The number of dairy farms in Scotland has decreased to 957, the lowest number since records began in 1903.
The average size of herds over the past year has increased by only one to 181 milking cows, the latest statistics by the Scottish Dairy Cattle Association showed.
Secretary of the SDCA, Janette Mathie said 2016 had been a 'horrible experience' for many dairy farmers with farm gate prices below the cost of production for much of the year.
NFU Scotland’s milk policy manager George Jamieson said he was surprised that even more farmers didn’t leave the sector given the damage caused by two years of low milk prices.
However, the latest analysis indicates that confidence is returning to the industry.
"Prices now show an improving trend which I hope will continue to rise in line with the world market for dairy products.
"The SDCA would strongly advocate that industry funded bodies spend a far larger share of their funding promoting dairy produce to the public which in turn would benefit both the producer and milk processor."
The number of herds decreased in nine counties led by Lanarkshire, Wigtownshire and Aberdeenshire. Banffshire now has no dairy herds.
Looking to the future Janette Mathie also commented: "Early signs are that at least 4 completely new dairy farms will start production in 2017 and others may increase cows so I hope it does not lead to over production which will adversely affect the present optimism in the industry."
