May 2026 dairy market review

Milk production

Domestic

GB milk deliveries in May reduced by an estimated 0.9% year-on-year with milk supplies now beginning to decline. The latest week of the month saw a 2.1% decline. However, we are still annualising versus record-breaking levels meaning the market remains very well supplied.

Dairy economics, including the Milk to Feed Price Ratio (MFPR) have now entered a stabilisation phase and there are signs of reduced feed use.  Sales of dairy compound feeds in March also dropped below the 5-year average for the first time in over a year suggesting that farmers are pulling back on production plans.

Agricultural Price Index (API) data for March shows total agricultural input price inflation rose by 3.7% year-on-year and was up 1.1% month-on-month, primarily driven by fertiliser, soil enhancers, fuels and lubricants putting further pressure on margins.

GB milk production for the 2026/27 season is forecast to decline to 12.91bn litres, 0.9% lower than the previous milk year according to our June forecast update.  Volume management schemes and AB pricing have accelerated the slowdown I milk production along with margin pressures.

The GB milking herd totalled 1.59 million head as of April 2026, another lowest number recorded, and a 2.0% decline compared to the same month the previous year.  The GB total herd stood at 2.46 million head, a year-on-year decline of 2.0%. A fall was seen across all age groups with the exception of the 4-6 years age group.

The average age of a cow in the GB milking herd now stands at 4.56 years, very slightly older than last year’s figures.

Milk price announcements have become less negative and are broadly stable with a few small positive announcements on cheese contracts.  The latest Defra farmgate milk price is now around 34ppl on average with feed prices relatively steady.      

However, this comes as too late for some farmers and we have seen producer numbers in GB falling below the 7,000 mark for the first time ever, a decline to 6,850 farms losing 160 producers or 2.3% since October. 

Organic milk supplies

GB Organic milk deliveries  dipped into year-on-year decline from May 2026 and have remained well below the 5-year average. Milk year to date (April to 6 June) volumes are now 1.1% lower, year-on-year, whilst calendar year to date (January to May) is 4.7% ahead.

Defra’s figures show that organic cow numbers are also in decline.

The widening gap between conventional and organic milk prices suggests stronger demand for organic milk and need to maintain organic milk supplies which makes it important for production growth to be maintained. However, access to limited processing capacity has been a barrier to growth for the sector.   

Global

• The latest global production data estimate shows growth in global milk flows continuing across milk-producing regions.  Global milk deliveries averaged 867.1 million litres per day in March, an increase of 36.9 million litres per day (+4.4%) across the selected regions, compared to the same period in the previous year

• Milk deliveries in the EU averaged 422.4 million litres per day in March, an increase of 19.6 million litres per day (+4.9%) compared to the same month of the previous year, and the strongest March on record

• Looking at the EU figure in greater detail, we saw the greatest year on year volume increase from Germany, up 192 million litres (+7%) for the month of March, followed by France, up 119 million litres (+6%)

• UK daily deliveries averaged 45.2 million litres per day in March, up 2.2% year-on-year. Milk deliveries in April now show stabilisation at high levels

• US production was up 8.4 million litres per day (+3%) year-on-year in March as the national herd increased. Dairy farm margins have now lowered from strong levels but remain positive, supported by dairy-beef revenue streams

• Australia recorded a year-on-year increase of 0.5 million litres per day (2.8%) compared to last year, to sit at an average of 19.8 million litres per day. Milk volumes have varied between regions, primarily due to the differing weather and pasture available

• New Zealand deliveries were up by 5.4 million litres per day (+9.8%) year-on-year with March average daily deliveries at 60.6 million litres per day. Farmer confidence continues to be supported by firm milk prices and favourable weather conditions which increased milk flows

• Argentina’s deliveries continued to grow, up by 2.1 million litres per day (+7.9%) in March, year-on-year. Favourable weather conditions and good dairy producer economics drove higher productivity. However, falling milk prices have reduced profitability, leading to slower growth forecasted for 2026

Dairy trade and war in the Middle East

Total export volumes of dairy products from the UK for Q1 2026 increased 2% year-on-year driven by non-EU exports which increased by 9,000 tonnes. Exports of dairy products to the EU declined by 1,400 tonnes probably due to strong milk supplies and production in the EU region.

The overall increase was largely driven by an increase in the exports of powders, yogurt, butter and cheese. A decline in the exports of milk and cream by 17,800 tonnes (8.8%) and whey by 2,500 tonnes (13.5%) during the period limited overall upside movement. Though overall exports increased in terms of quantity, there was a fall in value terms for all commodities due to lower prices except for powders and yogurt.

The data covers the period until March 2026, therefore does not fully capture the impact on export volumes resulting from the war in the Middle East. It is anticipated that there will be an impact on exports to the Middle East and Asia in Q2 and beyond.

The GCC remains a high potential market for UK dairy products worth £99 million in 2025. The GCC (a trading bloc made up of UAE, Saudi Arabia, Bahrain, Oman, Qatar and Kuwait) is the second-largest export market outside Europe for dairy products from the UK and any disruption could put this revenue at risk.

In addition, due to the conflict, displaced products from major exporters would pressurize markets elsewhere.

Wholesale markets: May

• SMP remained in demand, following the wider demand for protein and shortage in the market
• The cream price picked up through the month but, as it dropped at the end of April, ends the month at a similar average
• Butter lost another £210/t and is at the lowest price seen since August 2021 but may be edging up now
• Mild cheddar prices softened with demand sluggish

This month has brought similar themes for the markets – fats still under pressure due to milk volumes, SMP soaring high and the mild cheddar market very quiet. 

