Dairy farmers are facing acute financial pressure as milk prices fall below the cost of production within weeks, pushing many businesses to the brink and prompting unions to demand urgent action from the supply chain.
Most producers are now being paid less for their milk than it costs to produce, a position that has deteriorated rapidly following a surge in milk output in the UK and overseas.
Prices have fallen sharply at the same time as feed, energy and labour costs remain historically high, leaving farms with little scope to absorb further losses.
NFU Scotland vice-president Robert Neill said the speed of the downturn has intensified pressure across the sector. “We’ve seen highs and lows before, but the speed of this price drop is unprecedented,” he said. “Farmers are under real pressure, and the supply chain must act responsibly.”
The crisis has come at a particularly damaging moment for the sector. Many dairy farms invested heavily over the past two years in buildings, equipment and efficiency improvements, encouraged by stronger markets and policy signals.
That spending supported processors, contractors and rural jobs, but falling incomes now threaten farmers’ ability to service debt, maintain production and remain viable.
While some producers supplying supermarkets or operating under organic contracts have limited protection, many conventional dairy farmers are fully exposed to volatile market movements. NFU Scotland has warned that some are already considering reducing cow numbers or exiting milk production altogether.
In response, the four UK farming unions have written jointly to milk processors in a rare show of unity, urging fairness, transparency and responsible behaviour as prices continue to fall.
The letter highlights buyers’ obligations under new Fair Dealing regulations, which were introduced to rebalance power within the dairy supply chain and give farmers greater clarity over how prices are set.
NFU Scotland milk committee chair Bruce Mackie said clear communication was essential if confidence was to be maintained. “Prices are falling fast while costs remain high,” he said. “Processors must communicate clearly and fairly with suppliers. Farmers deserve transparency and trust during such a critical time.”
The union says the current downturn will be one of the first major tests of the new contract regulation adjudicator, with farmers entitled to request clear explanations of pricing structures and changes. NFU Scotland is also engaging directly with banks and retailers, calling for flexibility and support while prices remain depressed.
Neill warned that the consequences of widespread farm failure would extend far beyond individual businesses. “This is about more than milk,” he said. “It’s about rural jobs, local food security, and the future of our communities. The supply chain must share the risk, not just the reward.”
Despite the immediate challenges, the sector’s long-term potential remains strong. Major investments such as Arla’s £144 million upgrade at Lockerbie and growing export opportunities demonstrate confidence in dairy’s future.
However, without swift and coordinated action, unions warn that many farms may not survive the current downturn long enough to benefit from that future growth, risking lasting damage to milk supply, rural economies and food security.
