Arla will be the sole provider of fresh milk to Asda

Arla Foods, the company formed from the merger of Express Dairies and Arla, has one of the largest milk supply chains in Britain.

Asda said Arla would be the sole supplier of cream and fresh liquid milk for all of its 265 stores in the UK.

The group currently sells around 450 million litres of British milk, with a retail value of �230m, every year.

An Asda spokesman said the deal would be of benefit to farmers and consumers.

He added: "We think farmers will be paid among the very best rates in the industry, but it's too early to say what percentage of a pint will go directly to farmers."

Chris Brown, Asda's agricultural strategy manager, said the deal would see the supermarket "go back to its roots" by forming a direct relationship between the farmer and the store group which is also based in Leeds.

He added: "Arla is able to provide Asda with a segregated supply chain, which utilises a dedicated group of farmers.

"This will enable us to have full traceability of our fresh milk from farm through to the bottles in our customers' trolleys."

As part of the deal, Asda has ended its contract with Robert Wiseman Diaries and Dairy Crest.