EXCLUSIVE: Promar reveals how Tesco dairy cost data is compiled

Farmers Weekly used this week’s Dairy Event and Livestock Show to take worried dairy farmers’ concerns over sensitive information required by Tesco’s direct supply contract directly to the man behind its controversial farm cost tracker.

Consultant Promar has hit back at recent criticism from some in the milk industry, denying it has come under any pressure from Tesco to alter cost-of-production figures for its direct supply group and seeking to reassure dairy farmers that it remains independent.

Speaking exclusively to FW at this week’s Dairy Event & Livestock Show, Promar’s national consultant Derek Gardner said that although its data collection process required farmers to divulge some details of additional income and farm debts, this was to complete whole-farm accounts and would not be seen by anyone but the individual farmer.

“In any case it would be completely illegal for us to do so, because of the Data Protection Act,” Mr Gardner said.

He also rejected outright any suggestion that Tesco had sought to manipulate farmers’ costs of production figures, on which the Tesco Sustainable Dairy Group farmgate milk price is partly based. “If they did, we would immediately pull out [of the relationship with the retailer].”

FW received several calls from dairy farmers on the morning of the first day of the livestock industry’s premier event, concerned that Promar’s data collection required them to divulge income from diversified enterprises and details of farm overdrafts.

Promar acknowledged this was the case, but insisted the farm business accounts it prepared for individual farms in the contract were solely for the use of the farmer and, in order to be comprehensive, had to include all data. However, Mr Gardner sought to assure farmers that none of this information was used in the average costs of production his firm prepared for the milk processors and the retailer. “The only information passed on is an aggregate average of milk production costs.

“There are two separate contracts at work here. One is to provide farmers with a full set of farm business accounts, which only they see. The second is to provide aggregate average costs data to the Tesco Sustainable Dairy Group.”

The cost tracker was not, as some thought it, a historical set of dairy farm costings, but a budget prepared for an average farm for the forthcoming financial year, Mr Gardner said. “That budget includes capital expenditure, net of part exchanges, at £62,000, a big rise on last year because of vital renewals needed after years of low returns and the need for some to invest in slurry storage ahead of NVZ legislation.”

On top of the variable farm costs, which included average debts attached to the dairy enterprise and the reinvestment provision, about 3.5p/litre had been included to cover unpaid family labour. “That’s very close to the recent figure from the Royal Association of British Dairy Farmers”.

Dairy farmers’ fears that the Tesco contract would demand they reveal sensitive commercial information to the retailer were misplaced, he said. “It is disappointing that the profile and integrity of the tracker has been tarnished by the ill-informed criticism by some in the industry.”

Costs Promar includes

• The variable costs of the dairy herd only
• Variable costs of rearing replacement heifers,
• All forage costs, except for other land-using enterprises like beef (allocated on a livestock-unit basis)
• Cows’ share of farm overheads (based on % turnover)