"Since December our prices have fallen by up to 10p per pound at a time when they should normally be going up. The industry could end up dumping thousands of tonnes of the best UK apple crop we have seen for many years. The main reason for this problem is a lack of shelf space allocated to us by our supermarkets. Cheap imports from overseas have not helped the situation. "If the major supermarkets continue to force prices down in this way, the UK won't have a top fruit industry in ten years time, and all our orchards will be grubbed up" -Martin Harrell, an apple grower from Gloucestershire "Having just restocked after foot and mouth, I find that liquid milk prices are falling and are now below my production costs. My buyers are being squeezed by the supermarkets which sell liquid milk at below acceptable levels to attract customers. I am being asked to run a business at a loss. I have done all I can to become efficient and meet high welfare and farming standards. But unless I get a fair deal from the supermarkets I will not be able to continue. The issue of fair trading must be urgently addressed." -Gareth Watkins, Dairy farmer Source: Friends of the Earth press release "Supermarket power threatens farmers" 26/1/02.

To provide customers with the huge variety of inexpensive food that they promise, supermarkets ruthlessly exploit their effective monopoly as the biggest buyers of food. They can dictate how, where, when and for how much their food is produced, packaged, stored and delivered. This is monitored by a sophisticated system of specifications and tight managerial control, including direct contracts with selected farmers rather than tradtitional competitive markets and the use of favoured slaughterhouses, processing and packing companies.

Producers are merely assembly-line workers producing standardised products, designed by technicians. Supermarkets employ researchers to discover precisely what the average cost of production is for a particular crop worldwide, then conduct blind auctions over the internet, buying only when the price has reached the lowest level.Farmers do not know what price has been tendered by other producers and this forces them to offer their produce at a low price to ensure a sale. Producers of perishable foods are especially vulnerable. Only multinational food corporations and companies with successful brands have any leverage with the big suppliers.

The recent Competition Commission Report on Supermarkets (2000) cited 30 alleged exploitative supermarket practices over suppliers, including not paying suppliers on time, changing specifications at the last minute on quality, quantity and packaging and charging suppliers for supermarket errors. At the heart of this is the supermarkets' refusal to enter into binding contractual agreements with suppliers, thus leaving them with no redress against supermarket exploitation.

All of the supermarkets admitted to the Competition Commission that they requested suppliers 'to make a payment for better positioning of products in the stores', and demanding 'non-cost related payments' i.e. payments to ensure the continuation of business. These are sometimes charged retrospectively. They admitted 'to imposing charges and making changes to agreements without adequate notice; and unreasonably transferring risks to the supplier.'[23]

Farmers are forced to invest a huge amount into meeting supermarket needs, and then can be dropped at a whim, wiping out their entire business and the businesses and rural communities that rely on them. It's the same story across the globe as farmers around the world are forced to compete with each other to produce a better quality product, more efficiently at the price the supermarket demands.

One farmer sellling cauliflowers to the supermarkets had his entire crop rejected due to excessive quality standards. He had initially asked the supermarket in question whether he could use a pesticide to eliminate caterpillars, and they had refused. He successfully eliminated them using a bio-pest control, the Encarsia wasp. This caused no damage to the cauliflower, although it left the occasional dead wasp that could easily be washed off by the consumer. The supermarket in question, however, refused the cauliflowers anyway.[24]

The Commission report is full of testimonies from farmers and other suppliers about their treatment by the supermarkets. You may wonder why you hadn't heard about this shocking exploitation before; most are too afraid to raise their voices as they are at risk of being blacklisted by supermarket buyers. These buyers are regularly switched between product ranges making it hard for suppliers to build up a personal relationship.

One of the most shocking forms of exploitation is that farmers are frequently paid less than the cost of production for their goods. The UK dairy industry, for example, has been heavily hit by supermarkets who have used the oversupply of milk to their own advantage. It costs a small dairy farmer anything from 18p to 22p to produce a litre of milk. Until the Milk Marketing Board was abolished in 1994, they were being paid 24p per litre. Farmers are currently being paid 19p per litre, for what sells in the supermarket for 72.2p.[25]

In some sectors (arable, sheep and beef), the difference is made up by the taxpayer through subsidies. While farmers are often blamed in the media for being 'subsidy junkies' the truth is that in some cases the farmgate price is so low, that even with the subsidy, farmers cannot cover their costs.

The supermarkets and big processors are increasing their share of the profit margin by squeezing the whole supply chain, and the farmers at the end of the chain are in the weakest position. Agricultural subsidies essentially go straight into supermarket profits.

