Despite early challenges, UK dairy production is set to rise 1.1% in 2025. Higher prices and improved weather boost farmer confidence. However, the industry faces a balancing act with global risks and changing consumer trends. Will the sector’s resilience prevail in an uncertain market?
Summary:
In January 2025, the UK dairy sector experienced a 2.2% increase in milk deliveries compared to the previous year, according to AHDB. The sector is expected to grow by 1.1% in 2025, bouncing back from earlier difficulties caused by bad weather and low prices. This growth is driven by improved weather, higher milk prices, and a stronger milk-to-feed ratio, which boosts farmer confidence. However, the industry must navigate potential challenges like global commodity price changes and shifting consumer preferences. The market outlook is supported by environmental initiatives, emphasizing the need to balance production and demand to maintain progress.
Key Takeaways:
- UK milk deliveries increased by 2.2% in January 2025 compared to January 2024, indicating a robust start to the year.
- British dairy production is forecasted to rise by 1.1% throughout 2025, following a challenging previous year.
- Improved weather conditions and rising milk prices have positively influenced production levels.
- Despite increased supply, milk prices have maintained stability, with potential future pressures anticipated during 2025’s spring flush.
- Cheese and yogurt demand are on the rise, aided by evolving consumer preferences and health trends.
- The number of dairy farmers is declining, potentially reducing the total in the UK significantly within two years.
- Environmental efforts are underway to address methane emissions, including a new grant for vaccine development.
- Global milk production aligns with UK trends, with anticipated growth across primary exporting regions.
The Agriculture and Horticulture Development Board (AHDB) reports that British dairy production is off to a robust start in 2025. January milk deliveries rose by 2.2% compared to January of the previous year.
Production Boost
According to the Agriculture and Horticulture Development Board (AHDB), British dairy production is anticipated to increase by 1.1% in 2025. This projected growth is a rebound from the difficult commencement of the 2024/2025 dairy year, hampered by wet spring conditions and reduced prices, leading to muted output levels.
Recent data from the UK government’s milk utilization statistics show the following trends:
| Product | Nov 2024 | Dec 2024 | % Change (Nov to Dec 2024) |
| Milk available to processors (million litres) | 1,172 | 1,206 | 2.9% |
| Liquid milk production (million litres) | 503 | 504 | 0.2% |
| Cheese production (‘000 tonnes) | 39.1 | 42.1 | 7.8% |
| Butter production (‘000 tonnes) | 15.7 | 14.1 | -10.0% |
| Milk powder production (‘000 tonnes) | 5.5 | 9.7 | 75% |
As indicated in the table, December 2024 saw notable growth in milk availability and cheese production, while butter production declined.
Factors Driving Growth
Numerous crucial factors have contributed to the upward momentum:
- Enhanced Weather Conditions: The latter part of 2024 saw favorable weather, allowing cows to graze outdoors for extended periods and enhancing milk production.
- Price Rebound: Starting in September 2024, milk prices showed an upward trend, improving profit margins for dairy farmers.
- Enhanced Milk-to-Feed Ratio: This key economic measure has motivated farmers to boost their production levels, reaching 1.48 in late 2024—the highest recorded since March 2008.
Market Dynamics
The expansion in production has significantly impacted the market:
- Price Stability: Despite the rise in supply, milk prices have persisted at a relatively elevated level. The average cost, not accounting for aligned contracts, was 45.14 pence per liter in October 2024.
- Future Outlook: Nonetheless, specialists caution that the upsurge in production might exert downward pressure on prices during the spring flush anticipated in 2025.
Consumer Trends
As production progresses, shifts in consumer behavior have been observed:
- Retail Demand: While the overall demand for milk is projected to remain stable, a slight decrease in household consumption may occur as more employees transition back to office environments.
- Product Preferences: Promotional activities and the trend of preparing meals at home fuel a continuous increase in cheese demand. Additionally, yogurt sales are anticipated to rise, driven by a growing emphasis on health.
Industry Resilience
Susie Stannard, the Senior Dairy Analyst at AHDB, remarked on the industry’s progress: “Following a challenging beginning of the season, the sector is exhibiting signs of revival. Enhanced milk prices and a more favorable milk-to-feed ratio motivate farmers to increase their output.”
Challenges Ahead
The dairy industry, while experiencing a favorable beginning to the year, is not immune to challenges:
- Global Risks: Volatile commodity prices and the threat of disease outbreaks pose significant challenges to maintaining current growth momentum.
- Market Balance: Careful management is essential as the sector strives to harmonize increased production with the variability in consumer demand.
Global Context
According to Rabobank’s most recent forecast, global milk production will rise by 0.8% in 2025. This increase is expected across all seven primary exporting regions, including the US, EU, Australia, New Zealand, Brazil, Argentina, and Uruguay. This global pattern is consistent with the UK’s expected growth, situating the country’s dairy sector within a larger framework of industry expansion.
Environmental Considerations
The dairy industry is actively tackling environmental issues with significant financial backing. Amazon’s founder, Jeff Bezos, has allocated a substantial £7.3 million grant to the Pirbright Institute and the Royal Veterinary College. This funding is directed toward developing a vaccine that can potentially decrease methane emissions from livestock by over 30%.
Industry Outlook
The resilience of the UK dairy sector remains evident despite ongoing challenges. According to the Andersons Outlook report, the increasing demand for premium-quality milk and dairy products, coupled with significant investments by leading processors and a rise in milk prices, points towards a promising year for those who continue in the sector through 2025.
Nonetheless, the decline in dairy farmers persists, with 440 producers, accounting for 5.8%, exiting the industry between April 2023 and April 2024. This attrition has reduced the total number of producers in Great Britain to 7,130, and projections suggest a further decrease, potentially dwindling to 5,000 and 6,000 within the next two years.
As the UK dairy sector continues to showcase resilience and growth, stakeholders are poised to observe the evolution of these trends closely throughout 2025. The sector’s sustained success will hinge on its capacity to manage the intricate balance between supply and demand while simultaneously addressing environmental challenges and navigating industry consolidation.
Learn more:
- Is 2024 Shaping Up to Be a Disappointing Year for Dairy Exports and Milk Yields?
- Global Dairy Market Trends July 2024: Australia’s Rise as Argentina and New Zealand Face Challenges
- Sustained Dip in Milk Production for Eighth Month; Low Cheese Prices Impede Farmers’ Profit Margin Recovery: Rabobank Report
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