The reason for the price increase is that a falling world market price has led to a serious reduction in income for dairy farmers. Many dairy farmers have folded, and in just one year Sweden has lost the production of 8,800 dairy cows.

European dairy companies’ payments to dairy farmers have fallen around 31 percent since the end of 2007, say Milko’s management.

The price rise that Milko will institute is estimated to return dairy farmers an extra eight percent in income every month. The four largest Swedish food chains – ICA, Coop, Axfood and Bergendahls – accepted the price increase this summer, according to news agency TT.

Milko has released an opinion poll that shows that 9 out of every 10 customers are prepared to pay one krona more for a litre of milk if the price increase goes entirely to dairy farmers.

Around 850 farmers – in Dalarna, Härjedalen, Hälsingland, Jämtland, Ångermanland, Medelpad, Värmland, north Dalsland and north Västmanland – deliver their milk to Milko.

Meanwhile, wholesale milk purchaser Skånemejerier (Skåne Dairies) will pay dairy farmers 20 öre ($0.03) more for each kilogram of milk from 2010.

The additional price that Skåne Dairies will pay to farmers is being labelled a “market supplement”, and is a direct result of attempts by Skåne Dairies over recent months to increase their sales and take back market share. The market supplement will cut directly into Skåne Dairies’ profits and will not involve raising prices in shops, according to Björn Sederberg, Skåne Dairies’ CEO.

“We want to send a long-sighted signal to farmers, but it’s still not enough,” said Sederberg.

After the price rise, Skåne Dairies will pay an extra 2.79 kronor per litre to dairy farmers. “Farmers need to get an extra three kronor per litre in order to remain viable,” Sederberg added.

Around 625 dairy farmers deliver milk to Skåne Dairies.