From 1 October Tesco Sustainable Dairy Group (TSDG) members will receive 30.21 pence per litre for their milk

From 1 October Tesco Sustainable Dairy Group (TSDG) members will receive 30.21 pence per litre for their milk

Tesco has increased the price it pays farmers for milk on sale in its UK stores.

From 1 October, farmers that are members of the Tesco Sustainable Dairy Group (TSDG) will receive 30.21p per litre for their milk, an increase of 0.43p.

The retailer said it set the price according to the farmers' cost of production after receiving data from independent consultants and farmers.

Sean McCurley, Tesco's director of dairy, said: "We are delighted to be able to pay our farmers more for their milk, while offering lower prices on the essentials, which will help millions of families."

The news has been welcomed by farmers. A dairy industry source said: "The movement is welcome news to dairy farmers because dairy farmers costs have increased."

The source added that farmers do not like to see fresh milk devalued or sold at a loss but are aware of the competitive environment in which its being sold. Last year, discount retailers gained market share through selling milk more cheaply than major supermarket retailers, the source said.

This price increase is the smallest price rise the farmers have seen but is related to a specific price determination formula set by Tesco. Robert Wiseman Dairies and Dairy Crest have increased the price they pay dairy farmers for milk to 1.85p per litre, while dairy co-operative Milk Link increased its price by 1p per litre from the beginning of this month. 

"I'm sure farmers would have been hoping for more but that's what the [transparent price determination formula] is there for and it has done what it is meant to do," the spokesperson said.

However, the source said farmers would like to see the price increase extended to farmers that supply milk to produce other dairy products.

"We would like to see that extended to all diary products they sell. All farmers in the UK actually being treated fairly, farmers that supplying milk to produce cheese and butter."

The increase follows Tesco's Big Price Drop announcement last week that it would cut GBP500m (US$784.9m) from the price of thousands of items in the UK in a revamp of its promotional strategy.