Falling production costs have prompted Tesco to cut the price it pays to milk suppliers.

In its much-anticipated six-monthly announcement this week, Tesco said it would be paying 27.43ppl from 1 April, down from the 28.44ppl it was paying previously.

"This price is well above the market value of farmgate milk and reflects our commitment to the long-term sustainability of the members of the Tesco Sustainable Dairy Group," said a Tesco spokeswoman.

The price, which is calculated by consultants Promar using a formula that takes into account production cost changes, was greeted positively by farmer representatives.

"There's no room to criticise Tesco on this," said NFU Dairy Board chairman Gwyn Jones. "This price is based on factual projected costings that have been accurate in the past."

Analysis, p18