The UK's largest dairy company has withheld payments to its farmers following a crash in the price of milk, its chairman said.

First Milk, a co-operative owned by British farmers, said 2014 was a "year of volatility that has never been seen before" in the global dairy industry.

Its chairman, Conservative MP Sir Jim Paice, said it will delay today's payments to farmers by two weeks and all subsequent payments by a fortnight. In a statement he said: "We understand that the milk payment deferral will cause concern for members as direct debits and payments will have been lined up against milk cheques.

"On that basis, we are working with all major banks at national, regional and local levels to explain the rationale around this decision. That way, bank managers should be well equipped for any conversations they have with First Milk members.

"We are a business owned by dairy farmers. The board are acutely aware of the difficulties this current extreme volatility is causing First Milk members and the UK dairy industry.

"We don't know how long this current market downturn will last, and we are aware that hundreds of UK dairy farmers are unlikely to find a home for their milk this spring.

"Our priority is to make the business and our processing assets as secure as possible in order that we can continue to process and market every litre of our members' milk."

He added that the move will put the business on a "stronger platform" ahead of the spring.

Returns from globally traded dairy products have fallen by more than 50 per cent in the past 12 months, leading to a steep fall in milk prices around the world.

Last year the chief dairy adviser to National Farmers' Union warned that the cost of production outstripped the price farmers were receiving for milk.