Dairy Farmers of Britain has said it will cut milk prices to members by 2p/litre and is set to radically restructure its business in a bid to return to profitability in the next financial year.

The co-op is proposing to close its dairies at Fole in Staffordshire and Portsmouth in Hampshire, rationalise its distribution depot network and create two autonomously managed divisions within the business, one for liquid milk and the other managing milk supply and cheese.

It is also likely the co-op will shed jobs from its Nantwich head office and its dairy at Blaydon, Tyne & Wear.

In a statement, the co-op said the restructuring plan was to streamline the business to remove sites that were not delivering acceptable returns and to provide an efficient and cost-effective management structure.

The cut in milk prices will take effect from 1 November 2008 and is likely to help fund the restructuring programme.

DFB said that despite investments to increase efficiency and the shedding of loss-making contracts, it had not been able to deliver acceptable returns within its liquid milk division without “wide-scale change”.

The co-op blamed falling cream prices – which have nearly halved in the last twelve months – and unprecendented levels of input prices and energy costs, combined with declining doorsetp volumes.

Chief executive Andrew Cooksey said: “Dairy Farmers of Britain’s overall business performance has been hampered by continuing to operate with the current structure.  This difficult but decisive action safeguards the business moving forward and is therefore in the best interests of our wider business, our members and our employees.”

It is thought that up to 640 jobs could be at risk .