Watch: Farmers descend on Telford for UK Dairy Day

Don't celebrate yet though. If optimism is beginning to take hold among dairy farmers, it comes with a note of caution.

Thousands of farmers from across Britain came together in Telford for UK Dairy Day, with organisers estimating that visitor numbers had topped last year's 7,000 by as many as 2,000.

While there was a buzz around the International Centre, which hosted the event for the third consecutive year, farmers were not exactly effusive about the state of the industry.

In recent months prices have begun to sneak upwards from their rock-bottom low levels of the early part of the year, when some dairy companies were paying prices of around 10p per litre for milk which cost nearer 30p to produce.

"It's definitely not a purple patch," said Andrew Dutton, chairman of Holstein UK which organised yesterday's show. "But we have stopped going downwards, and seen an improvement in prices.

"It's nowhere near the production costs that will allow farmers to survive and flourish in the future but there is a sense of optimism for the long-term future of our industry. We have seen a lot of people go out of dairy and I believe that's slowing down and that there is a recovery underway."

One key reason for the recovery is a fall in production levels, due in part to some farmers leaving the industry.

Welshpool dairy farmer Jim Jones is among those who believes that has helped those who remain, but warned that there is still some way to go before people feel confident.

"I have known several farmers which have gone out of business, or that have taken up overdrafts or borrowing just to stay afloat," he said.

"Even when the price comes back to 30p it is going to take two or three years to cover their bills, just to get back to where they were.

"This market now looks like it's going to be in dips and troughs every five years. If it takes that long to come back after a recession, how can anyone carry on?"

According to Michael Oakes, the NFU's national dairy board chairman who grew up on a farm near Whitchurch, farmers and their customers need to work together to stop a boom and bust cycle emerging.

He said: "While the money isn't in the bank yet, people can see that there is a bit of light at the end of the tunnel. That bit of light, that bit of movement in milk prices just means we should have bottomed out and started to come out now.

"A lot of people are coming out of this in a far worse financial situation than they have ever been in. A lot of farmers I have spoken to say they have never been quite where they are today.

"If we don't change some relationships and find ways to manage risks we will find we are not over one downturn before we get to the next."

He added: "Farmers need to supply for the need that is out there, rather than blindly producing milk. We need to do things in different ways or we will find ourselves back where we are.

"It's not an industry that would cope well with boom and bust economics.

"But it's not all down to the farmers. Processors for the next few months are going to be short of milk. The market has been overcooked and we have gone from oversupply to undersupply really quickly.

"Processors also need to find a way to work with farmers so we can both grow and perhaps shrink when we need to. At the moment farmers as the primary producers are taking all the risk."

As well as the main show ring, major UK producers and suppliers to the dairy industry were represented at the show.

Among the local companies exhibiting were Muller, Lloyds Animal Feeds, Browns of Wem, and Ellesmere-based milking machinery manufacturer Fullwood.

Mike Watson, who was manning Fullwood's stand, said he was feeling the uplift in farmers' moods.

"There's been a loss of confidence with the price of milk dropping as it has," he said. "People who have been on decent contracts throughout the downturn are now willing to invest, but some people are still holding back trying to pull some money back in, or are unsure of where it's going to go.

"There has been a lack of confidence, but we expect next year, if the milk price increases as it has, to be a lot better."