Yesterday, in a ground-breaking move, ASDA announced that it has asked its processors to charge it two pence per litre more for fresh milk. In addition, and crucially, it has secured a commitment from its processors that the entire cost price increase will go straight into farmers’ pockets.
There’s good news for consumers too as ASDA have no plans to reflect this in increased retail prices.
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ASDA have worked hard with their processors, Arla Foods and Robert Wiseman Dairies, to agree on a fair price for British milk. They believe that a two pence per litre improvement fairly reflects market conditions as opposed to the one penny per litre increase proposed by Express and Dairycrest.
ASDA first canvassed the views of dairy farmers at its ‘Growing Together’ conference in April. The conference was followed by talks with the NFU, processors and farmers to explore long-term solutions to the dairy crisis. As a result of this consultation, ASDA has already pledged:
1) To provide short-term stability on milk prices by refusing to exert downward pressure on milk cost prices;
2) To provide long-term stability by developing a ‘cost-plus’ milk-buying scheme that will link the amount paid to farmers based on production costs rather than only the fluctuating market price;
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By GlobalData3) To create a £250,000 milk marketing scheme, designed to reverse the drop in sales. This will include a free milk to schools scheme, in-store sampling and advertising.
“This is the first time a supermarket has approached a processor requesting a cost price increase,” said David Cheesewright, ASDA’s dairy director, “All ASDA’s fresh milk is British and we see this move as an investment in the future of the British milk industry upon which we all rely.”
The NFU welcomed the price increase but warned that one retailer alone could not reverse the fortunes of dairy farmers.
“The past week has clearly shown that the farmers’ fight for survival is far from over,” said NFU president, Ben Gill, “The dairy industry is a chain with retailers paying different cost prices to processors who, in turn, pay farmers. I very much commend ASDA for this initiative. Dairy farmers need a minimum two pence price improvement from all dairy companies and retailers if there is to be any hope of recovery for producers. This price rise complements the rising world market prices for butter, skimmed-milk powder and other products.”
“Creative solutions to complex problems, like this, are essential for the long-term future of the dairy industry,” he added, “I commend ASDA for their lead.”
Notes to editors
The Milk Payment Chain
Retailers pay processors who, in-turn, pay dairy farmers. Where ASDA pays two pence per litre extra for milk and a competitor pays only a penny more the farmer would get an average of only 1.5p per litre extra.
ASDA fresh milk prices
1 pint 26p; 2 pint 49p; 4 pints 83p and 6 pints £1.24
