Dairy farmers supplying the UK’s leading supermarket are to receive a 20% rise in their fresh milk price to help them overcome challenging market conditions.
The 520 dairy farmers that make up the 15-year-old Tesco Sustainable Dairy Group (TSDG) are set to see price rises from 34.16 p/litre to 40.84 p/litre in May, just shy of the current industry-leading price of 41.62 p/litre being provided by dairy Meadow Foods. TSDG farmers will also see an interim price rise in April to address the current unprecedented levels of on-farm inflation.
The price Tesco pays its farmers for its milk is independently set on a quarterly basis and takes into account inputs such as feed, fuel and fertiliser, resulting in a price that is reflective of the cost of production, according to the company.
Tesco has paid £300 million over market prices to its dairy farmers, enabling them to invest in animal health and welfare, carbon reduction initiatives and biodiversity improvements.
It was set up in 2007 to address uncertainty and volatility in the dairy sector, with farmers guaranteed a stable price despite what might happen in the market, as well as ensuring producers can play for the future and invest in improvements on their farms.
Since then, Tesco has paid £300 million over market prices to its dairy farmers, enabling them to invest in animal health and welfare, carbon reduction initiatives and biodiversity improvements. This has included reducing on-farm carbon emissions by 8.5% since 2016 and biodiversity benefits through the planting of herbal leys, a mix that absorbs carbon from the atmosphere and boosts insects and wildlife.
Commenting on the rise, Tesco commercial director for Fresh Food, Dominic Morrey, said the firm was pleased to be offering significant support at such as challenging time: “We recognise the critical role they are already playing in helping transform the food industry, as we tackle issues such as climate change and food security.”
Bill Higgins, TSDG committee chair, representing Müller, said: “Following the extreme volatility we as farmers have faced in recent months, Tesco has stepped forward to help us adapt the TSDG model to better reflect and support us through these unprecedented times. This only goes on to strengthen our 15-year collaborative relationship.”
Other retailers have also announced additional price rises. Sainsbury’s told its Dairy Development Group that it would increase its April farmgate payment by 4.72 p/litre to 38.62 p.litre (a rise of 14%). The coop told industry that it was paying its farmers 37.97 p/litre for its liquid milk for April.
The announcements came as Arla called upon retailers to improve the profitability of UK liquid milk.
As part of its 5-year UK growth strategy announcement, Ash Amirahmadi, Arla Foods managing director, said more needed to be done: “For a number of years, we have indicated that the lack of profit in own label liquid milk in the UK is not sustainable. It delivers little to no profitability for farmers, and is a category of the UK dairy sector where the market is failing to deliver value for farmers. It is unsustainable.”
Arla plans to explore export potential for its UK milk as part of its Future26 strategy, and has begun trials to move milk to its European processing sites as a means to supply its growing international sales.