The UK dairy sector experienced robust growth in Q2 2025, with milk production, prices, and exports showing notable developments despite ongoing challenges in herd size, weather, and global trade.

Great Britain’s milk deliveries rose by 5.0% year-on-year in Q2, driven by favourable weather, strong farmgate prices, and a high milk-to-feed price ratio. April, May, and June each saw increases of around 6%, with the 2025/26 season forecasted to reach a record 12.83 billion litres — up 3.1% from the previous year.

However, herd contraction remains a concern for future production. The GB milking herd fell to 1.62 million head in April, the lowest on record for that month.

Youngstock numbers also declined, raising concerns about future heifer availability, partly due to the impact of Bluetongue virus (BTV) impacting supplies from the EU and increased use of beef semen.

Organic milk production rebounded strongly, up 12.6% in Q2, amid rising domestic demand and tightening continental supply.

Drought is becoming a concern in many areas of the country with forage availability for winter likely to be disrupted. Some dairying areas such as Cornwall and Devon and Cumbria have had plentiful rain and will be less impacted.

The number of dairy producers in GB dropped by 2.6% year-on-year to 7,040, continuing a trend of consolidation.

Average milk output per farm rose to 1.77 million litres annually. Block calving systems are becoming more common, now used by nearly 20% of farms, reflecting a shift toward more defined production strategies.

Global milk production rose 0.7% year-on-year in April, with notable increases in the US, New Zealand, and Argentina. The EU, however, saw a 1.6% decline, with Germany, Belgium, and Italy recording the largest drops. The lack of milk and fats in Europe is what has been holding up UK prices.

Forecasters predict modest global milk supply growth of 1.0% for 2025 but warn of potential price volatility due to rising supply and uncertain demand. Tariff changes in the US under President Trump are also creating trade uncertainty, particularly for UK exporters.

Despite increased milk volumes, UK wholesale prices remained stable in Q2. Bulk cream and butter prices strengthened due to tight continental supply and strong domestic demand. Skimmed milk powder (SMP) and mild cheddar markets were more subdued, although cheddar remains historically at high levels.

Farmgate milk prices were largely unchanged in July. The UK average for May stood at 43.1ppl. Most retail-aligned and non-aligned liquid contracts held steady, with only minor adjustments across cheese and manufacturing contracts.

While overall cow’s dairy volumes declined by 1.1% year-on-year, consumer spending rose 3.5% due to higher prices. Cow’s milk volumes fell 2.6%, but whole milk bucked the trend with 2.0% growth. Cheese volumes rose 2.9%, led by cheddar, while processed and plant-based cheeses declined.

Butter volumes dipped 2.3%, but block butter saw a 6.0% increase. Yoghurt and cream categories performed well, with fat-free and plain yoghurts showing strong growth. High-protein dairy products like cottage cheese also gained popularity.

UK dairy exports declined year-on-year in Q1 2025 but improved compared to the previous two quarters. Exports to the EU fell, while non-EU exports rose, particularly for powders, whey, and butter. Cheese and milk and cream exports declined, reflecting shifting global demand and trade barriers.

New US tariffs on UK imports have introduced uncertainty, with potential implications for pricing and market access, the details of which are yet unknown. The UK dairy sector is being urged to diversify export markets and prepare for further trade disruptions.

Ian Burrow, our Head of Agriculture, says: “We have supported UK farms for over 300 years, and work with organisations such as AHDB to ensure we’re adapting to the needs of agricultural businesses.

“We’re committed to driving long-term, sustainable growth in UK agriculture by combining intelligent risk management, deep sector expertise, and dedicated support.

“We recognise agriculture as a vital strategic industry, reflected in our £6.7bn funding commitment to the sector. By championing innovation, nurturing future talent, and identifying opportunities across the supply chain, we’re helping to build a more resilient, productive and future-ready agricultural economy.”

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