One of the West Country’s best-known Cheddar producers is giving up cheesemaking because of soaring production costs and because it can no longer get a commercially viable price for its cheese.

Denhay Farms has been making West Country Farmhouse Cheddar since 1959 and is a large supplier of cheese to Waitrose, which accounts for about half of its cheese business. Its cheese is also sold in Ocado, Morrisons, Tesco and Booths, independent retailers and to wholesale and foodservice customers.

Denhay said the competitive nature of the Cheddar category, soaring production costs and the fact it had been “unable to secure a commercially viable price across all sectors of the market” had forced it to make the difficult decision to leave cheesemaking.

Denhay declined to comment which of its customers had failed to give it a “commercially viable price” for its cheese, but stressed Waitrose had been highly supportive. “It has fully supported and worked with Denhay to help find a solution, but the business relies upon having a wide range of customers who together can deliver a commercially viable price,” Denhay said. “The cheese market and Cheddar in particular has become extremely competitive, and reducing costs and margins are common across all producers as the cost of making cheese increases.”

Denhay’s final day of Cheddar production is today, after which its Cheddar production facility will be closed down. However, the company said it had about a year’s worth of cheese currently maturing to sell throughout 2013 and into 2014. Production of Denhay’s farmhouse butter, which was made with whey from its cheese business, will also cease.

Denhay employs 10 people in its cheesemaking business and did not comment on how many jobs would be lost. However, it said it would “maximize opportunities for redeployment across the business”.

“It is with a huge amount of sadness that we took the decision to close the cheese production facility,” said MD Jim Loescher.

But he stressed the decision was right for the business, and said Denhay’s exit from Cheddar would free up capital and management time to “invest in our farming activites and our rapidly expanding bacon and sausage business,” which includes the SpoiltPig brand.

Waitrose said it was currently looking for a new supplier of West Country Farmhouse Cheddar to take over from Denhay once its Cheddar ran out. “We have a good relationship with Denhay and are disappointed that they will no longer be producing Cheddar; however, we completely understand their decision,” a spokeswoman added.