Supermarket giant Tesco hiked the price it pays farmers for milk yesterday as the dairy industry continues to battle rising feed costs.
The 700 dairy farmers who supply the chain's own-label non-organic milk will be paid up to 31.58p per litre from October 1 – a rise of just over 2p.
The increase leaves Tesco as one of the best-paying of the biggest five supermarket groups.
Promar, an independent consultancy that sets the prices paid to farmers in the Tesco Sustainable Dairy Group, found that as well as feed costs, the poor summer weather lowered the amount of milk produced.
Farmers recently blockaded dairy processors amid proposed cuts in the amount they are paid for milk, claiming they would put many out of business.
Rival supermarket chains Morrisons and the Co-operative Group have since raised their prices for farmers, but Tesco said yesterday's announcement was the result of a bi-annual review and was not connected to the protests.
The price paid by Tesco includes a 0.5p per litre "supplement" for submitting financial information to Promar. Without this, Tesco's farmers will receive 31.08p per litre.
This compares with 31p at Morrisons and 29.5p at Asda. Farmers supplying Sainsbury's receive 30.56p but this can be boosted if they hit other targets such as improved animal welfare. Farmers with the Co-operative Group currently receive 29p but this will rise to 30p from October 1.
Tesco set up its Sustainable Dairy Group five years ago, guaranteeing to pay more than farmers' production costs and claims to have invested £165 million into paying above-average prices to farmers.
Will Hosford, dairy farmer and Tesco farmer committee chairman, said: "This has been a very difficult, wet summer on the farm with uncertain levels and quality of conserved forage on many dairy units compounded by the huge rise in bought-in feed costs."