UK supermarket giant increases price paid to dairy farmers

Following extensive industrial action, UK supermarket giant Tesco has increased the price it pays farmers for milk, albeit only slightly.

Dairy farmers in the UK have embarked on strikes and blockades this year, as they call for the major supermarkets to pay a fairer price for their product.

From 1 October, the 700 dairy farmers who supply Tesco’s private label non-organic milk will be paid an extra 2 pence per litre.

Despite the miniscule increase, the price rise, which brings the possible earnings up to 31.58 pence per litre for farmers, will make Tesco one of the highest payers of the biggest five supermarkets.

Tesco’s rivals Morrisons and the Co-Operative Group have also increased the price they pay for milk to remain competitive.

While Tesco says the price increase was due to bi-annual review, and not a reaction to the protests, the fact that other supermarkets are raising prices is good news for farmers.

The problems in the UK dairy market mirror those being ensured by Australian farmers, but as Australian Dairy Farmers (ADF) director, Terry Toohey, told the Food Magazine Industry Leaders Summit earlier this year, it is not a coincidence.

“Given the sheer size of the supermarket duopoly, over 75 per cent of the market is between the two powers, and they are wielding that Australian marketplace and the majority of Australian suppliers, particularly to the fresh food industry,” he said.

“In the United Kingdom, they have already experience this [impact of pricing on dairy industry].

“This is a Tesco model, the people that have been brought in by Coles have come from Tesco.

“I had to go over there to do a study 4 years ago, and I came back with an alarm bell saying, ‘it’s not what’s going to happen in Australia, it’s when it’s going to happen in Australia.’

“We believe from the grocery supply code of practice, the grocery code could provide a good starting point on the basis of Australia legislation, establish a mandatory code of practice and an ombudsman with the ability to levy financial penalties,” Toohey said.

“We are sure that Coles’ actions impact on the visibility of the brand of dairy products and would lead to less variety of dairy products on supermarkets shelves as has happened in the United Kingdom.

“It’s our organisation’s view that Coles’ actions will ultimately less competitions consumers, decrease product choice as the experience of the UK has shown.”

Toohey told the Leaders Summit that the current supermarket environment is driving farmers out of the business, as they struggle to make ends meet.

“In NSW, my state, I see farmers being asked to sign contracts for 3 cents a litre than their previous contracts," he said.

“This will have astronomical effects on fund and profit margins.”

“In my case I’ll have 40 per cent of my tier 2 of milk [purchased] at 18 cents [per litre].

“The cost of products is 40 cents [per litre].

“So, you start to look and say, I’m only one person, there are 800 dairy farmers in NSW alone.”

Do you think Aussie dairy farmers should embark on industrial action to improve the price they get for their milk?

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