Beef and lamb contracts proposed by retailer
© Photofusion/REX Beef and lamb contracts to supply processors and retailers could become more widespread in a bid to secure supplies and take some volatility out of the red meat market.
Steve McLean, Marks and Spencer’s head of agriculture, said security of supply was a concern for the retailer and that the structure of the supply chain needed to change to help producers better cope with volatility.
For more on this topic: Fairer supply chain needed to encourage farmer investment
Speaking at a breakout session at the NFU conference on Tuesday (24 February), Mr McLean said coming to agreements with producers to remove risk from the supply chain was essential.
“Some love and some loathe contracts, but it goes back to security of supply” Steve McLean, Marks and Spencer head of agriculture
Part of that process could be introducing contracts, with the retailer considering rolling out its dairy supply group structure across beef and lamb sectors, he said.
“We are in a process with our red meat suppliers,” he told delegates. “Some love and some loathe contracts, but it goes back to security of supply.
“We want to get the best from our producers, and having a system to remove volatility to encourage investment in the future is vital.”
Two-way street
But if contracts were agreed, Mr McLean said farmers had to remember that they were a two-way street.
“When the market goes wrong producers don’t always stick by the contract that’s in place,” he added. “It has to be about trust and fairness, and it does need to be for the long-term, but we are up for it.”
Stumbling blocks
Charles Sercombe, NFU livestock board chairman, said the industry was as further forward than it had ever been in discussions with retailers and processors over contracts.
“More and more retailers are looking to offer contracts, driven by the desire to lock up supply,” he said.
“It’s not exactly easy as there are issues on both sides that are stumbling blocks.
“There’s nervousness and it needs a leap of faith on both sides, but we can look at the small print to check they are effective.”
Mr Sercombe said risk management was key in a volatile environment, something contracts could help farmers do better.
“But being able to plan ahead means you will have commitments you have to keep to,” he added.