DESPITE the dairy industry being in a far better place than this time last year, farmers should beware increasing production without careful forethought, according to farm accountant Old Mill.

Chairman of the West Country-based company, Mike Butler, said: “The past three years have seen some of the greatest turbulence in milk prices, driven by the precarious state of agricultural commodities and the delicate balance between supply and demand.

“A global drop in milk production and a weakening of sterling post Brexit boosted UK prices from 19.95p/litre in June 2016 to an average of 26.75p/litre one year on. However, that could encourage farmers to ramp up milk production, potentially triggering yet another downward spiral.

“The key is not to automatically drive for larger economies of scale. Expansion may be right for some businesses, but it’s not the universal answer," said Mr Butler. “It’s important to find the right level of production for your circumstances, and then take steps to make that system as sustainable as possible in the event of another drop in milk price.

“If every dairy farmer expands, oversupply will result in only one outcome – a return to low milk prices.”