Armlock theory doubts raised

AN INVESTIGATION into farm-retail price spreads conducted by London Economics has found no systematic widening in the 1990s between farmgate and retail prices as a result of increased supermarket power.

The study found that UK farmgate-retail price spreads are generally not among the highest in the EU member states, except for eggs and lamb.

The data did not reveal a consistent pattern of widening price spreads across all commodities in the UK or in other EU member states.

Moreover, the correlation between farmgate-retail price spreads and food retail concentration was found to be weak.

In the bulk of cases studied there was symmetry between price changes at the two levels, i.e. at farmgate and retail price level.

The British Retail Consortium argued that the results destroyed the “myth” that supermarkets hold farmers in an armlock.

Kevin Hawkins, BRC director general, said: “The London Economics report proves what we have always known, that falls in farm-gate price are passed on to consumers at retail level just as quickly as increases in farm prices.”

“The report also shows that there is no significant relationship between the strength of the UK supermarket sector in UK food retailing and the difference between prices paid to farmers and the price the consumer pays.”

“It is time for those who constantly criticise food retailers‘ relationships with farmers to admit that their attacks are based on nothing more than myth and prejudice.”

“This independent research provides the hard evidence that explodes the myth once and for all that supermarkets do not have farmers in an ‘armlock‘,” said Mr Hawkins.