Dairy farmers dropped from contracts as milk prices slump

Dairy farmers are being dropped from supply contracts as falling milk prices and global oversupply squeeze the sector.

Producers across the UK have been given notice in recent months, with processor Müller among those taking action. The company is understood to have issued around 1% of its suppliers with 12 months’ notice as part of efforts to rebalance supply.

While affecting a relatively small share of production, the move has raised wider concern across the industry as processors respond to a combination of oversupply, shifting demand and seasonal production patterns.

NFU Dairy Board chair Ian Harvey said the sector is facing “challenging conditions”, with a sharp fall in farmgate milk prices driven by global pressures and constraints on processing capacity.

Although there are signs of improvement in wholesale markets, he said lower prices combined with high production costs are leaving farmers under significant strain.

For affected producers, the loss of a contract can create immediate uncertainty over income and future production decisions.

Industry sources suggest the decision to end some contracts reflects a broader effort by processors to manage volumes more tightly in response to difficult trading conditions.

Mr Harvey said the current situation highlights the impact of global market pressures on domestic supply chains, as buyers adjust to fluctuating demand.

For farmers receiving notice, the NFU is urging early action.

Each case will depend on individual circumstances, but producers are advised to seek independent legal advice to understand their position and available options.

Under the Fair Dealing (Milk) Regulations 2024, farmers subject to no-fault termination must be given at least 12 months’ notice.

Where shorter notice is issued or reasons are unclear, producers are encouraged to raise concerns with the Agriculture Supply Chain Adjudicator or seek guidance through NFU CallFirst.

The rules are designed to improve transparency and fairness, rather than control prices or prevent market volatility.

Meanwhile, the Adjudicator is surveying the sector to assess how the regulations are working in practice, gathering evidence on both compliance and areas where improvements may be needed.

Looking ahead, the longer-term outlook for dairy remains positive despite current pressures.

Global demand is expected to grow, with some analysts suggesting it could outstrip supply by 2035, driven by rising consumption in regions such as Asia and North Africa.

In the UK, around 98% of households consume dairy products, while exports reached £2.2 billion in 2025, up 16.6% year-on-year.

Mr Harvey said stable, long-term relationships between farmers and buyers will be critical to maintaining supply and confidence, as the sector navigates ongoing volatility.