Muller dairy farmers in Shropshire will get £9.5m boost from supermarket giant Tesco - if they hit targets

The supermarket says farmers who supply milk for its stores via Market Drayton-based dairy giant Muller will earn an extra 2.5p per litre of milk if they hit key targets on emissions reduction, animal health, feed conversion efficiency and genetic improvements.

Tesco says the payments could be worth around £9.5 million for the 260 farms which are part of its sustainable dairy group, an initiative created in 2007 aiming to ensure dairy farms which supply the firm are able to stay in business through longer-term agreements on pricing for milk.

The retailer says the move comes on the back of feedback it collected from farmers as part of its Greenprint for UK Farming Report, which set out a number of recommendations for government and the industry to ensure a transition to a low carbon UK agriculture sector. 

Exploring new payment models and incentives was a key recommendation put forward by farmers, it says.

The firm will also introduce similar incentive plans for a number of its other sustainable farming groups, which it runs for lamb, pig and beef farmers, with incentives based on animal welfare improvements, biodiversity and soil health, and emissions reduction.

“Earlier this year, as part of our farmer-led Greenprint for UK Farming Report, we published a set of recommendations for the government and industry aimed at ensuring the UK agriculture sector is equipped to transition to a low carbon future," said Ashwin Prasad, Tesco UK CEO. 

"A key area identified by farmers was the introduction of incentive schemes to help achieve our shared sustainability goals. 

"We’re pleased to be acting on these recommendations with the roll-out of sustainability-linked incentives for a number of our Sustainable Farming Groups. These incentives will play a crucial role in ensuring our farmers remain economically and environmentally sustainable for the long-term.”

Last year, dairy companies Muller and Arla also linked up with Tesco to form an initiaive known as the "Future Dairy Partnership" to trial new innovations in the sector to reduce emissions, improve animal welfare and protect nature.

Rob Hutchison, CEO of Muller Milk & Ingredients said: "We are delighted to collaborate with Tesco to identify solutions for farmers that will not only drive high standards of animal welfare and reductions in environmental impact, but also create the financial conditions which supports future planning for their business. 

"We want to build a better future for the British dairy sector, and programmes like this, will make a real positive impact."