Tesco is cutting the price it pays its dairy farmers because feed costs have fallen.
From 1 April, farmers in the retailer’s Sustainable Dairy Group will receive 29.56 pence per litre, 0.65ppl less than the current price of 30.21ppl.
Tesco calculates the milk price it pays farmers taking into account cost of production, and the retailer said feed costs, particularly wheat, had dropped by 21%, from £210 per tonne to £165 per tonne, over the past 12 months.
Tesco farmer committee chairman Will Hosford said a drop in milk price was “never welcomed”, but added the TSDG continued to give producers supplying Tesco “the confidence to make the necessary investment their businesses demand.”
Tesco commercial director Andrew Yaxley said the TSDG had been set up five years ago to create greater price stability for farmers. “Our 700 farmer members continue to benefit from Tesco’s pledge to recognise the true cost of production with additional provisions, which means a brighter future for British dairy farmers.”
NFU dairy board chairman Mansel Raymond said Tesco’s milk price model “was and is still valued” but added farmers supplying the retailer would be concerned to hear feed costs were forecast to be declining, “which most farmers would find hard to believe.”
Raymond warned Tesco’s price cut should not be seen as licence for other milk buyers to cut prices. “Average milk prices in the UK are still at or below the break-even price,” he said.