Tesco is the first UK retailer to raise the price of fresh milk after Asda provoked a price war over the commodity when it lowered its prices in early March. Tesco will raise the price of milk by up to 20%.

The move, it is hoped, will “better reflect the value” of milk and create a “more stable pricing environment”, the company said.

The decision has been welcomed by the National Farmers’ Union, who said that while it may not translate directly into returns to farmers it will add stability and send a message to the dairy industry about the direction prices should be moving in.

Peter Kendall, NFU president said: “This is a much needed move in the right direction. … Tit for tat price cutting is a road to nowhere for Britain’s dairy industry.  It devalues the product, it puts dairy farmers out of business, and it doesn’t even appear to have any worthwhile impact on sales. …Tesco appear to have recognised that and we hope and believe that their example will quickly be followed by the other major retailers.”
When Asda reduced prices and sparked a milk-price battle, it said that it was simultaneously increasing the prices it paid to suppliers. However, the NFU said, the company has reduced the price it pays to its suppliers following price cuts at UK dairy group Arla.

Gwyn Jones, chairman of the NFU dairy board, said: “We have always maintained Asda should be held responsible for the price received by its producers. Questions have to be asked about why that price has reduced recently. But most importantly, this ridiculous discounting of liquid milk has to stop. We have welcomed Tesco’s move to increase prices and Asda must now act responsibly to do the same.”