Tesco sign© Rex

Tesco will drop the milk price it pays to dairy farmers by just over a penny a litre from May.

Britain’s biggest supermarket will pay its dedicated dairy group 30.93p/litre, after the latest six-monthly review.

Tesco faced farmers’ fury last year for slashing the retail price for four pints of own-label milk from £1.39 to £1.

But the retailer insisted price cutting on the shelf would not be passed on to the farmgate.

See also: 7 tips for running a dairy business on a budget

The price paid out to farmers covers the supply pool’s average cost of production, worked out independently by consultant Promar.

Accountant Dodd & Co recently estimated producers’ costs to be 29.84p/litre in 2013-14 and projected them to slide to 27.11p/litre in 2015-16.

This means the cost-tracker schemes run by Tesco, Sainsbury’s, M&S and Waitrose should be covering farmers’ costs, delivering well above the average UK milk price of 26.3p/litre in January.

Aberdeenshire farmer and Tesco dairy committee chairman James Stephen said the pricing structure gives farmers some stability and peace of mind, often lacking in a volatile industry.

“Set for six months, all farmers in the group have real certainty over the milk price they’ll receive, which is of huge benefit when budgeting and planning for the future,” he said.

The Tesco Sustainable Dairy Group (TSDG) contains more than 600 farmers, supplying the supermarket through Muller Wiseman or Arla.

But Arla farmers still receive the co-op’s standard price, which stands at 25.8p/litre in March, with the Tesco premium split across all members.

The TSDG was formed in 2007 and covers all the retailer’s requirements for:

  • Own-brand fresh and filtered milk – but not organic
  • Single, double and extra thick double cream
  • Mature and extra mature cheddar