March 31, 2010


UK retailer unveils new farmgate milk price



Tesco has unveiled the milk price that it will pay farmers in its Sustainable Dairy Group for six months starting from April 1.


It is the first major price announcement of the new quota year and represents a reduction of just under 0.5p/litre from its 27.37p/litre price announced last October. Tesco said its new price highlighted a minimal reduction in farmers' costs primarily driven by reductions in feed and fertiliser.


The retailer will pay its 800 farmers on direct supply contracts up to 26.90p/litre, based on dairy farm production costs provided by consultant Promar.


Meanwhile, dairy farmers in Tesco's direct supply group who have signed up to participate in Promar's cost tracker will receive the full 26.9p/litre from 1 April. Farmers outside the Cost Tracker will receive 26.4p/litre.


Promar's costings reflect a small drop in variable costs - which include feed, fertiliser, silage, vet-and-med and rearing costs - from 14.4p/litre to 13.64p/litre.


The consultancy firm's costings - which cover the period April-September 2010 - also make provision for a marginal increase in farmers' overheads, including labour, rent and finance, fuel, repairs and utilities costs.


Promar said it had also made a significant allowance for unpaid family labour and more than GBP70,000 provision for capital reinvestment.