Britain's largest farmer The Co-operative Group has announced that it will move to a dedicated milk supply scheme from August next year, when its existing contracts expire.

The Co-op committed to launch a dedicated supply scheme early this year, but only when the complex integration of its acquisition of the Somerfield supermarket chain was completed.

Over the coming months, the group will be finalising plans with milk processors which will result in up to 350 dairy farmers receiving a premium for supplying around 360 million litres of milk to more than 4,000 Co-operative food stores from next August onwards.

Tim Hurrell, managing director of the Co-op's food business, explained: "We are delighted to be making this announcement, and fulfilling the commitment we made at the height of the Somerfield integration. Under our supply model, which is still evolving, we shall recruit a pool of farmers and, in partnership with our processors, we shall develop long-term, transparent relationships. The foundation for this will be our own food ethical policy and the Defra milk roadmap, with the focus on animal welfare, environmental stewardship and carbon footprint reduction."

Earlier this year NFU President Peter Kendall and NFU Vice President Gwyn Jones met Co-operative Group chief executive Peter Marks for detailed talks about the retailer establishing a dedicated relationship with its dairy suppliers and to discuss issues raised in the NFU's Survival Plan for British Dairying.

Commenting on the announcement, NFU Dairy Board chairman, Mansel Raymond, said: "I am extremely pleased that the Co-operative is honouring the commitment it made to the NFU at the start of the year to establish a dedicated relationship with its liquid milk suppliers. Given the pressures the supply chain is facing currently, the news that another major retail customer of British milk is taking greater responsibility for its dairy farmers is very positive.

"I look forward to seeing the detail of this arrangement emerge in due course, but the commitment to greater partnership with farmers and processors and greater transparency in those relationships is a huge step forward.

"The NFU will be pleased to offer its ongoing support and advice to The Co-operative in the development of its plans."

As Britain's biggest farmer and its fifth largest food retailer, The Co-op has long claimed to be committed to supporting British farmers.

Through its farming business, the Co-operative Farms, it grows a range of products including strawberries, potatoes, onions, shallots and apples, all of which are stocked in Co-operative stores, which have a policy of always supporting British fresh produce, when in season. In addition, all Co-op brand fresh and frozen primary beef, pork, chicken, duck and turkey is 100 per cent British, and all Co-op brand bacon, sausage, gammon and ham (excluding continental products) is produced using only British meat.