Press Release   •   Sep 17, 2010 10:56 BST

Tesco today announced that it will pay a higher price for the milk it buys from the Tesco Sustainable Dairy Group farmer members.

Tesco has confirmed a new price of up to 28.18ppl from 1st October 2010, an increase of 1.28ppl, for the next six months. This new price is significantly higher than the average price of all other major supermarkets which is 25.77ppl.* The new payment follows an independent review of Tesco farmer production costs by Promar, the research consultancy specialising in agriculture and agri-food sectors. The increase is mainly a result of higher feed costs.

Tesco Board Director, Lucy Neville-Rolfe said; “We remain committed to ensuring British dairy farmers receive a fair price for the milk they supply to Tesco that is above the cost of production. This new price remains considerably above the current market value and reflects the transparent way we work with the dairy industry. The Tesco Sustainable Dairy Group also makes additional provisions for making a profit, including capital investment and unpaid family labour. This is essential for the long term future of the British dairy industry.”

Now in its fourth year, the Tesco Sustainable Dairy Group (TSDG) was established to address the huge uncertainty facing British dairy farmers caused by the continuing volatility in the markets. The group’s 800 farmer members continue to benefit from Tesco’s pledge to ensure dairy farmers are paid above the cost of production enabling them to invest and plan ahead.

Andy Bloor, Farmer Committee Chairman said; “Thanks to the TSDG our partnership with Tesco continues to grow in strength. Despite us operating in a volatile market, this unique relationship gives us the confidence and stability to remain in the dairy industry.”

The cost tracker review ensures Tesco pays farmers on an accurate cost of production, including unpaid family labour and depreciation – rather than led by market forces. In April, Tesco announced that since the programme launched in 2007, farmer members producing one million litres per annum have benefited by at least £62,500 over and above the average British milk price.** This equates to a total investment of at least £50,000,000 by Tesco.

Mansel Raymond, NFU Dairy Board Chairman said: “We all know that costs have increased for dairy farmers and importantly Tesco is reflecting the increase in costs to its TSDG suppliers with the outcome of its latest price review.

“It is extremely encouraging to see that Tesco is committed to its pricing formula and that the TSDG is working successfully. Tesco is benefiting from a committed, sustainable and secure supply of milk and dairy farmers are receiving greater stability, transparency and a market leading milk price, which allows them to invest in their businesses with confidence.”