The organisation warned that the decline is reducing the production of dairy items such as cheese and butter, a trend that could continue during the winter months.
AHDB expects milk supplies to contract further in the coming months, although the pace of change will depend on milk prices, the impact of bluetongue, weather challenges and forage availability over the winter.
Lower milk supplies will also likely mean continuing the lower production of dairy products.
AHDB also highlighted concerns that geopolitical factors could influence trade flows and the availability of dairy products.
The warning comes as UK milk deliveries, the volume of raw cow’s milk collected from dairy farms by processors, in the second quarter of the calendar year (Apr to Jun) totalled 4164 million litres (-1.1%).
AHDB said cheese supplies have been in the negative territory since the start of the year. Cheese production fell by 2.3% in the second quarter of 2026, impacted by lower milk supplies amid subsequent summer heat waves.
Cheese imports from New Zealand increased by nearly 2600 tonnes helped by the UK-New Zealand Free Trade Agreement giving the country improved access for its dairy products.
However, exports of cheese have continued to grow since the second quarter of 2025 and recorded an all-time high in Q2 2026 up by 15.3% year-on-year.
Globally, the biggest increase in exported cheese volumes were reported to the EU including the Netherlands (+1,800 tonnes), France (+1,600 tonnes), Belgium (+1,000 tonnes), Germany (+600 tonnes), Austria (+300 tonnes), Spain (+300 tonnes), Ireland (+200 tonnes) and Turkey (+200 tonnes).
This was followed by an increase to non-EU nations in Asia including China (+1,000 tonnes), Singapore (+400 tonnes) and North America including Canada (+100 tonnes).
Exports also picked up to the Middle East and North Africa (MENA): Libya (+1,900 tonnes), Bahrain (+1,400 tonnes), Saudi Arabia (+800 tonnes), Egypt (+200 tonnes) and Sub-Saharan Africa including South Africa (+400 tonnes).
Butter supplies trended down for another consecutive quarter, the AHDB revealed. Overall higher exports amid lower production and imports led to available supplies declining by 7.6%.
Production declined by 4.3% in the second quarter year-on-year as economics were not favourable churning cream into butter.
Imports also declined by 8.4% whilst exports boosted by price competitiveness in the global market increased by 7% during the period.
An increase in exports was reported to Australia, the Netherlands, Germany and Denmark, Libya, Egypt, Kuwait, Saudi Arabia, United Arab Emirates and Sub-Saharan Africa including South Africa.
In addition, China is also showing signs of revival in demand and imports are expected to strengthen in the coming months. Growth in dairy consumption is primarily driven by protein rich dairy products with consumers preference towards health, nutritional and functional foods.
