many of their products in Europe, are possibly finding that they cannot continue to source raw materials in euros while being paid less because of the weakening pound.

The other facet of this is that if we import more food in to this country, then the impact of price volatility because of currency fluctuation will continue to hit home.  That would compound the impact on farming where a weak pound has already had a big impact on some of the key inputs – fertiliser, feed – that we need to import for our businesses.

The line reported in the media is that Tesco don’t want to have to put the shelf price up, but I wonder how much of the shelf price are Tesco actually paying Unilever for a tub of marmite, for example?

There is most certainly an argument that because of the ‘Brexit’ vote, supermarkets should look to source more food from more of our farmers, growers, crofters, and our food and drink manufacturers, where there is no exchange rate impact.

From a shoppers’ perspective, I would think that it is preferable if the products that they buy week in, week out continue to have a presence on shop shelves, and if the price goes up then it should be the shoppers’ choice if they want to pay more for a product which they value.

NFU Scotland has consistently argued that unless processors and retailers pay a sustainable price for our food then it won’t continue to be there.

Fortunately for Unilever, they can use their corporate weight to refuse to sell at unsustainable prices. However, for farmers, when the price we are being paid by processors, and retailers, reaches unsustainable levels what we see is enterprising farming businesses, often family run, leave our industry after generations of hard work, sweat, and unfortunately tears in many cases.

The conclusion for farmers to take from this dispute must be that we need shoppers, processors, and retailers, to support our industry and ensure a sustainable income that allows our industry to grow and thrive, and we want an understanding that price deflation does impact on lives.

 

 

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