Tesco chief challenged over farm returns and 'race to the bottom' pricing

Tesco’s UK chief executive faced sustained pressure at NFU Conference as farmers warned domestic food production is “on a knife edge” and questioned whether retail pricing models are fit for purpose.

With more than one in three farm businesses losing money last year and average returns on capital negative over the past decade, delegates pressed Ashwin Prasad on long-term contracts, cheap imports and whether supermarkets are shouldering enough risk in the supply chain.

Chaired by NFU president Tom Bradshaw, the session followed Mr Prasad’s address on grocery supply chain resilience. But it was questions from the floor that exposed the underlying tension between supermarket margins and farm-level profitability.

Joe Stanley, Leicestershire farmer and outgoing chair of the NFU’s combinable crops board, delivered one of the bluntest interventions. Farmers receive less than 10% of the value of the food chain, he said, asking whether the retail sector’s “race to the bottom on price” was fundamentally broken.

Mr Prasad rejected that description. He described retail as a “low margin, high volume” business operating under intense cost-of-living pressure, and argued that Tesco’s open-book pricing frameworks are designed to reflect real input costs.

“All of our fresh models are open book, clear and transparent, that recognise what the input costs are, and they’re responsive to those things,” he said, citing feed, fuel and fertiliser volatility.

He maintained that suppliers must be profitable for the system to remain resilient. However, he stopped short of outlining structural changes to how risk is shared across the chain.

Ali Capper, chair of British Apples and Pears, asked whether Tesco would offer 20-year written contracts to give growers confidence to invest in orchards and infrastructure.

Mr Prasad said Tesco supports long-term relationships but does not typically issue 20-year contracts. He pointed to partnerships lasting decades, including a 20-year relationship with Anglia Free Range and others spanning 20 to 50 years.

While reiterating support for longer-term certainty “in principle”, he did not commit to formal multi-decade agreements.

Imports and production standards proved another flashpoint. Farmers questioned why food produced to lower standards abroad can enter processed products while British producers face tighter regulation.

Asked whether Tesco would back core production standards to ensure imports meet equivalent requirements, Mr Prasad said the retailer supports a level playing field and consistent benchmarks. He did not commit to legislative change but referenced certification schemes and calls for more standardised environmental baselining.

Martin Brown, NFU Staffordshire county chair and a Tesco supplier, warned that domestic output in cereals, red meat, poultry and vegetables is declining. He asked whether retailers are concerned about the long-term erosion of home production.

Mr Prasad said Tesco sources British first and only looks overseas when domestic supply is exhausted. He acknowledged frustration over planning delays affecting poultry expansion, noting that commitments to higher welfare are being undermined by slow approvals for new sheds.

The discussion also covered regulation, including Fair Dealing Obligations in dairy and the role of the Groceries Code Adjudicator. Mr Prasad expressed strong support for the existing code, crediting it with improving retailer-supplier relationships over the past decade.

Environmental transition was another key theme. Farmers stressed that emissions reductions cannot come at the expense of output and that significant investment will be required.

Mr Prasad highlighted LEAF certification, now adopted by more than 400 growers supplying Tesco, and pointed to the retailer’s low-carbon concept farm in Lincolnshire. The project aims to test how close field-scale production can move towards net zero while remaining commercially viable.

Fifty tonnes of low-carbon broccoli were sold last year, alongside 500 tonnes of potatoes grown using reduced-emission techniques. He said the objective is to de-risk innovation before wider rollout.

He also called for a national framework to standardise environmental data on soil health, biodiversity and carbon metrics, acknowledging frustration at the current patchwork of reporting requirements.

Alongside the scrutiny, Mr Prasad emphasised market opportunity. Tesco reported fresh food sales up 6.6% year-on-year in January, while products such as kefir, skyr and cottage cheese have seen more than 200% growth over two years. The retailer sold 34,000 tonnes of British apples in the past year.

Throughout the session, Mr Prasad returned to the language of partnership and collaboration.

But the exchange laid bare a deeper structural question: how a sector delivering negative average returns can continue to absorb volatility while retail competition remains intense.

For many in the hall, the test will not be the tone of conference debates, but whether pricing, contracts and standards shift in a way that measurably improves farm returns and restores long-term confidence in British food production.