MAGGIE PAGANO: Farmers are taking the hit from inflation

MAGGIE PAGANO: Farmers are taking the hit (despite what the supermarket bosses might suggest)

Morrisons has just slashed prices on hundreds more items, from basic foodstuffs such as potatoes to more luxurious sirloin steak.

The supermarket giant hopes to reduce costs by about 20 per cent to win back customers lured away by discounters Aldi and Lidl.

Until last autumn, Morrisons was the UK’s fourth biggest supermarket group but was overtaken by Aldi. While this fierce cost-cutting is great for customers, it is not so good for the retailers battling it out for volume at the expense of profit margins.

Pressures: ONS data shows that while agricultural input price rose at an astonishing 26.8% in the year to October, agricultural output prices rose at the significantly lower level of 17.7%

Operating profit margins at Tesco are now running at about 4 per cent while other retailers have even slimmer margins.

Which is presumably why Tesco chairman, John Allan, declared war on food suppliers as well as his rivals in his rather unusual outburst during a Sunday TV interview.

Allan blamed food suppliers for continuing sky-high price rises, claiming it is entirely possible they were profiteering by jacking up prices more than necessary.

His buyers, he says, are having robust discussions with many of their suppliers, asking them to justify price increases. 

They have fallen out with many of them in the process. It is entirely proper for Allan to beat down his suppliers but this time he may have gone a little too far.

Minette Batters, boss of the National Farmers Union, is furious about his claims, suggesting that Allan is living in a parallel universe if he believes farmers and other food suppliers are profiteering on the back of inflationary pressures. 

As she points out, his comments are baffling as farmers and suppliers have had to cope with a 650 per cent hike in wholesale gas prices – and other rising inputs – over the last three years.

Other analysts described Allan’s remarks as outrageous and simply incorrect as suppliers were being fastidious about justifying every penny of price increases. So, who is right? 

Are penny-pinching farmers and wholesalers the bad guys? The evidence suggests not. Overall figures from the NFU show that farmers have been absorbing the most painful price increases in energy, fertilisers and food stuffs, all of which rocketed after the lockdown and the Ukraine war.

ONS data shows that while agricultural input price rose at an astonishing 26.8 per cent in the year to October, agricultural output prices rose at the still high, but significantly lower level of 17.7 per cent. 

On balance, while farmers have had to put up prices, they have taken on most of the costs themselves. Far from gouging out customers or profiteering, many have been forced to cut production while others are going out of business.

It is why Batters is right to push Rishi Sunak to establish a joined-up national food security policy, to find more ways to help increase home-grown produce and make farming more efficient.

Allan should join her campaign.

Funeral plans

Direct Line founder Sir Peter Wood is spearheading the consortium bidding for Dignity. While sadly the number of excess deaths over the last year are up, Dignity has fallen on troubled waters. 

It owes more than £500million in debt and is running out of cash. 

But there is potential. Dignity operates more than 700 funeral branches and Sir Peter sees the chance to improve and expand its funeral plan business.

Investors have choices. They can take 550p cash (a 29 per cent premium on the shares from when an offer was first mooted) and have shares in the unlisted private company Valderrama or opt for shares in the Castelnau Group, a listed investment trust managed by Phoenix Asset Management, in which Sir Peter has a stake.

Stay with me. It is not that complicated. But the benefit of taking shares in Castelnau gives investors an exit route as well as the chance to see Sir Peter in action again.

Success story

Hats off to three British success stories.

Everyman Media has seen a huge boost in revenues over the last year. It is planning several more cinemas to add to the 38-strong chain.

Billionaire Bill Ackman has taken a big stake in the latest funding round at London-based Bremont Watches because he liked the timepieces so much.

Thirdly, sparkling wine sales at English producer Chapel Down fizzed 53 per cent higher after selling a record number of bottles of its premium bubbly last year. 

Even better news, Chapel Down says consumer confidence is back with a bang after 15 months of decline.