Farmers' leaders have rejected a suggestion by the boss of the UK's biggest dairy processor that the industry could be better off if it lost a billion litres worth of raw milk production.

Arla Foods UK chief executive Tim Smith made the observation at the official opening of the company's £18m dairy in Lockerbie this week. He told journalists that one billion litres might need to come out of the industry before supply and demand were realigned.

Smith's comments came at a time when increasing numbers of dairy farmers are leaving the industry, and after a year with one of the lowest levels of milk production on record. But farmers said lessons learnt from pig farming - which has been nearly halved in size in the past ten years - had demonstrated that less domestic production would not leave the dairy industry better off.

Pig farmers are currently watching in despair as the price they receive for their animals plummets. Farmers For Action chairman David Handley said contraction in the pig industry had simply created a vacuum for greater imports. He added: "A cut in milk production here would open that door. We're only 70% self-sufficient in dairying now. We should be increasing, not decreasing."

NFU chief dairy policy adviser Tom Hind said: "It is dangerous to make the assumption that reducing production would have a positive effect. There is no guarantee that losing a billion litres would increase profitability. We would see factories close, and that could result in more imports."

But Arla played down Smith's remarks. Milk procurement director Peter Walker said they did not reflect any official position. And Smith had quoted one billion litres simply because it was "a nice, round appreciable figure", he added.