Despite milk prices increasing to a new record of more than 40p, the rise is not still not sufficient and is 'barely covering the costs' – prices need to rise by up to 50%.

And, if processors want to reverse the drop in milk volumes compared to last year and the medium-term average, another 5 to 10p will be required, Kite Consulting has calculated.

Milk volumes have been tracking more than 4% down in recent weeks, according to the official production figures and while the gap will close due to the time of year and the expected spring flush, there is already significant concern among some processors for volumes later in the year.

“Aside from feed, fertiliser and fuel prices, grass availability this grazing season will also be a key factor, as it is likely that farmers will cut back on fertiliser use, despite the false economy of doing so. This will potentially mean that forage quantity and quality will be compromised for the winter as big bulky forage cuts will do little to stimulate milk volumes,” said Kite’s managing partner, John Allen.

“Lower forage volumes and higher feed prices will mean farmers will almost certainly reduce their cow numbers – especially as cull cow prices are generally high. However, I urge dairy farmers to continue, three-decades of low milk prices is coming to an end,” he added.

Exactly the same scenario is also playing out on the continent, with volumes in the EU’s biggest milk producers, Germany and France, being around 2% down on last year. The projections are that there will be no increase in volumes until Q4 at the earliest and that would depend on an easing of the input cost situation.

“In the UK, there are seven non-aligned processors and two retailers paying 40p, or more, for May and there is no doubt all of them are going to have to pay that and more before long. But if processors, their customers, Government or policy makers think this is enough to stabilise or even increase milk supply then they are deluding themselves ... it won’t," pointed out Mr Allen.

“A 40p per litre milk price is basically keeping pace with the rising cost of milk production. Another 5p is required to improve morale, another 10p is needed to cross the 1:3:1 MP:FP ratio and turnaround milk volumes.

“And if they all think they will be able to get their milk or dairy products from the EU, or further afield, then they are doubly-deluded. Global milk prices and shipping costs also make it uneconomic to import from further afield.”

Much of the world is tight in milk supplies, with the EU, US and New Zealand reporting a reduced supply. The US is heavily exposed to corn and feed prices, so there isn’t going to be any record-breaking volumes recorded this spring.

Backing up these comments was Patty Clayton, from AHDB: “We are seeing unprecedented rises in the milk price, mostly driven by demand. As we enter the spring flush supply will rise, but demand domestically and globally is strong enough that this shouldn’t check prices.

"I could see milk prices continuing to rise through spring and into summer, although perhaps at a slower rate than we’ve seen so far this year,” she added.

Aligned suppliers to retailers like Sainsburys and Tesco have been falling behind on milk prices as their cost of production formula for setting milk prices has been slower to react to the rapidly rising costs of feed, fertiliser and fuel. As a result, The Scottish Farmer understands some retailers have amended their pricing model to increase rates and prevent farms from looking to move to new processors.

Stuart Martin, of the Scottish Dairy Hub, said that the price rise has been a long time coming, with milk being undervalued for some time. “We have never experienced a 40p level, but it has now been cancelled out by the rising costs of the three Fs, not to mention the uncertainty in the industry,” said Mr Martin.

“Spring is a big indicator on how grass is going to grow and that determines how much milk is going to be produced in the back end, the next worry will be in September as dairy farmers role back their silage pit cover to see the quantity and quality.

“The supply chains needs to work at all stages with everyone getting a return, the consumer needs a good value produce, the retail and processors need a cut but the farmer needs to receive a fair price not only to farm sustainable but to invest in the future of their farm.

“A figure of 40p is no longer an adequate price for farmers, but with the market being so volatile it is hard to put a price on it to make it justifiable for dairy farmers, he concluded.

On BBC Radio 4 this week, Michael Oakes, the dairy board chair of the National Farmers’ Union, told listeners that milk had to shoot up by 50%, meaning four pints of milk retail could jump from £1.10 to £1.70.

"It's been a contentious subject – the price of milk – at a retail level for many years. But what we've seen over the last couple of years is a very sharp rise in inflationary input costs at farm level and then since the Ukrainian war we’ve seen a seismic change in costs. It hasn’t been sustainable," he said.

"Retailers are stepping up because volumes are dropping, farmers are having to make tough decisions in the way they feed their cows. For myself, it's a case of fertiliser costs have gone up over 200% and either I borrow the money to buy the fertiliser or I get out of dairy. Many farmers are in that situation."

Dairy giant Arla's boss, Ash Amirahmadi, 'called time' on cheap milk in a statement two weeks ago saying farmers had been facing squeezed margins for years. In the last 10 years consumer prices, had gone up 26% as a whole, Mr Amirahmadi said, but the price of milk has dropped by 7% in the same period.

Mr Oakes added that these price increases for farmers was likely to be a long-term problem. "The implications of current rises could well last for two years.

"Feed, fuel and fertiliser are the key inputs and we’re also seeing issues with labour and the costs of labour, so we’ve got a whole tsunami of costs coming towards us and it’s really really difficult," he concluded.