Dairy March forecast update: Marginal decline expected in GB milk production for 2024/25

GB milk production for the 2024/25 season is forecast to reach 12.25bn litres, 0.6% less than the previous milk year, according to our March forecast update. 

GB milk production is forecast to reach 12.25bn litres for the 2024/25 season, which is back by 0.6% compared to the previous milk year. The current milk year’s (2023/24) production is estimated to end the year at 0.6% down compared to 2022/23 at 12.32bn litres. Reduced yield has been one of the driving factors, which will contribute to lower production with herd size only seeing very minimal change. Wet weather during the last few months is likely to delay in turning out of the cows on the ground and will limit grass utilisation to an extent.

Lower milk prices in 2023 compared to the previous year have been the driving force behind reduced yield levels and thereby lower production. Our baseline assumptions for the coming year are of yields falling whilst the rate of decline will be less in the first half of the year compared to second half. Yield through the summer and winter months are likely to slow down to between -0.5% to -2.5%.    

There has been only marginal growth in milking herd driven by younger cows (2-4-year-old category). The latest BCMS data shows that the GB milking herd stood at 1.63 million head, as of 1 January 2024. This is the second consecutive quarter to show year on year growth in the milking herd, albeit marginal (0.1%). This has been driven by an increasing number of youngstock maturing into the herd. There may be some national variation, not captured in these numbers, with particular pressures being seen by Welsh farmers with NVZ, and other environmental regulations putting downwards pressure on cow numbers. 

Production in the Autumn declined quite sharply. but so far in 2024 declines have been much less marked (less than 1%) buoyed by recovery in wholesale price and positive price announcement by major retailers. We are expecting production decline to be mostly less than 1% compared to year ago levels for the remainder of the year. Much of the decline has been in the organic sector and, although demand remains challenged by the cost-of-living crisis, this decline may be reaching a floor.

After the recent recovery in milk prices from September onwards, there was a slight setback in January with the UK average Defra price at 37.68ppl for Jan24 (lower 24ppl month-on-month basis). In the last quarter of 2023, average farmgate prices had plateaued at the 36-37ppl range. Margin pressures continue to be a feature of 2024 as global energy prices, along with other input costs remain elevated over pre-Ukraine war levels. Our yield expectations are likely to return slightly lower levels compared to year ago levels unless we see a sustained recovery in prices.

Ongoing extremely wet weather since the Autumn has been a cause of concern for grass quality, silage production and also on the ability to turn cattle out and do groundwork. This could well have a negative impact on the depth of the Spring flush which is not expected to be stellar this year.

Based on the balance of these factors, we have forecast a fairly steady supply in the new milk year, with perhaps some marginal decline. Our next update to the forecast will be in June when there will be more clarity on production during flush, price levels and silage availability going into the autumn months, as well as the demand side. Dairy market price uncertainty remains across regions and dairy products with markets yet to find sound footing.

According to AHDB’s latest outlook, looking ahead there is scope for some recovery in dairy demand. The worst of the economic fears have subsided in some countries and the overall outlook is for a little less gloom. However, with China continuing to be slow to regrow imports, demand will remain fairly lack-lustre which will not push prices. 

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