The cost-of-production model managed by Kite Consulting was introduced in 2012 for the 290-plus farmers in the group at that time, with changes in feed, fuel and fertiliser prices taken into account when calculating the farmgate price to be paid by the retailer.
A statement from Sainsbury’s said it recognised that uncertainties were affecting the milk supply chain, and the more frequent reviews of the price it pays for milk would help farmers to navigate this and manage their cashflow.
Ex-gratia payments for Tomlinsons suppliers
The retailer also said it had recently made ex-gratia payments to some farmers affected by the administration in 2019 of its Wrexham-based processor Tomlinson’s Dairies.
Following the administration, Sainsbury’s had provided some affected farmers with loans to help ensure continuity of supply. “We have recently made ex-gratia payments to the farmers affected, which has helped to pay down these loans,” it said.
Tesco operates a similar cost-of-production milk pricing model, forecasting input prices quarterly for the 538 farmers in its Tesco Sustainable Dairy Group.
It is raising its February price by 0.8p/litre to 34.16p/litre for milk with 4% butterfat and 3.3% protein.
Tesco was not planning to revise the frequency of calculation for farmgate prices, but said it was monitoring the situation carefully.
GDT rises almost 5%, Medina adds 3p/litre
The 300th Global Dairy Trade online wholesale dairy commodity auction, saw the index rise by 4.6% this week. The biggest gains were in whole milk powder (up 5.6%), while butter and skimmed milk powder both rose 5%.
Medina Dairy has added 3p/litre to its core Watsons milk price for February, so will be paying 35.8p/litre next month, also on supply of 4% butterfat and 3.3% protein milk.