Dairy farmers in Wales continue to struggle with rising production costs despite recent increases in farmgate milk prices, highlighting the financial pressures affecting the dairy industry. Farmers and agricultural organisations are calling for greater price stability and a long-term strategy to protect the sector from market volatility.
Dyfrig Griffiths, vice-president of the Welsh Dairy Show and a dairy farmer in Llangoedmor near Cardigan, warned that farmers were still selling milk below the cost of production, even after recent price increases.
Rising Milk Prices Fail to Cover Production Costs
Griffiths, 63, said his farm had received only 30 pence per litre over the previous year, while the cost of producing milk was approximately 38 pence per litre at the beginning of the year. This resulted in a loss of around 8 pence per litre.
He explained that every penny change in the milk price could make a significant difference to his farm’s finances, amounting to approximately £4,000 per month in milk revenue.
Although the farmgate price has improved, Griffiths said production costs have continued to rise, particularly for fuel and fertiliser. His milk price increased by 3 pence per litre in September and another 6 pence in October, bringing it to 39 pence per litre. However, production costs have now exceeded 40 pence per litre, meaning the farm continues to operate at a loss.
Griffiths said the recent price improvement appeared to be linked to reduced milk production following drought conditions, which helped bring supply and demand back into balance.
Farmgate milk prices vary depending on market conditions and the processor or buyer supplying each farmer. The farmgate price is the amount paid to farmers before transport, processing, packaging and retail costs are added.
Input Costs and Market Volatility Squeeze Margins
The situation highlights the challenges facing dairy producers, who must manage fluctuating milk prices alongside the rising cost of essential farm inputs. Even when milk prices increase, higher expenditure on fuel, fertiliser and other supplies can prevent farmers from reaching profitability.
The approaching winter period has added to concerns, as this time of year can bring particularly high costs for dairy farms.
NFU Cymru has warned that increasingly tight margins are being squeezed further and has called on the Welsh government to provide greater stability for the industry. The organisation estimates that the Welsh dairy sector contributes £929 million to the economy.
Farmers Union Wales has also called for a clear, long-term strategy to help the dairy industry overcome fluctuations in milk prices and production costs. Industry representatives believe a more predictable operating environment is essential for maintaining farm viability and supporting the sector’s future development.
Consumer Milk Prices Have Also Increased
While farmers continue to face financial pressure, retail milk prices have increased over recent years. Figures from the Office for National Statistics show that four pints of whole milk cost an average of £1.66, compared with £1.10 in 2018—an increase of approximately 51%.
Consumers interviewed in Cardigan and surrounding areas expressed different views about the change. Some said they continued to purchase milk regardless of price because it remained an essential household product. Others acknowledged that rising prices could place a greater burden on families with several children.
Enfys Wyse, who operates a tearoom in Cenarth, Ceredigion, said milk remained essential for preparing coffee, pancakes and other products. Her business uses substantially more milk during the busy summer season than in winter, making it an important operating expense.
The experiences of consumers and farmers underline the difference between retail milk prices and the income received by dairy producers. An increase at the supermarket does not necessarily translate into sufficient returns for farmers, particularly when production costs are rising.
Welsh Government Highlights Support Measures
The Welsh government acknowledged the pressures facing dairy farmers, citing global oversupply as one of the factors affecting the sector. It said agricultural support schemes were available to help dairy farms improve their financial and environmental performance.
The government also pointed to its £1 billion funding commitment, alongside the Sustainable Farming Scheme, which is available to farmers across Wales.
However, farming organisations continue to emphasise the need for a long-term approach that addresses price volatility, input costs and the financial sustainability of dairy production.
The situation facing Welsh dairy farmers demonstrates that higher farmgate prices alone may not be enough to restore profitability. With production costs continuing to rise, stable milk pricing, effective support measures and a clear strategy for the dairy industry remain key concerns for farmers heading into the winter months.
