Pressure is mounting on the government to speed up plans for a retail watchdog amid fears that farmers will bear the brunt of a supermarket price war.

Britain’s big four retailers kicked off the New Year by slashing more than £1bn off shopping bills. In its most aggressive marketing campaign yet, Asda pledged to be 10% cheaper than rivals Tesco, Sainsbury’s and Morrisons.

Dairy farmers are on the front line. Milk is increasingly sold for less than water in many supermarkets. A pint costs as little as 25p when bought in multiple four-pint cartons – half the price of bottled spring water at Tesco stores.

Farm leaders fear the supermarket giants will heap pressure on suppliers as they seek to cushion consumers from the impact of food price inflation, which stood at 4% in December and shows little sign of easing.

NFU Scotland chief executive James Withers said: “The retailers have renewed their cut-throat battle for customers and we really fear that family farms – and ultimately shoppers – will pay the price.”

Confidence in the dairy industry remained at an all-time low among farmers, said Mr Withers. “This latest round of price-cutting is irresponsible and further underlines the need for an industry policeman,” he added.

NFU president Peter Kendall also called for the introduction of a retail watchdog “sooner rather than later” as he gave evidence to MPs on the House of Commons Environment, Food and Rural Affairs committee on Tuesday (11 January). But pressure on parliamentary time is likely to mean any such move remains some way off.

DEFRA secretary Caroline Spelman said: “We are looking for an opportunity to introduce a simple Bill on a supermarket
adjudicator.” Labour shadow farm minister Willie Bain said ministers appeared to be back-tracking on their commitment to introduce an ombudsman. Producers were taking the strain and quite rightly wanted to see action. “British farmers deserve to know when an ombudsman will come into being. The Tories need to stop dragging their feet on this issue or come clean if they have gone cold on the idea.”

The British Retail Consortium, which opposes the idea of an ombudsman, said there was no evidence that the burden of the intense competition between supermarkets had been carried by their suppliers.

Unprecedented discounts aimed to take the sting out of grocery shopping, said BRC director general Stephen Robertson. “The competitive retail environment will mean stores go on doing all they can to limit price rises.”