Long road to recovery for dairy sector as prices cut further

Dairy consultants and analysts are forecasting farmgate milk prices to remain at low levels throughout the spring, with no major price rallies expected until the second half of the year.

Markets appear to have reached a bottom, with several dairy commodities starting to lift in value.

At Dairy-Tech in Warwickshire on 4 February, independent dairy market specialist Chris Walkland said excess milk volumes continued to put pressure on prices, with an additional 760m litres of milk being produced in the UK in 2025 – the equivalent of 27,000 additional tankers.

See also: Farmgate milk prices face further cuts in February and March

He said milk production had also increased by roughly 2.5bn litres in the US and 2bn litres in the EU last year.

Farmgate milk prices had started from a fairly strong position in 2025 before starting to fall, with Defra figures showing a record average milk price of 44.05p/litre.

Mr Walkland suggested that liquid and cream processors were currently at the top of the milk price table, with cheesemakers in the middle, and processors focusing on ingredients typically at the lower end of the price table.

He added that there was also a considerable 12p/litre premium for those on aligned contracts compared with the majority of the market on non-aligned contracts.

Assuming a cost of production of 40p/litre, he said further losses were expected in the coming months.

The latest Global Dairy Trade (GDT) auction on 3 February provided some optimism for the sector with increases for skimmed and whole milk powder values.

“We had two positive GDT auctions in January and another positive one up 6.7% yesterday, providing the best start to the year that anybody could have imagined,” said Mr Walkland.