All the big retailers play a very canny game

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It may stick in the craw of the farming industry but the reality is that local food processors are likely to become more reliant rather than less dependent on the UK supermarkets during the period ahead.

The logic behind this is quite simple: Northern Ireland plc exports 80% of the food produced here and we live cheek by jowl with a neighbouring island which is home to some 60 million people. What’s more, these potential consumers all use the same currency (Sterling) and, ostensibly, they speak the same language.

Take the redmeat sector as a further case in point. Throughout the ten long years of the beef export ban, local meat plants had no option but to do business with Tesco, ASDA, Sainsbury et al. This meant meeting their specifications for the different cuts with the result that only certain grades of cattle secured a premium price. As a result, heavier, lighter or less well conformed cattle were discounted.

Significantly, all of this has come back to haunt the factories over recent months as farmers have found they can send all of their finished cattle live to Scotland and get a better price by taking this option. Beef cattle numbers are currently at an all time low. So it will be interesting to see how all of this plays out over the coming months. The factories need stock to process – otherwise they have no business.

All of the big retailers play a very canny game when it comes to dealing with Northern Ireland’s agri-food sector. At one level they are telling processors that the credit crunch is now a reality and that all suppliers must respond accordingly. Meanwhile, the same people are telling producers that they care passionately about the countryside and the rural way of life.

For their part, farmers think they are being shafted. They cannot understand, for example, why a litre of milk can leave their yard for 20 something pence and end up on a supermarket shelf for almost 80 pence. And they feel equally irate when it comes to the retail mark-up on beef, lamb, pork, potatoes and all the other food commodities produced here in Northern Ireland. Obviously, farmers want a better return for their endeavours. But they would also like the supermarkets to explain why the total retail take is so large and why they, the people at the start of the food chain, get such a small share of this total spend.

Numerous attempts have been made to elucidate the ways in which the supermarkets operate their buying policies but to date black holes have been more forthcoming in terms of the light that has been shed on this issue.

The last twelve months have seen global food prices increase in the wake of commodity shortfalls in many food producing regions. But the good news for farmers here was very short lived as these same commodity market trends soon led to withering fertiliser and animal feed price hikes. The theory is that agricultural producers in Northern Ireland should be very much at the mercy of the markets when it comes to determining the farmgate prices they receive.

Many leading economists are now predicting that the days of cheap food are over. However, it will be interesting to see if the UK multiples agree with this perspective or, armed with their undoubted buying power and ability to bring food in from every corner of the globe, will they come up with a Plan B? Only time will tell.