Sales of organic milk have soared by 65 per cent with demand outstripping supply, it was revealed yesterday.

The Organic Milk Suppliers Cooperative (OMSCo) claimed the market was being under-supplied for the first time in five years.

Its inaugural market report highlights the first in-depth analysis of the organic milk market. Richard Hampton, OMSCo's director of sales and marketing, said the figures showed it was vital the market was managed properly to avoid over-supply.

He added: "It is in every-body's interest that we avoid another boom/bust situation and managing the volatility of supply versus demand is undoubtedly the key challenge in the coming years.

"Failure to manage supply increases in line with what the market can absorb will result in over-supply, and in a market where demand will continue to track upwards, over-supply will inevitably lead to a period of under-supply.

"Getting it right will allow the sector to prosper. Get it wrong, and this cycle of feast and famine will reduce margins to retailers, processors and farmers. For this reason the Organic Milk Market Report is essential reading for all in the supply chain."

In the short term, increased supply can only come from expansion by existing producers. The report highlights the major risks to future supply growth, such as fragmentation of the supply base, and the potential to over-contract imported milk and displace increased UK production.