Lidl has become the second discounter to increase how much it pays dairy farmers for milk, raising its price by two pence per litre.

The German retailer said the increase, which comes into effect on 1 August, would offset price reductions proposed by dairy processors.

“It is our business model to offer our customers top-quality products for the best value, which means operating on lower margins than the larger food retailers,” the company said in a statement. “But, while we always strive to operate competitively, we do believe in a market that is fair to all businesses involved.”

Lidl added it had had no influence over the processors’ proposed cuts but had monitored the “difficult situation” dairy farmers were finding themselves in as a result of the proposed reductions as well as the recent bad weather.

“We wholeheartedly support our British dairy farmers, who play an integral part in providing all our consumers with the top-quality British milk they require and, for that reason, we have taken the decision to pay an additional two pence per litre of milk purchased, effective 1 August,” Lidl added.

“We will continue to monitor the situation and we welcome any initiative that will enable British dairy farmers to operate in a fair position with processors and large food retailers alike.”

NFU chief dairy adviser Rob Newbery said Lidl’s price increase was a “step in the right direction”. “This is clearly a positive move for farmers,” he added.

Lidl move on milk price comes a day after Aldi announced it would pay 2ppl more for its milk from 1 August.