Plummeting dairy commodity prices "may have found a floor" according to latest analysis from the Agriculture and Horticulture Development Board’s (AHDB) UK Dairy Agri-Market Outlook.

According to the report, early 2026 has seen "positive movements" in wholesale markets for skimmed milk powder and cheddar, signalling a potential recovery.

Fats, however, remain under severe pressure due to too much milk, and farmgate milk prices are expected to remain under pressure until at least mid-2026, AHDB said.

Growth for added-value

The board is forecasting growth for added-value products in retail.

Retail cheese volumes are predicted to increase by 3%, supported by consumer interest in premium own-label products and cottage cheese in the UK.

Yoghurt demand is forecast to grow by 7%, driven by a continued focus on health, protein, and affordable indulgence.

Whey also continues to expect strong global growth, reflecting rising demand for protein-rich diets, including among consumers using GLP-1 weight loss medicines.

Domestic retail demand is expected to remain steady after total dairy volumes fell by 1% in 2025, driven by less liquid milk consumed.

However, household incomes remain tight, and low levels of shopper confidence are also continuing to affect food and grocery consumption.

Despite this, demand for block butter remains strong and may strengthen further if prices fall, reflecting consumer preferences for less processed foods.

Safeguard

Susie Stannard, AHDB lead analyst for dairy, said: “The volume of milk in the system means the path back to higher farmgate prices is likely to be a slow rebuild, with fats prices still under pressure.

"Slowing production is vital to safeguard the future of the sector.

"However, this is from a high level, meaning processing capacity during the spring flush will still be challenged, keeping a lid on farmgate prices which have seen a cut of as much as 15p/litre for some."

More positively, Stannard said the report does highlight some key growth opportunities for the dairy category through 2026 and beyond, both in GB and abroad.

She said this is a reminder to farmers that "although times are currently tough, the longer-term prospects for the sector look bright as dairy remains a nutritious, sustainable, delicious and affordable cornerstone of the British diet".