Dairy farmers will have to increase production by 52 per cent over the next three years if they want to survive changes in EU supports, according to a leading agri-industry figure.

Food and milk processor Glanbia yesterday published the results of a survey of dairy farmers showing that 73 per cent of them want to stay in milk production, despite next year's shake-up of EU subsidies that will leave them vulnerable to market forces and trigger rationalisation in the sector.

But Glanbia group managing director Mr John Moloney warned that, in order to survive, those who stay in the business will have to increase production by an average of 52 per cent in the three years from 2005 to 2008.

This effectively means that they will have to increase the EU-imposed quotas that determine the amount of milk they can produce.

The survey shows that in order to remain viable, large producers will need increases of up to 30 per cent. Smaller producers will need to increase their quotas by as much as 140 per cent to survive.

The only means of increasing quotas is to buy them from those exiting the sector. Glanbia wants the Government to introduce a system that would allow 70 per cent of milk quotas that become available to be sold directly through a quota exchange.

The company argues that the remaining 30 per cent should then be sold through the State-backed restructuring scheme.

From next year, the EU will give farmers just one payment instead of a whole series of subsidies linked to production. Once the connection between farm subsidies and production is broken, the market will play a greater role in determining prices.