Record numbers of dairy farmers in England and Wales are pulling out of milk production, according to the Dairy Hygiene Inspectorate.

Ten years ago there were 28,000 active dairy farmers. That figure had dropped to less than 16,000 by April this year, a slump of 43%.

In the first half of the year an average of 77 farmers a month were quitting milk production, but in July this rose to a record casualty rate of 123.

Applied on an annual basis, this represents nearly 10% of the sector.

According to forecasts made by the Milk Development Council the number of dairy farmers is likely to be below 10,000 by 2006.

The rapid loss is attributed to the continuous effect of rising milk production costs accompanied by downward pressure on farmgate milk prices. This pressure is likely to increase as CAP price reforms hit milk prices over the next four years.

Many more farmers may be tempted to quit when Defra compensation payments kick in next year, because they will not be dependent on remaining in active milk production. What is less certain is whether the falling numbers of dairy farmers will affect the national output. So far, increased production among the dairy farmers remaining in the business has compensated for those who have bowed out.