French dairy farmers have struck a deal with their large customers on increasing the price of milk for the third quarter of the year, defusing tensions in a sector that saw mass protests by producers last year.

Under the terms of the deal, the price of milk will rise by about 11 percent compared to the same period last year, Christele Josse, the head of the national federation of milk cooperatives (FNCL), told reporters.

The parties also agreed to put in place a mechanism for monitoring differences in competitiveness between the French and German markets, a step which should facilitate future price negotiations.

French dairy farmers staged a delivery boycott roughly one year ago, dumping millions of litres of milk after a drop in prices they said threatened their livelihood. The protest was suspended after EU farm ministers agreed to offer extra support for the sector.

President Sarkozy, who is likely to face mass demonstrations against his pension reform plans starting in September, welcomed the deal, which wards off the threat of additional protests from milk producers.

“It will allow the price of milk paid to producers to rise in a fair manner over the course of 2010,” he said in a statement.

Sarkozy said he hoped the deal would set the stage for a balanced new long-term contract between dairy farmers and their clients from 2011.