Supermarkets praised for milk price hike

Related tags Dairy farmers Milk Tesco British dairy farmers

Dairy farmers in UK received a boost this week with the decision of
several retail groups to increase milk prices. But the long term
problems will remain unless the middle men - milk processors - can
be persuaded to pay more for their milk.

Two of Britain's leading supermarket groups raised the price of milk earlier this week by two pence a litre in a move designed to help ease the increasingly difficult economic situation facing many of the UK's dairy farmers.

The price rise from both Tesco and Asda came in direct response to an appeal from the National Farmers Union in England, whose president Ben Gill has been holding high-level talks with most of the major chains to discuss the worsening situation.

Tesco director John Gildersleeve said that Gill had been very persuasive. "It is clear that British dairy farmers are currently struggling in a difficult and complex market. Tesco is committed to helping those farmers get through this and we believe that there is a strong case for them to receive a significant price increase in the forthcoming negotiations with processors."

While the price increase is a step in the right direction, it is only a short term solution to the difficulties facing Britain's dairy farmers. The real problem lies with the milk processors - the middle men between the farmers and the retailers - and convincing them to pay more for the milk will be a harder task.

Welcoming the retailers' move, Gill said: "The major retailers acknowledge that dairy farmers need to receive a better return in the short term if the long-term viability of the industry is to be maintained.

"While the talks are encouraging, the NFU will not let the matter rest until the positive statements by retailers translates into a price for farmers nearer the EU target price of 20p per litre."

He continued: "The response from leading retailers has got the ball rolling. There is, as retailers have said, a strong case for processors to restore part of their margin to primary producers in addition to the retail price rise. The retailers have given a commitment to join the NFU at the table as it continues to put its case to processors, adding extra weight to the case for better returns for dairy farmers."

This pledge could be the key to winning the concessions that the dairy farmers are seeking. The UK's retailers are able to exert considerable influence over the milk processors, and Tesco, Asda and Sainsbury have all agreed to take part in the roundtable discussions between farmers and processors.

Gildersleeve added that Tesco would also continue to support British farmers by sourcing all of its milk from the UK and by increasing its sales of British cheese - at present, the UK accounts for 60 per cent of the cheese sold in Tesco stores. It also plans to cut the price of organic milk to help reduce overstocking, and pledged to increase sales of regional dairy produce such as yoghurts and cheeses produced by smaller suppliers.

"Although Tesco cannot offer a quick fix solution, what we can do is encourage communication and transparency and most importantly, as British farming's biggest customer, continue to support the industry by buying British."

Related topics Markets Fresh Milk Pricing Pressures