Managing director of dairy giant Arla Foods Ash Amirahmadi has warned that rising production costs means farmers can no longer cover their expenses.

Arla Foods is the fifth biggest dairy company in the world and the largest supplier of fresh milk and cream in the UK. The co-operative has 2,100 dairy farmers in the UK and 8,950 across Europe.

Amirahmadi said that the recent increases in price for feed, fuel and fertiliser have soared, impacting on their farmers’ cashflow. He added that farmers are producing less milk because of the higher costs.

Over the past seven years, farmers have been producing more milk than called for, however, February saw them produce 2% less and in March 4% less.

With cost increases of some 36%, Amirahmadi warned farmers are facing some hard decisions and that they need confidence to carry on producing.

He said: “The most important thing now is that we put our arm around the farmers […] and pay our farmers more to cover their costs to make sure the milk is flowing.”

According to Amirahmadi, the price of milk in the shops is 7% lower now than it was 10 years ago in real terms.

He said that for too many years the milk market has been failing to deliver for farmers in the UK. He explained: “Over the next five years we will have to make some tough decisions about where our milk goes to ensure farmers can cover their costs and continue to invest in reducing their on-farm emissions.

“The profitability of some of our milk contracts will need to increase significantly when up for renewal in order to compete with more attractive business opportunities that are opening up.”