Farmers take Tesco to task over 'ruthless' pricing

Tesco yesterday came under fire from farmers who accused the supermarket giant of treating British producers in a "ruthless" way by driving down prices to rock-bottom levels.

Tesco yesterday came under fire from farmers who accused the supermarket giant of treating British producers in a "ruthless" way by driving down prices to rock-bottom levels.

Britain's largest supermarket chain faced criticism at its annual meeting as it unveiled another strong performance on the high street. It said group sales were 12 per cent up in the first three months of the financial year ago, putting Tesco well on course for £2bn of profits in the full year.

At the meeting, held in the Queen Elizabeth II conference centre in London, one shareholder who said he was representing many farmers' views said: "There is a huge amount of anecdotal evidence that supermarkets are squeezing the heck out of farmers. They are very frightened of the ruthless way in which they are treated." The sentiment was echoed by other shareholders, who pointed out that many diary farmers are not even receiving enough money from selling their milk to supermarkets to break even.

Sir Terry Leahy, the chief executive of Tesco, rejected the idea that the company could remove the strain on producers, saying the "major forces affecting farming were exchange rates, government policies and Brussels".

He said Tesco was sourcing an increasing amount of its produce from the UK, and was "working tirelessly" to do what it could to alleviate some of the financial pressure on producers.

Friends of the Earth also protested over Tesco's record on buying products from parts of the world where human and environmental rights are abused. The group called on Tesco to do more to ensure it was not sourcing products containing palm oil from deforested areas, and from producers which violated workers' rights.

But there was praise from shareholders for Tesco's performance, including an 18 per cent rise in pre-tax profits to £1.6bn last year. There were few complaints about Tesco's generous executive pay packages, which saw Sir Terry receive more than £3m in pay, pension contributions and profits on share options last year.

Tesco shares closed up 5.25p to 268.25p yesterday.