Tesco maintains milk price link to cost tracker

Published 11 November 15

The outcomes of the review of the Tesco Sustainable Dairy Group (TSDG) were announced this week to its 600+ members. Of note is that members’ will continue to receive a milk price based on the cost tracker, although the promise to match potentially higher prices from other processors will be removed when the changes comes into force on 1 February 2016.

Other changes see the milk price updated on a quarterly basis rather than half-yearly, based on actual farm input costs. However, participation in the cost tracker scheme will no longer be voluntary and the 0.5ppl bonus for submitting farm accounts will disappear. Instead, all TSDG members will have to submit their accounts to Promar, with costs paid for by Tesco via the processor.

To deal with the surplus milk production by TSDG producers, seasonal supply contracts will be abolished and all TSDG milk will be supplied by core producers. The number of core producers will increase, decided by the milk purchasers, based on the newly introduced ‘recruitment scorecard’ and geographical location. A reserve pool will also be built in for young/ new entrant farmers. The ‘balanced scorecard’ will be used to measure producer performance annually. There are four categories in which producers will be assessed – quality, value, innovation and service.

The review has also aimed to reward performance and continuous improvement, and will implement this through an annual increase in ‘core’ volume allocation. The top 5% of producers, based on the balanced scorecard, will receive an additional 100,000 litres to produce within their TSDG contract. The volumes will be freed up by retirements or through the performance review process. The bottom 5% of farmers will be given a notice period of 6 months, during which they will receive support to improve their overall rating.

The changes will impact TSDG farmers at Müller Wiseman Dairies, Arla and Parkham Farms, but not those in receipt of the recently announced winter supplement for cheese.