Sainsbury’s dairy farmers to receive thousands more per year after retailer revises payment model

British supermarket retailer Sainsbury’s is set to invest additional £6m/$7.5m per year in its dairy farmer suppliers, the company said. The investment follows a £8.9m/$11m ‘booster payment’ the firm paid farmers in April 2022 and adds to the £66m/$82.3m offered in support in total to farmers across the past year.

Quoting National Farmers Union data, Sainsbury’s says up to 5% of dairy farmers had left the industry over rising costs and 1 in 10 think they would have exited the sector by 2025.

The investment has been informed by a review into Sainsbury’s milk pricing model, carried out in close partnership with the retailer’s farmer suppliers. Sainsbury’s says it was already paying more than the market average thanks to its Cost of Production model introduced in 2012, but the review highlighted the financial pressures its suppliers had been facing in recent times.

Coming into effect from October1, 2023, additional £6m will be ringfenced on top of the £8.9m booster payment Sainsbury’s paid farmers in April 2022. £4.3m/$5.4m of this new investment will go towards giving farmers an additional fixed 1p per liter for milk on top of the independently calculated Cost of Production price that the retailer currently pays to farmers. With the typical volume of milk produced per year, per farm being around 2.7m liters, this means the average farm could receive around £27,000/$33,650 extra per year, the company said.

The retailer has also committed £1.7m/$2.12m in so-called 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,” said the company.

“With new compliance legislation coming down the line for dairy farmers it’s expected many will need to make expensive updates to their farms, such as upgrading and improving feed stores and increasing the size of slurry storage. This additional support from Sainsbury’s aims to give farmers the confidence and desire to invest in these long-term changes so they can continue production for years to come.”