These are clear examples of the supermarkets exploiting their monopoly position. Farmers and even the bigger food manufacturers and processors are reliant on selling to a few retailers and thus vulnerable to exploitation. The Competition Commission found that as a result, suppliers were not able to innovate and develop new markets and were living in fear of being arbitrarily de-listed. See section on 'Rip-off Britain'.

When confronted over this blatant exploitation, supermarkets cast the blame elsewhere. Either it's the free market and we can import milk more cheaply from Eastern Europe or New Zealand.[30] Or, we'd like to pay you properly, but the WTO will clamp down on us for price-fixing (i.e. paying a fair price).[31] Or, it's the middlemen creaming off all the profits not us. Or, the quality of UK milk isn't up to it.[32]

The truth is that our global economic system may well be at fault, but it is the supermarkets, through lobbying governments and the WTO, who have manipulated the system to suit them, with total disregard for the little guy.

As for laying the blame at the feet of the 'middlemen' - there are seven large processors in the dairy industry, and, although not blameless, they were also affected by the drop in the price paid for milk by the supermarkets.

Farmers are in an extremely weak negotiating position. They used to have some bargaining power on the basis of seasonality, but imports and glasshouses have destroyed this advantage. Now farmers are squeezed by a limited number of buyers, big suppliers and global oversupply.

To make a living, farmers have adopted more intensive methods to produce more to sell, and have invested their savings. This may make sense on an individual level, but ultimately works against their interests, creating over-production and a further decrease in prices.

Farmers on the Continent have formed co-operatives so that with more to sell they can demand a better price. It is ironic that the Competition Commission broke up the large UK dairy farmers co-operative, Milk Marque, in 1999 whilst allowing supermarkets to continue with their monopoly.

Down on the farm In 1939, Britain had half a million farms, most less than 100 acres and worked by around 15% of the population. Britain today has lost over a third of its farms and the agricultural workforce is in serious decline. Less than 2% of the UK workforce is currently engaged in farming,[26] and the government predicts that by 2006, 25% of the remaining farms in the UK will have gone out of business or merged, with a further 50,000 people forced to leave farming. [27] The average farm income in 2002/2003 was £12,500 although incomes for some, predominantly small farmers, remain below the minimum wage.[28] Even though the global food sector continues to expand, now standing at one and a half trillion US dollars a year, farmers are getting a tiny share. Fifty years ago, farmers in Europe and North America received between 45-60% per cent of the money that consumers spent on food. Today, that proportion has dropped dramatically to just 7% in the UK and 3.5% in the USA, but remains at 18% in France.[29]

To make a profit, the supermarkets and processors prefer to deal in bulk with a standardised product. To achieve the blemish-free perfect 7.4 inch carrot, pesticides, fertilizers, and factory farming methods are necessary. Up to 40% of a perfectly good product will be discarded to meet the cosmetic perfection apparently demanded by UK consumers, and taste is undoubtedly sacrificed. It is not surprising that most major food manufacturers support the logical conclusion of uniform food: genetic engineering.

Intensive farming in the UK has not reached the proportions of the USA where the corporate control of agriculture is most keenly felt in the food processing and manufacturing sector. There, 70 million acres have been planted with GM soya, maize, oilseed rape and cotton and most meat is produced in feedlots or CAFO's (Confined Animal Feeding Operations).

The big players in US food production; Iowa Beef Processors and Cargill (beef), Smithfield and Premium Standard Farms (pork) and Tyson and Perdue (chicken) all have fairly similar production methods. Huge feedlots are sited in states where regulations are lenient, often in poor communities where people are less likely to object to the stench of excrement and pollution.

Animals are packed in as tightly as possible, gorged on high-protein feed (such as bonemeal) and dosed with hormones and antibiotics before being shipped to equally huge slaughterhouses where speed and quantity count for more than sanitation.

Would you like ground spinal cord with that, Sir?[34] Some 750 million battery chickens are produced for consumption each year in the United Kingdom. Intensively raised chickens grow so quickly that they cannot support their own weight. According to the Agriculture and Food Research Council, more than half have developed serious bone defects by the age of six weeks. One fast-food hamburger can contain meat from dozens or even hundreds of different cattle. Until August 1997, 75 per cent of cattle in the US were fed the remains of dead sheep, cattle, and even on occasion the corpses of cats and dogs purchased from animal shelters. Even with new regulations, the US Food and Drug Administration allows dead pigs, horses and poultry to be included in cattle feed. Poultry can also be fed dead cattle. In his shocking best-seller, 'Fast Food Nation', Eric Schlosser reveals how difficult it is to make sure that meat destined for consumption as fast food (whether sold through restaurants or for home cooking) is not contaminated in the slaughterhouse. Cattle hides are pulled off by machine, and if the machine has not been cleaned properly, dirt and manure can fall into the meat - and end up in your lunch. Schlosser also explains how the stomachs and intestines are pulled out by hand. If this is not performed exactly right, the animal's innards spill everywhere. Some slaughterhouses have gut contents spilling out of one in five carcasses on the production line. Processing plants can produce 800,000lb of hamburger a day. If only one of the animals involved is infected with E.coli 0157: H7 (a major cause of food poisoning), it means that 32,000lb of ground beef could also be contaminated.

