Dairy farmers losing thousands as price collapse bites

Dairy producers are starting to feel the impact of sharp reductions in milk prices as cuts by processors begin to filter through to farm level.

A significant proportion of businesses are now being paid below the cost of production for milk, with some larger farms losing more than £1,000 a day.

Dairy consultants suggest the average UK milk price is currently at roughly 38p/litre, and expect it to fall below 35p/litre by April.

See also: RABDF warns of further producers leaving dairy sector

However, there is a large spread between processors, with some already paying below 30p/litre, while at the other end of the league table producers are still receiving 45p/litre plus.

Cost of production also varies significantly between farm businesses, but is typically between 40p/litre and 50p/litre.

As an example, a farm producing 5,000 litres a day, receiving a milk price of 30p/litre while facing production costs of 45p/litre, would be losing £750 a day at present.

The Dairy Group consultancy forecast average cost of production for 2025-26 at 49.1p/litre, after taking into account all costs including family labour.

Nick Holt-Martyn, principal consultant at the Dairy Group, said: “January will be the first month when people get paid significantly less.

“The cashflow consequence is people have just had their December payment, which for some people was still a decent price. Cashflow is always further behind, so the actual financial effects of all this is yet to really hit home.”

Mr Holt-Martyn predicted that with the actual milk price equivalent (Ampe) down at 30p/litre in the UK and commodity prices in Europe also down, further price cuts could be on the cards.

He suggested that while there were signs that some commodity markets, such as cheese and butter, may have reached the bottom of the market, it could still take several months for farmgate prices to stabilise.

Milk supplies

Excess milk production remains the major driver behind low milk prices.

Milk supplies had been tracking at 6% higher than year earlier levels, but have started to come down following the recent price pressure and are currently running at 3% higher on the year.

GB average daily milk deliveries fell below 35m litres a day in mid-January for the first time since September, according to figures from the AHDB.

North East dairy farmer and NFU dairy board chairman Paul Tompkins has seen his own business operating at a significant loss as a result of farmgate milk prices falling below the cost of production, alongside many other enterprises.

Mr Tompkins said: “We have entered 2026 with many farms under economic pressure, but most recognise the reasons why markets are delivering the current farmgate price.

“Most farms are looking at how they ensure their businesses are resilient to such shocks.

“Each time we go through market shocks we come out into a rising market with less farmers than when we went in, which is not a measure of success.”

He added that long-term sentiment for the dairy sector still remains positive, driven by a growing global population with a strong desire for high-standard dairy products, but said it’s how farm businesses can ride these adjustments and periods of instability which is going to be key.