Sainsbury's 'open' to milk price rise

By Chris Mercer

- Last updated on GMT

Related tags Dairy farmers Milk Supermarket

A little piece of Fairtrade Fortnight touched the UK dairy industry
this week as the head of the Sainsbury's supermarket told farmers
he was willing to pay more for their milk.

Britain's dwindling pool of dairy farmers may have felt just a twinge of jealousy this weekend as the start of Fairtrade Fortnight brought more discussion of poverty among their third world counterparts.

No one is suggesting their plight is equal, but British dairy farmers will nevertheless be cheered by news that Justin King, head of Sainsbury's, is "open" to paying a premium for their milk.

King's comments came during a speech to the National Farmers' Union (NFU) conference on Monday, and are a further sign that retailers have become more amenable to farmgate milk price rises in recent weeks.

"It is important for Sainsbury's, our processors and farmers in our Dairy Development Group to sit round the table to better understand the costs involved in supplying our milk," King said.

Protests against low farmgate milk prices have increased recently amid news that 1,000 dairy farmers have quit in the last year.

The Competition Commission is set to investigate the matter further as part of its grocery supply chain probe.

King told NFU conference-goers that Sainsbury's was committed to buying British milk and appreciated it was in everyone's interest to have a profitable dairy sector in the long term.

But, he warned, "at Sainsbury's we cannot prop up inefficient businesses.

Nor can we try to buck the market.

The price we pay for milk must be based on the market place".

One farming source told recently they had never seen supermarkets so open to a milk price rise.

Sainsbury's said it would work directly with 450 farmers, linked to processing firms Robert Wiseman and Dairy Crest, in a new Dairy Development Group.

It said this could provide better foundations for producers to invest.

King told conference guests any premium paid by Sainsbury's would have to be clearly justified in added value benefits for the customer.

"So our questions would be: can the customer see a benefit?

Are they prepared to pay more for a differentiated product?

Are farmers in our Group prepared to work with our processors and us to create a new specification for Sainsbury's liquid milk?"

The NFU is developing a new contract for dairy farmers to use in negotiations with retailers.

Gwyn Jones, head of the NFU dairy board, said many current contracts were "open-ended documents" and that it was unfair to expect dairy farmers to sign.

Related topics Dairy-based ingredients

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