SUPERMARKET group Asda is to pay farmers an extra p a litre for milk.

The retailer made the announcement days before dairy group Arla, which has plants in Newcastle and Northallerton, North Yorkshire, becomes the group's sole supplier of fresh milk. Asda said the move showed it was committed to entering a meaningful dialogue with farmers at what was a critical time for the industry.

Large numbers of farmers have been pulling out of milk production in recent years amid pressure from rising costs and lower farm-gate prices. Asda's move was followed by the National Farmers' Union calling on other retailers to do the same.

Under Asda's deal with Arla, a group of about 600 Arla farmers will supply all of its milk.

This will come into effect on Monday in England and Wales and from January in Scotland.

Until now, the supermarket has been supplied by Dairy Crest and Robert Wiseman, as well as Arla.

Asda will start paying Arla an extra p a litre from next month. Farmers in the Arla group were paid 19p a litre until now.

The decision, which was reached by a review panel, will not affect the price of milk in supermarkets.

Asda sells about 450 million litres of British milk a year, with a retail value of about £230m. Prices range from 30p a pint to £1.51 for six pints (3.4 litres).

A report from the Dairy Hygiene Inspectorate said last month that the number of dairy farmers had fallen to 16,000 from 28,000 a decade ago.