Dairy farmers are heading into 2026 facing a severe income squeeze, with milk prices from major buyers falling to around 35p per litre and, for many producers, slipping below the cost of production within weeks.
Arla has confirmed its conventional milk price will fall by 3.51p per litre from 1 January 2026, taking the headline price to 35.73p per litre.
The co-op said the reduction reflects persistently high milk supplies globally and across the EU, combined with flat retail demand that continues to weigh on market returns. Producers supplying liquid and manufacturing markets alike are feeling the impact, with limited scope to absorb further losses.
Arla’s organic milk price will remain unchanged for January at 57.98ppl, although the outlook for organic markets remains uncertain.
The pressure is being felt across the sector. Dairy farmers supplying Müller are also facing further reductions, intensifying concerns about the sustainability of production.
From 1 February 2026, Muller Advantage suppliers will receive a farmgate price of 35.5ppl, a cut of 3ppl, following an earlier reduction due to take effect from 1 January, when prices are set to fall by 1.5ppl to 38.5ppl.
Cuts are being driven by a rapid deterioration in market conditions as rising milk output in the UK and overseas continues to outweigh demand. Prices have fallen sharply at the same time as feed, energy and labour costs remain historically high, leaving many farms with little room to absorb further losses.
NFU Scotland vice-president Robert Neill said the speed of the downturn has intensified pressure across the industry. “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 timing of the downturn has added to the strain. Over the past two years, many dairy businesses invested heavily in buildings, equipment and efficiency improvements, encouraged by stronger market signals and policy direction.
That spending supported processors, contractors and rural jobs, but falling milk incomes are now threatening farmers’ ability to service debt, maintain production and sustain employment.
Further reductions elsewhere underline the scale of the challenge. First Milk has confirmed it will cut its milk price by 3.6ppl from January 2026, taking the standard manufacturing litre to 32.25ppl, including the member premium.
With prices at or below the cost of production for many producers, the latest round of cuts is expected to weigh heavily on confidence and investment decisions, raising concerns about future milk supply and the long-term resilience of the UK dairy sector as 2026 unfolds.
