Supermarkets engaging in milk price wars must not put pressure on processors to cut the price paid to farmers, NFU Scotland has warned.
The plea comes after supermarket heavyweight Tesco this week dropped its retail price for four pints of milk from £1.39 to £1, joining Asda, Aldi and Lidl in what is often known as the “loss leader” culture surrounding milk.
Although reassurances have been given by Tesco that the price paid to farmers will be unaffected, NFUS warns past experience has shown selling milk for a loss leaves processors under pressure to meet retailer demands, making it near impossible to lift the farmgate milk price. The union says it is vital processors and producers do not ultimately fund retailer price wars.
“In the competitive retailer world, we appreciate that strategies designed to increase footfall in stores are necessary,” said NFUS milk committee chairman Gary Mitchell.
“However, the fact that retailers regularly choose fresh milk as the key sector in attracting customers to stores is evidence of the importance of dairy to shoppers. All the more reason not to undermine a progressive and sustainable UK dairy supply chain by shortsighted and often transient price wars.”
He warned the damage of milk price wars stretched beyond a retailer’s dedicated supplier base. “It can have impact on those supplying fresh milk markets but not aligned to any one supermarket, as well as those dairy farmers whose milk goes into cheese or high-value dairy products,” he said.
“The dairy industry – processors and producers – are putting strategies into place at a Scottish and UK level that look to drive value into the dairy chain, growing home and export markets for products. A retail price war on liquid milk – our biggest dairy sector – hinders that approach.”
In 2011, dairy farmers held a series of prolonged protests across the country – sparking the birth of the SOSdairy movement – after processors slashed the farmgate milk price. In spring 2012, further protests were sparked after dairy farmer co-operative First Milk warned it could be forced to drop its cheese contract price by up to 2p a litre. At the time, it was alleged the threat of a price drop was driven by retailer reluctance to pay more for cheese.