McCain has announced an additional £35m investment in its farmers, after committing to a 31% increase in contract payments.
The move complements a contract price increase of 15% last year and a supplementary £5m energy support package, totalling a £50m investment in its producer base in just two years.
McCain said the funding would help British farmers manage the challenging environmental pressures the sector is facing and offset “unprecedented on-farm inflation”.
The frozen potato giant has said it was taking the “necessary steps to support the future of potato farming in the UK”, including an ongoing commitment to sustainable contract pricing.
“If we don’t maintain that supply of local farmers selling us potatoes then we have no business,” James Young, vice president of agriculture at McCain GB & Ireland, told The Grocer.
The cash injection is based on an indexation model, which measures changes in the cost of production to calculate a fair and sustainable contract pricing for growers, and has been used by McCain for over a decade.
The indexation model had been “trusted” by McCain, Young said, as it was an “independent base to what we pay for the potatoes based on cost changes”.
However, more recently “the cost base for growing our potatoes has completely changed” and the model “allows us to be fully aware of what those cost challenges are, and cost increases growers are facing”.
McCain has also announced a supplementary energy support package for those who have had to renew electricity contracts or are paying variable rates.
McCain looks to ‘future-proof’ potato industry with £25m investment fund
The company works with 250 farmers across the UK, all of whom will receive this boost in indexation numbers based on their individual costs.
“Everything from the fuel, the fertiliser, the agchems, the labour,” had all gone up, according to Ben Sykes, a potato farmer for McCain in North Yorkshire, who added: “We all need more money to live and provide for our family.”
Sykes’ potatoes grown for McCain are contracted, with a price decided on 1 November each year, which meant last year was particularly challenging as “a lot of the inflationary pressures happened because of the situation in the Ukraine” after prices had already been set, he added.
This caused issues with cashflow for the farmer. However, he said the latest scheme, which follows supplementary support made by McCain last summer, was “welcomed on farm” and was “really needed”.
“McCain has been supportive in helping to bridge the gap there,” he said.
Last summer also saw significant drought conditions, which along with input costs increases, was described as a “double-edged sword” for farmers by Sykes, and according to Young had led to a “shortfall of supply”.
Young added that McCain hoped that by paying for the increased costs it and its farmers would be able to focus on “bigger challenges around growing potatoes and climate change that has become a bit more front of mind for growers”.
Growers had expressed concerns about the viability of growing, said Young, but he added that the latest investment had contributed confidence to the sector.
However, according to Sykes, the problem continued for some growers. He said he knew of a number who had walked away from planting due to the increased costs.
“We have trusted our indexation model and therefore feel we are paying fairly but there is still a lot to do,” said Young. “That long-term optimism for farmers but I am confident again through that relationship with our field staff and individual farmers that we will navigate through and have a good, healthy long-term resilient supply.”
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