Suppliers in Tesco’s Sustainable Dairy Group (TSDG) will receive 40.84p/litre in May.
This represents a price increase of almost 20% for the 520 British dairy farmers on this type of contract and marks a significant step in getting more liquid milk suppliers over the 40p/litre mark.
Rising on-farm inputs such as high feed, fuel and fertiliser costs are the driving force behind the increase. Prices are set quarterly by the retailer and factor in costs of production.
An interim price rise for TSDG farmers is expected in April, due to the unprecedented levels of on-farm inflation.
Dominic Morrey, Tesco commercial director for fresh food, said: “At a challenging time for the agriculture sector in the UK, we’re pleased to be offering our dairy farmers a significant increase in the price we pay for our fresh milk.”
Dairy farmer Bill Higgins, the TSDG committee chairman representing Muller, said Tesco had stepped forward to help adapt the TSDG model to better reflect and support producers following the extreme volatility facing farmers in recent months.
Dairy farmers who meet the conditions of Muller’s Advantage programme will receive a milk price of 40p/litre from 1 May. This includes an additional penny advantage payment which is paid quarterly.
About 500 farmers supply Muller on direct contracts and will benefit from this 3.5p/litre price rise for a standard liquid litre at 4% butterfat and 3.3% protein.
Rob Hutchison, chief operating officer at Muller Milk & Ingredients, said: “As the whole dairy supply chain faces the challenge of unprecedented increases in costs, we will continue to do everything we can to support farmers who supply us.
“We will continue to closely monitor all of the factors that influence the farmgate milk price in the coming months.”