The pint of milk was at the centre of a ferocious supermarket price battle yesterday as Asda and Tesco vowed to cut millions of pounds from customers’ shopping bills this weekend.

Asda said that it was slashing the price of a two-pint bottle of milk from 80p to 50p - its lowest price since 2001. Angry farmers said that the battle could force them out of business.

Spiralling food prices have been blamed for the steepest rate of inflation in 16 years. The average weekly grocery bill for a family of four has risen by 25 per cent in a year to £127.

This week, Tesco introduced Fresh ’n’ Lo milk, costing £1.06 for a two-litre bottle. On Wednesday, Asda and Sainsbury’s dropped the price of a two-litre bottle to 99p.

Yesterday, after Asda announced its latest milk price cut, Aldi, the discount chain, pledged to review its price. Tesco and Sainsbury’s had no plans to follow suit, but Tesco said that it was lowering prices on a third of products across its stores. The price of organic produce is to be cut by 25 per cent.

Asda’s latest 50p promotion will include orange juice and white bread, both of which are half price. Asda insisted that it was investing £1 million of its own money in the milk promotion and that no farmer would lose out. A delegation from the National Farmers’ Union (NFU) will meet Tesco today to seek guarantees that a price commitment to 850 farmers will remain in place.

Gwyn Jones, the NFU’s dairy board chairman, said: “We are playing with people’s livelihoods here. The competition between retailers is intense. If they are going to pay for these promotions out of their own money, then all well and good. But we know both historically and from experience they will come looking for farmers to help redress the balance. They don’t often give up any of their margin for long.”

He added: “We recognise that customers are struggling. We have had a good six to eight months, but our costs are going up and confidence is fragile. This price-cutting could force more farmers to go under.”

The number of dairy farmers in England and Wales has halved to 14,000 in a decade. Milk prices have climbed by almost 18 per cent in the past year. Farmers were preparing to push for higher prices in the autumn round of negotiations, given higher fuel costs. They claim that the cost of production has climbed from 26.45p per litre to 28p and is edging towards 30p.

Mr Jones said that the price war threatened to undo much of the work done over the past two years to convince shoppers of the need to pay a fair price for milk.

A supermarket price war has been brewing for weeks, with consumers facing the combined effects of rising food, energy and fuel prices. Asda and Morrisons cut the price of petrol and diesel by 2p a litre on Monday. Sainsbury’s is offering 5p off a litre of fuel to motorists who spend £50 on groceries.

The credit crunch has changed shopping patterns dramatically, with people filling their baskets with cheap value lines and premium ready meals. Year-on-year sales at discount chains such as Aldi, Lidl and Netto are growing at up to 30 per cent.

Explore UK News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• Fern Britton: 'I still can't see that I was wrong'
• Extreme cooking
• Easy French: Tarte Tatin