Tesco is to pay dairy farmers in its direct supply group a record high price of 29.78p/litre from 1 April.

Milk producers in its Sustainable Dairy Group, who subscribe to the costing model prepared by consultant Promar, will receive a new price of 29.78p/litre.

This represents an increase of 1.6p/litre since the contract was last reviewed in September.

The increase follows analysis by Promar of dairy farmers’ costs and mainly reflects higher feed prices.

A Tesco statement said the move meant it was paying its dedicated dairy farmers 3.04p/litre more than the average processor’s price, 26.74p/litre.#

Tesco board director Lucy Neville-Rolfe said: “With the price of feed and production costs rising it is important to support our British dairy farmers. We will continue to pay a fair price for the milk they supply and to work with the Dairy Centre of Excellence at Liverpool University to improve dairy productivity and sustainability.”

Andy Bloor, chairman of Tesco’s dairy  farmer committee, said: “This new price remains considerably above the current market value and reflects the transparent way Tesco works with the dairy industry. This strong relationship gives us the confidence and stability to remain in the dairy industry.”

Tesco’s Sustainable Dairy Group was established to address continuing volatility in dairy commodities markets. The group has 800 farmer members.