Aligned contracts were not set up for the current unprecedented circumstances and need to be changed if supermarkets value farmers
Aligned contracts need to adapt to changing market circumstances, as farmers consider whether they are still the best option for their business.
With lots of the models using quarterly pricing reviews, prices for farmers on supermarket contracts have in many cases lagged behind the rest of the market.
NFU dairy board chair Michael Oakes said: “What they have done for a considerable period of time is give stability. They have not had the fluctuations and farmers have been able to plan ahead.
“I do not think they were ever set up to see the seismic changes in costs we have seen. If the retailers value those relationships they are going to have to revisit them very quickly.”
An industry insider told Farmers Guardian it needed to be remembered supermarket contracts had come into existence at a time the industry was facing the ‘other way’, when supplies needed to be secured in an era of plummeting prices.
“The reason there was a quarterly review was to offer stability. The market is now working week-by-week rather than quarterly,” they said.
The insider added processors were working with retailers on this, but acknowledged for those looking at spiralling costs change would never come quickly enough.
But they insisted supermarket contracts were still fit for purpose.
“They will just adapt to the reality,” they said, adding the industry had been historically good at adapting to new situations, such as when the contracts had first come into place.
