Tesco hands diary farmers a 5p lifeline

Britain's biggest supermarket will now pay them 22p per litre, up from 17p.

The rise should mean farmers no longer have to sell their milk at a loss.

Tesco insists the deal will not lead to higher milk prices in its stores.

Instead, it plans to buy directly from producers, cutting out the middle-men who buy milk from dairy farms then sell it on to the store chains.

Peter Kendall, president of the National Farmers' Union, welcomed the deal yesterday, saying: "This is a critically important deal for nearly 1,000 dairy farmers directly and we hope for many thousands more indirectly.

"It is a ground-breaking announcement that should set a massive precedent for other retailers to now step up to the plate, not just on liquid milk but other dairy products as well."

Critics have accused supermarkets of making vast profits at the expense of dairy farmers, three of whom go bust every week.

The union said the average amount farmers are paid for a litre of milk has fallen from 24.5p to 18.4p since 1995, while the amount supermarkets make has risen from 1.3p a litre to 15.6p.

The collapse in prices has meant the number of dairy farms has fallen from 28,000 to 13,000 over the last 20 years.

Conservative MEP Neil Parish, chairman of the European Parliament's agriculture committee, said: "This announcement has come at just the right time for our beleaguered dairy industry.

"All farmers are asking for is a fair and sustainable price.We are paid the lowest price for milk amongst the major producers in Europe."