THE NFU repeated its demands for a 2ppl increase in farm gate milk prices at this week's national Dairy Event.

Milk price negotiations are at a critical stage and, officials said, farmers both needed and expected price rises from October 1.

"No-one should underestimate the mood and determination of dairy farmers," said Terrig Morgan, NFU dairy chairman. "Prices must rise."

He said fundamental to the price increase was an improvement in returns from the cheese markets and that point was re-inforced by Malcolm Smith, chief executive of Dairy Farmers of Britain, who warned that dairy farmers could not continue to supply milk for British Cheddar at a loss.

Either prices for mild cheddar had to rise by about £200/tonne, or processors and retailers needed to take a lower margin, he said.

The price rise, equivalent to 20p/kg on the retail price of cheese, was essential because domestic cheese stocks were shortening and Britain's farmers, who had been selling milk at a loss for most of the last four years, were now voting with their feet and leaving dairy farming.

"The situation has got very serious," said Mr Smith. "In the last year nearly 10pc of UK dairy farmers have ceased milk production because they simply cannot make a living at current price levels.

"The major food retailers have led two initiatives in recent months to raise the price of liquid milk for farmers by 2p/litre but, unless cheese prices increase immediately by an equivalent amount, these initiatives are not sustainable."

There was downward pressure on cheese prices because of imports of cheap Cheddar from outside the EU.

"There is a demand for British Cheddar which we need to fulfil with British milk, but we cannot guarantee this without better prices being paid to British dairy farmers," he warned