Sainsbury’s has cut the milk price paid to its Dairy Development Group farmers to 32.41p/litre – a reduction of 0.62p/litre.
But the price cut is not linked to global market forces which have been blamed for cuts by milk processors in recent weeks.
Instead the development group price is calculated on a cost of production plus basis and the fall reflects cheaper feed costs in the past six months.
The model, which has been developed with Kite Consulting, sets the farmgate milk price for the group members based on actual production cost data collected from the 300 farmers in the group.
It includes a provision for family labour and capital investment and some of the more volatile costs – feed, fuel and fertiliser. It is does not include market factors and is reviewed on a quarterly basis in April, July, October and January.
Despite the 0.62p/litre drop Farmers For Action chairman David Handley pointed to the fact that the 32.41p/litre price was well above the current average being paid at 28-30p/litre.
“It shows that costs of production have not fallen as much as we are led to believe and that swingeing milk price cuts introduced by other processors cannot be justified,” Mr Handley said.
“We have been told that farmers can absorb falling market prices because our costs have fallen. But Sainsbury’s development group cost is in-line with FFA’s calculations of about 32p/litre.
“It backs up what we have seen on farms and what FFA members have been telling us,” he said.
Mr Handley added that on his farm there had been a slight reduction in fertiliser costs but water and electricity costs were static.
“Labour costs are up, rents are up. And while fuel costs are down there is no difference in our contractor costs.”
Mr Handley repeated his belief that dairy farmers would once again return to protesting to fight for a fair milk price.
“Some processors have cut prices by 7p/litre since May. We can’t sustain that sort of hit. Frustration is growing and although I don’t want to see protests it is almost an inevitability.”