Tesco to offer out more lamb cost of production contracts

Sheep farmers looking to reduce the fluctuations in the price of their lamb will have the opportunity to sign up to a supermarket cost of production contract from next spring.

Tesco is expanding its scheme, initially set up as a pilot in 2016 with about 100 producers, to 160 farmers from any part of the country.

They are the only retailer in the country to offer a cost of production contract at the moment, with supply deals from other retailers relating only to volume.

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Contracts signed this year will come into effect on 1 April 2019, with producers having to commit either 70% or 100% of their crop.

Lambs would be sold on a standard deadweight grid through either 2 Sisters, ABP or Linden in Northern Ireland, with Tesco setting the grid base price.

Investment

The price paid changes every month but is fixed annually based on financial data submitted from members on what it costs to produce their lamb crop, with the retailer saying the contracts will provide additional confidence for farmers looking to invest and plan for the future.

National Sheep Association chief executive Phil Stocker welcomed the market offering a greater variety of options for producers.

Offset price troughs

He pointed out although some on the scheme may have missed the high prices enjoyed by sellers in the early months of 2018, it would help offset many of the price troughs seen in other seasons.

“Farmers should consider their options and lock themselves into a price that works for them,” he said.

“Generally speaking the younger generation will be more interested as they are more likely to be borrowing money or paying rent, while a lot of the older generation have gone through that and can afford to play the market a bit more.”

He said farmers should not be too concerned about giving up cost of production data as analysts were well equipped to make good assumptions about that anyway.

Anyone interested in taking part in the scheme can contact Hannah Donegan in the Tesco agriculture team by emailing hannah.donegan@tesco.com