Supermarket giant defends milk prices
06:30 18 July 2012
ARCHANT NORFOLK PHOTOGRAPHIC Â© 2005
As the row over milk prices continues, retail giant ASDA yesterday defended how it treated farmers that supply dairy products to its stores.
Director Paul Kelly appeared in front of a committee of MPs running a parliamentary inquiry into claims that low prices supermarkets demand for milk are driving farmers to bankruptcy.
Mr Kelly said: “These are structural issues in the industry and whilst every drama needs a villain, to simply point at supermarkets and say we are the solution to all the problems the sector faces, I think is perhaps a little bit misleading.
“We have to work across the supply chain to solve these issues.”
Recent cuts in the price of milk paid to farmers by food manufacturers and supermarkets led 2,500 dairy farmers to gather in London last week at a protest meeting.
They complained that supermarkets vying to sell milk at ever cheaper prices are using their market position to push the resulting loss in revenue onto farmers.
Mr Kelly added: “We have a duty and an obligation to both ends of the chain. We have a duty and an obligation to the farmer and we are satisfying that, but we also have a duty and an obligation to the customer; particularly at a time when they are finding it really difficult to make ends meet.”
Food producer Dairy Crest, also represented at yesterday’s select committee hearing, recently announce a 1.65p per litre cut in the price it pays for milk; a move which followed a 2p cut in May.
But company director Mike Sheldon told MPs on the committee that food manufacturers were also finding market conditions tough.
He said: “If you look at our results for our dairies business last year we made a small profit, the bulk of which was made on property.
“We didn’t make a return on our capital invested in our business last year and clearly that is not a sustainable position either.”
Earlier in the day ASDA had announced that it would increase the price it paid to its farmers by 2p per litre.
Meanwhile Dairy Crest, which supplies 15pc of British milk production, announced it would alter its contracts with farmers allowing them to move their milk supply with three months’ notice if they were unhappy with price changes, instead of the current 12 months.
National Farmers’ Union dairy board chairman Mansel Raymond, who also attended the hearing, said if the industry could not come to a voluntary arrangement on how to manage milk prices in the future, the government would need to set them through regulation.