NEW MILK PRICE WAR ANGERS WELSH DAIRY FARMERS

A Welsh dairy farmers' leader is seething over a new milk price war in which Asda and Tesco have slashed their prices.

Asda has dropped the price of Cravendale milk from £1.56 for two litres to £1 and Tesco is selling Wiseman's branded milk at £1.06 for two litres - 10ppl cheaper than milk sourced from their own contracted farmers.

"With the plight of British dairy farmers already in such a fragile state, this latest price war is another huge nail in the coffin of the industry," said Farmers' Union of Wales milk committee chairman Eifion Huws, who supplies milk to Tesco's through their "localchoice" scheme.

"Until recently, most retailers had been selling two litres for around 40-50p more than these latest prices and I believe this has sparked fears that Iceland, Lidl, Aldi and other discounters will also drop their prices."

Promar farm and agri-food consultancy business recently revised their estimated cost of milk production for the current year (April 2008 to March 2009) as 27.8p per litre.

"But farmers remained confident that the farm-gate price of milk would rise to 30ppl this winter. Those hopes will now be dashed if this new price war lasts for several months," said Mr Huws.

"I urge farmers who supply Wiseman's through First Milk to question how long this deal with Tesco will last and how happy are they with it."

Back in 1995 the average selling price was 42.1ppl with the retailer taking a margin of 1.3p, the processor 16.3p while the farmer was paid 24.5p.

Last year the retail price rose to 51.6p, the retailers' margin spiralled to a massive 15.6p, the processors margin increased marginally to 18p but the farmers'' return was cut to 18p.

"According to statistics due to be released next week, farm input costs have soared by 30% in the past year," Mr Huws added.

"I understand the latest Agricultural Inflation Index will show dramatic price increases for major inputs including fuel, fertiliser and feed, as well as seed and machinery.

"With soaring costs of this nature an increase in farmgate prices are essential to stem the flow of milk producers leaving the industry. Such an increase has to be significant but that will be very difficult to achieve if milk becomes the subject of a prolonged price war."