6 September 2002

Calls for processors to pay more milk money

By James Garner

TESCO, the UKs biggest retailer, has called on milk processors to pay dairy farmers at least 2p/litre more for their milk.

The surprise intervention came this week after a meeting between the retailers boss, Terry Leahy, and NFU president, Ben Gill, and is timed just before the next round of milk price negotiations start.

A statement from Tesco director, John Gildersleeve, said: "Although we cannot determine the price paid to farmers, we are calling on all milk processors to pay at least 2p/litre more because of the need to sustain the UK dairy industry."

But the retailer added that it was not going to use its profit margin to meet the 2p increase nor was it going to lift retail values. It insisted there was enough cash in the milk supply chain for processors to foot the bill.

A spokesman said that retail prices had remained the same for the past 18 months. Supermarkets increased retail prices by 2p in autumn 2000 and again in spring 2001. The money was passed back along the supply chain to farmers. But ex-farm prices have since slumped to autumn 2000 levels even though the retail price has not changed.

"Obviously we do not want to intervene in what a processor pays, but we do believe there is a case for higher farm-gate prices," said the Tesco spokesman.

ASDA said that it had no comment on whether Tescos move was the right one for the industry, but added it was still paying the same price for milk.

"We have not exerted any downward pressure on milk prices, nor have we done so in the past, and we havent accepted any price reductions that have been offered to us."

Processors remained tight-lipped over the proposal. As farmers weekly went to press, only Wiseman responded. "At this stage Robert Wiseman Dairies would like to reserve comment until it fully understands the details and implications of this development," a spokesman said.

Farmer-owned First Milksaid that it welcomed Tescos statement, but the focus should not just be liquid milk, but on cheese and other markets too. "Mild cheese is currentlyabout £1700/t, thats still £600-700/t below last year. As it stands, the price farmers aregetting wont do."

A spokesman for the NFU agreed it was a starting point. "We need a better share ofthe current retail price and farmers arent concerned whether it comes from retailers orprocessors."

Kevin Hawkins, Safeway communications director, said that the supermarket would support the price rise, if the dairies could pay it, but he doubted whether they would go further than a penny increase.

"I suspect their response will be less encouraging. And if Tesco has ruled out supporting the price from its coffers, then it clearly leaves us in a difficult position."

One industry source saidthe move was an attempt by Tesco to divert the blame ifthis seasons milk negotiations didnt result in a big cash boost for farmers. &#42

Tesco has no plans to raiseretail prices, saying processors should foot the bill for higherex-farm payments.