Dairy farmers supplying Sainsbury’s with milk will be paid more from next month thanks to a £6m annual investment made by the retailer to support farms for the future.
Recent reports have shown that due to factors such as rising costs almost 5% of dairy farmers left the industry last year and one in 10 believe they will have left the sector by 2025. Acknowledging the increasing volatility of input costs and high level of capital investment required by dairy farmers, Sainsbury’s undertook a year-long review, with the support of its Dairy Development Group (SDDG) farmer steering group, into how it pays farmers for milk.
Over the last year Sainsbury’s have paid over £66m of support to British farmers, including increased pay for milk. Coming into effect from 1 October, this latest investment in dairy pay is on top of an £8.9m booster payment given to SDDG farmers in April last year. Since introducing the Cost of Production model to the SDDG in 2012, Sainsbury’s has paid farmers, on average, 2.45p per litre more compared to the rest of the market, delivering a £114m benefit.
£4.3m of this new investment will go towards giving farmers an additional fixed 1p per litre for milk on top of the independently calculated Cost of Production price that the retailer currently pays to farmers. With the typical volume of milk produced per year, per farm being roughly 2.7m litres, this means the average farm could receive around £27,000 extra per year.
Alongside the investment in the new price model, the retailer has also committed £1.7m for sustainability bonuses. Farmers will be rewarded for helping Sainsbury’s to achieve its Plan for Better targets, specifically carbon reduction, through activities such as using sustainably sourced feed and using the correct amount of fertiliser, in the right way. The retailer previously committed a sum of £2.6m in bonuses for dairy farmers but is expanding the investment as it shifts the focus towards sustainability.
With new compliance legislation coming down the line for dairy farmers it’s expected many will need to make expensive updates to their farms, such as upgrading and improving feed stores and increasing the size of slurry storage. This additional support from Sainsbury’s aims to give farmers the confidence and desire to invest in these long-term changes so they can continue production for years to come.
Gavin Hodgson, director of agriculture, aquaculture and horticulture at Sainsbury’s, said: “The dairy farming industry is becoming increasingly challenging and we recognise the responsibility we have as a retailer to support farmers and the need for continuous investment in this sector.
“We proud of our continued investment into the Sainsbury’s Dairy Development Group and are confident our £6m annual investment will help farmers to plan for a long-term and sustainable future. In turn, we hope this will also provide surety of supply for our customers as we continue to champion British milk now and for the future.”
