Equitable contracts between dairy farmers and producers will pull the UK dairy industry back from the brink of collapse, the NFU dairy board chairman has told just-food.

With dairy processors responding to constricting UK milk supplies by increasing milk payments, Gwyn Jones said what remains of the UK dairy industry is in good shape to weather the storm hitting European dairy producers.

"UK dairy farmers are fairing better than the rest of Europe because the last ten years have been very tough," Jones said last night (28 May). "I'm sad to say that a lot of farmers have gone out of business. But this does mean that low supply is keeping UK prices up. European milk prices are still dropping," Jones said.

"Conditions in the UK dairy market are much improved compared to a year ago. Even though costs are increasing, price increases still mean we are ahead.

However, Jones warned: "Looking to next winter, when cattle will have to be fed, there is certainly cause for concern."

With the number of UK dairy farmers still in decline, Jones maintained that the way forward for the industry is the development of a more even-handed relationship between producers and processors.

"What I am trying to put in place are proper equitable contracts between farmers and dairies. That is the salvation of the dairy industry."

Jones said that he did not anticipate a milk shortage in the UK, but warned that production is still unstable as rising costs are putting pressure on milk producers.

"I don't think we'll have a milk shortage but there is a chance we'll get close in our trough period in the autumn," he added.