A NEW report highlights a £330m gap between the price farmers receive for their milk and their cost of production.

“The Cost of Milk production” reveals British dairy farmers are, on average, now losing 3p on every litre of milk they produce.

The National Farmers’ Union, which published the report, said with 11bn litres of milk produced annually, it added up to a £330m gap between the cost of production and the price received by farmers.

The recent huge increase in feed and bedding costs have made the situation worse.

Mansel Raymond, NFU dairy board chairman, said the figures revealed the “very desperate situation” many dairy farmers are in.

The NFU has been campaigning hard for increases in the price farmers receive for their milk.

Mr Raymond said: “The irony is that if they had received their fair share of available market returns this year, we wouldn’t be faced with such a staggering gap between the price we’re paid for our milk and the cost of producing it.

“It is true that prices have started to move up but some milk buyers have told their farmers to expect only a penny increase.

“That’s a drop in the ocean given the scale of the price problem we are faced with.

I’m seriously worried that for many dairy farmers it could be too little, too late.”

The report – which was put together with the help of seven firms of advisers and consultants – involved 809 dairy farms which provided their actual costs for 2009-10 and their projected costs from April last year to March this year.

The findings showed the current average cost of production to be 29.1 pence per litre (ppl).

With an average British milk price of 25.94ppl, it gives a 3.16ppl gap between the cost of production and the price the farmer receives.

Feed and bedding costs account for the largest part of the production costs and in 2010- 11, they are forecast to be 16.6pc higher than in 2009-10.

Bedding costs have risen by 13.8pc over the past year.