Tesco and Sainsbury’s have responded to growing farmer unrest by introducing big farmgate milk price hikes – raising the amount they pay for their milk to 46p per litre from 1 July.
The pair have come under criticism from the dairy farming community in recent months over the perceived failure of their aligned milk contracts to keep up with soaring farmgate prices, amid rocketing input inflation.
With major processors such as Arla and Müller now paying 47.79p and 46p respectively for a standard litre of milk at the farmgate for June, many farmers have been looking to resign from aligned pools in order to sell their milk for a higher price on the open market.
Speaking to The Grocer last week, NFU dairy board chair Michael Oakes said some retailers “haven’t reacted quickly enough to these rises” and had “failed to read the market”.
His comments came as dairy industry analyst Ian Potter said last Thursday that many Tesco farmers “have had enough” of the disparity – where they would be paid less than most of the market but still have to fulfil a range of additional animal welfare and sustainability-linked criteria. A significant proportion of farmers supplying both Tesco and Sainsbury’s have already resigned from their respective supply pools this year.
But in response to the ongoing volatility in the dairy sector, Tesco said on Friday that the pool of more than 500 British dairy farmers in its Tesco Sustainable Dairy Group would see their milk price increase from 41.59ppl in June to 46ppl in July.
The retailer said it hoped the increase would “help to address the current unprecedented levels of on-farm inflation”, with the latest move following a near 20% increase earlier this year, Tesco pointed out.
At almost exactly the same time as Tesco made its announcement on Friday afternoon, Sainsbury’s introduced its own price hike, from 41.7ppl in June to 46ppl for July, using what a spokeswoman called a “temporary booster payment”.
The payment is part of a further update to the SDDG, which now sees it review its milk price and the cost of production on a monthly basis. Sainsbury’s said it would also evaluate the need for further booster payments every month for the foreseeable future.
“We remain in close contact with our farmers and continue to support them through the unprecedented cost pressures they are facing,” said a Sainsbury’s spokeswoman.
“We have updated the payment model for our farmers this year so that we review the price we pay for our milk on a monthly basis, based on both the current and forecast costs we believe they will incur.”
The booster payment would “provide a greater level of protection from the volatility they are facing in the market”, she added. “We want to provide long-term support to our SDDG to help our farmers and ensure we continue to have good availability and the steps we’re taking are designed to make sure this continues.”