Farmers face a real dilemma if the Office of Fair Trading proves collusion between supermarkets and processors to fix the price of milk.

They have complained for years about their profits being squeezed at the expense of supermarkets and the middlemen in dairies. Finally they secured higher prices, possibly in spite of that collusion, and now their paymasters look set to be clobbered.

The initial findings by the OFT relate to the period of 2002 to 2003. It is an extremely serious allegation but the investigators are convinced they have the evidence of price-fixing. They claim to have discovered that supermarkets informed dairy companies of future intended milk prices and that this information was shared among the processors so that milk prices could be bartered and then fixed.

Farmers may not have enough evidence to prove such a case and in any event it will be fiercely contested by the retailers and dairy companies with no final outcome until mid-2008.

If the case is proven it was suggested today by more militant dairy farmers that they may launch a legal claim for compensation for being denied fair prices.

The National Farmers’ Union was being rather cautious in its initial reaction to the news. It has been campaigning for years for supermarkets to raise their prices to consumers so the farmer had a fairer share. But the union is well aware that any stinging fines imposed on supermarkets and processors may also have an adverse impact on their own prices.

This year for the first time, the union seemed to be making progress on dairy prices. There appears to be a closer relationship between farmers and the wider dairy industry.

Retailers have recognised that they need to pay more. Indeed earlier this year supermarkets were on a bandwagon competing to pay the most for a pint of milk.

Tesco, the biggest milk seller, intervened to pay 11p a pint to farmers - up from 9p a pint - and this has had a significant impact on prices. Like all the companies it has also introduced a higher price for local and organic milk and milk from farmers who are converting to organic production.

Few in farming, however, believe this approach will last long. Retailing is a highly competitive business and if farmers achieve a price rise for a couple of months they are invariably ground down in the next pricing round. The dairy industry is just as competitive and companies will always seek to gain new contracts from the High Street chains by offering lower prices than their rivals.

Some farmers also believe the high price gesture by the supermarkets was an attempt to cosy up to the Competition Commission, which is conducting an inquiry into prices paid by retailers to suppliers.

In January, the commission specifically focused on the higher margin the retailers were taking from milk - in 1995 it was less than 1p a pint but in 2005 this had jumped to just under 8p a pint. Across the same period the price paid to farmers fell from 12.25p a pint to 7.35p in 2005.

Dairies and retailers have consistently insisted that their prices reflect the global demand for milk. But at present the world demand for milk is high and even so farmers claim they are not getting their fair share. Many feel their profits are again be squeezed by the mighty combination of processors and supermarkets.

When they seek comparisons they look at Ireland where farmers are being paid more than 18p a pint. In the south-west of England the average farmer is getting less than 10p a pint. Organic milk producers though are doing better and being paid about 15p a pint.

The NFU has just launched a similar campaign for retailers to raise the prices of pork and chicken to reflect the sharp increase in the price of grain. It is therefore hardly surprising the union was somewhat coy about today’s OFT news.

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