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In the biggest change to benefit the dairy industry in decades, Tesco, the largest single retailer of milk in the UK, said that it would offer direct contracts to named farmers, raising the price farmers receive to around 22p per litre – the best price currently being paid by any supermarket, claims Tesco.
However, Tesco shoppers will pay no more for that milk than they do now. Crucially, the new contract prices will be reviewed every six months to make sure they reflect the farmers’ costs of production and will be determined using key variables such as feed, fertilizer, energy and labour.
Recognising that many smaller, often family-run farms can struggle to balance their costs against the market price, Tesco has also launched ‘localchoice’ milk, which will be sourced from local farms and sold at Tesco stores in or close to their county. It will sell for slightly more per litre than standard milk, meaning these smaller producers can make returns more in line with the proportionately higher costs of their business.
Announcing the measures, Tesco commercial and trading director, Richard Brasher, said, “We know that some British milk producers - often through no fault of their own - have had a very difficult time for a number of years. We can all debate the causes - the abolition of guaranteed pricing, CAP reform and structural factors in the market - but the fact remains that the industry has found it very tough for a long time now.
“Our customers tell us they are not comfortable with this, and they want us to help if we can. Dairy farmers also tell us that they would value a more direct relationship with Tesco. We have always recognised our responsibilities and have been working to get closer to key stakeholders in the dairy supply chain for some time, to improve efficiencies, productivity, sustainability, quality of product and security of supply.
The new measures will bring a £25 million investment into the UK dairy industry. Continues Mr Brasher, “I believe this new package of measures offers British farmers a great opportunity to work with us, get closer to consumers and grow their business. It will also allow us to better understand the challenges they face as producers.”
He added that he was “particularly pleased that we have also found a way to help smaller family producers with our new ‘localchoice’ milk. This will offer those producers a return more in line with their unique costs and increases choice for our customers by enabling them to support the kind of farming they want to sustain into the future - through their own buying decisions.”
Mr Brasher admitted the changes were in line with consumer demand, with more people wanting to buy local and support their economy. Around 850 dairy farmers will be offered contracts with an opening price of around 22p pence per litre. In collaboration with Dairy Farmers of Britain, ‘localchoice’ milk will be sourced from around 150 small family-owned dairy farms around the UK.