IN normal circumstances, for a proposal to be attacked by the militant vegetarian organisation, Viva, would be enough to guarantee it my enthusiastic support.

But with Nocton Dairies' plan to establish an 8,000-cow super dairy on a green-field site in Lincolnshire, I really feel we ought to think through some of the implications before rushing to judgment.

The venture is the brainchild of Peter Willes, who already milks 2,000 cows at Parkham in North Devon and Clitheroe in Lancashire, in partnership with his farm manager at Clitheroe, David Barnes, and a Lincolnshire arable farmer, Robert Howard. They are applying for planning permission to construct what would be by a wide margin the most productive dairy unit in Britain, with an output of around 90 million litres a year. It would include its own electricity-generating anaerobic digester, employ some 80 people, including a full-time vet, and cost over £40 million.

But the unit will occupy just 22 acres. That is because forage for the cows will either be grown by the local farmers, or come as by-product from the nearby sugar beet factory and bio-fuel power station. That means the cows will not have access to grazing and will be kept indoors for virtually the entire year.

It is this which has upset Viva and, it has to be said, a fairly wide spectrum of media commentators, the Daily Mail prominent among them. The proposal has been branded "an environmental and animal-welfare disaster", by Viva's Justin Kerswell, who has been sounding off in lurid terms about dairy cows "imprisoned in sheds".

A Facebook group opposing the plans has so far attracted over 2,800 supporters.

Now while I do, as you will discover, have my doubts about the plans, they do not concern the welfare of the animals. I have visited several 1,000-cow plus zero-grazed dairy units, and they have without exception been models of comfort and amenity for the animals kept in them. Everything I know about this proposal suggests to me that it will be the bovine equivalent of a five-star hotel. Offer a cow a choice between the warmth, comfort and food on tap of Nocton Dairies' gigantic, open-sided barns, and a wet and muddy hillside somewhere the other side of Rackenford, and she would take the moo-tel every time.

But what this is about is not the reality of animal welfare in bovine eyes, so much as the perception of it in human ones. When the aforementioned Justin Kerswell says "it blows out of the water the pastoral image that the dairy industry likes to convey", he has a point. Ask the average customer whether they would prefer their milk to be produced by cows out grazing pastures in the traditional way, or kept indoors in what is effectively a giant milk-producing factory, and most would take the free-range option, even if the indoor milk was cheaper – which for the time being at least, it won't be.

One of the ironies of the existing milk-pricing structure is that, organics apart, the milk on which consumers would probably place the highest value – milk from small herds, on family farms, produced mostly from grazed grass, hay and silage in remote and often beautiful locations – actually receives the lowest price, several pence a litre less, typically, than the milk from a large, intensive unit.

This is mainly down to economy of scale: it is much cheaper for the dairies and co-operatives to pick up a large volume of milk from somewhere handy for their processing operation than it is to send a tanker down a long lane for a small pick-up in the wilds of North Devon or West Cornwall.

However, if my interpretation of consumer perceptions is correct – and most of the response to the Nocton Dairies proposal points that way – then the most intensively produced milk may not be commanding the highest prices for much longer. We have already seen with the success of the organic milk market that consumers are prepared to pay a modest amount extra for a product that they perceive as being more "natural", "healthy" and "traditional".

If experience with other commodities is anything to go by, there is room in the dairy market for a halfway house between "organic" and "standard", and the most obvious label for it would be "free-range". We would need a definition, of course. Even on the most traditional dairy farms, the cows are kept indoors for at least three months, for the sake of themselves and their pastures.

I can understand the objections to a new market category; that it would effectively downgrade milk from cows kept indoors, in the same way as happened with eggs from battery cages. But I do not see how else small-scale, grass-based, non-organic dairy farming in the Westcountry is going to compete with the Nocton Dairies of this world, with their cheaper forage, better access to markets, fewer pollution problems and more supportive planning authorities. We have to play to our strengths, which are all about green fields, happy cows and family farms and ultimately, the perception will only be right if it is underpinned by the reality.

The Nocton Dairies proposal was driven by the market. Demand for milk is running ahead of supply.

That represents an opportunity which Peter Willes and Co identified and have set out to exploit. Good luck to them. But everything we know about the food market tells us that the more intensive a mainstream production becomes, the greater will be the demand for less intensive alternatives. That is an opportunity as well, and it is one that the Westcountry is ideally placed to grasp. It won't be long, I suggest, before free-range milk becomes as commonplace on supermarket shelves as free-range eggs, and for that, ironically, we'll have Nocton Dairies to thank.

Anthony Gibson is a freelance writer and may be contacted at anthony.gbsn@googlemail.com