Asda milk campaign welcomed but NFU cautions against undervalueing produce

Asda's announcement that its dairy suppliers will be paid an extra 0.5 pence per litre has been welcomed by the NFU.

Asda made the announcement as it launched a new dairy campaign, the Four Pint Pledge. The campaign involves not only increasing farm gate prices but promoting milk to consumers through cuts in retail milk prices and a significant advertising campaign.

However, the NFU has expressed concern at the potential knock-on impact of Asda's decision to make a significant reduction in its retail milk price, warning that this could serve to devalue the product and create instability in the long term.

NFU dairy board chairman Gwyn Jones said: "I applaud Asda for its endorsement of the NFU's Vision document and for the work they have done to develop meaningful partnership with dairy farmers. Today's farm-gate increase is a positive move to address some of the cost increases seen on farm and we would challenge others in the dairy sector to follow suit.

"This is good news for the Asda/ Arla farmers and we must work hard as an industry to ensure that other producers benefit in a similar way. This puts Asda, Waitrose and M&S way out in front and sets a benchmark for the rest of the industry.

"However, I am concerned by moves to reduce retail milk prices as this will only serve to devalue the product and potentially create further downward price pressure in the market place. There are significant margins in liquid milk at retail level but at the end of the day retail pricing is not the business of the NFU, what matters is the cost price paid back to producers & processors.

"As part of its campaign Asda has challenged other retailers to adopt the recommendations of the NFU Vision for the dairy industry by setting up dedicated supply arrangements and publishing the price that they pay to farmers. The NFU believes this is a start but is also pushing for further commitment from the retail sector"

Mr Jones identified a further four key areas for action:

· Long term pricing commitments to producers

· A fairer distribution of profits as well as costs

· Margin for investment at all levels of the supply chain

· Commitment to source and promote all British dairy produce