Tesco pays more to its farmers for milk

Posted by Kim Newbold on 17th Sep 10

Tesco Sustainable Dairy Group members, a select group of farmers who supply the grocer with milk, have been told that, as of the beginning of November, they will be receiving an extra 1.28 pence per litre. This works out at just over a penny extra for every pint. Many dairy farmers have been complaining that because pricing is so tight they often make a loss on the milk they sell to the country’s supermarkets.

Tesco claim they worked out the new price of 28.18 pence per litre by taking a mean average of the prices paid by rivals’ Morrisons, Asda and Sainsbury’s to their dairy farmers in July. Tesco added that its farmers were now being paid significantly more for their milk than the 25.77 pence per litre average being paid by the UK’s other major grocers.

Earlier in the week, dairy giant Robert Wiseman saw its share price fall by nearly a third after the company predicted that strong competition would have a serious effect on operating profits. Analysts said the problems being experienced by Robert Wiseman were directly attributable to supermarket’s aggressive pricing tactics.

The National Farmers Union said it welcomed the new pricing policy being implemented by Tesco. Chairman of the Dairy Board at the NFU, Mansel Raymond, said because of Tesco’s milk pricing formula, Tesco Dairy Group members would be able to continue to invest in their businesses with confidence.

The rise in the price being paid for milk to farmers follows an independent review which found the price of cattle feed had risen recently.