The debate over whether or not the dairy industry would benefit from farmers quitting continued this week, with one senior figure stating that the industry would need to lose 30% of raw milk production before it became more profitable.

The claim by Dairy Crest head of milk purchasing Arthur Reeves came in response to a suggestion by Arla Foods UK's chief executive Tim Smith last week that losing one billion litres of production might help to realign supply and demand.

Reeves said: "Taking out that volume wouldn't increase prices at all. A fall of four billion litres would be needed to generate a more profitable industry.

"At that level all commodity production in the UK would cease, and massive rationalisation, particularly in the farmer co-operatives sector, would take place."

However, consultant Michael Bessey disagreed, saying: "It won't solve anything. The drop would increase competition in the liquid market, as this would be the main market."

He warned that a fall of four billion litres would make it impossible for all three of the major dairy co-operatives to continue operating.

Four billion litres is equivalent to the total volume produced by both Dairy Farmers of Britain and First Milk - the largest supplier co-ops.

Analyst John Allen of Kite Consulting said that falls in production would also signal rationalisation of factories, with the first casualty of this likely to be the farmer co-op-owned facility at Westbury.

He said: "This plant has been consistently running under capacity and its future will largely depend on spring milk production and whether it has a role in stabilising surplus supplies and market prices."