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Economic effects of supermarkets on producers
Supermarkets fail to pay farmers a fair share of retail prices.
Thousands of farmers and workers are forced to leave the industry each year because of the low prices they receive for their produce. Farmers′ organisations believe that a major contributory factor to this crisis in farming is the increasing buying power of supermarkets and their ability to squeeze suppliers. According to the 2000 Competition Commission Report the buying power of the major supermarkets actually means that ′the burden of cost increases in the supply chain has fallen disproportionately heavily on small suppliers such as farmers′.
Supermarket buying power means that a supermarket can obtain more favourable terms than other buyers. For example, the Competition Commission investigation revealed that Supermarkets consistently paid suppliers nearly 4% below the average price paid by other retailers. However when a supermarket squeezes its supplier, it merely reallocates profit margin from supplier to retailer and there should be no assumption that the retailer′s saving will be shared with consumers.
In the UK, The National Farmers′ Union (NFU) has called for the appointment of an independent ombudsman to oversee a ′significantly improved′ Supermarkets Code of Practice and ensure the supply chain is ′fair, transparent and sustainable′.