Dairy farmers supplying liquid milk to Morrisons are set to receive a long-awaited boost, the supermarket giant has announced. It is to increase the price it pays its two processors – Dairy Crest and Arla – for its milk by 1p/litre and has asked they pass the full increase on to farmers.

“We have a long-established relationship with Dairy Crest and Arla, so expect them to honour that,” Richard Taylor of Morrisons said.

The move follows last week’s 0.5p/litre processor increase to “reflect market conditions”, and was broadly welcomed by NFU dairy board chairman Gwyn Jones, who said it should help inject some further confidence and profitability into the dairy sector. “With milk production declining in the UK Morrison’s is sensibly seeking to secure their supply of milk.

“The NFU Vision for the dairy industry supported moves by retailers to get closer to dairy farmers to break down the barriers of mistrust, create clearer market signals and generate better transparency.”

Morrisons store

Morrisons is set to become the first supermarket to offer all of its own-label standard fresh milk sourced and sold regionally

But he said the price increases were likely to be smaller once shared among the pool of producers. “For these reasons we want to see Morrison’s go further by establishing not only a direct, but also a dedicated relationship with their farmers.”

Quota broker Ian Potter, also welcomed the price increase, although he said it had been long overdue. “It might not be as much as some producers hoped for, but it does come without additional cost.”

Morrisons’ approach was simple, transparent and more cost-effective than dedicated supplier agreements favoured by some other supermarkets, such as Tesco and Sainsbury’s, he added. “Hopefully, Morrisons are tough enough to ensure the full penny is passed on to farmers.”

Own-label local milk scheme launched

Morrisons has also announced it is to become the first big retailer to offer all of its own-label standard fresh milk sourced and sold regionally. The scheme will start at the end of June in north-east England, before being rolled out to all of its 376 stores nationwide. The company already operates a similar regional milk initiative in Scotland.

“We want to help as many dairy farmers as possible and also give customers own-label milk [rather than separate premium lines] that has been supplied by farmers in their own region,” Mr Taylor said.