Milk prices under pressure

The dairy market has gone into 2026 under real pressure. Quite simply, there is too much milk around, both in the UK and globally, and prices are feeling the strain.

UK milk production surged through the autumn.

October deliveries were nearly 7% higher than last year, and volumes stayed 3–5% up right into early January. That extra milk quickly fed through into falling wholesale prices.

In December alone, bulk cream lost around a quarter of its value, butter prices dropped sharply, and skimmed milk powder kept sliding.

Processors struggled to process all of the milk and were also left with more product than the market could comfortably absorb.

Unsurprisingly, farmgate prices followed. Many buyers announced cuts towards the end of 2025 and into the first quarter of 2026, and most signs suggest margins will stay tight through to autumn.

High milk-to-feed ratios at 20-year highs, gave a strong signal to produce.

On top of that, cows delivered record-breaking fat and protein, meaning even more product was coming off every litre.

Forecasts for GB production were revised upwards several times, and 2025/26 is now expected to be a record year.

Prices stayed high until October because of shortages in the EU due to bluetongue. When this resolved, places like the Netherlands, France and Germany saw a second flush.

The problem doesn’t stop at the farmgate or even the UK. Globally, supply has also been running ahead of demand.

Rabobank reports that the world’s major dairy exporting regions finished 2025 over 2% up on the year, with production still growing into early 2026.

The USA have seen big growth driven by a quarter of a million extra cows to service a lot of new cheese processing capacity.

They are producing a lot of products, more cheaply than in Europe. 

Across Europe, commodity prices have taken a hit as stocks have built up and exports slowed.

Analysts expect commodity markets to stay under pressure until those stocks are worked through and demand improves.

Most market watchers expect the first half of 2026 to remain difficult.

With high volumes heading into the spring flush, processors will be under pressure to manage milk and farmgate prices are unlikely to recover quickly.

Things could start to stabilise later in the year if a few conditions are met:

• Global milk production slows, as expected
• Butter and skim powder stocks begin to clear
• UK milk output eases back as tighter margins and forage limits bite

If that happens, butter and cheese prices could steady from late Q2 onwards, with some improvement possible in the second half of the year.

Disruption from weather, disease (such as bluetongue), or processing capacity constraints could also tighten supply sooner but these are hard to predict.

In the UK, recent contract price cuts show how closely farmgate prices are tracking commodity markets.

Aligned contracts and organic producers have fared much better.

For most conventional producers, a realistic outlook is lower prices through the first half of 2026, followed by stabilisation and a modest lift later in the year.

Longer term, there are reasons to stay positive.

Global demand for dairy continues to grow, driven by population growth and changing diets.

Investment in new UK processing capacity, especially for products like mozzarella and cottage cheese, shows confidence in British milk over the long run.

This is a supply-driven downturn, made worse by high milk solids and full stores.

Most signs point to continued pressure through the first half of 2026, with the chance of improvement later in the year if supply eases and stocks come down.

In the meantime, resilience comes from focusing on what you can control:

• Getting the most from your milk contract
• Working proactively with your processor
• Challenging unfair terms where necessary

These steps won’t remove volatility, but they can help protect margins and strengthen your position when the market turns.