Milk prices dropping like a stone
Understanding Milk Price Volatility in the Wake of the Dry Summer of 2025
Milk price volatility is an ongoing challenge for dairy farmers in the UK, influencing profitability, cash flow, and long-term planning. However, the market dynamics have been especially pronounced following the dry summer of 2025, when grass shortages led to changes in feeding practices, and milk production levels unexpectedly surged.
Many dairy farms in the UK are in crisis, with the money they earn from selling their milk not even covering their costs.
At Douglas Green Consulting, we believe that understanding the underlying causes of this volatility is the first step towards effective business planning. In this article, we aim to detail the factors driving milk price fluctuations and provide practical insights for navigating this complex market.
The Impact A Dry Summer on Milk Production
The summer of 2025 posed difficult conditions for UK farmers, with sparse rainfall creating suboptimal growth for grazing pastures. Many farmers faced depleted silage stocks, forcing them to adapt their feed strategies by incorporating alternative feedstuffs such as purchased concentrates and forage substitutes. This shift, interestingly, resulted in increased raw milk production.
The reason? Concentrate-based diets often offer higher energy densities than grazed grass, enabling cows to meet their nutritional needs more efficiently and potentially boosting milk yields. While this unintended production increase provided some farmers with short-term gains, it also fed into broader market dynamics that tipped the balance of supply and demand, driving down milk prices.
Why Milk Prices are 'Dropping Like A Stone'?
Milk price fluctuations are a natural result of a highly sensitive, interconnected market influenced by both supply-side and demand-side factors. Below, we explore why prices have been unusually volatile in 2025:
1. Record Levels of Raw Milk Production
When milk production peaks, as it has in 2025, it often surpasses both domestic consumption and export capacity. This surplus inevitably pressures commodity markets, lowering milk prices as processors and buyers negotiate hard to manage their storage, processing, and distribution costs.
The changes in feeding strategies following the dry summer have exacerbated this situation. While production has surged, the market has struggled to absorb the excess, especially as broader economic conditions are already challenging for consumers and supply chains alike.
2. Consumer Demand and Economic Forces
UK consumers continue to face high levels of inflation and heightened cost-of-living pressures, which have led to muted demand for premium dairy products. Domestically, when consumer buying power weakens, the market typically reverts to basic, lower-cost dairy items, reducing the value chain across all sectors.
This reduction in demand coincides with an increased global supply of dairy products such as milk powders, cheese, and butter. UK milk prices are closely tied to global commodity markets, which have softened due to strong production levels in other major dairy-exporting nations like New Zealand and the EU.
3. Processing Capacity and Bottlenecks
Processing plants can only handle so much volume at a given time. During periods of high production, processing bottlenecks can arise. The inability to process excess milk as efficiently as required means that some surplus may be diverted to lower-value uses - or even wasted in extreme cases - a further drag on farmgate milk prices.
4. Disrupted Trade Channels
While UK milk remains highly competitive, export markets have been constrained by logistical issues, including continued Brexit-related complexities (yes – it’s still going on!) and overarching issues within global trade. Limited access to international markets further restricts the ability to offload surplus milk, leaving more on the domestic market and driving prices lower.
Practical Steps to Navigate Volatile Milk Prices
At Douglas Green Consulting, our independent farm consultants understand that price volatility is a source of immense frustration for UK dairy farmers. While there is no single solution, there are strategies you can adopt to mitigate its impact:
- Focus on Cow Feed Efficiency and Production Costs
The decisions around feed systems in 2025 highlight the importance of assessing your input costs carefully. While higher volumes of milk can increase turnover, it is profitability, not yield alone, that determines financial success. Focus on feed conversion efficiency and balance nutritional needs with cost-effective rations to maintain a profitable herd. - Diversify Your Farm Revenue Streams
Consider producing higher-value products such as organic milk or specialty cheeses if possible or explore on-farm processing to retain more value post-farmgate. Diversification reduces reliance on commodity prices and allows for greater control over your margins. - Engage with Milk Contract Options
Fixed-price contracts, though they may seem restrictive, can offer valuable protection against extreme price fluctuations. Working closely with milk buyers to secure a degree of price stability ensures more predictable cash flow. - Adopt Forward Planning for Weather Events
The weather extremes seen in recent years, whether drought or flooding, are becoming more frequent. Ensure your business has a robust forage management plan in place, with sufficient stores of silage and hay as a buffer for increasingly erratic weather patterns. - Monitor Dairy Market Signals and Seek Expert Advice
Staying up to date on global dairy market trends and pricing indicators is critical in navigating volatile conditions. At Douglas Green Consulting, our dairy farm management consultants provide tailored market insights and financial consultancy to help you adapt, plan, and thrive even in challenging conditions.
Looking Ahead: A Resilient Future
The dry summer of 2025 has highlighted how even subtle adjustments in farm management practices, like switching feeds, can ripple through the entire dairy supply chain. The resulting milk price volatility is an unfortunate reality of the current market landscape, but it also serves as a reminder of how adaptable and innovative UK farmers must be to future-proof their operations.
Our dairy farm management consultants are committed to supporting farmers across the UK to navigate these complexities. By combining in-depth knowledge of production economics with a truly client-focused approach, we aim to equip you with practical, bespoke solutions that secure your long-term viability.
If you need assistance with market planning, cost analysis, or strategies to mitigate risk for your dairy farm, please call our dairy farm consultants.
Together, we can help ensure that your dairy farm business thrives in a future that is as dynamic as the dairy industry itself.
Ready to Tackle Milk Price Volatility?
Call Douglas Green Consulting today on 01666 817278 for expert advice tailored to your farm's specific circumstances. Your success is our top priority.
Douglas Green Consulting: Helping UK farmers succeed through expert advice, impartiality, and a shared commitment to sustainable growth