Under the terms of the contract, Asda will agree to pay farmers £2.70/kg for their cattle at time of slaughter.
A price-easing mechanism will be built into the contract to protect farmers and Asda against fluctuations in future beef prices. For example, if the market price fell to £2.50/kg, farmers would be paid £2.60/kg, but if the market price reached £2.90, they would be paid £2.80.
The contract will initially be offered to a small number of Asda BeefLink breeder-finisher farmers through processor Dawn Meats. Asda claimed the initiative was a first among the major supermarket chains for standard-tier beef. It would help to eliminate risk for beef farmers, said Asda senior beef buyer Jim Viggars.
"Asda is committed to supporting the UK red meat sector and this move is one in a series of initiatives enabling beef farmers to plan for a profitable, stable and sustainable future," he added.
It would also promote on-shelf quality by encouraging breeder/finisher farmers to stay in the industry, he said. "Breeder-finishers are the backbone of the UK beef sector and are committed to the production of high-quality beef from conception to carcase."
Asda's move had positive implications for the beef farming industry as a whole, as it could help set a floor and encourage other companies to follow suit, according to the National Beef Association.
"The key thing here is changing the way we operate to keep the supply chain sustainable. What we're currently doing is too ad hoc, too fragmented," said Kim-Marie Haywood, director of the NBA. Fixed-price contracts offered security for farmers and continuity for processors, she added.
Asda also plans to offer the new contract to beef producers who feed into beef processor ABP.