Tesco raises the bar on milk prices
price rises announced by Tesco this week, in the latest development
on dairy farmer incomes.
Tesco said this week it would raise retail milk prices by two pence on one and two-pint containers, and four pence on four-pint products. The move offers more evidence that retailers have begun to soften their approach to the dairy supply chain, following weeks of sustained concern over dairy farm incomes. Gwyn Jones, head of the National Farmers' Union dairy division, welcomed the Tesco price rise. "It will not return the industry to profit overnight, and the lesson learned from the past is that any increase must be sustained. But it does set an important example that others should follow." The NFU and other farmer groups have been lobbying retailers for the last few months, arguing that a milk price rise was justified. Peter Kendall, NFU president, said the sector was in "meltdown". Britain's dairy farmers earn the lowest farmgate prices for milk in Western Europe, around 18 pence per litre, which is below the cost of production for some. Concerns about the state of dairy farming in Britain have been thrust into the public spotlight recently, due to petitions to Parliament, a report on the Competition Commission's grocery supply chain investigation, and industry figures showing three farmers were quitting the sector every day on average. "I also have no doubt that an important factor in Tesco's decision was the clear message coming from the public," said Gwyn Jones. Tesco's rivals have also tried to reassure farmers recently. Justin King, chief executive of Sainsbury's, told NFU Conference guests recently that his supermarket was "open" to paying a premium for milk if their was a clear benefit for the consumer. Steve Esom, managing director of Waitrose, told conference-goers he was "shocked" by a poll that found 70 per cent of farmers would not sign a supermarket contract if offered one. The NFU is currently developing an independent contract that groups of farmers could take to retailers, in order to get a fairer deal. Gwyn Jones said many current contracts were "open-ended documents" and unfair to farmers.
