Combating Falling Milk Prices

Across the board, milk prices are taking a significant hit for November, December and going forward into 2026. A drop of 5-6ppl on 150,000 litre monthly milk sales will have a significant impact on cashflow, losing £7,500 per month. The dairy sector is used to seeing cyclical milk prices and businesses have shown resilience in the past, but there are some key areas which every farm should be focusing on to ensure they survive this particular low. 

 

1. Identify the Cash Needs of the Business 

Your business must generate enough profit to cover loan repayments, personal drawings and tax. If your profit level for the last year is high and you are anticipating a high tax bill in January 2026, this will have a negative impact on an already tight cashflow. HMRC offer a “Time to Pay” arrangement with flexible terms and low interest rates which will allow you to spread payments over several months. Similarly, speak to your bank or lender about loan repayment terms if you are concerned about defaulting on payments. Personal drawings can be a sensitive issue, especially if there are multiple families involved in the business.  Have an honest and open discussion about the level of drawings and where any savings can be made.    

Ensure you make best use of your monthly book-keeping processes to give you the maximum amount of information on your business costs, allowing you to spot trends and identify areas for potential savings. 

 

2. Feed Efficiently  

In general, silage quality has been good this year, but in some areas, quantities will be back. Carrying out a feed budget will allow you to predict where any forage shortages will lie, allowing you to make decisions about what feeds are required.  Prices for store cattle are high, and so it may make more sense to sell dairy beef calves than buy forage for them if stocks are tight. Regular silage sampling will ensure rations are formulated to maximise milk from forage and control feed costs. With falling milk prices, feeding for marginal litres on split price contracts may no longer be cost-effective. Having rations checked by an independent nutritionist can help you formulate the most cost-effective rations. 

 

3. Buy Fertiliser Wisely 

Many businesses have taken advantage of the Preparing for Sustainable Farming Fund and have had a large percentage of their farm soil sampled. Make use of your soil analysis by having a nutrient budget prepared, which will ensure that the use of slurry is maximised to meet crop demand and inorganic fertiliser use is targeted to reduce cost.   

 

4. Hit Milk Quality Targets 

You can control the quality of the milk you are selling by ensuring you are hitting bactoscan and cell count targets to maximise bonuses. Formulate winter rations to ensure fat and protein payments are being met in a cost-effective manner. 

 

5. Talk to Others 

Use your social and professional networks to discuss strategies and compare success stories. If you are not already part of a FAS Connect group, contact advice@fas.scot to find out if there is a relevant group in your area.