Dairy cows

Iceland is to link the price it pays processors for milk directly to farmgate prices.

The move follows the retailer coming under pressure in October after dropping the retail price of four pints of milk to 89p, prompting protests by members of pressure group Farmers for Action (FFA) at Iceland depots.

On Friday (12 December), Iceland said it had agreed with its milk processors to pay them a “price directly linked to the farmgate price received by dairy farmers” in future. It is understood Farmers for Action played a key role in brokering the agreement.

Dairy industry expert Ian Potter said the arrangement means Iceland will move its price by the amount processors move their non-aligned farmgate milk prices. It should also “take Iceland out of the equation as a potential retailer who is exerting further unnecessary downward pressure on already weak farmgate milk prices”, he added in his weekly newsletter.

The Iceland spokesman also confirmed that it had advised FFA that it would be happy “to open our books to any independent adjudicator that may be appointed by the government in the future”.

FFA is understood to have requested access to the books of other retailers and processors, including Müller Wiseman’s last week.

The Iceland spokesman added that the deal it had agreed with its processor suppliers would “avoid the need for protracted negotiations and is intended to ensure that the farm gate price will in future drive our cost price, rather than the other way around”.

The retailer has also announced that 70% of its cheese would bear the Red Tractor logo by early February 2015. The logo will also be applied to approximately 60% of its cooked meat range. Iceland currently does not have any products bearing the Red Tractor logo.