Dairy farmers urged to make the most of profit ‘rebound’

South West dairy farmers have enjoyed a financial “rebound” over the past 12 months, but margins remain fragile, according to the latest Milk Cost of Production Report from Old Mill and the Farm Consultancy Group.

A combination of stronger milk prices and lower feed costs in the last milk year (April 2024-March 2025) lifted average farm profits to £644/cow, up from £153/cow the year before.

See also: Milk prices on the turn as commodity markets weaken

Milk income rose 15% to reach £3,335/cow, thanks in part to better yields, while non-milk income jumped 46% to £578/cow, helped by stronger beef prices.

So even though the total cost of production climbed 4% to £3,269/cow in 2024-25 – largely driven by higher labour costs – on average dairy farmers in the South West made bigger profits.

“The rise in milk income of around 4.9p/litre was not completely offset by costs,” said Bradley Causey at Old Mill. “Milk prices began to tick up partway through the 2024-25 period, and feed prices continued to soften.”

Performance

The gulf between the most- and least-efficient producers continued to widen, however, with the top 10% of farms achieving profits of £1,098/cow, while the bottom 10% lost £497/cow.

Interestingly, the most profitable herds actually produced slightly less milk, but spent £218/cow less on feed than the bottom 10%, and more than £1,000/cow less on labour, power and machinery.

Size was also a factor. “The most profitable farms averaged 540 cows, compared with 198 cows in the bottom group,” said Allaster Dallas at the Farm Consultancy Group.

“Economies of scale allow larger farms to spread the cost of labour and machinery more effectively, leaving them in a stronger position when milk prices fluctuate.”

Current milk year

Looking at the current 2025-26 milk year, the report predicts a further rise in milk income to £3,465/cow, despite the recent price cuts.

However, costs are expected to rise further to £3,467/cow, resulting in a forecast profit of £514/cow (after allowing for cow and calf sales) – down on the 2024-25 peak, but broadly in line with the four-year average.

With profitability now restored, the report urges farmers to future-proof their businesses by paying down debt, investing in resilience, or putting succession plans in place.