Tesco has announced it is to offer direct contracts to about 850 farmers, reportedly paying a milk price of around 22ppl (pence per litre). These contracts will be for 12 months, but will be reviewed every six months to take into account agreed criteria such as feed, fertilizer and energy prices.

As part of this deal, they will also launch "localchoice" milk, sourced through Dairy Farmers of Britain. This will involve about 150 small dairy farms who will receive up to 6ppl more than the 16.63ppl they are currently getting on the DFOB Liquid contract. This milk will retail alongside standard milk but will be slightly more expensive, allowing cosnumers to choose to pay a premium to support local farmers.

Tesco source 60% from Robert Wiseman Dairies and 40% from Arla and hold a 27% share of the GB liquid milk market, according to TNS data for 52 weeks ending 25/02/07.

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