The prices are basically unprofitable, so it is not surprising that people are selling up

Stuart Yarwood, dairy farmer, Cheshire

Dairy farmers say that a hike in the price of milk is desperately needed to keep their businesses afloat.

The typical farmer has been selling milk at a loss for most of the last four years.

Now they are voting with their feet and leaving dairy farming altogether. So there are fewer farmers, fewer herds and less milk.

Historically low reserves

Stuart Yarwood, who has a dairy herd near Congleton in Cheshire, says: "The prices are basically unprofitable, so it is not surprising that people are selling up.

"The average age of a dairy farmer is 57, so many of them are retiring with no young farmers to take their places."

One in every ten farmers gave up last year.

The National Farmers Union told the BBC's Working Lunch that the flow of milk from British farms began to falter in September and is now running at historically low levels.

Price increases could begin to bite "within a matter of weeks".

An extraordinary situation could now arise: British production falling short of the quota set by the European Commission.

The NFU's chief dairy adviser, Phil Hudson, says "Milk production is running at only 35 million litres a day at the moment. It would have to rise to 46 million litres to give us any hope of reaching the quota."

If milk is short, food manufacturers will have to try to import more from the continent, or buy up supplies destined for Britain's doorsteps.

The supermarket chain, Safeway, said that there was no immediate threat to milk supplies.

However, its spokesman, Kevin Hawkins, warned that price increases could begin to bite "within a matter of weeks".

"It is a question of supply and demand," he added.

Blockades planned

The dreadful weather of the past few months has affected production as well. "It has meant that the winter feed that farmers have put by is low quality," says Stuart Yarwood, "So there isn't so much high quality milk."

Another problem is that farmers are deciding not to rear replacement cows for their herds, putting future milk supplies under threat.

Some dairy farmers in the West of England are planning to blockade dairy companies to draw attention to their plea for better prices.

If that happens on any scale, there could be real milk shortages in some shops.

Sources within the dairy industry dismissed talk of a milk shortage as a scare story, put about to frighten dairy companies into making price concessions just as negotiations get under way for long term supply contracts.

But there is little dispute that milk production has fallen to surprisingly low levels.

If Britain continues to undershoot its quota, there could be a milk producers' free-for-all.

Farmers will be allowed to produce as much milk as they like, in an attempt to plug the gap.