UK retailer Tesco has said that it will invest GBP25m (US$40m) a year to provide support to pork and beef farmers through newly-established Tesco Sustainable Farming groups.
The company will create two producer groups that will guarantee beef farmers an “above market” price for meat, while pork farmers will receive a price linked to the cost of feed. Pork prices will be reviewed monthly.
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In what Tesco described as “an industry first”, farmers in its supplier groups will be given direct contracts that will last for up to 36 months. Tesco said this would provide livestock farmers with “more security”, the ability to forward plan and a “guaranteed fair price” for their meat.
Tesco will work directly with around 140 pig farmers who will supply the retailer with the majority of its own brand fresh pork. The retailer will also work with around 1,000 beef farmers who will supply Tesco with all its Finest brand beef. The company estimated this “new way of working” is likely to affect up to 10% of UK pork and beef farmers.
The retailer already operates a system that provides top-up payments linked to the cost of production for its milk suppliers.
Derek Lawlor, meat, fish and poultry director at Tesco said the move was a response to the pressure that pork farmers are facing from rising input costs. Poor grain harvests this year, particularly in the US, have led to rising feed costs that are hitting protein producers.
The move has been welcomed by farming groups.
“Tesco’s desire to establish a dedicated relationship with producers matched with a long term direct contractual commitment should be praised. We believe that these arrangements will foster stronger relationships with the farmers involved and ensure that Tesco is able to provide a consistent product for consumers,” National Pig Association chairman, Richard Longthorp commented.