Processors may cut costs through mass production and using waste products from the food industry such as maize starch, sugar beet fibre and whey powder, but their cost is hugely increased through packaging, transportation and presentation. For example, Northern Foods' Dalepak lamb grills cost £8.45 a kilo; almost twice the price of genuine lamb chops from a local butcher.[35]

It seems that consumers are happy to believe the hype: that they are getting the best deal with the 'convenience' of processed foods and shopping in supermarkets.

The Cheap Food Myth

Cheap food is a myth. The consumer pays three times: once in the shop, twice through direct subsidies to farmers, and finally indirectly in taxes cleaning up the mess left by industrial agriculture and subsidising transport infrastructure.

It has, for example, cost the government over a billion pounds to install the equipment necessary to remove nitrates and pesticides from our water.[36]

The consumer also pays the price in ill health and increased risk of disease. The drive for cheap food has been behind every major food catastrophe of the past decade. Feeding ground-up animals to cattle - who are natural herbivores - as a cheap source of protein is generally recognised as the initial cause of BSE. Salmonella is endemic in chickens and their eggs because the broiler system delivers cheaper poultry products. E. coli is a by-product of intensive livestock practices. Infectious Salmon Anaemia virus (ISA) in salmon is caused by the broiler system being applied to fish.[37]

The costs of BSE and Foot and Mouth disease could well average £4 billion each and then there are the costs of our unhealthy diets on the National Health Service (see 'Selling unhealthy food' section).

Further liberalisation of markets through the Agreement on Agriculture, part of the World Trade Organisation, will mean that our cheap food will continue to be subsidised by environmental and social destruction as well as animal exploitation in poorer countries and the UK. Opening up markets to 'developing countries' will not benefit poor plantation workers, rather the multinational corporations who own the infrastructure by which food is transported around the world, such as international grain traders, Cargill and ADM who control 80% of the world's grain trade.

The current pattern of supermarket consolidation will not help matters. At a recent seminar help by the Grocer, ex-CEO of Somerfield, David Simon, claimed that the proposed takeover of Safeway will be a 'killing ground' for weak brand and private-label suppliers, and hence the farmers who supply them. They will face crippling reductions in margins and the possibility of losing their entire business.[38]

References
[23] Quoted in 'Summary Of Supermarkets: A report on the supply of groceries from multiple stores in the United Kingdom. Published by the Competition Commission. DTI, UK'.
[24] Anonymous source at the Farmers World Network meeting 24th November 2001.
[25] Accurate on 28th February 2001. From author's own research in Tesco and the bi-weekly farm-gate price guide produced by the Small and Family Farms Alliance.
[26] DEFRA Quick Agricultural Statistics statistics.gov.uk/esg/quick/agri.asp viewed March 2004.
[27] Extent of farm crisis revealed' Patrick Wintour. The Guardian 11/4/04
[28] Robert Harris 'Incomes slowly recovering' Farmers Weekly 30/1/03
[29] Jules Pretty 2001 ' Some Benefits and Drawbacks of Local Food Systems'. www.ruralfutures.org
[30] 'Don't Blame the Supermarkets' by Neil Davison, Financial Times www.ft.com/fteuro/qbe7a.htm
[31] ibid.
[32] Policy Commission on Food and Farming industry stakeholder meeting 23/10/01
[33] 'Corporate Pigs and Other Tales of Agribusiness' Multinational Monitor. July/Aug 2000 Vol 21. Nos. 7&8.
[34] Where reference not made, from 'Fast Food: Some facts and figures to make you lose your appetite' Clare Dwyer Hogg. The Independent (London) September 5, 2001.
[35] 'That's the Horror of Haskins' by George Monbiot. The Spectator. 1st September 2001.
[36] Pesticide Action Network UK Briefing: Pesticides in Water. www.pan-uk.org
[37] 'Paying the price for cheaper food' The Observer, 25th February 2001.
[38] The Grocer's seminar: What Price Safeway? Reported in The Grocer 15th February 2003