Turbulence in the dairy industry continued this week with Asda slashing the shelf price of its British Cheddar cheese by 27% and simultaneously reversing its March price cut on liquid milk.

Dairy Crest also cut the price it pays farmers for raw milk by 0.75ppl and Tesco was said to have sourced cheese in its latest re-tendering round for £1,850 a tonne - £150 a tonne lower than the current market.

The NFU hailed Asda's decision to reverse its "industry-destabilising" four-pints-for-£1.00 liquid milk pricing policy and match Tesco's £1.11p level, although it falls 5p below the pre-cut price.

Gwyn Jones, chairman of the NFU's dairy board, said: "We are relieved that Asda has taken this common- sense decision at a time of considerable difficulty in the market.

"Now it is up to the remaining supermarkets to restore their prices to a sensible level. It serves no-one's long-term interest to be continually draining value out of the market and putting the future of the sector at risk."

As The Grocer went to press, Sainsbury was raising its prices, following Morrisons earlier in the week.

The NFU did not condemn Asda's cheese policy in the same terms as its milk cuts, as the retailer is committed to sourcing 100% of its cheese from the UK, as do Sainsbury and Morrisons. The cut is thought by supply-side insiders to be a temporary promotion.

Jones said: "The villain of the piece is Tesco, which sources Irish cheese that does not come up to British farm standards and refuses to adopt a buy-British policy. The other retailers have to match Tesco on price."

Asda's agriculture manager Chris Brown challenged other retailers to follow suit on UK sourcing. "They should show real support for British dairy farmers and commit to get their Cheddar from Britain."