With a rapid rise in input costs UK growers are under more pressure than ever to secure cost price inflation from their customers.
During the breakout session for horticulture and potatoes at the NFU Conference, the spotlight was on the issue affecting every business across the sector – the rising costs of energy, packaging, agricultural chemicals, and most notably, Home Office proposals for a new minimum salary for seasonal workers.
The latter is the issue that has pushed its way to the forefront of discussions, following the announcement by the home office this week of a salary level which could mean a huge increase in wages for growers. For many, this figure would be unsustainable.
The challenges of rising costs
“We came here to talk about the sharply rising costs across the industry, but the announcement by the Home Office last week risks putting all other cost increases in the shade,” says Ali Capper, Horticulture and Potatoes Board chair. “It could add 38% on top of today’s National Living Wage. With just 6 weeks’ notice, this is unworkable, and impossible to manage commercially.
“What we have to do is wait for further clarification. I feel very strongly that the £10.10 is just not acceptable, not with such short notice and not when most of us have already negotiated our prices for this year. We were all anticipating £9.50 which is 6.5% more than last year, and we have all got to bear 1.25% national insurance rise, so I’m hoping that common sense will prevail.”
“We came here to talk about the sharply rising costs across the industry, but the announcement by the Home Office last week risks putting all other cost increases in the shade. It could add 38% on top of today’s National Living Wage. With just 6 weeks’ notice, this is unworkable, and impossible to manage commercially.”
Ali Capper, Horticulture and Potatoes Board chair
During conference Defra Secretary George Eustice said that seasonal workers will be paid a minimum of £10.10 per hour. He also committed to further clarification and guidance for growers. Read more from the NFU22: George Eustice on the future of British farming session.
Suppliers can not absorb costs
Referring to rising costs in general, Mrs Capper added: “Cost price inflation is not a negotiation. It is a simple state of fact that costs are rising, and suppliers cannot absorb them on their own.
Discussions with buyers, particularly midway through a contract term, will never be easy. But they can be successful, and for the sake of our industry, they must.”
Speaking about the other end of the supply chain, David Miles, of The Retail Mind, talked about the role of buyers and the pressures they face from all sides.
He explained the best way for growers to approach the rise in costs and revealed how these growers should look for solutions that help the supermarket buyer out, making them more likely to become the supplier of choice.
Bridging the gap between retailer and farmer
To give the session a different perspective, Tim Lock gave an insight into how the dairy industry handles its contracts and price management, including the role that the M&S Milk Pool plays in bridging the gap between retailer and farmer.
Impact on next generation of growers
The final speaker was Alastair Heath, a member of the Potato Forum, who talked about the impacts of rising costs on the potato supply chain and the reaction of packers and processors in the sector.
He also touched upon how this difficult period is impacting on the next generation of growers, and whether it is creating more barriers to entry.
Other issues addressed during the session included the priorities for the horticulture board in 2022, which included labour issues, R&D provision in the wake of the demise of the AHDB, plant import delays and slow crop protection authorisations.
