0.23ppl Sainsburys cost of production model increase criticised as 33.1ppl is muted

The word on the street is that the Sainsburys Dairy Development Group cost of production (COP) model is only increasing by 0.23ppl resulting in a liquid standard litre price of only 33.10ppl

The problem is the Sainsburys model, as overseen by Kite Consulting, tracks back 6 months on most inputs with fertilizer tracking back 12 months and fuel 3 months.  But Sainsburys farmers have exceptional bills to pay now.  Numerous Sainsburys farmers are extremely unhappy with some claiming they want to exit their aligned contracts.

This COP model simply fails to react to the current exceptional circumstances and whilst they will eventually catch up Sainsburys need to find a way to support their aligned farmers now unless the game plan is to ditch their aligned pool and to achieve this, they simply plan to painfully force farmers to leave them.

 

Kite are in the thick of it because their recent report calling for a 35ppl milk price as of October has been adopted by almost all processors as the independent source of accurate data which they are using to push through price increases.  Kite have helped the industry enormously but in doing so have set a 35ppl expectation which Sainsburys farmers are short on.

 

Given the surprise Lidl move its not helpful to have a SDDG price of only 33.10ppl.  Will Sainsburys follow Lidl’s lead and recognise the need for immediate support and price action in these extraordinary times.  The right move must surely be for Sainsburys to pull a chair up to the table and find a mechanism to pay more now.