UK: Tesco Milk Price War Could Spell Disaster For Dairy industry

Dairy farmers say Tesco risks sparking another damaging price war after it launched a new cut-price milk line. Britain's biggest retailer has started selling branded Fresh 'n' Lo milk at £1.06 for a two-litre carton, 10p below the price charged by its closest rival.

The move has brought immediate condemnation from Farmers For Action.

David Handley, its Monmouth-based chairman, said it threatened to wipe out all the progress made over the past 18 months in obtaining better prices for milk producers.

"The last time we saw this happen was in 1995/96 when Tesco decided to take on Asda, and we all know what happened then, the sky fell in for a lot of dairy farmers" he said.

Tesco is being supplied with the milk by Robert Wiseman Dairies which has recently opened Europe's most modern processing plant near Bridgwater.

But Mr Handley said milk producers were in no financial state to get caught up in a discount war.

"I really thought we had turned the corner, that the supermarkets had at last got it into their heads that if they want security of supply from British milk producers then they need to be paying a sustainable price" he said. "There was a huge fall-out of dairy farmers the last time this happened and the exodus hasn't stopped yet.

"With rising prices squeezing profits a lot of farmers are already questioning whether it's still worth getting up to milk the cows.

"The prospect of another price war will simply convince thousands more of them that it isn't."