Farmers fuming as shops sell milk on the cheap

By Sean Poulter
15 January 2011, 1:02pm

Supermarkets have slashed the price of milk to half the cost of bottled water in a move that has been condemned by farmers.

Tesco, Sainsbury's, Asda and Morrisons are all offering eight pints of milk for £2, equivalent to 25p a pint or 44p a litre.

At the same time, they are selling popular brands of water, such as Highland Spring, for 50p a pint or 88p a litre.

Farmers say the price war is devaluing milk in the eyes of consumers – and claim the wholesale market is so competitive that many dairy farms are paid less per pint than it costs them to produce milk.

James Withers, of NFU Scotland, said the use of milk as a loss leader threatens the future of dairy farming, as low retail prices affect the supply chain.

'The history of price wars show that it is not supermarket profits that suffer the consequences, but those of their suppliers,' he said.

'The average milk price for a dairy farmer is three pence below the cost of production. And whilst they lose money on every pint produced, retailers are making millions.'

Alastair Driver, of the Farmers Guardian, said: 'Supermarkets need to question whether selling eight pints of milk for £2 as a loss leader is either necessary or in anyone's long-term interests, including their own.'

Farmers want an industry ombudsman to ensure they get a fair deal and Farmers For Action has threatened to blockade Asda depots over low prices.

But a number of chains including Sainsbury's and Tesco have signed up farmers on an exclusive basis and in return pay more than the market rate for milk.

The British Retail Consortium, said: 'Just because customers are getting good deals for milk, doesn't mean farmers are losing out.

'The dairy industry's own figures show the top 11 best-paying milk contracts are all paid by supermarkets.'