Consumers Benefit While Farmers Struggle

UK - Food prices may be on the rise but there is little sign of the increase in consumer spending percolating back down the chain to farmers. The truth is that, in real terms, most items in a supermarket trolley have never been cheaper

Beef is a hugely important component of Scottish agriculture, accounting for 40 per cent of the total output of the industry. Returns to producers have improved recently, with a good-quality animal now worth in the region of 217p per kilo when hanging up after slaughter. Yet, back in 1994, two years before the onset of the BSE crisis, figures from the Meat and Livestock Commission show that the UK cattle average for the full year was 225.6p per kilo. Scottish beef usually enjoys a premium of 10p above the UK average, so it is clear the current level of return is still well behind those better times.

But perhaps the most salient argument in farmers' claims that they are not being sufficiently rewarded comes in figures from the government's Office for National Statistics. Taking January 1987 as the base year, with a score of 100, and then adjusting for inflation, the retail price of beef in January 2007 had slid down the scale to post a score of 71.1. That means that beef in real terms is 30 per cent cheaper than 20 years ago.

Using the same data, poultry meat comes out as the greatest bargain of all, with its real value having fallen by 45 per cent over two decades. Lamb and bacon at retail value have just about kept pace with inflation, but both are still 7 per cent cheaper in real terms than in 1987.

The all-food index for produce eaten in the home also makes it plain consumers are getting a good deal, with a 21.5 per cent fall in the real spend. Eating out is increasingly popular, but, on this front, the real cost has increased by 23.1 per cent.

Dairy farmers have been struggling in recent years and Scotland now has barely 1,300 milking cows, which is half the number of 20 years ago. Milk prices at farm gate level have recently increased but, at less than 20p per litre, are still 5p short of five years ago. Meanwhile, the typical retail price of milk in a supermarket is in the region of 60p-67p per litre, and higher in some corner shops.

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Source: Scotsman

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