Tesco is to cut the milk price paid to its farmer suppliers by 0.65p/litre from next month.
Producers on its cost-tracker contract will receive 29.56p/litre from 1 April, while those not on that contract will get 0.5p/litre less.
Cost-tracker contract prices are reviewed every six months by consultants Promar. It bases the price on budgeted farm production costs for the next financial year and includes variable costs, investment provision and unpaid family labour.
Tesco said the April price cut reflected a large reduction in feed costs, mainly wheat, which had fallen from £210/t in February 2011 to £165/t last month. This had more than offset increases in fuel and labour costs.
Will Hosford, dairy farmer and farmer committee chairman said: “While a fall in milk price is never welcomed, the Tesco Sustainable Dairy Group continues to give producers supplying Tesco the confidence to make the necessary investment their businesses demands.
“This has been a positive journey over the last five years for both farmers and Tesco, and I look forward to continuing this good partnership.”
The price will be reviewed again in six months’ time.
The question will be whether any other processors follow Tesco and cut spring prices. Milk Link recently announced it would hold its price for April, although others are yet to move.
Have your say
Have your say and see what others are saying on our forums.