Milk deal will help farmers, but price of a pint may rise

Wiseman, which operates from seven dairies across the UK, said it would increase the price to ensure the long-term supply of milk for its customers.

The supplier, which earlier this year signed a major deal with The Co-operative Group, has come under pressure from surging diesel and raw material costs.

The price warning comes as research from the British Retail Consortium showed a surge in food prices in June, piling more pressure on consumer spending power.

Leeds-based Arla Foods, another key milk supplier, said it is in the process of reviewing the markets and is in ongoing dialogue with farmers. Arla said it couldn’t comment on future plans as it would be in breach of strict rules.

The group increased the price of milk by 2p a litre in March from 24.5p to 26.5p a litre, a rise of eight per cent.

Dairy Crest, another leading supplier, said it could not talk about forward looking milk prices, but said it has increased milk prices by 12 per cent over the past year.

The company said that farmers’ costs have gone up and they need more money to compensate.

Wiseman, which has a depot in Normanton, said yesterday that trading for the 13 weeks to July 2 was in line with expectations.

The company said sales volumes would benefit from the start of the deal with the Co-op from August, when Wiseman will supply all of the supermarket’s own brand milk.

The Co-operative Dairy Group, formed from the deal, will benefit some 240 Wiseman producers, the company added.

Wiseman said diesel costs were 15 per cent higher during the 13-week period, compared to last year, while the cost of resin used to produce its plastic bottles was 18 per cent higher.

The group said it continues to invest in the business in a move to generate cost savings. New refrigeration equipment has reduced gas usage by 50 per cent.

Chairman Robert Wiseman said: “Over the past 12 months, the business has experienced unprecedented pressure on margins and significant increases in input costs.

“Despite these pressures, we have continued to gain volumes and have achieved record levels of efficiency.”

Analysts at Panmure Gordon said the decision to pay suppliers a higher price gives Wiseman an opportunity to recover costs from retailers.

“The market place remains competitive but, given the recent increase in the raw milk price, there appears to have been an easing in the middle ground market which we regard as encouraging,” said the broker.

But Panmure warned that any price recovery would be “hard won given the current retail environment”.