UK retail giant to pay dairy farmer suppliers extra

Considering the typical volume of milk produced per year, per farm being roughly 2.7 million litres, this means the average farm could receive around £27,000 (€25,210) extra per year.

With dairy farmers under huge pressure with rising costs, many of them are deciding to leave the industry. In fact, reports show 5% of UK dairy farmers left the industry last year, and 1 in 10 believe they will have left the sector by 2025.

Recognising this, Sainsbury’s aims to help alleviate the financial cost burden by increasing the price it pays to its suppliers in a bid to help farmers prepare their farms for the future.

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.

Increased pay for milk

Over the last year, Sainsbury’s has paid over £66 million to British farmers, including increased pay for milk. Coming into effect from 1 October 2023, this latest investment in dairy pay is on top of an £8.9 million booster payment given to SDDG farmers in April last year. Since introducing the Cost of Production model to the SDDG in 2012, according to Sainsbury’s, it has paid farmers, on average, 2.45p per litre more compared to the rest of the market, delivering a £114 million benefit.

Around £4.3 million 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.

Sustainability bonus

Alongside the investment in the new price model, the retailer has also committed £1.7 million 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 £2.6 million 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 is expected that many will need to make expensive updates to their farms, such as upgrading and improving feed stores and increasing the size of slurry storage. Sainsbury’s says this additional support 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 are proud of our continued investment into the Sainsbury’s Dairy Development Group and are confident our £6 million 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.”