Rising oil prices have eroded the benefits of milk price rises achieved last March, according to Robert Wiseman Dairies.
In a trading update it said that it was “uncertain” whether energy price rises and increases in derv and plastic costs could be recovered in what was an intensely competitive market.
The company also revealed plans for its new £30m dairy in the south west, which will be built near Taunton. A site purchase agreement is being drawn up and the dairy is expected to be operational by spring 2007, with an initial capacity of 200 million litres.
Dairy Crest also said high oil prices were making trading conditions tough.
And it confirmed that changes in liquid milk contracts would hit profits in the six months to September 30.