Food suppliers accused of 'profiteering'

The Agriculture Commissioner has said that the only way forward is to increase the EU farming subsidy budget from 2028.

Price inflation has averaged 14.4% in the UK, and shoppers faced huge price rises, such as 51% for the cost of Bisto gravy.

The chairman of a supermarket chain on course for profits of at least £2.5bn this year has enraged the food industry by accusing it of "profiteering" from inflation.

Tesco chairman John Allan told the BBC the chain is in a “constant battle” with its food suppliers to keep prices down.

But industry representatives, from farmers to food processors, said Allan’s comments ignored the huge cost pressures facing suppliers.

He made the comments as food price inflation averaged 14.4% in the UK, and shoppers faced huge price rises, such as 51% for the cost of Bisto gravy.

No stranger to controversy, the Tesco chairman had in the past bemoaned that white men were becoming an “endangered species” in the boardroom, and he called last year for a windfall tax on energy companies, even as Tesco itself announced a £2.2bn profit for the previous year.

His latest inflammatory remarks are sure to start a war of words, at a time when tempers are getting frayed in food production and retail, in the ongoing battle between rising costs and keeping food prices under control, not just in the UK, but worldwide.

This battle has been going on for a while, after commodity prices were pushed up by labour shortages, supply disruption, and import-export challenges during the Covid-19 pandemic. Then the war in Ukraine hit the price and availability of oil, gas and cereal crops.

And in the UK, and in the EU to a lesser extent, Brexit added to economic disruption.

There's no sign of the disruption abating, with inflation rates staying stubbornly high, and economic pressures increasing, unless hard-pressed governments can keep shovelling out energy bill supports and pandemic recovery funds.

In the EU, the food industry looks to Brussels for regulation and aid, but the EU Agriculture Commissioner Janusz Wojciechowski has ominously warned that all options to tackle soaring food and input prices have been exhausted.

Speaking in the European Parliament, he said the 24% price increase for agricultural products in the EU does not adequately compensate farmers for a 30% increase in their costs of production.

The only way forward is to increase the EU farming subsidy budget from 2028, said the Agriculture Commissioner.

But that could leave farmers facing six hard years battling cost inflation, not to mind other unexpected setbacks.

"Our farmers are up to the task, but they are working under very difficult circumstances,” said Wojciechowski.

The EU farmers' crisis fund has been triggered for the first time ever, and the ceiling of state aid was raised to €250,000. However, it is up to individual member states to dip into their own pockets for state aid to bail out farmers facing increased prices of inputs, such as for fertilisers.

Meanwhile, EU consumers saw food price inflation jump to 17.86% last November, compared to an average of only 3.28% from 1997 until 2022.

In the USA also, food price inflation has soared, from an under 4% rate from 2013 to 2021, to a peak of more than 22% in recent months.

Eggs, a basic food item In the USA, are now 138% more expensive than a year ago, at $4.25 a dozen. The US Department of Agriculture has pointed to the country's biggest-ever outbreak of avian flu as a reason for high egg prices (in 2022, nearly 58m chickens and turkeys were killed in the USA by avian flu, or to control the spread of the virus).

US egg production was about 5% lower year-on-year in recent months, and stocks were down 29%.

But farmer representatives said that that did not explain record-high prices, hinting instead that it is another example of price gouging by huge agri-food companies, such as when the price of beef jumped in 2021.

Last year, the Biden administration pointed the finger at the four big companies that process more than 80% of beef in the US.

And in the other meat industries, said Agriculture Secretary Tom Vilsack, giants like Tyson, Smithfield and JBS had enormous leverage over both farmers and consumers.

The Biden administration is setting aside half a billion dollars to help bankroll new meat processors to compete with the big four. Meanwhile, the US Justice Department is investigating alleged price fixing in the chicken market. The second biggest chicken processor, Pilgrim's Pride, already pleaded guilty to conspiring with others to limit production and keep chicken prices artificially high.

Now under scrutiny is Cal-Maine Foods, which controls 20% of the retail egg market in the USA, and has reported quarterly gross profits up more than 600%.

Here in Ireland, supermarket egg prices have gone up 72c per dozen, but farmers say they are seeing only a small portion of this.

Even at this time of agri-food market disruption, US, UK, and EU consumers can count their blessings. In Egypt, with the price of food having increased by 37.9%, eggs, milk and cheese now cost four times the price of a year ago.

Food cannot be taken for granted anywhere now. In the UK, it has been calculated it’s no longer possible for everyone to eat their five portions of food and vegetable a day, which is recommended for good health. There simply isn’t enough to go around, according to the Sustainable and Healthy Food Systems (SHEFS) research group.

The UK depends on imports for 65% of its fruit and vegetables, and some of its own farmers are giving up or reducing production, as their production costs soar. Their costs have risen by 23% in the past year, they only received on average a 0.8% year-on-year price increase from the supermarkets.

For protected cropping in particular, high heating costs make profitable production or expansion impossible, not to mind paying more for fertilisers, distribution costs, etc.

And the Brexit shortfall of around 330,000 workers left an estimated €27m worth of fruit and vegetables unharvested last year in the UK.

However, there was no extra support for sectors such as horticulture and poultry, despite intense lobbying. in the UK's new Energy Bills Discount scheme (even though botanical gardens were included).

It's no wonder National Farmers Union leader Minette Batters accused Tesco chairman John Allan of “living in a parallel universe” after he accused Tesco suppliers of profiteering from inflation.

Here in Ireland, the Office for Fairness and transparency in the agri-food supply chain being debated in the Oireachtas will have a baptism of fire into a period of food industry disruption.

The UK already has a high-powered Groceries Code Adjudicator, which says it is has been “overwhelmed” by food price queries, and is now carrying out a survey of retailer behaviour, as food inflation runs wild.