A large number of seemingly profitable dairy farmers are leaving the industry prompting fears milk output could plummet, a Government study warns.
A report funded by the Department for the Environment, Food and Rural Affairs, highlights the dangers posed to the dairy sector due to volatile and uncertain market conditions. Researchers from the University of Manchester found a higher than anticipated number of larger, more profitable, herds have quit production.
They also predict milk output will fall below quota by more than one billion litres as an increasing number of farmers quit the business.
Gwyn Jones, NFU dairy board chairman, said: "This report reinforces our view that milk price cuts and general volatility have seriously eroded the confidence of all producers, threatening the future viability of domestic milk supply.
"If a sustainable future is to be achieved for the dairy industry a profitable supply base is vital. That simply will not happen if short-sighted pricing decisions from those further up the dairy chain continue to drive even the largest, most efficient herds from production, as evidenced by this report.
"The inherent competitiveness of dairy producers in England and Wales coupled with fantastic market opportunities should be enough to ensure a long-term stable production base, but dairy farmers must have the confidence to invest in the future of their businesses.
"Fair and profitable returns for dairy farmers are the only ways in which this can be achieved.
"If those further up the chain are to enjoy the benefits of secure supply then they must address the culture of tit-for-tat price cuts that threatens to undermine the whole industry."