Milk production is a fundamental driver of market dynamics in Great Britain

The Agriculture and Horticulture Development Board hold a milk forecasting forum twice a year, where representatives from across the industry debate, analyse and discuss the key factors influencing production.

GB milk production for the 2023/24 season is forecast to reach 12.32 bn litres, 0.5% less than the previous milk year, according to our September forecast update.

The milk year up until the forecast renewal ran ahead of last year’s production being driven by the higher prices seen at the end of 2022/beginning of 2023. This led to higher yields and a slowdown in the rate of cows leaving the herd. In addition, favourably wet weather through most of the summer led to high levels of forage availability keeping production ahead of last year.

However, the expectations are now that with a much lower milk price and still eye-wateringly expensive input costs, many farmers could be facing a winter crisis in cash flows. This could be further exacerbated by rising interest rates meaning the cost of borrowing and overdrafts are higher. In addition, many will be hit with a bumper tax bill following the last year of high milk cheques.

There will be little incentive for farmers to push cows and herd reductions could be made to boost cash flows later in the autumn/winter. We expect milk flows will begin to dwindle, steadily in the short term, with potential for some bigger reductions in the early part of 2024.

Milk supplies have gone into decline for September and October

There is a risk that some farmers may elect to keep their foot on the production pedal to keep their overall milk cheques at a reasonable level. However, bearing in mind current costs of production, chasing marginal litres for a headline milk cheque could be damaging for on-farm profit margins but also contribute further towards the current over-supply issues.

It is important to note that October 2022 had exceptional conditions for milk production, recording the highest volumes in seven years. The weather was unseasonably warm and sunny and milk prices were on the up, moving towards the December peak.

In contrast, the weather in October 2023 was poor, with farmers particularly affected by the heavy rainfall and flooding resulting from Storm Babet. Eastern parts of Scotland and the east coast of England saw exceptional amounts of rainfall and flooding as well as strong winds. These conditions led to many cows being brought in to sheds earlier than expected.

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This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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