Five Factors Affect British Dairy Farmers and Milk Prices

The Agriculture and Horticulture Development Board (AHDB) has reported that British dairy farmers have endured a difficult year, with farmgate prices plummeting since August 2025 due to a global oversupply of milk. Farmgate prices have dropped to an average of 34ppl, leaving many farmers with income below production costs.

Repeated heatwaves in the UK have caused milk supplies to decrease significantly. From late May through August, the country experienced exceptionally hot weather, leading to a decline in milk production by 3.1% in June and 2.6% in July, with signs of further reduction. These conditions have forced farmers to use winter sileage earlier than planned, potentially leading to challenges in the winter months.

In addition to weather concerns, the war in the Middle East has driven up prices for fuel, fertilizer, and energy, alongside rising labor and taxation costs. Another issue is the bluetongue virus, which has been reported in the West Country, potentially affecting milk production and fertility in cows.

Market responses to these challenges include a rise in spot milk prices to 40-50ppl and an increase in cream and cheddar prices. However, the market remains under pressure due to high butter stocks and competition from cheaper US exports.

Milk processors are contemplating whether to raise milk prices to protect production, with September announcements showing some positive adjustments. However, there are still uncertainties about whether these changes will meet farmers' breakeven points.

Globally, milk production remains strong in the Southern Hemisphere, although El Nino could affect output later in the year. The overall market outlook is uncertain, with mixed movements in global dairy trade indices.