Tesco UK has announced that it will increase the number of farmers on direct contracts by a quarter by spring 2016.

Using an independent pricing mechanism, Tesco says it has consistently paid a market leading price for milk.

It says the price, which is fixed for six months at a time, recognises the true costs of production across different dairy farming systems, allowing the 600 TSDG farmers to plan and re-invest in their businesses, irrespective of the market price.

Matt Simister, Tesco’s Commercial Director of Fresh Food & Commodities said over the summer Tesco has been carrying out a collaborative review with members of the TSDG, to help them continue to partner with  farmers in a sustainable way, adapting to the significant changes seen across the whole of British Agriculture as well as dairy in recent years.

“As we near the end of the process, we are confident that we’ll be able to increase the number of direct relationships with our core TSDG pool farms by over a quarter by spring 2016, helping us to further cement our lead as British Agricultures biggest supporter,” he said.

Following the regular six monthly evaluation of production costs, the new price Tesco will pay for milk from November 1 will be 30.58p/L.

It says the new price has been set using the independent consultancy-Promar- to make sure that the price paid by Tesco reflects the average cost of production of the TSDG members.

That price is agreed in collaboration with farmers, then set for six months and is completely independent from the retail price for milk.