Dairy farming under pressure: local voices on the new milk-price reality

At 4.40am in the Vale of York, Paul Tompkins says he starts the day already in the red.

He farms 234 hectares with a 500-cow Holstein herd and reckons it costs him about 40p a litre to produce milk. But he says he’s being paid 29p — leaving him around £1,800 a day down, before he’s even finished the first milking.

It’s a stark local snapshot of a national squeeze: milk prices falling fast, costs refusing to follow, and farmers trying to work out which parts of the system they can still control.

That is not a gentle drift. That is a drop that can turn a “tight but workable” dairy budget into a loss-making one in a single quarter.

Why prices are sliding now

1) Too much milk, too quickly

AHDB’s December forecast points to a record GB milk year: 13.05 billion litres for 2025/26, 4.9% higher than the previous milk year. Deliveries for the season to late November were 5.5% ahead year-on-year.

That extra milk has to go somewhere. When processing and commodity markets can’t absorb it at last year’s values, the pressure travels back down the chain — and lands on the farmgate price.

2) Wholesale values are signalling weakness

AHDB’s Q4 market review puts December’s Milk Market Value (a proxy for market returns) at 33.1ppl, while AMPE (butter/powder equivalent) sits at 29.9ppl and MCVE (cheese value equivalent) at 31.5ppl.

Those numbers help explain why farmers are being warned of further pressure: they’re pointing to returns that look uncomfortable for many conventional producers if contracts track commodity markets.

“Mid-30s milk” and the gap farmers can’t close overnight

For many farms, the hardest part isn’t just a low price — it’s the speed of change.

Arla’s conventional headline price fell to 35.73ppl from January, while Farmers Weekly reported some processors falling by as much as 15ppl by February and noted some smaller regional processors “reportedly paying” base prices below 30ppl.

In that environment, the question becomes brutally simple: what does it cost to keep the wheels turning?

That “margin over purchased feed” is not profit — it still has to cover labour, power, bedding, vet bills, machinery, rent, finance, and reinvestment. But it shows why farmers feel cornered when milk prices fall into the mid-30s: feed alone doesn’t move fast enough, and everything else is stubborn.

When the top line drops quickly, “everything else” doesn’t politely shrink with it.

The local impact: “you can’t turn a dairy herd on a sixpence”

Talk to dairy farmers across England and you’ll hear the same frustration in different accents: they can’t switch off production like a factory line.

Even if you cut feed, you risk yield, fertility, health, and next season’s performance. Sell cows, and you may lose the herd you’ve built for genetics and efficiency — and you still have buildings and finance to pay for.

In Yorkshire, Tompkins’ figures are extreme, but the fear behind them is widely shared: that loss-making months come first, and capacity exits come later — often quietly, one family at a time.

What’s meant to protect farmers — and why it’s not a quick fix

A major change is already in place: the Fair Dealing Obligations (Milk) Regulations 2024. The NFU says the regulations came into force for new contracts, and that contracts need to be compliant by 9 July 2025.

The point is straightforward: more transparency, clearer terms, and fairer treatment in contracts.

But farmers will tell you this is a seatbelt, not a rescue helicopter. It may improve how changes happen — consultation, notice periods, clarity — yet it can’t conjure stronger commodity markets or eliminate oversupply.

A tale of two contracts: aligned vs exposed

One of the clearest divides right now is between farms on retail-aligned contracts and those exposed to commodity-linked movements.

AHDB notes that aligned liquid contracts were an exception to the wider bearish tone, with some aligned buyers holding or even increasing prices in January.

That matters because it shapes what farmers can plan:

• Aligned contracts can offer steadier returns and fewer violent swings.
• Non-aligned/commodity-linked contracts can move fast — and when they move down, it can be sudden.

You can see why local conversations increasingly turn to one question: how do you get onto a better contract — and what do you have to give up to get there? (volume commitments, exclusivity, specification, location, investment).

What to watch next (and what farmers are watching)

Production discipline
AHDB flags record volumes and continued strength into the spring flush even as prices fall. If milk keeps flowing, price recovery can be slow.

Processor capacity and contract mechanics
AHDB references “B-price mechanisms” and different contract impacts — a reminder that not all price cuts feel the same on farm.

Whether the floor is near
AHDB notes a bounce at the first Global Dairy Trade event of the new year, but cautions it could be a blip. Farmers will recognise the feeling: hope, quickly followed by “let’s see”.

The human line at the heart of it

Dairy farming has always asked families to live with volatility. What’s changed is how quickly it can arrive — and how many farms feel they’ve used up their spare resilience already.

In the Vale of York, Tompkins puts a number on it — 29p coming in, 40p going out. Across England, plenty of other farmers won’t share figures publicly, but they’ll nod at the arithmetic.

And they’ll tell you the same thing: when milk prices fall “like a stone”, it’s not just a market story. It becomes a local story — because every parish has a dairy farm that anchors jobs, contractors, vets, feed merchants, and the next generation’s decision to stay or go.