Colin Clark: It is not good for farmers to be at the mercy of the markets

There has been a lot of comment about manipulation of the markets and how that might be used to control food costs. In a free-market economy such as ours it is a very difficult balancing act between allowing enterprise and restricting trade through regulation. In either case you end up with manipulation which usually means someone losing out.

In theory, in a genuinely free market, prices should find their true level. In practice, however, the market is manipulated by governments through subsidies or commodities taxation and by businesses which have a monopoly or a big enough share to influence the price up or down.

In the UK, our farmers benefit from subsidies on the one hand but on the other, they are at the end of the supply chain where they are not buying or selling into a truly free market.

Was the dramatic increase in the cost of fuel oil during the recent cold weather caused by rising oil prices or profiteering? The same question is often asked when fertiliser suppliers increase their prices by similar amounts at the same time.

The price paid for milk is below the cost of production for many producers causing a lot of dairy farmers to give up production. Are milk prices being kept artificially low?

The conundrum is how to deal with real as opposed to perceived market manipulation. There is no doubt that government has a role to ensure that suppliers and consumers are given a fair deal, but they must be prepared to act quickly to prevent long-term damage. But farmers also have a role.

This may be by saying "no" when offered a price which is too low. Or by increased cooperation through a marketing group or representative body which has strength in numbers to fight back.

A solution must be found as being at the mercy of markets as a price taker instead of price maker is not a comfortable situation to be in and is not sustainable in the long term when trying to build a profitable and vibrant industry for the future

• Colin Clark is a specialist in agricultural law and partner at Pagan Osborne.