Asda is increasing its premium paid to farmers to 3p/litre from 1 August, which is worth £30,000 a year to an average supplier, it said.

The 2p/litre increase means Asda milk producers will continue to be paid 27.5p/litre, offsetting the cut in farmgate prices previously announced by Arla.

“Over the past eight years, in partnership with Arla, we have worked extremely hard to build an open, honest and transparent relationship with our farmers,” said Karl Martin, Asda’s commercial director for dairy.

“We pride ourselves on listening and acting positively whenever necessary in order to ensure we operate within a sustainable supply chain.”

Asda will now also be able to source significantly more butter from the UK, it said, after the expansion of Arla’s butter processing facility in Westbury, Wiltshire. New production lines have been added which will give dairy farmers a market for excess cream, said Asda.

“We are fully aware that the liquid milk we purchase is only half the story. A significant amount of the cream produced by the dairy industry in the UK is sold on the global commodity market. In order to improve returns to farmers, Asda is committed to driving retail sales of British butter and cream,” Mr Martin added.

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