Analysis from the Agriculture and Horticulture Development Board (AHDB) has found that plummeting dairy commodity prices “may have found a floor”.

According to the Dairy Agri-Market Outlook, early 2026 has seen positive movements in wholesale markets for Cheddar and skimmed milk powder, 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 is forecasting growth for added-value products in retail, with retail cheese volumes predicted to increase by 3%, supported by consumer interest in premium own-label products and cottage cheese. Yogurt demand is forecast to grow by 7%, driven by a continued focus on health, protein and affordable indulgence.

AHDB said that whey also continues to expect “strong global growth”, reflecting rising demand for protein-rich diets, including among consumers using GLP-1 weight loss medicines.

The trade body went on to say that 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, said AHDB, demand for block butter remains strong and may strengthen further if prices fall, reflecting consumer preferences for less processed foods.

“Slowing production is vital to safeguard the future of the sector.”

Susie Stannard, AHDB lead analyst for Dairy, commented: “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.

“The Outlook shows GB milk production is forecast to stabilise in 2026, with marginal growth of around 0.3% expected. 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 15ppl for some.

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