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Examines UK milk pricing since market deregulation in November 1994. Finds a wide range of milk price contracts on offer, with many processing companies paying prices above those paid by the voluntary farmer co‐operatives. Looks at the factors influencing dairy farmers’ initial choice of milk supply contract in the months preceding deregulation of the UK dairy sector in November 1994. Finds around 70 per cent of farmers surveyed, slightly above the percentage for all milk producers, signed to supply the voluntary farmers co‐operative, Milk Marque. Then surveys farmers to identify those who have switched supply contract during the year, finding little evidence of movement. Attempts to understand the apparent differences between farmers’ expectations in their initial contract choice and the market realities they have experienced over that period.

The UK milk industry has been in a state of rapid evolution following the dissolution in 1994 of the milk marketing boards. The paper examines dairy processing companies, milk collection co‐operatives and milk groups in the south west of England to assemble reasons for success and failures and compare them with north west France, with similar traditional dairying. The findings suggest the following opportunities as the best development potential for the dairy industry in south west England: mature cheddar, speciality cheeses, suitable territorial cheese varieties and other fresh cheeses; dairy desserts; and yoghurts, fromage frais and crème fraiche. A second tier of opportunities could take place through new on‐farm processing; expansion of the product range of existing companies; expansion of the Davidstow Creamery as a producer of mature cheddar; and new “green field” site developments by new entrants.