UK retailer Morrisons has confirmed it is “looking at” the premium that it pays to dairy farmers in its dedicated milk pool.

The company pays UK dairy farmers a premium of one pence pre litre for milk supplied. However, this means its farmers are being paid less than the cost of production.

Dairy farmers have stepped up pressure for retailers to increase the payments they make for milk after a swathe of farm-gate price cuts left them in a “severe loss-making situation”.

“We are looking at other ways of making payments,” a spokesperson for Morrisons revealed.

However, the spokesperson played down reports it is preparing to switch to payment model related to the cost of production – as is already operated by rivals Tesco and Sainsbury’s.