Supermarkets to pay more for milk

6 April 2001



Supermarkets to pay more for milk

By Robert Harris

MILK prices could rise to over 20ppl after supermarkets agreed to pay processors 2p more for liquid milk if the increase is passed on to farmers.

Asda and Safeway have already confirmed they would pay the extra.

Safeways Kevin Hawkins said other major retailers were likely to follow, backdating payments to the start of April.

“This will take the average farm price to over 20ppl,” he said.

“There is still a small shortfall between that and the cost of production, so we are probably going to have to see some further improvement.”

Robert Wiseman Dairies, a main supplier to Asda and Safeway, has pledged to pass on the increase to direct suppliers and co-operatives.

It will now pay 20.75p per standard litre of milk.

But chairman Alan Wiseman said the decision had not been easy and warned other processors must follow for the increase to stick.

“Seasonal reductions in commodity prices and recent weakness of the Pound have not helped,” he said. “We cannot operate from an uncompetitive base.”

“It is important that our competitors do not see the increase agreed by the major retailers as an opportunity to drive higher levels of profitability.”

Express Dairies is expected to announce a similar increase soon and Dairy Crest may have to improve its recent 1.5ppl rise for liquid milk.

Arla, which also supplies Asda, has said it will pay 1.75ppl more, said commercial director Philip Wilkinson.

“Talks with retail customers have been productive. Weve responded positively to help return dairy farmers to profitability.

“We have taken the price rise and amortised it across manufacturing. We didnt want two camps in our producer base – that would not be fair.

“I think weve done better by our producers than the marketplace justifies.”

Other processors are more exposed to weaker commodity markets.

Only half the UKs raw milk goes to the liquid milk market and processors point out that cheese prices have stabilised.

Butter and skimmed milk powder are well off last years highs, although a continuing milk shortage could encourage some processors to pay more.

One outcome could be that regional price differences could figure more this spring, said John Duncan, chairman of First Milk.

Dairy Crest has already caused controversy among direct suppliers by paying more for liquid milk only, and other processors could follow.

Mr Duncan said all farmers desperately need 2p more to return farm-gate prices to 20ppl, to gain time for further negotiations.

April prices should have been agreed some time ago, but co-ops are having a hard time persuading some processors to pay more, said Mr Duncan.

“Unfortunately, price negotiations have become almost confrontational.”