UK dairy markets find floor, but prices remain in decline

Dairy commodity prices may have finally reached a floor after months of falls, according to the AHDB, however farmgate prices remain under pressure due to excess milk volumes.

AHDB’s UK Dairy Agri-Market Outlook suggests that prices for skimmed milk powder and mild cheddar are beginning to recover.

Milk market indicators have started to lift, and the outlook suggests demand at retail for yogurts, cheese and whey products are forecast to grow.

See also: Dairy farmers losing thousands as price collapse bites

There were further positive signs for dairy commodities, with trade lifting at the first two Global Dairy Trade auctions of the year, as more buyers from across Asia and the Middle East return to the marketplace.

The AHDB still expects farmgate milk prices to continue to fall until milk supplies stabilise, despite the improvement in commodity markets.

It forecasts that prices may steady following the spring flush, but will remain low until the summer.

Susie Stannard, lead dairy analyst at the AHDB, said: “The volume of milk in the system means the path back to higher farmgate prices is likely to be a slow rebuild, with fats prices still under pressure.

“Slowing production is vital to safeguard the future of the sector.”

Ms Stannard added: “The outlook is for pressure on farmgate prices, for those contracts that are exposed to falling commodity values, to continue until milk supplies come under control and start to fall.

“At the same time, buyers are expected to come back to the market to start to absorb some of the excess global product stocks that have built up.

“This will not happen until after the spring flush, so farmers on non-aligned conventional contracts should expect milk prices to be low until at least the second half of 2026.”

Milk supplies

Daily GB milk deliveries have been running at roughly 3.5% above the same week last year throughout January.

GB milk production is forecast to surpass 13bn litres for the 2025-26 milk year, putting it up by almost 5% on year-earlier levels.

Ms Stannard added: “The outlook shows GB milk production is forecast to stabilise in 2026, with marginal growth of around 0.3% expected.

“However, this is from a high level, meaning processing capacity during the spring flush will still be challenged, keeping a lid on farmgate prices which have seen a cut of as much as 15p/litre for some.”