With recent high food prices you could be fooled into thinking that British farmers are now laughing all the way to the bank.

But the recently announced closure of a Staffordshire dairy and a further four dairies and milk delivery depots around the country by the farmers co-operative Dairy Farmers of Britain shows underlying concerns in the market.

Now Dairy Farmers of Britain, which is owned and run by the dairy farming industry in the UK, and processes more than 1.5 billion litres of milk a year, is slashing back its costs in a bid to beat the ailing economy.

It has announced the closure of the Fole dairy near Uttoxeter with the loss of 246 staff and closed other centres around the country including Hertfordshire, Lincoln and Portsmouth in a bid to cut costs. Altogether nearly 500 jobs will be lost.

As well as the closures, the co-operative announced earlier this month that it would be reducing the amount it paid farmers for milk by two pence per litre.

Andrew Cooksey, chief executive officer said: “Dairy Farmers of Britain’s overall business performance has been hampered by continuing to operate with the current structure.

“This difficult but decisive action safeguards the business moving forward and is therefore in the best interests of our wider business, our members and our employees.”

A spokesman for the co-operative added: “This isn’t about trying to screw over the little man, it’s about trying to improve things for the future.

“If you take the example of the Fole dairy, it was a very old facility and it would have taken tens of millions of pounds to bring up to speed, which is money that the Dairy Farmers of Britain doesn’t have,” he said.

“We have seen certain trends in the food market which have squeezed the industry. One example is cream, where the price has halved in the last 12 months.

“It’s caused by a variety of factors, including the economic situation, but it hits the dairy industry very hard because cream is a major by-product when we’re producing skimmed and semi-skimmed milk.”

The current Dairy Farmers of Britain business only came into being three years ago as part of an evolution involving the merger and purchase of several different companies.

Much of the business remains similar to the original Co-op dairies which used to dominate the British milk market.

John Gorle, national officer for Usdaw, the Union of Shop, Distributive and Allied Workers, which represents workers at the dairies and depots said he felt the move to close centres was unavoidable.

“There’s a problem of over-capacity within the business. There really isn’t the need for this many dairies and milk distribution depots.

“Couple that with the fact that the current system in place is very old and I think you can see why they have taken this decision.

“We’ve sat down with the Dairy Farmers of Britain and we’ve looked at the business case and we felt, sadly, that if we were in their position we would have to take similar action.

“What we have to do now is work with people who are at these centres and help them to work towards getting a new job. Many of them will have been in their current jobs for longer than you can imagine and they won’t have filled out a job application for a long time.

“Thankfully, because the Dairy Farmers of Britain came out of the old Co-op Dairies many of the workers have very good contracts and agreements about redundancy payments so there isn’t an issue with that.”

But Oliver Cartwright, NFU West Midlands spokesman, said the news was grave for farmers.

“This is a devastating announcement for Dairy Farmers of Britain and all its members,” he said. “While we understand that it would appear necessary to make such huge changes to the structure of the company to make the business viable and give it a prospect of future success, we are extremely unhappy and do not support retrospective milk price cuts.

“This will hit Dairy Farmers of Britain farmers extremely hard and I am deeply concerned at the potential impact of this decision for our members.”

He added: “Two pence for every litre might not sound like very much but I can assure you it’s a lot when you’re producing milk in the quantity that these farmers are.”