Saputo Dairy, producers of Cathedral City Cheese, Clover, and Utterly Butterly spreads has cut ties with 13 farmers in the South West, who supply it with 20 million litres of milk annually.

       The global dairy giant had an exclusive supply arrangement with the farmers, who are now at risk of going bust if they do not find alternative business.

       Saputo has said it was “a necessary thing to do for the business” yet has not revealed why it decided.

       Industry experts have condemned the move, saying farmers are already facing mounting pressure from supermarkets' unfair pricing policies and the pending inheritance tax (IHT) bills.

       Diarmaid Mac Colgain, the founder of pricing platform Concept Dairy, told the Telegraph how the changes to IHT are the “final straw for farmers”, highlighting the many issues within the industry.

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       He said: “Every day, a dairy farmer goes out of business. A lot of this is because they are being paid below the cost of production. We have seen them crying because they can’t afford to pay their staff.

       “Every month, farmers have no idea how much they are going to get paid by the processor. Imagine going to work every month and not knowing what you are going to get for it.

       “Companies know they can manipulate the price paid back to the farmer, controlling their own price risk by reducing the farmer’s milk price.

       “On top of this, they can cancel the farmers’ contracts and that’s their livelihood destroyed. The farmers always come off worse.”

       The latest statistics from the Agriculture and Horticulture Development Board show that the UK is losing about 440 dairy farmers annually. There are 7,100 in Britain currently, meaning an annual decline of nearly 6%.

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       Richard Thomas, the chairman of Davidstow Creamery Direct (DCD), which negotiates prices on behalf of farms that supply Saputo, said the termination of farmers' contracts has effectively put them out of business.

       “If you’re a dairy farmer, you have one contract with one processor to sell your milk,” he said.

       “The 13 farmers have lost their business. Where the market currently is and where production is, there are very few processors looking to take on extra dairy farms. Supply is greater than demand.”

       The National Farmers’ Union (NFU) is now in talks with Saputo and the DCD over the situation, saying it will continue to support those impacted by the move.