Farmers' milk price war concerns

Two supermarkets have cut milk prices in recent days

A supermarket price war on milk will be a "nail in the coffin of the industry", according to a farmers' leader.

Tesco and Asda recently announced they were cutting the price of milk after inflation reached its highest level since 1997.

But Eifion Huws, of the Farmers' Union of Wales (FUW), said an increase in farmers' returns was "essential" to cover rising production costs.

Asda said it would not pass the cuts on to its suppliers.

Mr Huws, the chairman of the FUW's milk committee, said: "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."

The FUW said although the selling price of milk has risen, the share going to farmers has fallen since 1995 from 24.5p to 18p.

'Financial pressure

"With soaring costs of this nature an increase in farm gate prices are essential to stem the flow of milk producers leaving the industry," Mr Huws said.

"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."

Asda said it will be cutting the price of milk in its stores over the weekend to 2001 prices - a 38% cut. Two-pints will go down from 80p to 50p.

Tesco is now selling two-pint bottles of Fresh and Lo brand milk for 99p.

A spokesperson for the supermarket said: "In the current economic climate customers are telling us they want a range of products which will help to ease some the financial pressure they are facing.

"With Fresh and Lo we have delivered this without any impact on the farm gate milk price we offer Tesco Sustainable Dairy Group producers."