Milk supplies are beginning to come under control and as we have now passed the peak signs that markets may be less pressured but will be a long recovery with so much product in store.

Skimmed milk powder (SMP)

SMP is the strongest-performing product relative to fats and prices rose by £140/t to £2,500/t. We have to go back to November 2022 to see those levels.

Demand for protein remains strong with pricing remaining very competitive particularly compared to the US.  Demand would be even stronger if not for the conflict posing export issues.

Stock volumes building up are causing some pressure to move product on.   

Mild Cheddar

The cheddar market is reported to be ‘quiet’ with not much demand and much of the market fairly balanced, although there is plenty of cheese around. 

Cheddar prices have eased slightly as a result although balanced by an increase in whey pricing.

The average price for mild cheddar was £2,940, 1% lower than the last period.

Bulk cream

Prices saw some movement through the month from a low point in the 1.00’s up to the low 1.30’s at the end of the period. 

The average for the month came out as £1220/t which was very similar to last month despite a lot of movement in the interim. 

Some tightening in the milk supply as we have passed the peak of the flush is offering some support for prices, as is the price on the continent.

Prices remain at half the value of a year ago though. 

Butter

Butter has struggled due to high milk volumes and reportedly large volumes in store.

With churns running at capacity and a lack of places for it to go, the market is reliant on demand which seems to be weak on the spot market. Most buyers are looking to secure slightly worse prices further ahead but not need to store it. 

Cream is undervalued versus butter so there is money to be made if you have capacity to churn and store which keeps pressure on the price.

Although the price moved down £210/t (6%) to £3,330/t, as with cream this belies some movement across the month and sentiment is slightly more positive in the past week.

The latest GDT (Global Dairy Trade) auction results weakened in the latest period.  The auction, which is New Zealand-based but a barometer of global dairy sentiment, fell by 2.8% in the last period with pressure across the board.

Farmgate milk prices 

The latest published farmgate price was for March 2026 and was announced by Defra as being  33.99ppl, down 1.05 pence on the previous month

Latest announced farmgate prices were mostly stable with a few increases for May. Aligned liquid contracts saw stability apart from M&S and Sainsbury’s, which made a positive price announcement of 1.12ppl and 0.15ppl respectively.

Looking to non-aligned liquid contracts, most buyers held for another consecutive month. Pembrokeshire Creamery was the only one in the category to make a positive announcement of 0.84ppl.

Cheese contracts saw the most gains overall. Barbers increased by 1.5ppl. Saputo made a positive announcement of 1.5ppl while Lactalis and Wyke Farms increased their price by 1.55ppl and 1.57ppl respectively. Parkham Farms and Wensleydale Creamery increased their price by 2.0ppl and 0.92ppl respectively. All others held.

Manufacturing contracts were mostly steady during the month apart from Pattemores Dairy which increased by 1.0ppl.

Retail demand

During the 12 weeks ending 16 May 2026, cows’ dairy returned to growth and increased 0.2% year-on-year¹. Spend on cows’ dairy increased by 4.2% year-on-year, driven by a 4.0% increase in average prices paid. Despite farmgate prices decreasing, retail prices are still rising.

Cows' milk

Cows’ milk volumes declined by 0.9% year-on-year¹, while spend saw a 5.9% increase, driven by an 6.8% increase in average prices paid.

Declines were seen for semi-skimmed, skimmed, and other cows’ milk. Whole milk continued to see volume growth, with a 2.6% increase year-on-year, this is due to increased occasions per buyer.

Cows' cheese

Cows’ cheese remained in volume growth, seeing a 2.0% increase year-on-year.¹ Spend grew by 2.1% during this period, primarily driven by volume gains as average prices only increased by 0.1% due to an increase in promotional activity during the period.

Cheddar, which represents a majority (44.5%) of all cow cheese volumes continued to see decline with a 0.5% decrease, due to a reduction in buyers. Other cows’ cheese (+9.5%), snacking (+6.7%), and speciality and continental (+3.0%) saw growth. These categories have seen growth due to consumers wanting a healthier option that is high in protein.

This is particularly driven by cottage cheese (+1.4m kg) and kids snacking (+0.6m kg). This growth offset declines in processed, British regionals and Stilton and British blue.

Cows' butter

Cows’ butter saw a 0.1% decrease in volumes purchased year-on-year¹. Spend saw a 1.3% decrease, mainly driven by average price reductions of 1.2% year-on-year, with decreases in wholesale price feeding through to shoppers, as we predicted back in December.

Block butter continues to be the only subcategory to see volume growth (+7.6%), this growth is due to consumers wanting less ultra processed and more natural foods. However, this growth was not enough to offset the decline in cow butter spread volumes (-3.6%).

Cows’ yogurt, yogurt drinks and fromage frais

Cows’ yogurt, yogurt drinks and fromage frais volumes continue to see growth (+6.0%), with spend increasing 8.5% year-on-year¹. This growth is due to increased volumes per buyer. Averages prices paid grew 2.3%.

Cows’ standard plain yogurt saw the fastest growth of 25.0% year-on-year, while cows’ fat-free yogurt saw the greatest actual growth, with an additional 3.6m kg purchased year-on-year (+8.5%).

Cows' cream

Cows’ cream volumes saw a 1.6% decrease year-on-year¹, with an 5.2% increase in average prices paid, and an 3.5% increase in spend.

Aerosol (-17.5%) saw the largest volume decrease, this could be due to consumers turning away from ultra processed foods. Double (+0.2%) and other cream (+4.5%) were the only categories to see growth.

See the full data and these insights visualised on our GB household dairy purchases retail dashboard.

¹ NIQ Homescan POD, Total GB, 12 w/e 16 May 2026

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