UK dairy farms faced mixed results in 2023. Are higher milk prices sufficient to cover production costs and provide fair income for farmers? Learn more.

Imagine laboring daily to provide an essential staple people need only to find your efforts insufficient to pay for your costs. Many UK dairy companies experience this reality. The changing milk prices over the last year have created additional challenges. Although prices improved significantly from a low of 36.49ppl in July 2023, the Kingshay Dairy Costings Focus Report reveals that they still do not meet realistic wages or manufacturing expenses. Good news is available, however. Milk solids per cow have increased by almost 11%; herd numbers have grown, and stocking rates have become more significant during the last ten years. Markets must provide premiums to cover these extra costs as climate change takes center stage. Now, efficiency and sustainability are more important than ever. The future of dairy farming relies on knowledge of the interactions between environmental factors and market pressures. 

Despite the challenging year, UK Dairy Farmers have shown remarkable resilience in the face of economic challenges, with Milk Prices and Production Costs coming under scrutiny. Last year, UK dairy producers displayed conflicting fortunes, particularly regarding milk pricing and production costs. According to the Kingshay Dairy Costings Focus Report, milk prices dropped drastically to an average of 36.49ppl in July 2023. Prices have increased since then but still fall short of manufacturing expenses. Many farmers need help to get fair compensation for their family effort.

The market peaked at 13.8ppl in March 2023 and narrowed to 11.6ppl by March 2024. The gap between the highest and lowest milk prices was erratic, drawing attention to the difficulties of satisfying customer needs and store expectations.

While the continuous difference between expenses and income threatens economic sustainability, the potential for market changes to offset these extra expenses and labor on farms, especially given climate change, offers hope.

The UK’s Dynamic Milk Market: Navigating Volatility and Embracing Sustainability 

The milk scene in the UK is constantly changing. In March 2023, the difference between the highest and lowest milk prices exceeded 13.8ppl; in March 2024, it narrowed to 11.6ppl. These price swings reveal consumer and retailer desires, causing market instability. 

Consumers and stores are now advocating sustainable practices in addition to reasonable costs. Promoting regenerative agricultural methods, which focus on restoring and enhancing the health of the soil, helps the market adjust as climate change takes the front stage. Meeting customer expectations and laws depend on processors like First Milk providing premiums for these environmentally beneficial approaches.

Dairy farmers face a complex combination of changing market dynamics, sustainability mandates, and varying milk prices. They must strike a compromise between environmental conscience and financial feasibility.

Over the past decade, UK Dairy Farms have embraced efficiency amid dynamic shifts in production trends, indicating positive developments in the industry.UK dairy farms’ production patterns have changed dramatically over the last ten years. Now averaging in the mid-8,000 liters per cow range, milk solids reach a record 646 kg/cow—an 11% increase from 10 years earlier. This meets contract criteria and shows a higher feed economy. Herd sizes have also increased from 185 cows in 2014 to 219. From 2.25 a decade ago, stocking rates have risen to 2.39 cows per hectare. These developments indicate a concentration on increasing output and economic resilience in challenging market circumstances.

Weather’s Whims: A Tale of Diverging Fortunes for UK Dairy Farmers 

Dairy farming has traditionally depended heavily on the weather, so this year proved difficult. Due to bad weather, three percent less milk was produced from pasture. Fascinatingly, Scotland broke the trend with a 16% rise, demonstrating how much regional practices and the environment affect outcomes.

Talk about the Kingshay Dairy Costings Focus Report-based patterns in milk prices over the last year. Describe how milk prices have increased but fall short of supporting fair rewards for family work and manufacturing expenses.

Rebound in Reproductive Health: Dairy Herds Return to Stability After Last Year’s Heatwave

After last year’s scorching summer, fertility patterns steadied. Days until the first service is 70—one day more than in 2021/22; the calving interval is back to 393 days. For the herds, these consistent readings point to a resumption of regular reproductive cycles. The not-in-calf rate over 200 days has dropped to 12%; the infertile culling rate is now down to 6.7%, in line with pre-summer rates. These patterns indicate that farmers are recovering control over the reproductive condition of their cattle.

