Dairy market volatility exposes an unsustainable milk price gap

The whiplash effect of volatile dairy prices and volumes has continued in 2026, with record hot weather leading to a drop in milk production, across a summer where the average daily temperature was almost 2.5 degrees higher than the average for the last three decades.

Messages from the start of the year warning of overproduction seem a distant memory, but the pain of those sharp price drops experienced towards the end of 2025 / beginning of 2026 is still very much being felt.

Many dairy farmers across the country experienced price drops of between 10-15ppl, a loss in the value of their milk of around 40% over a matter of months as production warnings hit headlines and volume management mechanisms were introduced quickly in many contracts across the sector.  

However, as the UK recorded its hottest summer since records began, deliveries fell below expected levels for 87 days this summer. Lost production equates directly to a drop in farm incomes at a time when many dairy farmers were already producing milk well below the cost of production.  

While we have seen a, much slower, rise in milk prices in Q2 and Q3 of 2026, there is still an unacceptable gap between the bottom and the top of the milk price table.

For October/November 2026 we have seen some dairies announce 40+ppl prices, with many already near that mark for September. Yet, at the bottom of that price table there are still farms who have barely hit 30ppl in 2026.This despite input cost rises in fuel, fertiliser and feed.  

The current gap between the top and the bottom of the price table is not sustainable and is damaging to the wider supply chain.

Increasingly we are hearing from farmers who are in a desperate position; who want to continue to produce milk but whose businesses are not receiving strong enough returns to remain viable.

With meteorologists predicting next year to be even hotter, driven by an unprecedent El Nino event, and as demand for dairy protein remains strong across the world, long-term, collaborative action is needed.

The one variable the global supply chain should not be relying on right now is consistent milk supply.  

Resilient, profitable farm businesses need a resilient dairy supply chain.

The NFU has welcomed the news that a number of dairy processing businesses are looking to invest in their stainless-steel capacity going forwards, to allow for further processing of raw milk and to help deal with periods of high volumes.

Nearly half a billion pounds worth of investment has been mooted over the next 10 years, showing the wider confidence processors have in the long-term future of British dairying.

But it is vital that this confidence is passed down and shared with dairy producers, so that supply and demand can work in tandem.  

Communication and negotiation between farmers and milk buyers is key.

Buyers need to be meeting their suppliers face-to-face, know the succession or retirement plans of their milk pool and recognise the pressure higher input prices, drought and increasingly rigid legislation are having on dairy farm business.  

At the same time, milk forecasting has become increasingly important.

While some dairies still do not ask farmers to forecast, understanding and managing farm milk volumes, regularly reforecasting and sharing any anticipated or unexpected changes in production with your milk buyer is vital to ensure there is join-up between supply and demand.  

Adaptation to different weather patterns is another area dairy farmers are looking at following a number of very wet and vert hot years.

From improving water capture during the rainy months, to investing in improved ventilation for cattle housing and adapting their usual silaging patterns.

Climate adaptation has become increasingly important when it comes to food production and is something the wider supply chain and government must be aware of and support to help ensure domestic food security going forwards.