Milk supplies will start to run short in five years time if the exodus of dairy farmers in the UK continues.

Added value milk demand will match supply by 2011, leaving not a single litre for commodity plants, according to a report published this week.

Milk Forecasts 2007 to 2012, by Neil Blackburn of Kite Consulting, was issued a week after John Lewis Partnership chairman and ex-dairy farmer Sir Stuart Hampson said the UK would start importing milk within five years (see panel right).

The Kite report assumes current trends will continue, notably a 7% annual fall in herd numbers. That means producer numbers will drop 25% to 12,300 farms by 2012 and total milk volumes will fall to 12.68 billion litres. But domestic demand for liquid milk and added value products, including regional and mature cheeses, is expected to rise to 12.6 billion litres.

"While the UK will probably not reach the point of a true milk shortage in the next five years, we will reach the point in 2011 where supply in the November trough exactly meets the demand for the added value market," says Blackburn. He is calling for processors to step up the move to longer term pricing and contracts, for better relations with retailers and more farmer collaboration. Above all, milk prices need to rise to a sustainable level.

"If the dairy industry is wound down to a point where we produce less milk than we need it will take a long time to turn it around."

Tom Hind, dairy advisor at the National Farmers' Union, agreed with Blackburn's analysis, adding that a French study into the UK dairy industry had come to similar conclusions.

But dairy co-op Milk Link was wary of the report. "Milk Link and its 2000 farmer members believe there is a sustainable future for the British dairy industry. In five to eight years time the majority of it will be farmer owned," a spokesman said.