The dairy roller coaster has been a tough journey over the past 18 months.

However, with prices on the rise, the outlook is more positive than for some time, which bodes well for farmers choosing to stay in the sector.

Most of Andersons’ clients experienced a 10p/litre milk price drop between the year ending March 2023 and March 2024, according to Mike Houghton and Oliver Hall, both partners in the firm.

The decline in the cost of production was significantly less than this, and many are still living with the negative cashflow legacy of that tough winter.

Dairy farmer numbers continue to reduce, with 440 producers (5.8%) leaving the industry between April 2023 and April 2024. The GB total now stands at just 7,130, the UK total just below 10,000.

Silage, slurry and agricultural fuel oil (SSAFO) compliance is still a major issue for many businesses, and slurry store cover legislation is due to come into force by 2027.

The intention is to reduce methane emissions, but this has to be science-based and needs further examination in our view.

Importing thousands of plastic sheets to cover stores is unlikely to solve the problem, as there are always losses when injecting the slurry.

Cow numbers

Success is much more likely to be achieved through reduced cow numbers.

These continue to decline steadily, and utilising feed supplements that reduce emissions, and improved genetics, will produce cows that convert feed more efficiently and therefore produce less methane.

The new all-Wales nitrate vulnerable zone rules are imposing a need for investment and more planning. Many Welsh dairy businesses are finding they are now “overstocked”, according to the regulations.

Milk prices are rising again, which is essential for most producers, but future supply will be a critical component in determining what happens to values.

Overall, the number of dairy farmers leaving could well accelerate, potentially reducing the critical mass of GB producers to between 5,000 and 6,000 within the next two years.

The key question is whether those remaining can or will increase output to maintain the UK milk supply at about 14.8-15.2bn litres.

Over the past decade, UK dairy farmers have been unbelievably efficient in doing this, despite the reduction in their number.

Ongoing investment by major processors demonstrates their confidence that supplies will remain adequate for their future need. The key will be keeping supply and demand balanced.

Looking ahead, future-proofing the dairy farm business is likely to become a key priority.

Not only has the milk price been volatile, but we are also now experiencing unprecedented changing weather patterns, as illustrated by Met Office data, says consultant Tom Cratchley.

Conditions are becoming warmer, wetter and more extreme. This is adversely affecting forage quality, yields and overall utilisation of the lowest cost feed available: grass.

Weather resilience investment needed

Adapting to the future will require dairy farmers to invest in weather resilience.

More housing, better tracks and grazing infrastructure, more rainwater separation, potentially for re-use, and heat-stress mitigation will need to be planned for.

Focusing on sustainability and self-sufficiency could well drive greater collaboration between expanding dairy businesses and arable producers who are seeking more profitable and beneficial break crops.

Forage crops combined with straw-for-muck agreements are likely to become more commonplace.

Producers will need to become aware of the new milk contract regulations and address these over the winter.

New contracts are already governed by this legislation, but all existing agreements will need to be updated to reflect the new regulations before July 2025.

There is currently very little discussion at farm level on the impact of these regulations, but all milk processors need to be considering this, and revised proposals are likely to be put to dairy producers over the winter.

The dairy outlook is positive, with milk prices currently increasing and most of the main UK processors continuing an investment programme.

Greater weather resilience and investment to comply with legislation are probably the immediate challenges, but demand for high-quality milk and milk products appears to remain strong, which should underpin a profitable future for those who remain in UK dairy production.

Friesian Farm

Andersons’ model dairy farm illustrates the roller coaster which dairy farmers are currently riding.

This volatility is quite difficult to manage; farm businesses end up with a large tax bill on the back of good milk prices, but of course this can arrive in a year when prices have slipped back.

To help reduce the effects of this, farmers should consider forward booking their fertiliser and feed requirements, both of which are relatively good value at the moment, at a time when milk prices are on the rise.

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