Opinion: Proposed ‘price cap’ is largely irrelevant to farmers
Mike Neaverson © Tim Scrivener The enterprise that demands much of my time and certainly most of my cash is growing potatoes.
I’m a bag-trade supplier by instinct, but a proportion of my crop usually ends up on supermarket shelves across the country.
It would be difficult to argue that spuds do not come under the definition of a staple product, and I was initially unsure what effect the government’s recently proposed grocery price cap would have on our sector.
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Would it be used by supermarkets as a stick to beat suppliers with?
Are we going to see the resurgent Conservatives taking on the might of big vegetable? Are the supermarket leaders going to be claiming victory over the courgette cartel?
But in all honesty, I don’t think it’s really going to matter.
What follows are two potential scenarios of how this will likely play out, the former of which is many times more likely to happen than the latter.
Scenario one: Commodity, energy and input prices continue to freefall
Wheat is now worth half what it was 12 months ago and we haven’t sold oilseed rape at these low values since the depths of the pandemic.
The fertiliser we applied last month cost us £2.08/kg N and I can now buy the same stuff for 96p. If we haven’t already hit “peak grocery”, then we must surely be very close to it.
If the government genuinely had wanted to help with the very real cost-of-living problem, it should have initiated this policy months ago.
Doing so now seems like little more than smart but ineffectual politics – it’s like putting on your seatbelt having just written off your car.
There’s going to be a general election next year and my prediction is that the government will use this policy to claim the credit for bringing down grocery inflation while conveniently ignoring the fact that it would have happened anyway.
While falling food prices aren’t necessarily good for the farmer, it’s going to happen whether there is a price-capping policy or not.
Scenario two: For an as-yet-unknown reason, commodity prices spiral upwards again
Wheat is making £400/t at harvest and fertiliser is more expensive per kilogram than certified rapeseed.
Supermarkets are holding suppliers to a loss-making and entirely notional price cap.
History is full of toxic examples of meddling in the free market, and the proposed policy does have a whiff of Marxism about it.
Enforcing supply arrangements below the cost of their production will simply lead to a sudden and mass exodus from the sector.
As someone who is both youngish and daft, I’d like to think that my business is agile enough to see through the tough times for a year or two.
The sunlit uplands of selling in an undersupplied, inelastic market seem like my idea of fun.
It might take a year or two of pain, but the price cap would in fact have been responsible for raising farmgate returns for a good few years until the market balance recovers.
So, as a farmer I’m certainly not going to lose any sleep over the price cap.
I suspect this is a policy – in the run-up to an election during a cost-of-living crisis – that merely attempts to help sitting MPs to do the same.