Big five retailers who do not use cost of production payment models for their milk have moved to defend their stance in the wake of this week’s “catastrophic” processor price cuts that will see some farmers lose up to 2ppl on their milk.

Farmers whose milk is supplied to Asda (via Arla), Morrisons (via dairy Crest and Arla) and The Co-operative (via Wiseman) will see their milk price fall. Although those farmers receive a premium from the retailer - on top of the price they receive from the processors - their basic milk price is set by the processor.

Last week (29 June) Robert Wiseman Dairies announced a cut of 1.7 ppl to the price it pays for milk. This week, Dairy Crest and Arla announced cuts of 1.65ppl and 2ppl respectively.

A spokeswoman for The Co-op said different milk pricing models - based on cost of production or offer ing a premium - “both have merits” and came under scrutiny at different points in the milk market cycle, adding: “The Co-operative Group is proud of the Co-operative Dairy Group and its work in helping dairy farmers and is in constant dialogue with them.”

But she would not be drawn on the possibility of moving to a cost of production model of payment.

Morrisons said it preferred to pay a premium which included all of its farmers, instead of benefitting a select few. “We have no plans to change our model,” said a spokesman.

Asda did not respond to enquiries from The Grocer.

The price cuts will not apply to those farmers who supply milk to Tesco through the Tesco Sustainable Dairy Group or to Sainsburys via the Sainsbury’s Dairy Development Group as both these groups operate based on on-farm costs of production rather than processor prices.

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