ASDA HAS decided to increase the price it pays for milk by 0.5p per litre, putting £2.5 million back into the pockets of its milk producers.

The supermarket chain‘s 600 milk suppliers, who are part of the Asda Farmer Partners group within the ARLA Foods Milk Partnership, will receive the premium from Dec 1.

The supermarket has promised that it will not pass the extra cost on to consumers via retail price hikes.

The announcement followed the maiden meeting of a new price review body involving Asda, Farmer Partners and Arla Foods Milk Partnership, which took place on Nov 3.

Wes Abbey, chairman of Asda Farmer Partners, said: “Asda‘s announcement today shows it is committed to entering into a meaningful dialogue with its farmers at what is a critical time for the industry.”

The move bucks the recent trend among dairy processors for milk price cuts, which saw Arla shave 0.4ppl off its prices on Sept 1.

But only the 600 Arla dairy farmers supplying Asda will benefit, with the remaining 600 of the group‘s milk producers seeing prices unchanged.

“All of our members are fully aware that there could be a movement in prices that could only affect Asda Farmer Partners,” said AFMP chairman Jonathan Ovens.

“It has to be positive for all dairy farmers in what looks like a falling market, that we‘ve got an extra halfpenny on nearly half a billion litres of milk per year.”

The price review body will meet once a quarter, although Mr Ovens warned that milk prices could still change between meetings, or be kept on hold.

Gwyn Jones, NFU dairy board chairman, welcomed the news and said that other dairy operators must now follow suit.

“There has been a lot of speculation recently on the impact of supermarket supply contracts and this decision finally sends some positive messages to dairy farmers at a time when they‘re seriously considering their futures.”

But chairman of pressure group Farmers for Action, David Handley, remained unimpressed by Asda‘s move on prices.

“We have told Asda it falls far short of getting the other 14,000 producers a decent milk price and we still require Arla to reinstate the 0.4ppl they removed in September. 

“Until that happens direct action will continue,” he warned.