Asda’s move to increase the price it pays to suppliers in its dedicated milk supply pool from has been branded an insult to dairy farmers.

Speaking to just-food, Farmers for Action chairman David Handley said Asda’s announcement it will increase the premium it pays to its farmers through the Arla Foods Milk Partnership highlights the low price that the retailer was – and is – paying. Asda has lifted the premium by one pence per litre to 3ppl. 

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“Asda are now paying such a low price that their cost of production figure is 27.5 pence per litre. That is three pence per litre below the actual cost of production, according to Sainsbury’s formula. This is just an insult. What it shows – to consumers as well – is if you apply a bit of pressure suddenly it is easy to find that extra 2ppl. The money is there in the supply chain,” Handley insisted.

Farmers have been hit by a recent spate of price cuts from the UK’s largest dairy processors that will result in a 3.65-4ppl reduction in the milk price when the latest price drop kicks in on 1 August. The cuts have caused outrage in the farming community, with farming organisations insisting their businesses have been pushed into a severe loss-making situation and asserting both sets of cuts must be rescinded.

Dairy processors have said the cuts are the consequence of a drop in bulk cream prices. However, according to Handley, retailers should shoulder the majority of responsibility as the low retail price has been supported by cream prices.

“The reason for the price cuts is because retailers are applying pressure on processors to keep prices down. If you look at where the margin is in the supply chain, it is with the retailers.”

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Nevertheless, a spokesperson for Asda insisted its decision to increase the premium that it pays its farmers by 2ppl was the consequence of talks with the Arla Foods Milk Partnership, which “focused on the latest round of cuts”.

“It is the milk cuts from 1 August that we have responded to,” the spokesperson said. Asked about calls for the first set of cuts to be addressed, the spokesperson said: “These are not the discussions that we have had.”

“It is the processors – not the retailers – that have cut the price paid to farmers for milk,” the spokesperson emphasised. 

The spokesperson added Asda will not be increasing the retail price of milk.