Asda to increase price it pays for milk to 28p a litre

The supermarket said: “We have confirmed to our milk supplier, Arla, that we are increasing the price we pay per litre from Monday to a level that will assist our farmers during the current crisis.”​

This decision came days after Morrisons announced that it was launching a new brand of milk from which 10p a litre would go to producers. Morrisons’ ‘Milk for Farmers’ will sit alongside the supermarket’s standard priced own milk brand in the dairy aisle. The extra money paid to farmers will be paid for by consumers, as the milk will be sold at a retail premium.

Asda trumps Morrisons offer​

Asda’s pledge looks a more favourable deal for both consumers and farmers – the supermarket has pledged to pay 28p a litre for 100% of its liquid milk volume throughout its entire range. It is introducing the Farmer’s Marque label and said it would not be passing on any of the costs to customers – its retail price would remain the same, the retailer said.

Dairy UK, the trade association for the British dairy chain, has welcomed the move. “​We welcome all measures to help the industry in these difficult times and hope they will have a positive impact,​” said Dairy UK.

More measures needed​

However, it called for more to be done to improve the plight of the UK dairy industry, including a review of the intervention price by the EU; margin payment protection; and government support to help open export markets and promote British products abroad.

“The current intervention price is far too low to be helpful and we will keep asking the UK government to put pressure on the European Commission to raise the intervention price,”​ said Dairy UK.

“​In the long-term, we need a collaborative approach throughout the supply chain to handle the impact of volatility which is now an inherent part of the milk market. That includes looking at how to develop future markets and investigating whether some form of margin payment protection such as that available in the US is feasible in Europe.”​

NFU reaction​

The National Farmers Union (NFU) described Asda’s commitment to pay its milk supplier a higher price as a “significant leap forward in recognising the true value of British dairy products”​.

NFU president Meurig Raymond said: “​The NFU has been lobbying tirelessly for Asda to recognise the plight of the dairy industry so we are pleased that Asda has moved to support farmers in their hour of need.​

“​It is clear from Asda that this commitment is to support the UK dairy industry at a time of crisis. It is now important that Arla ensures this is delivered to British farmers on the ground, with immediate effect.​”

Milk prices hit rock bottom​

The current crisis has erupted as value sales of fresh milk hit historic lows. According to latest figures from the Dairy division of the Agriculture and Horticulture Development Board (AHDB), while the milk market increased in volume by 3.3% in the first half of this year (to June 21 2015), it declined by 3% in value. AHDB Dairy said this reflected a 6.1% drop in retail milk prices since 2014.