Morrisons may begin recruiting farmers for a new dedicated liquid milk pool, having signed a three-year agreement with processors Arla and Dairy Crest.

During the horsemeat scandal in 2013, Morrisons received praise for its traceable, vertical meat supply chain, when other supermarkets were less certain about the provenance of their processed foods, due to the "shifting, adversarial nature" of their own procurement practices. However, the supermarket was targeted by protesting farmers in October, when it retendered its milk contract at a time of crisis for dairy farmers.  

Morrisons will be reducing the amount of liquid milk it sources from Dairy Crest under the new agreement.

Even so, Morrisons, one of the UK's 'Big Four' supermarkets, said the contracts will "bring closer Morrisons' ambition to introduce a scheme that will help farmers manage the volatility of their milk price." This, the retailer said in a statement, will involve working with a group of farmers to help them hedge prices to mitigate against volatility in the event of another price crash, like that which began last year.

The new deal will involve paying farmers in the dedicated supply group a price based on movements in international commodity markets. This is intended to ensure prices don't slip below the cost of production.

Once Morrisons' scheme is in place, Walmart-owned Asda will be the only Big Four supermarket without a dedicated supply scheme.

Casper Meijer, Morrisons Group Trading Director commented, "Following the end of our previous five year contract, we have chosen to continue the relationships with our existing dairy companies ensuring no further volatility is brought to the dairy industry. It's important that we can assure customers of a long term supply of liquid milk and our existing relationships with both processors have already shown us they can deliver that."

The retailer also said that the opening of Arla's new processing plant in Aylesbury "will lead to stronger returns for Arla farmers in the long term."