Tesco to pay farmers more for milk

Tesco is to increase the milk price paid to dairy farmers by 1.02 pence per litre to reflect the increased cost of cattle feed.

From 1 November, Tesco will pay 33.79ppl for liquid milk to those farmers in the Tesco Sustainable Dairy Group (TSDG) who submit details of on-farm costs through independent consultants Promar’s Cost Tracker monitoring tool. Dairy farmers who do not participate in Cost Tracker will receive an increased price of 33.29ppl, as participation attracts a 0.5ppl premium.

According to Tesco, there are 460 farmers in the TSDG who submit data to Promar, representing 80% of all the milk Tesco buys.

Promar calculations showed a 0.54ppl increase in dairy farmers’ costs of production, mainly due to increased feed costs, Tesco said. It had agreed a further 0.48ppl price increase on top of that because milk volume had not recovered as quickly as expected following the poor spring weather.

Tesco commercial director John Scouler said the price rise reflected Tesco’s commitment to recognise the true cost of production of milk and to pay a price which was above that cost. “The TSDG has now been running for six years and we are proud to continue to lead the way in offering dairy farmers a fair price and support British agriculture.”

Despite the good summer weather, the dairy industry continued to feel the effects of the extreme weather at the start of the year, and the market remained volatile, added Will Hosford, dairy farmer and TSDG farmer committee chairman. “The security and confidence that Tesco provides farmers through the TSDG is more important than ever as we look to prepare for the upcoming winter.”

Tesco claims to have invested over £180m into the TSDG since 2007.

Every litre of Tesco own-label fresh milk is covered by the new prices, with the exception of organic milk. 

From 1 October, the standard price paid to dairy farmers in Sainsbury’s Dairy Development Group rose to 34.15ppl, a 1.97ppl increase from the previous price of 32.18ppl. The price is based on Sainsbury’s cost of production model.