A MAJOR UK SUPERMARKET has admitted it does not consider what it has paid a farmer when setting the price of a pint of milk, an investigation into the dairy crisis has revealed.
The practice has been described as ‘astounding’ by Conservative MP Simon Hart, who is assessing prices farmers are paid for their produce as part of a review by the House of Commons Environment, Food and Rural Affairs Committee.
With representatives from Morrisons, Sainsbury’s and Tesco in front of him, he asked them to clarify that there is no connection between the price paid to producers and the retail price.
Morrisons interim fresh trading director Alex Brown said that for their business the two prices are ‘decoupled’, but where it can give money back to a ‘farming community in distress’ like the dairy industry, it has taken that opportunity to pay farmers extra.
“I find this astounding. It’s a basic business principle isn’t it?” said Mr Hart.
Mr Brown, who said Morrisons lowered milk prices in the past to cope with other retail competition, said: “There’s no connection, but where we’ve got some scope with a price increase to give back to a farming community in distress, we’ve taken that opportunity.”
He said their most recent price rise on Monday has led to farmers being paid more.
However he was forced for the first time to publicly address concern that their Milk for Farmers brand is in fact sending extra funds to farmers across Europe.
The higher-priced milk range sees a third of the money passed to British farmers through processor Dairy Crest, while two-thirds is passed back to Arla, a European milk cooperative where the money is split between its British and European members.
Mr Brown said: “We have altered the label on the back following two pieces of customer feedback that we weren’t clear enough.”
Chairman of the committee, Neil Parish MP, asked: “Are you finding that your customers are actually expecting that premium to go back to British dairy farmers?”
Mr Brown said: “I think if we asked them they would.”
He said he had tried to get Arla to change the situation but because they’re a co-op it would be illegal. The committee meeting came as criticism continues over the effectiveness of the Grocery Code Adjudicator (GCA), which was a position set up by the Government to investigate supermarket relationships with producers and deal with complaints and disputes.
Julian Sturdy, MP for York Outer, said it has so far failed to carry out a single investigation into supermarket pricing. Furthermore, as only 3% of the dairy market provides milk to supermarkets directly, the scope of the adjudicator role is far too narrow.
With milk prices falling from 30p a litre to the low 20s, he said farmers across Yorkshire are continuing to make a loss and the situation is still not being properly dealt with.
He said: “You could say Morrisons have done a good thing by getting the ball rolling, but ultimately it’s short sighted trying to drive down the price of milk within the dairy industry which means that the dairy farmers are physcially losing money. You are going to draw the industry to the wall and if people who go under leave, where does that leave the dairy industry for the long term?”
It is understood that the Environment, Food and Rural Affairs Committee will commence an investigation into the role of the GCA in the Spring of next year.