The UK dairy industry has been given a clean bill of financial health but farmers are being urged to demand more information on their milk buyers' strategies to ensure long-term profitability.

DairyCo published its Company Performance and Strategy Report this week, in which it analysed the financial performances of Arla, Dairy Crest, First Milk, Meadow Foods, Milk Link, Müller UK and Robert Wiseman.

It concluded that the UK dairy industry was largely in good financial health and was well-placed for future growth. But the report revealed a wide variation in the pence-per-litre pre-tax profit margins of the seven leading milk buyers.

Müller and Dairy Crest had the largest profits, with 7.89ppl and 4.72ppl respectively, while the First Milk and Milk Link co-operatives whose objective is to return profit to members rather than retain it had the lowest.

DairyCo called on farmers to ask First Milk, for example, what its timetable for increasing its added-value portfolio was and how much more milk Müller would need to fulfil its expansion plans.

"We would like farmers, and particularly their representatives, to look at this report and use it to discuss and question the strategy of their milk buyer in a constructive way to make sure the profits for both parties are maximised," said outgoing NFU Dairy Board chairman Gwyn Jones.

One area of concern raised in the report was investment in cheese processing, which lagged behind milk. The last major spend on cheese was the £49m Dairy Crest put into its Davidstow plant in 2004.