Industry leaders will examine whether futures trading could help dairy farmers ride out a slump which has seen farmgate milk prices plummet by one third.
Futures could have a strong potential to bring added security for farmers, said Defra secretary Liz Truss.
After a series of talks, the issue would be discussed again next week by a joint farming resilience group established by Defra and the industry, she added.
Ms Truss told the Oxford Farming Conference she understood the pressure dairy farmers were under. Farmgate milk prices have plummeted from 33.8p/litre a year ago to little more than 20p/litre for some producers.
Milk prices were expected to rise later in 2015, said Ms Truss. But it was important that producers were able to withstand low prices now. “We are working very closely with the NFU and I have met Dairy UK about how to help farmers manage this situation,” she said.
“We will continue to face a difficult global market in the coming months. We want to make sure the hard-working farmers in this industry are able to withstand as far as possible the immediate effects and also to have the resilience to handle volatility in the longer term.”
Ms Truss said this meant ensuring dairy farmers received full support from the £141m Countryside Productivity Scheme under the Rural Development Programme, which was targeted specifically at helping farm businesses become more competitive.
Benefits could include help with new capital investment for monitoring animal welfare or improving the energy efficiency of cattle housing. Defra was also encouraging the use of longer contracts with buyers to give farmers added security.
Ms Truss said: “What I want is for our dairy industry to be number one in the world – an industry that not only gets through this difficult period, but builds up its competitive strength to meet future challenges and opportunities.”