Britain’s biggest retailer Tesco will pay its processors 29.93p per litre (ppl) for the milk that goes into its cheeses. These processors must be able to transparently distribute this back to the farmer, the NFU said.
The NFU said it was pleased Tesco had made the move during a time when dairy processors were being forced to slash the price they paid farmers for milk to remain competitive.
A whopping 80% of dairy farmers are selling milk “way below the cost of production”, the NFU’s president Meurig Raymond told FoodManufacture.co.uk earlier this year.
NFU dairy board vice chairman Michael Oakes said: “We are pleased that Tesco has recognised the challenging time the dairy industry is currently facing.
“This is especially welcome as we are heading towards the winter as farmers face significantly higher costs of production while cows are housed.”
It was a “significant move” from Tesco to extend its Tesco Sustainable Dairy Group’s cost of production model to its cheese supply base with First Milk and South Caernarfon Cremeries, Oakes claimed.
“This is the first retailer we have seen to make this move and this is a positive step given the current environment,” he said. “Consumers have made it clear that they want to see a dairy sector that is sustainable in the long-term and all retailers need to be accountable for this.”
‘Very real concerns’
Farmers for Action chairman David Handley said he was pleased Tesco had listened to its “very real concerns” and was offering some kind of security for the “struggling” dairy industry.
Tesco has also promised to label all fresh milk sold in its One Stop stores with a Red Tractor logo from December 1 2015 and to make all country of origin labels on cheese clear and only specify one origin.
Earlier this month, Asda increased the price it pays it milk supplier Arla to 28ppl.
Arla revealed this week that its revenue had been hit by the “tough” situation in the dairy industry, falling 3.8% to £3.78bn.