Sainsbury’s has defended the contract terms for farmers in its Dairy Development Group following criticism of its cost of production model.
According to independent dairy consultant and Dairy Farmer columnist Ian Potter, farmers in the north of England and Scotland have been frustrated with the retailer’s pricing model.
Farmers felt efficiency was not being fairly rewarded as, if cost savings of 2ppl were achieved, the supermarket intended to pocket the whole amount with no benefit to its farmers.
Mr Potter said: “In addition, the Sainsbury’s farm units have, on average, expanded but the fixed amount added in for family labour is being constantly diluted in the ppl cost of production as on-farm production increases.”
Scottish farmers were also frustrated by the way the feed price was calculated, with the cost of feed per tonne charged by the Sainsbury’s buying group’s price, which Scottish farmers were not part of.
And the final straw was the recognition the model had costed calf milk powder and Megalac in as the feed wheat price, which Sainsbury’s have now agreed to correct, recognising the difference as a loss to farmers of 0.9ppl.
However, Sainsbury’s will give farmers only 0.6ppl and there were no moves to backdate payments.
A Sainsbury’s spokesperson said: “We meet with the farmers in our Dairy Development Group on a regular basis to discuss opportunities and challenges.
“We listen to their views and regularly review how we can evolve our cost of production model to ensure we can best support them now and in the future.”
The supermarket added it had worked in close collaboration with farmers since the inception of the group in 2007 and, following the majority vote to move to a cost of production model in 2012, farmers had benefited from reduced volatility and been able to invest in their business.