It is one of America's and Europe's favourite nuts, popular as a snack and rather good in curries. But the cashew is at the centre of a simmering global row amid accusations that western retailers are skimming off fat profits, leaving farmers and processors with a pittance for their crop.

Campaigners are objecting to a warped economic model in which a supermarket earns just over £1 from a bag of cashews sold for £2.50 while the factory worker who sits all day cracking shells with a pernicious toxic residue makes 3p.

Now the EU is showing signs of taking up the case against the industry. Next month, the commissioner for internal markets, Michel Barnier, is to make an announcement on unfair trading practices, amid mounting pressure for proper regulation.

"Farmers and workers across the world are suffering every day because of unfair trading practices by supermarkets," said Liz May, head of policy at the fair trade organisation Traidcraft. "It's time the EU took action and set up a regulator with the power to stop abuses by retailers that result in extremely low pay and appalling working conditions."

The cashew nut, which is really a seed, is a $4bn (£2.5bn) global business that provides jobs for millions, particularly in Africa and India. While half of the world's crop is grown in Africa, more than 60% of the cashews consumed are processed in India.

With its premium price tag, the cashew should be an opportunity for developing economies; instead it points up the kind of jarring it is beset by supply chain anomalies that are seen in industries such as coffee, clothing and sugar.

More than a quarter (27%) of India's processed cashews are sent to Europe, and the majority of these are sold through supermarkets, often having had value added in the west through roasting and salting. Germany, France and the UK account for about 50% of salty snack consumption.

Both brokers and processors bemoan the fact that retailers are driving the market. One producer said: "Twenty years ago, Europe was a booming market and quality was a primary concern, but today it is only about the price … The value of relationships is not appreciated."

E Mohanakumar, project director of Cadre India, an NGO in Tamil Nadu that supports self-help groups for women and raises awareness of health problems among factory workers, has carried out research into working conditions.

"When people are getting 1 rupee [1p] as their wage, they are using 50 paisa [0.5p] for their savings, for the marriage of their children, because here we have a big dowry system" he said. "And 10 paisa they will spend for their food. So there are malnourished children and that means the next generation is in danger. Quality of life means spending for health, especially good food."

Shelling the nuts is labour intensive and is done by hand. They produce a caustic liquid which burns the skin. Many factories provide some form of protection – if the workers are on site – such as alkaline potash to counteract the acid; alternatively, some women bandage their hands.

In some factories, rubber gloves are available, but in many instances workers have to pay for them and not everyone can afford it.

Lalita, a young mother in a small rural community in Tamil Nadu, peels cashews from home. Her husband is not around and she has a young son. She avoids working in the local factories as she dislikes the noxious fumes released during the roasting phase [before de-shelling] used to help loosen the hard outer shell. Even at home, the heat and the smell when she is working make her want to vomit.

Lalita's earnings are half those of the factory workers. To feed herself and her son (a breakfast of tea and rice at noon and in the evening some snacks or tea and occasionally fruit) she takes in tailoring and plastic mat weaving but it does not pay as well.

Whether they work at home or in a factory, labourers' pay is low and their health can be at risk but it is their only realistic option for earning a living.

On this, workers and processors speak as one: they want the work and the business is critical to their welfare. They just want small improvements to their conditions and terms of trade.

"In Kanyakumari district, this is the only factory," said Lalita. "Because of this industry, people have made their lives here, they've invested their money for the education and health of their children.

"They want improvements for their family. So, when they study, their children will go for other work – not to the cashew factory, even if it has helped them to survive."

She added: "What we need is for the Europeans to buy more from us. Then only better things will happen around here."

Unprofitable growth

Vimila Ramil, a cashew farmer in India with just 0.4 hectares (1 acre)

Ramil limps round her plot, pointing out the rainwater tank used to tend her saplings. The biggest chore in this flat, exposed land is keeping the young plants watered. She is not married and, having cared for her mother, she lives with her brother and sister-in-law.

She says cashews are the only viable crop. "Because of the quality of the sand, we cannot cultivate anything else so we will continue to grow only cashew. In December 2011, we had the Thane cyclone. During that time everything fell fallen and all the trees were damaged. So last year there was a great loss; this year it is better. Although we can fry and eat [cashew], because of our difficult situation at home, we sell it."

Baskir Bhaskar, a farmer with four hectares

Baskir Bhaskar seems to have his mobile constantly glued to his ear. He grows cashew but also has paddy fields. Though cashew is a low-maintenance crop, it is still at nature's mercy, along with the farmers who depend on it.

"This year, because we did not get good rain, the yield was not good," said Bhaskar. "We expected around 50 bags but only got 40. If I sell these 40 bags, I will get around two lakhs [about £2,000]. Out of the two lakhs – we have already spent one for cultivating."

Like so many people in the industry, Bhaskar has different aspirations for his child: "He will not come into agriculture. He is a commerce graduate so he will do accounting. My son has decided to go and work in the bank."

Patrick Obeng-Nketiah, Catholic monk in central Ghana

"Cashew has become one of the main cash crops in the Brong Ahafo region. As a community we need to have something to feed ourselves, to be independent, and cashew is a good business. [But] picking the cashew is a lot of work," said Obeng-Nketiah. " We hire young people from the local area to do the picking. We pay them per kilo picked – for every 10 kilos they collect, we give them the value of one kilo."

Yaw Gbogbolo, 56, farmer in Ghana

"During the harvest season, children from the local village come to pick the nuts on the weekends," said Gbogbolo, a native of the village of Samsam in the Greater Accra region, who began growing cashew in 2004 under a government programme to promote production of the crop. "The adults aren't interested in doing it – the money is not attractive enough for them."