Milk prices set to stay above 40p/litre despite ample supply

The outlook for dairy markets seemed pretty bleak towards the end of last year as wholesale prices slipped back and milk supplies surged.

However, sentiment among speakers at the 2025 Semex conference in Glasgow this week suggested the market now appears slightly more upbeat, with some recovery in butter and cream prices.

Michael Masters, head of milk supply operations at Barbers Cheesemakers, told Farmers Weekly that cheese markets were stronger than futures markets would perhaps suggest.

Mr Masters said that while cheese markets had been under some pressure, they had managed to surprisingly bounce back so far during January.

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Mild cheddar prices have been trading at roughly £4,000/t in recent weeks, while mature cheddar fluctuated at about the £4,500/t mark.

Meanwhile, spot milk prices have varied between 43p/litre and 45p/litre in January.

Rob Hutchinson, chief executive at Muller, said liquid markets were in a small decline each year and acknowledged that powder markets hadn’t been as strong recently.

However, he added that powder markets go up and down and that the processor was focused on looking at the long term.

Dairy producers have been able to find a margin at current farmgate prices, which has meant GB milk supplies have remained high and continue to trend at 3% above year-earlier levels.

Milk volumes in 2024 are likely to be the highest ever produced at about 15bn litres, according to independent dairy market analyst Chris Walkland.

Mr Walkland added that the gap in farmgate milk prices between the best- and worst-performing processors is growing quite alarmingly and that milk prices seem to be becoming more volatile and harder to manage.

However, he suggested there had been a lot more positives to start off 2025 than expected.

Semex conference chairwoman and crossbench peer Baroness Batters added that there was a different atmosphere in the dairy sector compared with this time last year due to the strength of the market.

2025 prospects

Figures from the International Farm Comparison Network suggested growth in global milk volumes in the first half of 2025 could steady.

Industry sources suggest milk prices globally to be in the region of 38-39p/litre in 2025, however typically GB milk processors pay a base price several pence above this, and many producers also receive further quality bonuses.

Mr Walkland said there are a lot of positive drivers in terms of the outlook for 2025, with milk prices strong and exceeding the cost of production and a great milk-to-feed price ratio.

“I think [producers] have got a few months of really good milk incomes to come, so there is every reason to start 2025 on an optimistic note.

“I do think the next milk price moves will be down, especially from those paying really high prices like Arla at the moment.”

“Overall, I think we are going to get above 40p/litre for quarter one. I think that’s a guarantee.”

Mr Walkland suggested that prices could fall below 40p/litre in the second quarter of 2025, but overall will average above 40p/litre for the first half of the year.