Dairy sector plans ahead to manage excess milk volumes

An oversupplied milk market is putting significant pressure on farmgate milk prices, with further cuts expected to be announced by processors next week.

Independent dairy analyst Chris Walkland has warned that some farmers could be left receiving a milk price of 30-35p/litre for up to eight or nine months.

Despite declining prices, milk volumes remain high, with GB daily milk deliveries tracking 5% higher during mid-November than this time last year.

See also: Dairy sales tick-up as producers cull cows to cut costs

Dairy consultancy firm Promar International says milk flows have also accelerated in the EU and the US, and that strong production and modest growth in demand have led to oversupply, rising stocks and pressure on prices.

Promar International managing director David Eudall said: “Milk prices have been falling, and the outlook isn’t showing much upside, but farmers still have real opportunities to protect their margins.

“Our work with dairy businesses shows that even small, targeted efficiency gains in feed, youngstock, energy and daily routines can make a meaningful difference to cost per litre. The key is acting now.

“By tightening performance today, farmers can prevent short-term price pressure from becoming a longer-term challenge and build a more resilient, profitable system for the future.”

Curbing production

As milk volumes continue to rise, several dairy processors have been looking at how they can reduce volumes ahead of the spring flush next year.

Many processors already implement seasonality payments to incentivise milk production when volumes are typically low and discourage excess milk production during the spring when volumes are highest.

Muller has agreed with its dairy producer organisation MMG Dairy Farmers to update its milk pricing mechanism in order to manage future milk volumes.

In a letter sent to producers and seen by Farmers Weekly, Muller said collections on farm rose by 5% in 2025, equivalent to an additional 100 milk tankers every week.

It also projected a milk surplus of more than 12.5% for December.

Muller has said that between 1 March and 30 June next year, if a farm’s monthly production exceeds 102% of the volume supplied in the same month in 2025, it will receive 1p/litre for the ingredients portion of the price.

However, there is not expected to be any impact on pricing if production volumes stays below this threshold.

The initiative has received a mixed response from industry, with some calling it responsible volume management, while others view it as a tough penalty on growing businesses.