An escalating supermarket milk price war has stoked fears among West Midland farmers that they will once again see a squeeze on their livelihoods.

The situation for some of the region’s dairy farmers has improved over the last couple of years after supermarkets brought in a new style of contract – known as dedicated relationships – which take into account the costs of production.

But 80 per cent of UK dairy farmers don’t have this safety net, leaving them at the mercy of market prices – which are often below their cost price.

Now the new price battle which has broken out between rival supermarkets has sparked fears small family-run farms could go out of business because of the big buyers’ tactics.

Even those with dedicated relationships – also known as direct deals – are nervous, as they fear the current price-cutting climate could see their current contracts undermined.

The West Midlands plays a big role in producing the nation’s milk, with one in seven of the UK’s dairy cows living here.

The situation has prompted the Warwickshire-based National Farmers Union (NFU) and the The Women’s Institute to relaunch its Great Milk Debate campaign, which was first held in 2007, to safeguard the industry’s future.

Mike Madders, NFU regional dairy board chairman, has 230 cows on his farm near Stafford.

He said the industry was very concerned about the impact of the milk price war for farmers.

“We have seen Tesco direct deals and most of the supermarkets have come on board with something similar, which has been quite an improvement for people operating in the liquid milk market,” he said.

“But there are areas of concern. One is that supermarkets seem to be entering into a price war at the moment. Obviously milk is a staple and they are using it as a weapon in this price war and that’s putting a lot of pressure on the supermarkets and putting the direct deals under pressure.”

Farmers who supply milk for cheese are particularly worried, he said. “The cheese market has been particularly cut-throat,” he said. “Whereas the supermarkets have more direct deals for liquid milk, they haven’t been so keen to do that for cheese.

“Those farmers have had more of a struggle because they don’t have these direct contracts in place for cheese.”

But the retailers’ trade association, British Retail Consortium, insisted farmers would not suffer from the price war.

Andrew Opie, British Retail Consortium Food Director, said: “Just because customers are getting good deals for milk, doesn’t mean farmers are losing out. Retailers know they have to reward farmers and thousands of them benefit from dedicated supply arrangements.

“The dairy industry’s own figures show the top ten best paying milk contracts are all paid by supermarkets.”