31 August 2001

Farm and shop lamb prices go further apart

By Robert Harris

THE gap between farm-gate and retail lamb prices widened last month, leading to further accusations of supermarket profiteering by farm unions.

Monthly farm to retail price spreads, published by the Meat and Livestock Commission, showed that retail prices slipped by just over 31p/kg in July, or 6%, with shoppers paying an average of 474.5p/kg for lamb. But ex-farm prices fell over 20%, or 46p/kg DW, to 165.2p/kg.

To ease comparison, the MLC uses a percentage price spread to highlight the difference between farm and retail prices. This is calculated by expressing the difference between the farm-gate and retail price as a % of the retail price. Simply put, the higher the result, the bigger the margin. Julys figure was 65.2%, 7% higher than June and almost 5% more than a year ago.

Tony Fowler, senior economic analyst at the MLC, warned against reading too much into the figures. "The retail price trend tends to be flatter. It doesnt change as much as the producer price in either direction. The producer price has dropped sharply, and is the lowest for some years. It is highly likely later in the year that the gap will narrow."

But Welsh farmers described the MLC figures as an indictment of the attitude of retailers to their primary producers. Both farm unions are demanding effective fair trading regulations, and far greater transparency so that consumers can judge whether farmers get a fair proportion of across-the-counter prices.

"These shocking calculations show supermarkets are prepared to go on kicking farmers in the teeth," said Bob Parry, president of the Farmers Union of Wales. "MLCs findings reinforce the results of our own recent survey, which showed that the value of a 16kg lamb from a Gwynedd farm increased from £26 at the farm gate to £91 over the counter. There is absolutely no question that while markets are closed supermarkets are setting prices, and are ripping off producers."

But Kevin Hawkins of Safeway, one of the first retailers to announce it would stock light lambs, said such comments were "way off the mark".

"Firstly, the MLC data cant catch all the promotional activity, so it tends to overstate retail prices. Secondly, when the gap between retail and farm price widens, it is usually due to one factor. When processors run below optimum volume, as now, they run into a problem. So they reduce prices to farmers but the price they charge us moves very little."

A weighted average across all cuts shows Safeway prices fell by 12%, double the average fall, between June and July, said Mr Hawkins. Year on year, prices on chops and mince, the stores two biggest sellers in the lamb sector, fell by 23% and 3% respectively, with cutlets and half legs down about 10%, he added.

Nationally, the price spread for beef also rose in July. The average farm price rose by just 0.6p/kg, to 163.5p/kg, while shop prices rose 4p/kg to average 379.7p/kg. That produced a percentage price spread of 56.9% compared with 55.3% in July 2000. &#42