Tesco is set to make a multi-million pound investment in the British lamb industry by introducing improved cost of production contracts for around 160 of its British lamb farmers.

The contracts represent the latest step in Tesco's drive to build long-term transparent partnerships with its suppliers and farmers, and will see farmers up and down the UK benefit from a price based on the average cost of production across the group. The price will be set for 12 months, before being reviewed for the second year of the contract.

All the farmers are part of the Tesco Sustainable Farming Group for lamb, a group set up in 2014 to strengthen Tesco's relationship with British lamb farmers and processors. The group meets on a regular basis to share knowledge, customer insight, and best practice around sustainability and animal welfare.

Tesco made the announcement at the Royal Welsh Show, with around a third of the farmers included in the scheme based in Wales.

George Wright, Tesco's Commercial Director for Fresh Food said:

“We know many lamb farmers are looking for stability to overcome the uncertainty surrounding CAP payments, so we're delighted to be offering these industry-leading COP contracts to 160 lamb farmers across the UK. Through our ten Sustainable Farming Groups, we're building transparent, long-term partnerships with our farmers and producers, and our cost of production model is the next stage in ensuring our farmers have the confidence to invest in their businesses and build for the future. The door is open for more British lamb farmers to join us and take advantage of the new model.”

Tesco's lamb farmers welcomed the news. Richard and Sarah Wilde, lamb farmers from Welshpool, Powys who have been supplying Tesco with lamb for over 5 years said:

“This cost of production model is great news for our farm as it gives us a guaranteed price for our lamb for the next 12 months. It means we and other lamb farmers in Wales and across the UK can invest and plan for the future with confidence, and ensure we continue to provide Tesco customers with the very best British lamb.”

Tesco is actively looking for more farmers to join the scheme, with next year's contracts starting on the 1 April.

The news comes just weeks after Tesco announced new contracts for its Aberdeen Angus beef farmers and the relaunch of the Tesco Sustainable Farming Group for Beef. Tesco now operates 10 Sustainable Farming Groups covering areas including lamb, beef, poultry and eggs, cheese and potatoes.