Britain's biggest retailer Tesco will increase the price it pays for all its fresh milk by nearly 20% as suppliers battle unprecedented levels of on-farm inflation, the company said in a press release.
The group, which has a 27.4% share of Britain's grocery market, said the 520 British dairy farmers that make up Tesco's Sustainable Dairy Group (TSDG) will see the retailer pay them 40.84 pence a litre in May versus 34.16 pence a litre currently.
Dominic Morrey, commercial director for fresh food at Tesco, said, "At a challenging time for the agriculture sector in the UK, we’re pleased to be offering our dairy farmers a significant increase in the price we pay for our fresh milk.
"Our farmers work incredibly hard to provide quality, fresh food to our customers, and we recognise the critical role they are already playing in helping to transform the food industry, as we tackle issues such as climate change and food security."
The farmers will also see an interim price rise in April, Tesco added.
The rise reflects the soaring cost of feed, fuel and fertiliser that dairy farmers are having to endure.
Tesco declined to say what the implications would be for the price shoppers pay for milk.
CEO Ken Murphy said in January the grocer would do its "very best" to manage inflationary pressures.
Several of Tesco's own brand milk lines, including four-pint variants, are covered by a scheme which matches the prices of German-owned discounter Aldi.
On Tuesday, market researcher Kantar said UK grocery price inflation hit 5.2% over the four weeks to 20 March, the highest level since April 2012.
The Kantar data also showed Tesco continuing to outperform its big four rivals - Sainsbury's, Asda and Morrisons.