The current milk pricing crisis in the UK has led many to ask just how much profit are retailers making on milk.
When Walmart-owned Asda was asked how much profit it makes on a litre on milk at the Royal Welsh Show this week, the retailer said it was not privileged to provide the information to the public. The retailer says it is already increasing what it pays farmers by 2p a litre, but farmers say this is not enough. “It was just tight enough previously for young farmers in the industry,” said one farmer at the argicultural show yesterday, without having the price cut even further.
With a pint of milk costing an average of 50p, just how much of that price actually goes to a dairy farmer? According to the Royal Association of Dairy Farmers, this price includes a cut of 29p for the retailer, the processor takes 7p with just an average of 14p going to the farmer. However, it costs farmers 17p to produce a pint of milk.
Farming minister Jim Paice says that the Government can’t set prices. Speaking to BBC News, he said, “I can’t intervene in prices – that has to be for the market to resolve to settle.” He added that they have tried to do is make things work much more transparently.
Dairy farmers and processing companies have now established the main principles of an new agreement for milk pricing. The voluntary code of practice will give farmers more bargaining power.
Analysts believe that discount chains have taken the price of milk down to a level that is unsustainable. When Asda dropped the price of four pints of milk from £1.18 to £1 last week, the company endured the wrath of the farming community. Rival supermarket chain Morrisons then made the decision to sell four pints of milk for just 98p. The majority of supermarkets are offering 4 pints of milk for £1.18. While the new deal will go some way to making milk pricing more transparent, it will not solve the current crisis, says the National Farmers Union.
Click here to watch the Asda spokesperson responding to the question on profit at the Royal Welsh Show.
© Profitero 2012
Other Profitero stories on milk pricing:
Morrisons’ 98p Vs. Asda’s £1 For 4 Pints Of Milk
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