The NFU is mounting a campaign to address escalating costs and diminishing margins in “the roulette wheel of horticulture”.
The union is embarking on a six-month process to examine the supply chain and address the status of a “high-risk, high-cost, low-reward” industry.
Horticulture and potatoes board chair Sarah Pettitt and chief horticulture adviser Hayley Campbell-Gibbons are already in talks with growers, packers and processors, discussing supply chain issues.
The union will produce a report scrutinising price transmission, margins and contract terms as well as customer behaviour.
Pettitt said in an email: “Growers in most sectors have been taking more and more of a gamble by investing in the production of fruit and vegetables - often having to commit to renting land, buying seed and planting crops in the ground before the customer even thinks of placing an order, or negotiating a decent price for the product - and all the while costs are escalating and margins diminishing.”
An English Food and Farming Partnerships study published last year reported grower margins of less than 2.5 per cent on average. At the same time, DEFRA research stated that vegetable growers received an unfavourable return on capital over the last six years, and negative incomes that were discouraging reinvestment.
Gary Markham, director of agriculture at analyst Grant Thornton, told FPJ the war on price to gain market share between the supermarkets, which intensifies by the week, is putting further pressure on those margins.
He said: “It could not have come at a worse time. The rise in inflation [by 5.6 per cent] coupled with the supermarket price wars is a big blow to the fresh produce industry. Who is going to pay for that? It has to be the producer.”
Markham said strong management and financial direction would put many medium-sized businesses in good stead but feared another poor winter could leave some firms “vulnerable” while the poor Sterling-Euro exchange rate is likely to do further damage over coming months as UK businesses turn to imports.
The NFU’s annual confidence survey recently revealed low levels of confidence in the horticulture sector - both currently and for the foreseeable future.
Pettitt added: “While prices have improved within the last year for some sectors, no grower has received anywhere near enough to cover the increases in costs that we all - as farmers and growers - are feeling the pain of. It’s leaving some growers questioning whether there’s enough reward in the job at all.”
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