In return for the unexpectedly generous deal, the National Farmers' Union (NFU) is today expected to call off the mass demonstration at the conference planned for Monday.
Thousands of angry farmers, protesting at their plunging incomes and the alleged lack of sympathy from the Government, were to have marched past the conference hall in Bournemouth.
As fox-hunting supporters are to stage a similar mass protest on Tuesday, when Mr Blair delivers his keynote speech, the Government faced two days of unwelcome conference headlines dominated by the vociferous rural lobby.
The deal with the farmers is believed to have been personally struck between Mr Blair and the president of the NFU, Ben Gill, at a secret meeting in Downing Street.
Yesterday Mr Gill, who confirmed that he had met Mr Blair but declined to give details, said the NFU was "urgently reviewing how best to proceed" with its planned demonstration in the light of the aid package announced on Monday by the Minister of Agriculture, Nick Brown, which was much more liberal than expected.
Mr Gill said Mr Blair had also given a personal commitment that the recently announced review of over-regulation in the agricultural industry, which farmers say is now one of their worst problems, would "deliver results".
Asked if he had done a straight deal with Mr Blair to call off the march in return for the aid and promise, he said: "It's not a deal, it's a recognition that the Government has listened. We are considering postponing our demonstration." An announcement would be made this morning, he said.
The Labour conference will still face the distraction of 16,000 angry fox-hunting supporters bused in on 350 coaches from all over Britain by the Countryside Alliance, who will try to time their demonstration to coincide with Mr Blair's address.
The Chief Medical Officer, Professor Liam Donaldson, has formally recommended that the ban on the sale of beef on the bone, brought in nearly two years ago, should be ended. The risk of lifting the ban would be "tiny and unquantifiable in any meaningful way", he said in advice to Mr Brown, given in July and released yesterday. But he repeated that several million people were still at risk from CJD due to infected beef consumption prior to the ban.
Mr Brown said on Monday he was willing to lift the ban immediately in England but he wished it to be lifted on a UK-wide basis and he did not have agreement from the agriculture ministers in the devolved Scottish and Welsh assemblies.
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