Co-op has announced a change in the way it calculates the milk price paid to its dairy farmers, in a move that could see it invest an extra £1m in its dairy supply chain.
The retailer – which has, for the past decade, paid the 145 farmers in its Co-op Dairy Group a ‘basket price’ which takes into account the cost of production – will now peg its price to the generally higher Müller Direct farmgate price.
The move follows the agreement of a new, five year milk supply contract with the dairy giant, which includes “a stronger role for the CDG in decision making”, said the CDG’s chair Tom Bramall.
It will see farmers in the CDG have their milk price increase by 1.3p per litre to 42.25p per litre in April with an additional guarantee that Co-op will now pay out either the Müller Direct price or, if higher, the basket price.
The change in pricing strategy follows “recent challenges with The Co-op basket price”, which had been lower than the Müller price for a prolonged period and “had put pressure on the [retailer’s pricing] model”, Co-op said.
Based on the current Müller price, the changes will see Co-op make an additional investment of just shy of £1m in the farming group.
“Co-op is a long-term supporter of British farming, and I am absolutely clear that farmers are the backbone of the UK’s food supply,” said Co-op Food MD Matt Hood.
“Supporting UK agriculture is more important than ever, and whilst our milk pricing model has worked well over the past decade, we recognise the need for its evolvement, as part of our continued commitment to farmers.”
By working so closely with its British farmers, the retailer understood the industry was “facing many challenges, and whilst I know this won’t be a salve to all of those, we hope this increase in milk pricing goes someway to helping our dairy farmers”, Hood added.
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