The mults have shown little appetite for following Iceland’s lead and linking the price they pay processors for milk to farmgate prices.
Iceland last week agreed with Arla and Müller Wiseman that when the processors adjust the price they pay farmers - either up or down - that adjustment would “immediately be reflected” in the price paid to them by Iceland.
The move was welcomed by protest group Farmers for Action (FFA), which targeted the retailer in a series of protests over its decision to drop the retail price for four pints of milk to 89p in October. FFA chairman David Handley urged other retailers to follow suit, but the deal appears to have gained little traction among the big four.
Sainsbury’s said it already worked to a cost-of-production model that determined how much it paid Sainsbury’s Dairy Development Group members for their milk. The group supplies about 90% of its own-label milk, and the arrangement includes a quarterly review of the most volatile elements of costs - feed, fuel and fertiliser.
“It means the price we pay our farmers changes to reflect these variable costs, ensuring a fair deal for all the farmers involved,” a spokeswoman said.
Members of Tesco’s Sustainable Dairy Group received similar concessions, and a milk price several pence per litre higher than the average farmgate price, said a Tesco spokeswoman, while Morrisons and Asda said they had no plans to adopt similar measures to Iceland.
Dairy expert Hamish Renton described Iceland’s move as “logical for both parties on the face of it.” But he questioned what the retailer would do when farmgate prices rise. “If the cost price of two litres increases because the farmgate price is higher yet the rsp stays at 79p, who pays?” he said.
Other commentators suggested Iceland’s move was “a PR exercise” to deter further protests by FFA. However, Iceland said it had not set a time limit on the new pricing arrangement, and had “no plans” to reconsider it.