British Dairy Farmers Leave Industry Amid Market Pressures
British dairy producers have been quitting the industry in record numbers, as per the latest AHDB survey. The data reveals that there were approximately 7,130 producers in the UK in April 2024, a 5.8% decrease from a year ago. In comparison, there were 7,570 active producers in April 2023 and 7,500 in October 2023, indicating that 440 farmers exited the industry during the winter. Despite the decrease, average milk production per farm has increased, with a flat growth in average herd size, pointing towards continued consolidation rather than a new industry trend.
According to Food Standards Agency (FSA) data, the largest loss of producers occurred in the North West (39) and the North of England (22), followed by the Midlands (16) and the Mid West (13). AHDB's data represents the number of producers actively supplying milk, while the FSA and Defra conduct less frequent checks and count smaller dairy holdings.
Freya Shuttleworth, AHDB senior analyst, livestock, cites several factors driving farmers out of the sector. “Although milk prices are historically higher, they have dropped substantially from the peaks in 2022. Coupled with robust cull cow prices, inflationary pressure on key inputs such as feed, fuel, and energy, and increased interest rates driving up borrowing costs, many producers are incentivized to leave as farm margins tighten.”
As of June 2024, the average UK farmgate milk price was 38.43ppl, according to Defra, which is 13.08ppl less than the highest price paid to farmers in 2022, and 1.53ppl less than June 2023. While fertilizer prices have remained stable since mid-2023, fuel costs have increased by 3.5% year on year.
Land values have also impacted the sector. Savills' 2024 Farmland Market report estimates that land values in England grew by 4% on average in 2023, with high land availability in the north. In Scotland, values were flat in 2023, and stock was in negative territory. In Wales, prices soared by 23% on average, with the highest trading activity in 23 years and a supply increase of over 40%.
Additionally, increased regulatory pressures, such as Nitrate Vulnerable Zones and slurry storage, have driven some producers out of the industry before making long-term investment decisions. Succession issues also play a role, with some farms closing or selling due to a lack of willing successors.
Despite these challenges, there is potential for new entrants to the industry. Shuttleworth believes consolidation will continue, but the industry has been improving productivity, with higher average yields per cow and relatively stable national milk production volumes.
Environmental regulations will focus the industry on further efficiency improvements across the supply chain, ensuring the UK dairy sector remains competitive and sustainable.
