The East of England Co-op is pulling out of the dairy processing sector, blaming tough market conditions.

The co-op this week confirmed it is in discussions with Dairy Crest for a sale of its dairy distribution business in February that would also lead to the closure of its Ipswich processing dairy in early March.

The society, which is the largest independent retailer in East Anglia, blamed the decision on uncertainty over the milk supply, declining demand and high price volatility, combined with a need for major investment at its Boss Hall facility in Ipswich.

It made the move after a strategic review suggested dairy operations were not viable at a local level in the long term.

The transfer is expected to lead to the loss of up to 58 jobs, though a further 300 employees in Norfolk, Suffolk and Essex will transfer to Dairy Crest.

East of England moved to reassure its customers and farmer producers that there should be a smooth handover that would allow customers to continue to sell its milk without interruption.

The society's chief executive Richard Samson said that the move reflected the increasing difficulty for local dairy processors to survive in the current climate.

"Sadly, the market has changed considerably and it is clear that the future lies with large-scale national operators with facilities to meet the increasingly varied and specialist needs of consumers," he added.

Samson stressed that it opened discussions with Dairy Crest as it was an established operator that could retain as many of its staff as possible and ensure a smooth transition for customers.

Despite this week's announcement from the society, East of England has pledged to continue with its £40m store development programme in the region, with a number of store acquisitions, extensions and refurbishments planned.