Milk production this quota year has been a record, with the UK crossing the 12 billion litre threshold for the first 10 months of the year, and on course for a 14.5 billion litre total.

The previous highest was 11.858 billion litres in 2003/04. Back then, we had over 36,000 dairy farmers in the UK, and 2.6 million cows. Now 13,800 farmers are producing more milk from 1.78 million cows.

According to the latest DairyCo farmer intentions survey, however, the amount of milk will surge even more – by an astonishing 6% over the next two years, taking volumes to a staggering 15.4 billion litres. Those figures would be the net effect if the 850 producers DairyCo surveyed expanded to the degree they said they would, and it was extrapolated across the rest of the UK.

The survey, which was carried out in December 2014 and crucially before most of the recent and severe milk price cuts had found their way into milk cheques, showed that “confidence had taken a knock” compared with 2014.

The percentage of farmers who were optimistic about their own business had fallen from 55% to just under 30%, while those extremely optimistic about their business was the same at 10%. However, Luke Crossman, DairyCo’s senior dairy analyst, who presented the figures, said that “if we look to the next five years, confidence hasn’t changed much”. The percentage of farmers optimistic about their business for the next five years had fallen from 55% to 40%, while the percentage of farmers extremely optimistic was up from 10% to about 12%.

DairyCo calculated that the net effect was that a third of farmers would increase production, while 60% will stay the same, and 6% will exit the industry. Nearly 50% of herds with more than 300 cows; 33% of those with 150 and 299 cows; and 38% of those with 100 and 149 cows were in expansionist mood. Herds in England and Wales will expand more than those in Scotland.

The predictions are in contrast to those from other organisations. Dairy experts Kite Consulting predict that next year will see a fall in volumes to just over 14 billion litres, before it picks up again in 2016/17 – but still not to levels witnessed this year.

The UK currently has processing capacity for probably around 40 to 42 million litres per day – based on the fact that peak milk production is 40 to 43 million litres per day, and we always have to export milk during the flush. A new drier coming on stream this year will increase that by around 1 million litres a day. However, if DairyCo’s prediction comes true, the UK will need to find capacity for a peak of over 47 million litres per day – equivalent to two to three more Westbury Dairies operating flat out. And there are no plans for three more Westbury Dairies – although The Scottish Farmer is reporting that a new drier in southwest Scotland “could start construction in 12 months”.

However, what the farmers actually do in practice is very different to what they say they will do in the intentions survey – and that will be especially the case this year with the market having changed so fundamentally since the initial survey was carried out. DairyCo’s prediction also ignores the fact that many milk buyers are introducing A & B pricing mechanisms, which were only just beginning to be talked about at the time of the survey. Such a pricing mechanism has the potential to significantly curb expansion as “new” milk will be paid for at “market-related” – ie, discounted – prices. First Milk this week confirmed that it will introduce A & B pricing.