Müller is offering those farmer suppliers who continually improve herd health and welfare an additional payment worth 1p per litre starting from 2020.
The dairy processor's Direct Premium 2020 payment will commence next month.
It will be made available to those farmers who commit to improve herd standards and end the practice of euthanising healthy bull calves on farm.
The premium will run from 1 January to 31 December and will be paid in a lump sum in January 2021.
The additional payment would be worth £20,000 to a 2 million litre per annum producer.
Rob Hutchison, Milk Supply Director for Müller Milk & Ingredients said: “For the industry to move forward, we must evolve to ensure we’re aligned with the needs of our customers and consumers.
“We buy a fifth of all milk produced on Britain’s farms, so we’ve got a real opportunity, and responsibility, to encourage our suppliers to make positive changes.
“Müller Direct farmers are already hugely passionate about the welfare of their herds, but we’re confident that by participating everyone will reap the rewards.
“Apart from the obvious financial gain, farmers will benefit from potential improvements to the health and welfare of their herd, as well as benchmarking and additional expert support.”
Suppliers must meet full compliance on all four of Müller's initiatives. They are:
• The practice of euthanising healthy bull calves on farm must end by December 2020.
• The Müller Direct Farm Insight Programme, an on-farm health and welfare assessment which provides benchmarking, advice and potential savings.
• The Müller Direct Antibiotic Programme, designed to manage and reduce unnecessary use of antibiotics.
• The National Johne’s Management Plan, which aims to control and eradicate Johne’s, a chronic disease with affects cattle.