The number of cattle in Britain fell by 200,000 in 2007
Britain is having to buy in a record million litres of fresh milk daily from Holland, Belgium and Northern Ireland.
The shortfall is because so many dairy farmers are going out of business, with two a day leaving the industry due to low prices and high costs.
In addition, a poor summer has also reduced cows' ability to produce high levels of milk.
These two factors combined mean British milk production is at its lowest for more than 30 years.
Last year, the number of cattle in Britain fell by 200,000.
Retailers and processors have been forced to buy in a million litres every day from Northern Ireland, Holland and Belgium.
Anna Hill from BBC Radio 4's Farming Today programme said one major cheese maker has already announced it is cutting a tenth of its staff because it cannot afford the more expensive imported milk.
Although the price of milk has increased, farmers' have seen their profits squeezed, due to the power of the supermarkets and the rising costs of fuel, feed and fertiliser.