The financial impact of supermarket buying behaviour on British farmers

By Chris Wright, Consultant and ARA specialist

British farmers are facing mounting financial pressures, with unfair supermarket buying practices making it harder than ever to turn a profit.

A recent letter from 46 Labour MPs to the UK’s six largest supermarket chains has put the issue in the spotlight, accusing retailers of prioritising excessive profits over fair treatment of farmers.

The reality is that many farmers are struggling to keep their businesses afloat, with supermarket pricing strategies, contract terms, and so-called ‘farmwashing’ practices squeezing their margins.

So, what does this mean for farm finances, and how can farmers protect their businesses?

How supermarket buying behaviour is impacting farmers

For many farmers, supermarkets are their biggest customers.

However, the power imbalance between large retailers and smaller producers often leads to unfair contract terms, with supermarkets dictating prices, ordering large volumes with little notice, and even cancelling orders without compensation.

Recent research revealed that 61 per cent of farmers fear they will have to give up their farm in the next 18 months due to financial difficulties.

Additionally, only 24 per cent of farmers believe that supermarket claims of supporting British farming are backed up by their actual buying behaviour.

Some of the biggest financial challenges farmers face include:

• Unpredictable pricing – Supermarkets often set the price, leaving farmers with little bargaining power and sometimes selling below cost.
• Delayed payments – Cash flow is a major issue for farms, especially when payment terms are stretched over long periods.
• Last-minute cancellations – A supermarket cancelling an order can mean a farm is left with unsellable produce and lost income.
• Farmwashing – Some supermarkets use misleading branding to give the impression that products are locally sourced when they are not, undercutting British farmers.

Strategies for farmers to protect their finances

While supermarkets hold significant power, farmers can take steps to build financial resilience and reduce their reliance on volatile contracts.

Strengthen cash flow management

Delayed payments and unexpected order cancellations can cause serious cash flow issues. Farmers should:

• Work with our accountants to ensure they have strong cash flow forecasts.
• Consider short-term financing options, such as invoice financing, to cover payment delays.
• Negotiate better payment terms where possible or set penalties for late payments in contracts.

Explore alternative revenue streams

Supermarkets may be the biggest players in food retail, but they are not the only option. Farmers looking to regain control over their pricing should consider:

• Direct-to-consumer sales – Selling through farm shops, farmers’ markets, or subscription box schemes can offer better margins.
• Online sales – E-commerce platforms allow farmers to reach customers without relying on supermarkets.
• Wholesale contracts with independent retailers – Smaller retailers and hospitality businesses often look for reliable local suppliers.

Diversify farm income

With rising costs and squeezed margins, diversification is becoming essential for long-term financial stability. Options include:

• Agritourism – Farm stays, pick-your-own experiences, and farm cafés can bring in extra revenue.
• Renewable energy projects – Many farms are turning to solar, wind, or biomass for additional income.
• Adding value to produce – Processing raw goods into premium products (e.g. cheese, cider, or jams) can increase profitability.

Pressure is mounting for supermarkets to improve transparency and commit to fairer pricing.

However, farmers cannot rely on retailers to change overnight.

If you are concerned about supermarket pricing pressures and want expert financial advice, our team can help you assess your options. Get in touch today.