Tesco has confirmed that it is raising the price it pays farmers for their milk by 0.5p/litre, but has added an extra condition for suppliers.
A Tesco spokeswoman said: “Even though commodity prices such as bulk cream, skimmed milk powered and whole milk powder have gone down over the over the last few months we understand that there has been concern amongst our farmers about rising costs.
“This price rise means we are paying 28p/litre, which is the highest price being paid by any major supermarket for liquid milk.
We hope this will reassure our dedicated pool of farmers that we remain committed to them and the future sustainability of the British dairy industry.”
NFU Scotland reacted cautiously to the announcement.
Willie Lamont, NFU Scotland Milk Committee Chairman, said: “Today’s announcement from Tesco is a small step in the right direction and will go some way towards alleviating the increased costs, such as feed, fertiliser and fuel prices rises, being faced by Scotland’s dairy farmers.
“However, whilst the rise will mean that most can now cover their production costs, it still leaves little room to reinvest in businesses, something which as already been put on hold for at least 10 years due to poor prices.”
One farmer who contacted Farmers Weekly welcomed the increase but was unhappy with one of the conditions attached.
The right thing to do
In a letter to producers Alan Guilpain, dairy category manager, said, over time, all farmers supplying the firm should sign up to consultant Promar International‘s cost tracker computer package.
He said: “We firmly believe that this is the right thing to do for long-term exclusivity and sustainability of our partnership and is a small token of your commitment given the significant investment in price.
“The additional 0.5p/litre will be reviewed in our September committee meeting for those not committing to join input cost tracker,” he added.
Need to switch?
The farmer, who did not want to be named, said she was happy with her existing software package and didn’t see any reason to switch.
“This is the first stage in the heavy boys behaviour, which they Tesco said they weren’t going to do.”
Tesco, however, defended the new requirement.
A spokeswoman said: “We have held extensive discussions with our supply base on the Promar cost tracker and feedback told us that it was the right thing to do.
“We believe this input cost tracking will benefit our farmers as it will give a clearer and more consistent overview of the cost of production and allow us to continue to ensure we are paying a sustainable price for the future.
“We would emphasise that we have a great relationship with our supply base and farmers are completely free to choose whether or not they want to work with Tesco.”