The first signs of a small rise in the confidence of UK dairy farmers has been detected particularly among those in dedicated supply chains.

The 2010 DairyCo Farmer Intentions Survey found that although 1,174 milk producers nine per cent intend to leave the industry within the next two years, 32pc plan to increase production.

It means that for the first time since 2004, when the survey began, the amount of increased milk production will more than cover that lost from those leaving the industry.

Ken Boyns, DairyCo sector director, said there had been two years of relatively good prices and the development of a number of dedicated supply chains.

But he warned: "This must continue if the survey's predictions are to become reality, and farmer confidence is to grow."

The small rise in confidence is particularly reflected in more farmers planning for the future. The number intending to implement a succession plan in the next ten years has risen from 24pc in 2009 to 43pc this year. Mr Boyns said: "This suggests the industry is attracting more entrants and younger generations to join or remain in the industry, which is very encouraging for the long-term future of the British dairy industry."

The level of intended investment has also risen slightly compared to last year, and is now closer to 2008 levels.

The largest change is in the number intending to invest more than 250,000 in the next five years nine per cent compared to two per cent over the last two years.

Mr Boyns said the announced investment in the liquid processing sector, and retailers investment in dedicated supply chains, were likely to help the sector become more efficient and maintain the rise in confidence.