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01/04/2008 14:35:05
NFU Encouraged by Tesco Milk Price Review
NFU is encouraged by the outcome of the most recent price review for liquid milk suppliers to Tesco which has led to a 0.5p per litre increase in milk prices from April 1.
Commenting on the outcome of the review, which is held every six months with representatives of the producer suppliers and takes account of changes in farm production costs and market developments, NFU Cymru President, Dai Davies said, "The increase of half a penny is small but a move in the right direction. However, the vast proportion of milk from dairy farmers in Wales goes directly into manufacturing.
"The advantage of the Tesco contract is the ability to track production costs so that the price reflects these as a bare minimum. Costs have already undeniably soared as the recent work by Promar/First Milk showed. It is vital that Tesco's own 'cost tracker' captures anticipated changes in costs over the next six months, which are likely to be significant for liquid milk producers who are saddled with the cost of level supply for the liquid market.
"We described the Tesco arrangements as ground breaking when they were announced almost a year ago. The relationship between the producers and Tesco is still at an early stage, but we've been encouraged by what we've seen so far, with genuine effort to forge closer relationships, create representative structures, and communicate specific requirements under the contract to producers.
"What concerns us more is the apparent inertia from the rest of the industry in driving milk prices upwards at a time when dynamic cost pressures, falling production, a weak pound and solid cheese market all point to further milk price increases to farmers."
Commenting on the outcome of the review, which is held every six months with representatives of the producer suppliers and takes account of changes in farm production costs and market developments, NFU Cymru President, Dai Davies said, "The increase of half a penny is small but a move in the right direction. However, the vast proportion of milk from dairy farmers in Wales goes directly into manufacturing.
"The advantage of the Tesco contract is the ability to track production costs so that the price reflects these as a bare minimum. Costs have already undeniably soared as the recent work by Promar/First Milk showed. It is vital that Tesco's own 'cost tracker' captures anticipated changes in costs over the next six months, which are likely to be significant for liquid milk producers who are saddled with the cost of level supply for the liquid market.
"We described the Tesco arrangements as ground breaking when they were announced almost a year ago. The relationship between the producers and Tesco is still at an early stage, but we've been encouraged by what we've seen so far, with genuine effort to forge closer relationships, create representative structures, and communicate specific requirements under the contract to producers.
"What concerns us more is the apparent inertia from the rest of the industry in driving milk prices upwards at a time when dynamic cost pressures, falling production, a weak pound and solid cheese market all point to further milk price increases to farmers."
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