Supermarket group Asda is cutting the size of its dedicated milk supply pool, informing about 200 dairy farmers they are to lose their “aligned” status.
Asda secures all of its liquid milk from the Arla Foods Milk Partnership and letters were sent last week advising those affected that their contracts will be amended from 1 April.
According to the letter, the move has been made to minimise the need for Asda to take farmers in and out of its pool just to balance seasonal fluctuations in supply and demand.
The change will leave about 300 farmers in the Asda/Arla pool. The 200 who are being excluded will receive the same price as “non-aligned” producers – effectively 1p/litre less.
It is understood that a range of criteria have been used to chose who is to be removed from the pool, including location and the farmer’s “commitment to the partnership”, as demonstarted by the attendance record at Asda/Arla farmer meetings.
The development has been severely criticised by the NFU. “This is not just a rebalance, but a total restructure of Asda’s milk supply base which should have been communicated to the farmers affected more clearly,” said chief dairy adviser Hayley Campbell-Gibbons.
“Suppliers should have received more notice of the changes and more information on the realignment process and selection criteria that would be applied.”
NFU president Peter Kendall has written to Asda chief executive Andy Bond to express his dissatisfaction with the supermarket’s move.
Having made the reduction, Asda has said it will look to strengthen its relationship with remaining producers and back that up with more investment and commitment.
But question marks are being raised in the industry as to whether the move marks a change in Asda’s sourcing policy.
It is understood that Asda has a total liquid milk requirement for about 450m litres of milk a year. With 300 farmers supplying an average of 1.2m litres each, industry analysts reckon the supermarket will only be securing 80% of its needs from Arla.
“It is still unclear how Asda will make up the balance,” said one analyst.