GB milk production for the 2026/27 season is forecast to record a new high of 13.04bn litres, 0.1% more than the current milk year according to the March forecast update.
GB milk volumes have registered record highs in the milk year 2025/26, an increase of nearly 5.2% (April to 14-March) compared to the previous milk year due to strong dairy economics After a record-breaking year, 2026/27 should see the brakes start to come on and prediction is -it will end as a year of stability. However, we have to keep in mind that we are annualising against a year of record highs meaning there will still be a lot of milk available.
The growth momentum is likely to continue in the first half of the milk year but will likely slowdown in the second half as we annualise against high levels to end the year mostly stable. We have built the forecast based on normal market conditions. However, if the current war scenario drags on putting a lot of pressure on input costs for an extended period, the situation could be different.
Despite price cuts since late autumn, milk volumes were higher as the Milk-to-Feed-Price-Ratio (MFPR) remained in the expansion zone, particularly once seasonality and milk composition were factored in. There is too much milk, not only in the domestic market, but also globally. And in such a situation, controlling volumes is necessary to support the market.
Changes in milk prices and feeding practices
Even though some milk prices have been cut substantially, there have been recent announcements of stability and increases for the month of April and May. Moreover, those on retail aligned liquid and organic contracts have mostly not felt the declines. Also, for others, high constituent levels in the milk and bonus payments have compensated for some of the headline decline in milk prices.
Dry weather and lack of grass growth in 2025 2025, meant farmers had to feed more concentrates, thereby boosting yields. A wet winter has helped reservoirs and ground to recover, and we have assumed more normal grass growth and forage availability this year.
Herd Size
Cow numbers are declining, with the size of the GB milking herd in January 2025, 1.3% lower than a year earlier. This is the lowest January number and the lowest number recorded in a decade. The GB female herd total stood at 2.47 million head, a 1.6% decline year-on-year. A fall was seen across all age groups with the exception of 4-6-year-olds. Youngstock levels continue the year-on-year decline.
However, herd size was a less important factor on last year’s strong milk volumes so yields will be the key factor to look at.
Costs and Yields
High yield growth of 6% to 7% was seen in 2025/26 milk year that compensated for falling cow numbers, a trend which is likely to continue into the next milk year. However, some slowdown in the yield growth is expected in the second half of the year.
In the 12 months to November 2025, the overall Agriculture Price Index for all agricultural inputs increased 2.4% year-on-year. Though fertiliser inflation price was easing previously, in 2025 prices began to rise caused by tight global supply and increased production costs. The largest downward correction to the inflation rate was compound feed stuffs. In January 2025, compound feedstuffs moved below the average rate of inflation of all agricultural inputs and remained so for the rest of the year
War Scenario
A key factor for 2026/27 will be the outbreak of war in the Middle East and to what extent and for how long this impacts input costs. Already we have seen fertiliser and fuel costs spiking and this looks set to continue until global conditions improve. This has the potential to impact feed prices longer term as well which we will monitor going forwards.
War between Iran and US, Israel will be a caveat to our production forecast. With the ongoing Iran war, trade has been disrupted across the Strait of Hormuz which is leading to an increase in costs of fertiliser, energy, oil, plastics. This will increase the cost of production and squeeze dairy farmer’s margin. Global demand for dairy in the Middle East and neighbouring regions is also affected. In the event of war lasting longer, milk prices could push up to support rising costs, and this could heighten milk supplies further moving into another record territory.
The forecast
There are uncertain times ahead for dairy markets with input costs fast rising and spring flush approaching. The recent upward momentum in commodity markets will decide farmgate price direction but is uncertain and trade flows are being impacted by the outbreak of war. For the forecast we are assuming prices will remain under pressure due to the fundamentals of over-supply until well into the year although we will see some easing from where we have been.
Our forecast is based on current market conditions and normal weather. However, further decline in milk prices, upwards pressure on input costs and extreme weather conditions could result in lowering of output in the next milk season.
The momentum of higher production is likely to continue at least until the second half of the milk year. Long-term breeding decisions would have been made when prices remained high. Beef prices are currently strong with deadweight cow prices sitting at 527p/kg this week (21-Mar), up 5% from a year ago and nearly 50% higher compared to 5-year average With margins being squeezed amid increasing input costs and depending on forage availability, there could be reassessment of herd size with more culling coming forward in the coming months. During the last three months, dairy culls were up 8% year-on-year (7,300 head). Though throughputs are lower than expected, going forward it could accelerate based on market situation. On the other hand, crucially, heifer replacements are expensive and scarce which may hold back culling decisions.
Weather will be crucial in influencing yield levels in the upcoming flush period. Any deviation from normal weather condition will affect grazing and forage availability later in the season.
Animal diseases also remain a risk to our forecast. Bluetongue has spread across the country and with the midge’s season approaching, there could be further spread. It is continuing to circulate in Europe and might have lasting impact on calving patterns. Last year we saw record volumes of milk in Europe in the second half of the year following late spring calving due to Bluetongue.
After the first half of the milk year, we are likely to see lower production numbers following slowdown in yield levels and there will be decline year-on-year. However, one has to remember that we are annualising against a year of record volumes, which means too much milk in the supply chain. How demand copes with this oversupply in the domestic and global markets will influence price direction.
Dairy farmers should be prepared for a more uncertainty and highly volatile markets. The Milk price support hub has been launched which provides practical tools, market insight and support to stay in control and plan for the future. Reviewing costs, testing decisions around herd size, improving efficiency, planning cash flow and making the most of the milk contract will help farmers to navigate through turbulent times.
Source : linkedin – Soumya Behera
