Farmers welcome Tesco's milk price move

A surprise move by Tesco to increase the price it pays for milk was welcomed by the hard-pressed dairy industry last night .The country's largest supermarket, which will now source 100pc of its milk direct from 850 farmers, will pay 22p per litre on a rolling annual contract - up by about 4p per litre - linked to the cost of production.

A surprise move by Tesco to increase the price it pays for milk was welcomed by the hard-pressed dairy industry last night.

The country's largest supermarket, which will now source 100pc of its milk direct from 850 farmers, will pay 22p a litre on a rolling annual contract - up by about 4p a litre - linked to the cost of production.

Dairy farmers have been leaving the industry in droves in the past three years as prices have plunged to below the cost of production prompting protests from farmers' groups and also the National Federation of Women's Institutes.

Farmers' leader Peter Kendall said: "I would like to congratulate Tesco on this groundbreaking deal."

And a leading Norfolk dairy farmer, William Brigham, of Lyng, near Dereham, said that Tesco's announcement was the best news for the industry, which should encourage dairies to pay fairer prices.

He said that while Asda did take the lead in paying slightly higher prices of about 1p a litre to about 650 producers, mostly in eastern England, it did not stem the ruthless round of price-cutting.

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"We've been saying for months that milk prices cannot continue at such low levels. I hope that it will give the lead to other supermarkets and dairies," said Mr Brigham, who is regional chairman of the National Farmers' Union.

Tesco has promised that retail prices will not rise as a result of dairy farmers being paid an extra 4p a litre - which will be paid as soon as producers can be signed up.

It is also launching a "localchoice" milk, which will be sourced from 150 smaller family farms, which will receive about 6p a litre extra. This will be sold in the county or region where it is produced for about £1.23 for a four-pint bottle - or 8p more than the standard bottle.

Mid-Norfolk producer Ken Proctor, who milks about 300 cows on the family's farm at Grange Farm, Shipdham, said: "This is welcome news and will give the whole dairy sector a real lift. This will encourage others to follow their example."

In February, the Devon Young Farmers' Great Milk Robbery campaign presented a 3,000-signature petition to 10 Downing Street to highlight the plight of dairy farmers. It claimed farmers were paid an average of 18p a litre for milk which cost around 21p a litre to produce.

Tesco commercial and trading director Richard Brasher said: "I believe that this new package of measures offers British farmers a great opportunity to work with us, get closer to consumers and grow their business."

Waitrose and M&S, which introduced higher prices for milk, have also seen increases in sales, as has the East of England Co-op.

Since the co-op launched its Exclusively East Anglian milk brand, which now involves about 15 producers supplying the Ipswich dairy, about four years ago, sales have soared.