Dairy farmers are facing severe financial pressure as milk prices fall below production costs within weeks, pushing many companies to the brink and prompting trade unions to demand urgent action from the supply chain.
Most producers are currently paid less for their milk than the cost of producing it, and their position is rapidly deteriorating following the rapid increase in milk production in the UK and overseas.
Feed, energy and labor costs remain historically high, while prices have fallen significantly, leaving farms with little room to absorb further losses.
NFU Scotland vice-chairman Robert Neil said the speed of the economic downturn was increasing pressure across the industry. “There have been highs and lows in the past, but the speed with which prices have fallen this time is unprecedented,” he said. “Farmers are under huge pressure and supply chains must act responsibly.”
This crisis comes at a particularly detrimental time for the industry. Many dairy farms have invested heavily in building, equipment and efficiency improvements over the past two years, driven by strong market conditions and policy signals.
That spending supported processors, contractors, and local jobs, but reduced income now threatens farmers’ ability to service debt, sustain production, and survive.
While some producers who supply supermarkets or operate under organic contracts have limited protection, many conventional dairy farmers are fully exposed to volatile market movements. NFU Scotland has warned that some people are already considering reducing their herd numbers or withdrawing from milk production altogether.
In response, four UK farming unions jointly wrote to milk processors in an unusual show of solidarity calling for fairness, transparency and responsible action as prices continue to fall.
The letter highlights buyers’ obligations under new fair dealing regulations, which have been introduced to rebalance power within dairy supply chains and give farmers greater clarity over how prices are set.
NFU Scottish Milk Committee Chair Bruce McKee said clear communication was essential to maintain trust. “Prices are falling rapidly, but costs remain high,” he said. “Processors must communicate clearly and fairly with their suppliers. Farmers deserve transparency and trust at a time of crisis like this.”
Unions say the economic downturn will be the first big test for the new contracting tribunal, which says farmers have a right to clear explanations about price structures and changes. NFU Scotland is also working directly with banks and retailers, seeking flexibility and support during the depressed price period.
Mr Neil warned that the impact of large-scale farm failures would extend far beyond individual companies. “This is more than milk,” he said. “This is about local jobs, local food security, and the future of our communities. Supply chains must share the risks as well as the rewards.”
Despite the immediate challenges, the sector’s long-term potential remains strong. Major investments such as a £144m upgrade at Arla’s Lockerbie factory and expanded export opportunities demonstrate confidence in the future of the dairy industry.
But without swift and concerted action, the union warns that many farms will not be able to survive the current downturn or benefit from future growth, risking lasting damage to milk supplies, rural economies and food security.
