There is a lot of gloom and doom in the dairy industry as a result of depressed prices for milk due to global overproduction.

Global production is showing little sign of decreasing in the near future, despite milk prices being at critically low levels. New Zealand's production was up for May from 719,000 tonnes in 2014 to 796,000 tonnes in 2015 (an increase of 10.7 per cent). New Zealand's production is seasonal and will jump significantly in August - September (their spring). Mainly as a consequence of quotas being abolished, EU milk production in May rose five per cent on the previous May, while UK output was up 2.1 per cent.

Prices at the last GDT (Global Dairy Trade) auctions were back a whopping 10.7 per cent on the previous sale, making that the 9th consecutive fall. Biggest price reductions were for cheddar that was back 13.9 per cent, whole milk powder fell by 13.1 per cent, skim milk powder was down 10.1 per cent and butter eased back by 9.5 per cent. The next GDT auction on August 4 will have 60 per cent more product on offer, so there is a lot more pain to come.

Buyers in the key Chinese market have near vanished because of heavy stockpiling of milk powder that took place in 2013 and early 2014. China's milk imports may remain restrained for longer than previously expected due to China having 300,000 tonnes of carry-over stocks (almost twice as much as previously estimated). The adjustment in stocks is as a result of higher than expected domestic production and a relatively small drop in consumption.

Here in the EU the pressure on exports is compounded by the Russian ban on western food imports in response to European sanctions after the annexation of Crimea.

UK producers are at a further disadvantage as a result of the value of the Euro against Sterling having fallen by 10 per cent since the beginning of 2015 - it has fallen by 16.4 per cent since the dairy market was at a high in February 2014.

Milk surplus to the requirements of processors that is traded on the spot market is now fetching such low prices that some have introduced an "AB" pricing system. That's where the farmer is paid the full liquid price for a pre-determined amount, and anything supplied over and above that amount is paid at a much lower price based on the spot price.

The farmer-owned co-operative First Milk and Graham's the Family Dairy are the two milk buyers in Scotland that operate an AB pricing system. Graham's the Family Dairy sent shock waves throughout the industry recently when it announced that it is to halve the price it pays for milk in its B pool to just 7p per litre (ppl). That is the lowest price paid by any UK processor, but is justified by the current poor returns from the spot market. While there is no volume limit for Grahams farmers, the move has instantly affected production with one producer switching from three-times-a-day milking to twice-a-day.

With surplus milk so hard to sell, there is now a need to change the behaviour within the industry to be more collaborative.

Rory Christie, who milks 1,430 Jersey cross Holstein Friesian cows near Port William in Dumfries and Galloway, cites his concern about the introduction of an AB pricing system as one of the reasons he has started milking his herd just once-a-day instead of twice-a-day, as part of a radical overhaul of his business.

The changes have led to cost savings as well as a reduction in milk yield, although the milk is now worth more per litre as it contains higher levels of protein and butterfat, which is important to his buyer, cheese-maker Lactalis in nearby Stranraer.

Mr Christie, who is currently chairman of the independent, farmer-led Milk Supply Association (MSA) told me: "I was becoming concerned at the possibility of the introduction of an A&B pricing structure and the global markets for milk remaining depressed. We need to share the responsibility of aligning a market for our milk output. Farmers need to have more consideration for their customer's critical requirement.

"In collaboration with Lactalis, MSA is currently developing a system that aligns volumes of production with sales of cheese. Put simply, increasing production without prior agreement with the buyer will be unacceptable unless the producer is prepared to accept a commodity price."