The dairy industry is effectively pouring a fifth of the cost of every pint of milk down the drain - as a result of serious supply chain inefficiencies.

Up to 20% of the cost incurred between the farm and the final consumer added "no value" to the product, a draft report on the dairy supply chain for the Food Chain Centre due out this month was expected to claim.

NFU chief dairy adviser Tom Hind described the findings, which come as retailers fight to keep on-shelf dairy prices down in the face of rocketing raw milk costs, as "eye-watering".

The report, compiled by Cardiff Business School's Lean Manufacturing Unit, blamed inefficient collection and delivery of raw milk to dairies and demand amplification - the process by which changes in retail orders get exaggerated in volumes as they are passed down the supply chain.

Dairy UK said it would urge its members to reduce inefficiencies and combat waste by taking advantage of its government-subsidised manufacturing excellence programme.

But Hind warned that consumers wouldn't necessarily see shelf prices fall if the inefficiencies were ironed out.

"Since when have costs had anything to do with retail pricing? It's got more to do with what the supermarkets can get away with," he said. "Efficiency has always concerned farmers, but the same couldn't be said of the processors."

Meanwhile, major milk buyers were warning of a possible 20% rise in the cost of raw milk from farmers in the new year.

If the increase materialises, it would mean farmgate milk prices had risen more than 60% year-on-year.

A year ago, Asda was charging £2 for two four-pint bottles of milk. Now it has dropped that promotion and has raised the cost of each bottle by 34% to £1.34.