Pressure is mounting on Tesco, Sainsbury's and Asda to increase the milk price paid to their dedicated producers and "calm farmer nerves".

Tesco is expected to increase the price, which is based on a formula geared 60% towards costs of production and the rest towards market movements, in the next two weeks.

The cost figures are currently being collated by consultancy firm Promar. In a recent cost report for First Milk it estimated that the cost of milk production was now 26.64ppl, but proposed a sustainable price of 29.64ppl.

"If Tesco increases the price it will calm farmer nerves," said consultant John Allen from Kite. "What it decides to do will set the tone for all the retailers."

Sainsbury's is thought to be most likely to follow Tesco, as it has no predetermined premium or formula for its dedicated suppliers.

Asda pays a premium of 1ppl over the standard Arla Foods Milk Partnership price.

However, it is believed that farmers within Arla are exerting pressure on Asda to increase prices further.

"If Tesco and Sainsbury's move, but the Arla price doesn't, there will be pressure on Asda to break away from the current pricing arrangement," a source told The Grocer.

Meanwhile, Morrisons suppliers are calling for the supermarket to make an announcement over the creation of a direct supply policy, which had been expected to follow the signing of new contracts with Dairy Crest and Arla at the end of last month.

Dairy farmers have accused Morrisons of selling milk for the same price as its competitors but not paying the direct supplier premiums that its rivals do.

The National Farmers' Union has outlined its frustrations to Morrisons over the delayed announcement, with the union's chief dairy adviser Tom Hind warning the supermarket that "farmer patience is wearing thin".

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