All of Arla's goat milk suppliers have been handed notice of contract termination, including some suppliers of Abergavenny Fine Foods.
In a statement, the Milking Goat Association has called the news "absolutely devastating".
It said goat farmers now find themselves in the "unenviable position" of taking "very difficult" management decisions, in order to respond to the forthcoming loss of their milk buyer.
The Milking Goat Association, formed in early 2017, has this year encouraged suppliers to engage more with their milk buyers in order to address supply demands and possible oversupply.
However, the actions of Arla and Abergavenny Fine Foods shows that oversupply continues to be cause for serious threat to the industry.
The Milking Goat Association has stated that it wishes to repeat its plea to encourage existing goats’ milk suppliers to engage closely with their milk buyers, to find out what the buyers want.
It said this is as much about volume, as it is about milk profiling across the year, solids and protein content targets and so on.
To the milk buyers, the Milking Goat Association has requested that they work "much closer" to their milk suppliers, and help them more to meet future supply requirements, without risking over supply.
The association said that those considering entering the goats’ milk supply market need to be "very mindful" of this current oversupply situation, and think carefully before diversifying and investing during a difficult time.
"As an industry we must learn from this situation now, and take the lead in self regulation of our production levels," the statement concluded.