The AHDB has highlighted the tough year that British dairy farmers have had with commodity prices followed by farmgate prices plummeting since August 2025 as a response to global milk oversupply.
As average farmgate prices have fallen to 34ppl, with many well below that, it means income will be well below the cost of production for many farmers on market related price contracts, it said.
“With Autumn calving about to kick off, many farmers will be in search of clues as to how the rest of the milking season will pan out. Should they dig in, cut costs and prepare for another difficult year or gamble that markets may improve as milk supplies fall? “ said Susie Stannard, Lead Analyst (Dairy) at AHDB.
“However, the current situation is unpredictable and highly dependent on weather and disease progression. Fortune may favour the bold but prudence could live to see some fight another day.”
What five factors could impact on British Farmers and milk pricing?
Repeated heat waves have caused milk supplies to fall
The country has had an exceptionally hot summer with heatwaves beginning late May, late June and continuing through July and into August with only brief periods of respite for many parts of the country.
AHDB said this has caused milk supplies to “falter”, with June behind last year by 3.1% and July to date (to 25 July) behind by 2.6% with signs of an acceleration.
Milk volumes are also being impacted and have fallen in other countries due to the weather situation, such as with France seeing successive days of over 40C.
Pressure on input costs
The challenging weather conditions have been not only been hot but also dry, meaning a lack of grazing grass for cattle.
Farmers have already had to begin feeding sileage put away for winter.
“This could cause difficulties through the winter season and farmers may need to manage numbers accordingly,” said Stannard.
“The war in the Middle East has also caused prices for fuel, fertiliser and energy to rise with ongoing cost rises in labour and taxation still posing an issue.”
Disease threats
Bluetongue virus has become an increasing threat with reports of many cases in the West Country and estimates of vaccination uptake remaining at minimal levels.
Whilst less severe in dairy cows than sheep, bluetongue can cause a drop in milk production and impact on fertility and cause foetal malformations, AHDB said.
Market response
Fears of compromised milk supplies are encouraging some response in the markets, according to Stannard.
Spot milk has risen into the 40-50ppl range, cream up to £1.53/kg on average in July although as high as £1.70 at points and cheddar gaining 6% in the latest dairy wholesale survey for July.
Whilst more milk is being diverted to fresh and liquid, a high amount of butter stocks still “weighs heavily” on markets, Stannard said.
However, European (and British) produce is still being heavily undercut by cheap US exports which is limiting export demand.
“At the same time, whilst Europe struggles with heat other markets are still producing a lot of milk. The Southern hemisphere is still seeing strong growth, although El Nino could be a factor later on in the year,” Stannard said.
The US have been producing strongly although they are starting to report impacts from hot weather as well.
The global picture remains uncertain and the latest GDT numbers suggesting a steady index of 0.1%.
However, there has been a negative movement on the fats side (-2.3% for butter, -0.8% for AMF) and more positive moves on protein (SMP +1.2%, Cheddar +3.8%, Mozzarella +1.0%).
Milk prices
Processors have been forced make decisions on whether to safeguard milk production by raising milk prices, but risk commodity markets not moving, AHDB said.
September price announcements have been largely positive – with 1 or 2ppl on top of 1 or 2ppl for August.
However, Stannard said there are “question marks” over whether that gets close to the breakeven point.
