MILTON KEYNES, England, (Reuters):

Britain's farmers, on Monday, said a growing shortfall between the price they receive for milk and production costs was threatening the future of the dairy sector.

The National Farmers' Union (NFU) said dairy farmers were losing more than £270 million (US$528.50 million) a year.

"The numbers just don't add up," NFU Dairy Board chairman, Gwyn Jones, told reporters as the farmers' organisation launched a campaign to highlight the shortfall.

Jones said the farmers were now losing on average about four pence (about eight U.S. cents) per litre on milk supplied to processors, double the total at the start of this year with prices falling and production costs rising.

"Even for the very best farmers, who do make a small profit, there is not enough money for reinvestment and without reinvestment there is no future," he said.

Some have argued that prices are low because many farmers have continued to produce despite losing money.

"Others are taking advantage of the fact that they (farmers) are willing to do just about anything to keep on milking cows," Jones said.

The U.K. has lost 50 per cent of its dairy farmers since 1992 and milk production earlier this year fell to a 12-year low.

Stuart Hampson, chairman of retailer, John Lewis Partnership, recently said the U.K. may soon be importing milk. John Lewis is the parent of supermarket chain, Waitrose.

Importer of organic milk

Jones said the U.K. is already an importer of organic milk and some analysts have estimated that in low production months such as November it was possible that conventional fresh milk could be imported as soon as 2011.

"We want the recent suggestion made by ... Stuart Hampson to be a wake-up call to the industry. We need a fair share of the profits made by supermarkets and processors passed back to farmers," Jones said.

"There is plenty of money in the supply chain. It is just a question of sharing it out more equitably," he said.

NFU president Peter Kendall said farmers need to work with retailers "to give them something to brag about". Local milk production could be promoted on environmental grounds such as less transportation.

"It is no longer just about price. It is about environment. I don't think consumers would notice that extra 10 pence to make sure production was sustainable," Kendall said.