Autumn flush pushes milk production forecast into growth

GB milk production is now expected to reach 12.44bn litres for the 2022/23 season, up 0.7% on the previous season, according to our December forecast update. This is 175m litres higher than our September forecast, as the tide of production turned shortly after that projection was published.  

Yields have been the primary driver of changes in production over the last year or so, as high input costs have pressured farm margins. Consequently, production ran behind year-ago figures from July 2021 until September 2022. A shift in the weather in the autumn gave a late boost to grass growth, which, combined with a favourable milk to feed price ratio, provided a lift to production.

Deliveries across the three months September to November totalled 3,032m litres, up 2.5% (74m litres) on the same period last year, when production was subdued by surging costs. This is also 92m litres higher than we previously forecasted for Sep-Nov.

We anticipate yields to remain supported over the next couple of months on the back of strong milk prices and a stable milking herd.

As we move into the final quarter of the 2022/23 season, our yield expectations are tempered, moving back below the recent strong growth rates. Forage stocks are reported as tight in some of the key dairying regions following the hot dry summer, and there is some nervousness around the extent of price cuts in the first quarter of the year.

We have already seen a couple of price reductions announced for January as wholesale markets weaken on the back of lower demand.  Processors may struggle to push through any further price increases to their customers as the cost-of-living crisis continues, constraining their ability to maintain milk prices at current levels.

At the same time, production costs look set to remain high. While it will depend on when inputs are purchased, higher prices will inevitably lead to an increase in overall production costs for the year, stretching budgets.

In contrast to the volatility seen in yields, the GB milking herd has been relatively stable. The long-term trend of gradual decline continues – though the latest data showed with the smallest annual contraction in the October herd since 2017. Overall, the number of cows in the milking herd was marginally up on our previous projection, contributing slightly to the lift in forecast – but a minor player compared to yield.

Looking forward to the 2023/24 season, we currently expect production to stay above year-ago levels until October, and then run somewhat in line with the 5-year average to the end of December. Currently, our projection for the 2023 calendar year is 12.43bn litres, up 0.3% from 2022. We will publish our full 2023/24 season forecast in March.

As always however, this outlook is highly dependent on how milk prices and input costs develop through the year, and the impact of further reductions to farm payments and labour shortages on farmer confidence and production decisions.

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