NFU Tell the 'Harsh Reality' to Tesco

UK - NFU Director General, Richard Macdonald has on Wednesday reinforced the NFU's continued support for the Tesco Sustainable Dairy Group, but has sent a clear message that there is room for improvement.
calendar icon 16 October 2008
clock icon 3 minute read
National Farmers Union

Speaking at Tesco's Wiseman producer conference, Mr Macdonald stated: "When we consider the British dairy industry in the context of such global challenges as the current economic crisis, volatile world and EU dairy markets and the growing concerns around food security, the TSDG stands up as a leading example of how dedicated supply chains can bring stability, transparency and confidence to the British dairy industry.

"The role of the retailer has changed significantly in recent years. The power that the multiples exert on the domestic market is a significant factor in determining the fortunes of farmers. They are the industry's biggest and most powerful customers and the sheer volumes now involved in their contracts for milk, cheese and other dairy products means that processors are often in a weak position to resist downward price pressure. Over time this has contributed significantly to the fall in UK production and has shaken the confidence of our dairy farmers.

"The NFU remains committed to its Vision for the Dairy Industry, which pioneered the concept of dedicated supply chains"
NFU Director General, Richard Macdonald

"Tesco's decision to stock FreshnLo highlights the challenge retailers face in meeting their responsibilities to customers without compromising their commitments to farmers. I understand that Tesco wants to provide value to their customers in a testing economic climate and will be concerned at losing market share to the discounters. However, I am concerned by the strategy and by the claim that this move will not be felt by the TSDG. While for now the core TSDG farmers are protected by their contract, the impact of this move on farmers' confidence, who are still adjusting to being in a relationship with a retailer, cannot be underestimated.

"The NFU remains committed to its Vision for the Dairy Industry, which pioneered the concept of dedicated supply chains, where milk prices are no longer governed just by commodity markets, but based on clear pricing formulas, which offer greater long-term stability, transparency and build trust between producers and retailers. We still believe that Tesco has gone further than any other major retailer to put in place mechanisms that allow prices to reflect production costs and to guarantee them for 6 months at a time. However, this does not mean to say there isn't room for improvement.

"At what is still an early stage in a new relationship, getting communications right is vital. There are still undercurrents of negativity and distrust that persist among dairy farmers, understandably after 10 difficult years of a badly functioning supply chain. Secondly, while we have seen great progress for liquid milk I want to see Tesco extended this responsibility into cheese and other dairy products. This includes sourcing more produce, especially own label cheese, from Britain. Thirdly, it is time for the TSDG to better organise itself with a proper democratic structure and representation to strengthen communications and negotiations.

"Tesco and all of the TSDG suppliers should be congratulated for what they have achieved so far. The harsh reality is that if consumers and retailers want quality British produce then farmers must be given long term certainty on their milk price and have the confidence to commit dairying to long-term. I still believe that the TSDG offers these assurances."

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