Dairy industry leaders have issued farmers and processors with a stark warning not to let high commodity prices water down investment in innovation.

The Milk Development Council, NFU, NFU Scotland and Dairy UK buried their differences to call for an ­increase in R&D and on-farm investment, rather than simply pocketing the extra money they are making.

"There is a large and growing trade deficit for dairy products in the UK, primarily because we are exporting low-value products such as cream and importing high-value cheese and butter," said NFUS president Jim McLaren. "We need to turn that around if we are to have a viable future."

The warning came in an MDC report, commissioned by NFUS, highlighting areas in which the dairy industry and farmers must try harder: innovation; sustainable relationships with customers; and raising efficiency.

Commercial opportunities existed in areas where UK consumption lagged behind European trends, including cheese - Britons eat 60% less than the Greeks and French - butter and dairy drinks, said the report.

There were a number of quick wins including differentiating dairy produce in terms of provenance, with local milk, for instance, but the industry could not shy away from heavy R&D investment, the report added.

It was vital farmers didn't pass the buck, said Gwyn Jones, NFU dairy board chairman.

"Innovation does not have to take place in a factory," he said, adding that farmers still had a lot to do to maximise earnings from their milk contracts. Some could earn up to 5p per litre more for milk by producing it to buyers' specifications.

However, the UK dairy industry had much to feel positive about, according to a Dairy UK report published at the same time.