Editor’s View: Volatility takes toll on long-term dairy plan
© Andrew Linscott/iStockphoto Conversation at this week’s Dairy-Tech event at Stoneleigh was understandably dominated by the current market situation. Production volumes are not dropping fast enough to help prices level off.
Indeed, a good number of businesses that have so far been cushioned from the worst of the price drops we have already seen will now be increasingly exposed as seasonality payments taper off and the spring flush arrives.
And despite some good news about the latest global dairy commodity prices, it is now extremely clear that the next six months are going to be a chilling experience.
See also: Long road to recovery for dairy sector as prices cut further
About the author
Just like when a major news story is dominating the headlines and journalists wonder what other important things have dropped off the agenda, I was left pondering what we could and should have been talking about, were the markets more stable.
This is the hidden price of volatility. It stifles the ability of the decision-makers in each business to think and act long term.
When thoughts are dominated by riding out the storm, crucial issues such as tackling succession, investing in slurry storage or acquiring and keeping the best employees (as discussed last week) will naturally be pushed down the agenda.
Alongside his remarks on the staggering global increase in milk production in the past 12 months, analyst Chris Walkland talked in his Dairy-Tech seminar about the longer-term increase in UK milk price volatility.
There have been some tremendous highs – in 2022 and last year – alongside some significant dips, with the gap between cost of production and farmgate price expected to yawn even wider until the second half of this year.
So what is the solution to this? How can a reversal in volatility be achieved?
I chaired a Farmers Weekly Question Time session at the event where the speakers agreed that at least part of the answer is better communication between producer and buyer (there are other factors, of course).
It seems remarkable in 2026 that there are still milk processors that have zero or little knowledge about what their farmers are planning to produce in the next 12 months.
So they must carry their share of the blame for the 760m additional litres produced in the UK in 2025 versus year-earlier levels.
And even if better communication results in more processors taking the Muller approach – which will pay only 1p/litre for output above 102% of year-earlier levels from next month – surely that is better in the long term than prices swinging as wildly and as rapidly as they have done of late.
There is a lot to celebrate in the sector at the moment.
Consumer demand is advancing at 2% a year and looks as robust as it has for a long time, with ever-increasing interest in good-quality protein.
And in the longer term, good chunks of the UK look to be far more resilient places to grow grass than much of Europe, holding out hope for exporters.
We just need to find a way to come off the boil without flinging any more producers out of the pan – a problem that refreshingly seems like something the industry can sort out itself without needing to call upon politicians.