Tesco has confirmed the new milk price it will pay its dairy farmers following an independent review.
Tesco Sustainable Dairy Group (TSDG) farmers will receive the new price of up to 31.58p per litre from 1 October 2012 – one of the highest prices paid by any retailer for milk.
Now in its fifth year, the Tesco Sustainable Dairy Group was established to address the huge uncertainty faced by dairy farmers caused by continuing volatility in the markets, providing stability.
Under the Tesco Fair Price Guarantee, Tesco always pays TSDG farmers a price that is above the cost of production, ensuring that their business turns a profit so they can plan and invest for the future.
The price covers every litre of Tesco own label fresh milk, with the exception of Organic milk.
Tesco is the only major supermarket to guarantee that its milk is 100% segregated, meaning that consumers can be assured that every litre of own-brand milk they purchase has come from a TSDG farmer.
The new level takes into account an increase of 2.02ppl in the cost of production from 29.06ppl to 31.08ppl, primarily driven by the significant increase in the cost of feed. Reduced milk volumes as a result of bad summer weather has also caused the overhead contribution per litre to increase.
Since its creation, Tesco has invested £165m into the Tesco Sustainable Dairy Group and in paying above-the-average price to farmers.
Andrew Yaxley, Tesco commercial director, said:
“This increase in the price we pay our 700 dairy farmers means they will continue to benefit from Tesco’s pledge to recognise the true cost of production of milk, and always pay a price above that cost.
“We are proud to have led the way in guaranteeing famers get a fair price for their milk, and proud to be a strong supporter of British farmers.”