A £40,000 study is being launched to investigate the feasibilty of creating a major milk processing plant in Cumbria to safeguard the future of the county's dairy industry, reports Jennie Dennett.

Rural Regeneration Cumbria the collective responsible for dispensing foot-and-mouth recovery cash - has joined with milk co-operative First Milk to commission the research.

RRC agricultural programme manager Richard Lancaster said the study was absolutely critical.

Cows grazing the lush green fields of Cumbria, particularly in South Lakeland and Eden, produce around seven per cent of the UK's milk the largest output of any English county.

Yet Mr Lancaster said questions were being asked about the long-term future of the existing processing plants handling Cumbrian milk, namely Dairy Crest at Aspatria and Glanbia at Lockerbie.

Both operations produce cheese for the commodity cheese market, which has suffered a price slump and is facing tough times.

If the worst did happen and those operations shut-up shop, Mr Lancaster said local dairy farmers would face the alarming prospect of sending their milk as far afield as Westbury in Wiltshire, which is home to the UK's largest milk processing plant.

This could come at a time when milk prices are set to slide as a result of reforms to the Common Agricultural Policy.

"Farmers need every penny they can get," said Mr Lancaster. "If milk prices are going to drop and then they have to pay an extra one-and-a-half pence to 2p per litre for transport to Westbury, these businesses are no longer going to be viable."

He stressed that maintaining the dairy industry was vital for the county's economy.

According to 2002 figures there are 1,291 dairy farms in Cumbria out of a total of 7,000 farm holdings and the industry churns out 800 million to one billion litres of milk a year.

RRC and First Milk are now looking to appoint consultants this week and the study should be complete in May.

The study will: l Assess the impact of the mid term CAP review on UK dairy production.

l Identify trends and potential changes in the UK and overseas dairy product markets and determine opportunities.

l Identify new product opportunities within the dairy industry as well as mapping out current product opportunities such as milk powder, long life milk, yoghurts etc.

l Review current and potential trends in the development of UK milk processing covering capacity, market trends, ownership and control.

l Provide a comprehensive analysis of UK supply and demand for milk up to and beyond 2010.

The report will not explore where a Cumbrian dairy processing plant might be located.

Old Hutton dairy farmer Matthew Robinson, a district chairman of milk co-operative Dairy Farmers of Britain, welcomed the study as a "great start".

"There is more milk in Cumbria than there is in the whole of Scotland, we are one of the leading dairying counties in the UK and it's important that we do have a modern processing facility within the county."

He added: "I'm pleased to see the study will look at products. To me that is the key. If we can get some niche markets, some locally branded products, that would be good. It's important what products the plant manufactures because we don't want to compete with anybody head on."

Competition will certainly be on the minds of the existing processors and Dairy Crest was keen that its Aspatria plant should not to be written off.

Dairy Crest corporate communications manager Greg McNeill said that, while cheese prices had fallen through the floor in 2002 to a ten-year low, there were signs of recovery. Prices for UK mild cheddar had improved, he said.

"We still continue to invest in our Aspatria plant," said Mr McNeill. "It still does have a future."

Glandia spokesperson Geraldine Kearney said: "In terms of the cheese business it is challenging at the moment but we have no reason to question the future of the plant."