British dairy production is also undergoing change: whilst the number of farms is falling, average herd sizes and milk yields are rising. At the same time, producers are seeking strategies to cope with volatile prices, increasing red tape and the consequences of Brexit.
Even after ten years, the UK dairy sector is still feeling the significant effects of Brexit, alongside trade restrictions, reduced export opportunities and additional red tape. Dairy farmers are particularly affected by rising costs, uncertain milk prices and shortages of labour and farm inputs. Speaking at the annual congress of the European Dairy Farmers (EDF), agricultural journalist Chris Walkland said: “60 per cent of the population now believe that leaving the EU has been bad for the UK. Current trade with the EU is perceived as chaotic.” There are free trade agreements with many countries and regions worldwide, but the volume of trade under these agreements is relatively low. Between 80 and 87 per cent of UK milk exports (by volume) go to the EU. Total export volume rose by 9.1 per cent to 1.35 million tonnes in 2025.
At the same time, the United Kingdom is a major net importer of food. The self-sufficiency rate stands at around 87 per cent for milk fat and 89 per cent for milk protein. Imports also come predominantly from EU countries, particularly Ireland.
Agricultural support has undergone fundamental changes since Brexit
The previous system, modelled on the EU’s Single Payment Scheme (SPS), is still being gradually replaced by the UK’s own support schemes. These differ in some respects across the regions of England, Scotland, Wales and Northern Ireland. In England, for example, the ‘Delinked Payment Scheme (DPS)’ has been replacing the basic premium scheme since 2024. Payments are no longer tied to a specific area and will be gradually reduced until 2028. By 2026, they will be capped at the equivalent of €700 per farm – a reduction of 98 per cent.
Furthermore, funding is increasingly being allocated for specific environmental and sustainability measures – such as soil protection, biodiversity, water quality, animal welfare and climate protection. This is based on the principle of ‘public money for public goods’: public funds should finance public services. In 2024, for example, payments for agri-environmental programmes rose by more than half.
The dairy cattle population is shrinking
Structural change is also taking its toll on the British dairy sector. The number of dairy farms continues to fall. There are currently 6,850 left. This means that, over the past five years, almost one in five farms has ceased dairy production. And the pace is accelerating: in 2025 alone, the decline stood at 2.7 per cent.
One ray of hope, however, is that the average farm size has increased at the same time. A total of 1.59 million dairy cows are being milked, with an average annual yield of 8,536 litres. This has risen by around 5 per cent per cow per day in the past two years alone. In the first half of 2026, the increase was 1.4 per cent.
More than half of the dairy cows are mated with beef-breed bulls, and around 40 per cent are inseminated with sexed semen. The herd consists predominantly of Holstein-Friesians, often with Irish genetics – as many farms operate a pasture-based system. This extensive production is frequently combined with block calving in spring and autumn, or in autumn only, to make the best use of the periods when grass is growing and to keep feed costs low. The farms thus achieve a milk yield of between 8,000 and 9,000 kg per cow per year.
However, the other extreme is also common: intensively managed, high-performance farms with year-round indoor housing and higher costs for feed, buildings and equipment. Here, milk yields of more than 11,000 kg per cow per year are achieved.
Special lease models
A large proportion of agricultural land and farmsteads is owned by the Royal Family or by long-established noble families, known as landlords. Of this, they farm only a small proportion themselves; the vast majority is leased to farmers. Lease agreements generally cover the land, the entire farm infrastructure – including the farmhouse, stables and farm buildings – and, in some cases, the machinery. The terms of these agreements often range from 20 to 40 years. Any structural investments made by the farmers generally remain on the farm and are owned by the lessor once the lease agreement expires. This explains why tenants are often cautious about investing and pay particular attention to cost-effectiveness.
Structure of milk prices
In principle, there are two types of milk supply contracts: those linked to supermarkets, or ‘free’, standardised contracts with the milk processor. What does this mean in practice?
In the tied model, milk producers are integrated into partnerships between dairies and the food retail sector. The supply contracts apply to the milk purchased by a specific retailer (e.g. Tesco, Sainsbury’s or M&S). Pricing is determined by a cost formula set by the supermarket or through long-term agreements. These depend more on production costs and less on short-term world market prices. Farmers receive a contractually agreed premium on top of their average production costs. This offers them greater financial stability and better planning certainty; in times of crisis, this is usually more advantageous than standard contracts that are not tied to a particular food retailer.
The other option is off-take contracts, which may, for example, include bonuses or deductions based on the nutrient content or seasonal surcharges and discounts. The milk is categorised as liquid milk or for processing into cheese, butter or milk powder, and is paid for accordingly at the farm gate. These contracts are more heavily dependent on the world market price. If the world market price falls, the payment price also drops; conversely, however, any price rise is also passed on. The price level for supermarket-linked contracts in 2025/2026 was equivalent to between 49 and 51.5 Ct/l of fresh milk. In April 2026, it stood at 55 Ct/l of milk. Dairy farmers who had concluded standard supply contracts with their dairies were paid the equivalent of between 34 and 37.4 Ct/l in 2025/2026. Depending on the buyer, however, the milk price during this period was also significantly lower, and in April 2026 it averaged 29.3 Ct/l.
Understandably, contracts tied to supermarkets are more popular. And farmers who have such a contract naturally want to keep it and fear that the supplier might terminate it. Finding a new processor seems almost impossible
Arla: The number one milk processor
In British dairy production, Arla ranks first, processing 3.3 billion litres annually into drinking milk, cheese and milk ingredients. Müller follows in second place with 3 billion litres of drinking milk and yoghurt. In third place is the privately-owned dairy ‘First Milk’ with 0.6 billion litres of processed milk. Next comes the co-operative dairy Meadow Foods, also with 0.6 billion litres, which specialises in milk ingredients. This is followed by the privately owned dairy Saputo with 0.5 billion litres. This means that the top two processors control more than half of the milk produced in the UK.
