The UK's largest milk producer, the Co-op, is to cease its operations in dairy farming. The group is simply unable to make enough profit in the sector due to the current milk crisis.
The Co-op is ceasing dairy farming due to the milk crisis
Despite producing 20 million litres of milk a year through its dairy business Farm Care, the company has decided to concentrate on its more profitable arable and vegetable production businesses.
The news will compound the turmoil facing smaller farms in the industry, who last month campaigned for a rise in the price of milk. At present they receive an average price of 17p for every litre of milk they sell. Five years ago this was an average of 24p a litre.
But Farm Care says it is unable to benefit from flexible economics used in smaller farms.
Family farms are able to get around this by paying themselves less, Farm Care's general manager Christine Tookan told BBC Radio 4's Farming Today.
Industry in crisis
"We aren't competing well against family farms because we don't have economies of scale to make up for the big difference in the way that we cost our businesses.
"Although we may well be the biggest milk producer in the UK, actually stopping producing has no impact on the supply chain at all."
The company produces just under 2% of the milk that is packaged and distributed by ACC Milk.
News of the closure paints a bleak picture of an industry already in crisis. Last year 1,700 dairy farmers - about 10% - chose to leave the business and the same rate of loss is expected this year.
Nick Everington, chief executive of the Royal Association of British Dairy Farmers, said it was a bad sign for the industry and will highlight the difficulties facing small farms.
"If we don't have a rise in the price of milk to the farmer, the problem will get worse.
"Many farmers are having to take less out of the business to survive. The situation is not sustainable."
Recent research shows the average dairy farmer earns £2.90 per hour for a 70-hour week, says Mr Everington, and only one in 10 will find ways to increase their profit.
Dairy farmers all over the country have been campaigning for milk price rises
With competition from abroad, prices in the UK are unlikely to rise. UK dairy farmers face stiff challenges from New Zealand, Australian and Irish farmers, especially in the production of cheddar cheese.
"We have a very efficient industry here, but we have problems with government red tape," said Mr Everington. "We've conformed to a lot of strict regulations and these regulations cost money.
"We're not being paid a sufficient enough price to reflect the amount of work that goes into adhering to that legislation."