Production Systems and Economic Efficiency: Diverse Approaches in the UK Dairy Sector 

Economic efficiency varies across the UK’s dairy production systems. All-year-round calving herds focused on housing achieve the highest margin per cow at £2,495. Meanwhile, autumn and split block calving herds with a grazing focus lead in margin per liter, reaching 29ppl. Economic implications are significant. Higher margins per cow mean better cash flow for reinvestment in the farm.

In comparison, higher margins per liter highlight the cost-effectiveness of pasture use. These efficiencies influence profitability, resilience, and the ability to meet consumer demands. Understanding them is critical to optimizing your operations in a dynamic market.

Organic Dairy Farming: Navigating Financial Pressures and Growth 

With the margin over-bought feed per cow declining 13.9% to £2,048 from £2,380 last year, organic dairy farms are under financial strain. Still, in the previous ten years, organic herd numbers have increased by 19% and now stand at 243 cows. Conversely, conventional herds have grown 18.4% to 219 cows from 185 in 2014. Although both farms are expanding, organic farmers suffer more profitability because of considerable feed expenses, stressing their difficulties in fulfilling organic requirements.

The Bottom Line

This year has been a swirl of events for UK dairy farmers driven by changing milk prices and growing production costs. Notwithstanding these difficulties, the industry has improved efficiency, with mixed results. Milk prices fell during the last 12 months, then slowly recovered, still not covering production expenses or paying adequate compensation for family work. This shift captures a consumer and retailer-driven market motivated by environmental needs.

From the production standpoint, there are advantages. Adverse weather affected forage milk, but generally, milk solids reach record levels because of better feed efficiency and careful herd management. Although lameness still exists from inclement weather, health statistics reveal fewer incidences of mastitis. After the heat wave, reproductive health has steadied, underscoring good management.

Efficiency is crucial; different economic performances across manufacturing systems result from this. Although both conventional and organic farms deal with financial constraints, the industry is changing with creative ideas aimed at sustainability and lessening environmental impact.

Market changes such as increased premiums for environmentally beneficial approaches and better price stability could better assist UK dairy producers in meeting environmental criteria and remaining profitable. Your help advocating these changes may significantly change this rugged yet hopeful terrain.

Key Takeaways:

• Milk prices dropped sharply to an average of 36.49ppl in July 2023 but have since risen, albeit insufficiently to cover production costs and family labor for many farmers.
• The price gap between the highest and lowest milk prices fluctuated significantly, peaking at 13.8ppl in March 2023 before narrowing to 11.6ppl in March 2024.
• Retailers and consumers are increasingly demanding sustainable practices, pushing milk processors to offer premiums for regenerative farming.
• Despite adverse weather conditions, average herd sizes have grown to 219 cows, and milk yields have seen a slight increase.
• Health improvements include a reduction in mastitis cases, although lameness has increased, primarily due to poor weather affecting grazing.
• Fertility metrics have stabilized following disruptions caused by the previous year’s heatwave, with calving intervals and days to first service returning to normal levels.
• Diverse production systems showcase varying levels of efficiency, with housing-focused herds yielding higher margins per cow and grazing-focused herds delivering higher margins per liter.
• Organic dairy farming has also been impacted, with margins over purchased feed dropping by 13.9% while herd sizes have increased by 19% over the past decade.

Summary:

UK dairy farmers have faced a challenging year due to changing milk prices and growing production costs. The Kingshay Dairy Costings Focus Report shows that milk prices dropped drastically in July 2023, but still fall short of manufacturing expenses. However, good news is available as milk solids per cow have increased by almost 11%, herd numbers have grown, and stocking rates have become more significant over the last ten years. Markets must provide premiums to cover these extra costs as climate change takes center stage. The dynamic milk market in the UK is constantly changing, with the difference between the highest and lowest milk prices exceeding 13.8ppl in March 2023 and narrowing to 11.6ppl by March 2024. Processors like First Milk must provide premiums for environmentally beneficial approaches to meet customer expectations and laws. UK dairy farms’ production patterns have changed dramatically over the last ten years, with milk solids reaching a record 646 kg/cow and herd sizes increasing from 185 cows in 2014 to 219.

Learn more:

• Is 2024 Shaping Up to Be a Disappointing Year for Dairy Exports and Milk Yields?
• Sustained Dip in Milk Production for Eighth Month; Low Cheese Prices Impede Farmers’ Profit Margin Recovery: Rabobank Report
• Rising Milk Prices and Lower Feed Costs Boost Profitability: May Dairy Margin Watch