Tesco has cut the amount it pays its dedicated group of milk farmers to reflect lower production costs.

Members of the Tesco Sustainable Dairy Group (TSDG) will receive 26.9ppl for their milk from 1 April a fall of 0.47ppl. The price is calculated by consultants Promar based on a formula that takes into account changing input costs.

Tesco last raised the shelf price of its milk in October 2008, when four pints of semi-skimmed went up 9p to £1.53 [Grocer 33]. The price has gone unchanged in the 17 months since, despite Tesco cutting the sum it pays farmers by a total of 1.54ppl.

Tesco milk category manager Neil Franklin would not be drawn on what this week's announcement meant for future shelf prices, but did reveal that the chain was considering plans to promote its work with dairy farmers directly to consumers.

A TSDG cow logo has been on packs since January and will soon be added to tankers and farm signage, Franklin said. A website for consumers and farmers is also in the pipeline, while Tesco's marketing team is considering above-the-line creatives.

"This is a competitive point of difference," he said. "We're very proud of what we've got. When customers say they are concerned about farmers being paid above the cost of production, we can actually prove that we do. With customers concerned about welfare, we can prove we have got high welfare standards. We want to tell people what's different about our milk."

Tesco claims TSDG farmers producing one million litres of milk per year have received at least £62,500 over the average UK price since the launch of TSDG in 2007. It amounts to a total investment of £50m.

The new price was welcomed by outgoing NFU dairy board chairman Gwyn Jones. "Tesco has not only honoured its commitment to pay a price based on the true cost of production, it has invested in its dairy farmer suppliers and in research and development through the Tesco Centre of Excellence," he said.