Farm Diary August 30 2008

Paying the motorway toll was never easier; anything so I did not have to change gear! We were lucky to get back.

Since we came home the weather has been atrocious, and the cereal harvest is still to get going properly, as the grain deteriorates whilst combines stand idle.

There has been a bumper harvest in Europe and the price of feed wheat has dropped sharply in the last month or so. The farm is in good order with plenty of grass due to the rain, and the maize is all a forest of green, but needs plenty of sunshine to ripen the cobs.

We have a Welsh TV film crew arriving for two days this week to do some filming, and my niece has been forewarned that she will be taking a major part; in fact she will be the star!

More changes to staff as a Hungarian couple arrive (both to work on the farm), to take over from Alex from the Ukraine and Miroslav from Bulgaria. Miroslav has now been back to Sofia and bought an apartment with the money he has earned working at Crouchlands over the last two years. Its good to see people work hard, look after their money and set themselves up for the future. It's good to be a part of that.

The launch of Wiseman's 'Fresh n low' in all Tesco stores last week shattered the traditional quiet time in the dairy sector. I think it would be accurate to say that absolutely everyone in agriculture and the retail trade were taken by complete surprise when a new line was introduced to Tesco's shelves at 10p per litre below the cost of standard milk.

What were they doing? Why was it a Robert Wiseman milk and not 'Tesco Value'? What would be the response from other retailers? What did this mean for farmers? Where did this leave 'dedicated pools'? Where would the discounters go with their price now? The media picked up on this story within hours and by the end of the week it was headline news.

At the NFU we have a good working relation with most players in the industry including retailers, and although we were not expecting this, it has been clear for many weeks that the competition at the retail level has intensified, and if it was not exactly a price war; it is now!

We have seen fuel as well as staple foods being used to lure consumers through the door, and milk has been used in the past to not only win customers from other retailers, but away from doorstep delivery. We should not therefore be surprised that as competition intensifies, that milk has again been devalued.

What is surprising though is the scale of the cut in milk price, and the introduction of a cheap line which is not a temporary offer, but a long term commitment by Tesco to sell milk at the same price as the discounters.

The response from Asda, Morrison's and Sainsbury's was predictably swift, and savage; cutting the price by a massive amount, undercutting Tesco by 6-7ppl. They did not have the means to introduce a cheap line at such short notice, but slashed the price of 'Cravendale milk' as an immediate reaction. Will they launch a cheap milk line? We don't know, but major retailers can move very fast indeed if they feel that there is real need to do so.

The official line from Tesco (as one would expect) is that they are taking the hit, and the discount is coming from their margin. The implication is that farm gate price will not be affected, and it is therefore nothing to worry about.

I only wish that were true! We know from bitter experience in the past that retailers do not take a hit on margins for long, and they soon start recovering such losses from the supply chain; a supply chain where one finds, at the end, an unprotected dairy farmer in an extremely weak position.

Has the hard work over the last three years, building direct supply chains between farmers and retailers been wasted? No. I believe that retailers still value the good public relations that such models give them, and it is very easy to monitor the real effect on farm gate price due to the transparency of these models.