LAST week Sir Stuart Hampson, speaking towards the end of his tenure as president of the Royal Agricultural Society of England, ignited speculation about the future of the dairy industry by predicting that, if current trends continued, Britain could be forced to import milk from Europe in as little as five years.

His comments were given added weight due to his role as the chairman of Waitrose's owner, the John Lewis Partnership.

Milk Link does not see a case to suggest that we will have to start importing milk to the UK. Undeniably British dairy farmers are under huge financial pressure. We believe there is a sustainable future for the industry. There is also an undercurrent of more positive developments in the dairy industry, which have not received such widespread publicity.

There are indications that stability in the marketplace is growing, with less downward pressure on milk prices. Over the past month, there have been small but welcome increases in milk prices. Milk Link has just announced that it will increase the B price for the first five months of 2007. This increase reflects the higher price paid for incremental milk due to a recent strengthening of the cream and powder markets, and will also act to reduce restrictions that would otherwise hamper increased production.

Taken together these changes will be worth at least 0.15p per litre to the average member, although some will benefit more. This news comes in addition to our raising of the liquid price by 0.2p per litre effective from the start of October.

We believe that in a few years time the majority of the British dairy industry will be owned by British dairy farmers. Following our transformation into a vertically integrated dairy processor, Milk Link now owns the UK's largest cheese manufacturer, The Cheese Company. This is testament to the foresight and loyalty of our members, Our members are also looking towards a positive 2007 for other reasons. The Cheese Company will be refinanced by the end of March. This will enable us to flow more of its profit directly back to Milk Link and our members. Both Milk Link and The Cheese Company are also planning to launch exciting new products onto the market, with the aim of further boosting sales.

Looking at the global market, there is increasing demand for dairy products. For example, over the past two years demand in China has increased by 13 billion litres - the equivalent of the UK's entire milk production. Given that the west coast of Europe, and in particular the south west of Britain, is one of the best environments for dairying in the northern hemisphere, such growing demand leaves us in a positive position in the longer term. Whilst we must never be complacent, recent developments bode well for the dairy industry and Milk Link in particular.

n Keep in touch with agricultural news by logging on daily to: www.southwestfarmer.co.uk