Dairy Crest has extended its contract to supply fresh milk to Morrisons over next three years, following a competitive tender process.

However, the amount of milk to be supplied by Dairy Crest to Morrisons will be reduced from March 2015.

This comes after Dairy Crest lost a third of its Morrisons supply contract to rival Arla, The Grocer reported.

Dairy Crest anticipates that the reduction in supply will not affect its financial results for the year ending 31 March 2015.

Besides fresh milk, Dairy Crest will also continue to supply cheese, flavoured milk, butter and spreads to Morrisons.

Morrisons already has an existing partnership with both Dairy Crest and Arla.

Morrisons Group Trading director Casper Meijer said: "Following the end of our previous five year contract, we have chosen to continue the relationships with our existing dairy companies ensuring no further volatility is brought to the dairy industry.

"It's important that we can assure customers of a long term supply of liquid milk and our existing relationships with both processors have already shown us they can deliver that."

Graham's of Scotland will also now begin supplying their brand of milk and butter to Morrisons stores in Scotland.

Image: Dairy Crest retains its contract to supply fresh milk to Morrisons. Photo: courtesy of Dairy Crest.