The Co-operative Group is reported to be in negotiations to dispose of Associated Co-operative Creameries’ business.

The operation is the fifth largest milk processor in the UK with annual turnover of about £300m producing liquid milk at five dairies around the country.

It also produces some 20,000 tonnes of cheese and 40,000 tonnes of other milk products, including butter and milk powders, at two Welsh creameries.

Two leading candidates to buy the business are co-operatives Dairy Farmers of Britain and First Milk.