Tesco milk contract review - what it means

Farmers supplying the Tesco Sustainable Dairy Group (TSDG) face having to jump through more compliance hoops for potentially lower financial returns, a dairy expert has claimed.

Independent dairy analyst Chris Walkland said the TSDG review, announced last week, would leave some farmers with a tough choice to make about whether they stuck with the scheme.

TSDG is also looking to recruit an extra 150 suppliers.

Mr Walkland said: “For the first time farmers are going to have to really work for their premium to such an extent that, once market prices recover to a more normal market environment, the premium Tesco gives might, for some, struggle to justify the additional cost and administrative burden.

“However, given the track record of the TSDG for paying a volatility-free price, few farmers are expected to quit.”

Another change has been the introduction of a ranking programme to measure continuous improvements in animal welfare standards, milk quality, environmental management, carbon footprints and ‘engagement with the TSDG principles’, including going into stores to talk to consumers.

The bottom 5 per cent which do not make the grade will be given six-months’ notice, but also help to improve.

“In contrast, the top 5 per cent of producers will be incentivised more, so the net result will be a gradual improvement in the standards of the TSDG pool,” Mr Walkland said.