British dairies are fast disappearing as European companies look for new markets to sell their butter and cheese, and distressed UK farmers grab the chance to sell out.
The stakes are high. The United Kingdom is the third-largest milk producer in the European Union after Germany and France, producing about 13.5 billion litres of milk annually.
However, cut-throat price wars among supermarkets like Tesco and Asda, low bulk cream prices, and higher input costs have hit British farmers, who are paid much less than their European counterparts.
The merger of Arla Foods, a large Danish-Swedish farmer co-operative, with British co-operative Milk Link last week signals that the British dairy industry may see more churn.
The deal, which creates the largest dairy company in the UK, follows the acquisition of Scotland's Robert Wiseman Dairies by Müller, a privately held German dairy group, in January.
"Our view would be that there is likely to be further consolidation," Milk Link's Chief Executive Neil Kennedy told Reuters.
The UK dairy industry, mostly a stronghold of farmer cooperatives that dot the countryside, has now shrunk to four key players - Arla, Müller, Dairy Crest Group Plc and First Milk.
Arla, which is also expanding its business in China, expects annual turnover of Arla-Milk Link to be around 2 billion pounds ($3.14 billion) - ahead of Dairy Crest's 1.6 billion pounds and First Milk's 573 million pounds.
"There could possibly be a merger between a southern Irish co-op and First Milk. And ... there could well be that another company purchases Dairy Crest by the end of the year," said David Cotton, chairman of The Royal Association of British Dairy Farmers.
Cotton, who manages a herd of 165 cows, is also a member of Milk Link.
"First Milk now looks a little bit vulnerable," Investec Securities' analyst Nicola Mallard said.
"Most of the milk industry is either in private hands or co-operatively owned so Dairy Crest is unusual in that respect, but we've not really had any suggestions of a deal," added Mallard.
Typically, European dairy firms focus more on milk products such as cheese and spreads, which are more profitable than liquid milk. On the other hand, only half of the milk produced in UK is sold in the form of milk products.
"European markets have less involvement in liquid milk," said Patty Clayton, senior analyst at DairyCo.
"The milk that's produced in Europe tends to have a wider variety of uses. More goes into powders, more goes into butter, more goes into cheeses than (in the UK)," added Clayton.