NET profits for dairy farms fell by 25 per cent earlier this year and could plummet even further, according to a farm accountant.

Old Mill said dairy farmers’ saw their profits decrease by 25 per cent in the year up to March 2016.

Head of rural services Andrew Vickery said non-aligned milk prices dropped by around 4p to 6p per litre compared with 2014/15,

Supermarket-aligned suppliers fared rather better, with price cuts of between 1p and 4p per litre.

Mr Vickery said: “Some or all of that was offset by lower costs of production as the models seek to reflect, so profits were far less volatile.”

Even so, the average price on some supermarket-aligned contracts fell by more than the cost of production, he adds.

“As a result, almost all producers – whoever they supply – have endured a large hole in profits and a steep drop in turnover, which in many cases has translated into serious cash flow problems.”

Although there are signs of an uplift in milk price, producers should not expect a rapid improvement in profitability in 2016/17, warns Mr Vickery.

“At the start of the 2015/16 milk year prices were in the high 20s – even if they improve by 4p/litre the 2016/17 average may not look any better.” And while cereal feed prices remain low, the weaker pound is making imports; particularly of proteins like soya, more expensive.”

That said, it’s not all doom and gloom. Mr Vickery added: “Many people have survived the troughs and will come out with a leaner, more efficient business that will make good profits in the future.”