Arla's December price for conventional and organic milk will increase by 0.89 pence per litre as the sector's outlook is forecast to be 'positive'.
This means the UK manufacturing price for conventional and organic milk will be 36.10ppl and 43.54ppl respectively.
It is the first price increase announced by the cooperative since the summer.
Arla Foods amba board director, Arthur Fearnall, said the outlook was 'positive' for the dairy sector.
“This announcement is a step in the right direction for our cooperative business," he explained.
"Global milk supplies are slowing down in major production areas and retail sales continue to pick up after the turnaround in Q3."
In Sweden, farmers will see an Arla organic on-account milk price increase of 2.0€c per kg.
Mr Feranall explained: "In Sweden, the additional organic increase is driven by improved utilisation," adding that global commodity markets were also recovering.
Paul Savage, agriculture director for Arla UK, welcomed the announcement for the co-operative's 2,000 UK farmers.
“It is good news that we have been able to increase our farmgate milk price for all farmer owners in our cooperative," he said.
"Our branded retail sales continue to pick up and both conventional and organic markets are coming back to growth.”
