Tesco Sustainable Dairy Group

The future of Tesco’s aligned pool of dairy farmers appears secure, after it revealed it was “confident” it could bolster its ranks by more than a quarter by next spring.

Tesco launched a “comprehensive and thorough” review of the 600-strong Tesco Sustainable Dairy Group in July, amid a slump in global farmgate prices and ongoing market volatility.

While the review is ongoing and scheduled to be completed in November, Tesco’s commercial director of fresh food and commodities Matt Simister this week gave the strongest hint yet that the group had a long-term future, and calmed fears it could be reduced in size by stating the retailer planned to recruit as much as 150 extra dairy farms, and would continue to pay members above the cost of production.

“Over the summer we have been carrying out a collaborative review with members of the TSDG, to help us continue to partner with our farmers in a sustainable way, adapting to the significant changes we’ve seen across the whole of British agriculture as well as dairy in recent years,” Simister said.

“As we near the end of the process, we are confident we’ll be able to increase the number of direct relationships with our core TSDG pool farms by over a quarter, helping us to further cement our lead as British agriculture’s biggest supporter,” he added.

Simister’s comments follow Tesco’s announcement earlier this month that it would pay farmers supplying milk for mild and medium Cheddar, Red Leicester and Double Gloucester cheese 29.08ppl until next February, while all Tesco branded standard yoghurt will be made with British milk from next March.

Tesco will pay TSDG members 30.58 pence per litre for their milk for the six months from 1 November, following an independent cost tracker review by agriculture research consultancy Promar. 

This is a slight reduction on the price paid during the previous six months of 30.93ppl, and reflected “a reduction in the cost of feed and rising milk volumes”, it said.

A spokeswoman for Tesco declined to give any further details on the future terms offered by the TSDG to its members or whether it would continue to employ Promar to calculate its farmgate price, but said more details would be disclosed in November.

Dairy industry consultant John Allen of Kite Consulting said Tesco’s apparent continued commitment to the TSDG could be seen as a move to cut out price volatility and risk.

“For better or for worse, we have moved into a different place over the past few months, with the actions of rival supermarkets to pay a fair price for milk taking the pressure off the likes of Tesco and Sainsbury’s to make dramatic changes to their aligned groups of farmers,” he said.