The States wants to reduce farming subsidies and direct cash into diversification to boost the rural economy and protect the environment.

Farmers will have to comply with new restrictions if they are to receive financial help from the government.

Andrew le Gallais, chairman of the Milk Marketing Board, says politicians and farmers must work together.

He said restrictions, such as making dairy farmers store slurry for longer, may force some to consider leaving the industry because of the additional investment.

He said: "This poses challenges for the dairy industry and in our response we will need to identify how we overcome those challenges."