Global instability
Farmgate milk prices are beginning to recover from over 12 months of extreme volatility and low prices - however, margins on dairy farms throughout Wales remain under pressure.
Ongoing global geopolitical instability and conflict have seen the costs of key inputs – such as fuel and fertiliser - rise significantly. Farmers are also facing a winter of increased feed costs after a sustained hot, dry summer that has depleted winter rations.
Suppling below cost of production
Speaking ahead of the Welsh Dairy Show held at Nantyci, Carmarthen on Tuesday 20 October, NFU Cymru Dairy Board Vice Chair Martin Griffiths said:
“The Welsh dairy sector is worth £929 million to our economy and supports thousands of jobs, on farm, in the supply chain and across the allied industry.
The sector delivers day in, day out, a supply of climate friendly nutritious milk and dairy products for the people of Wales and further afield with demand, especially for protein, continuing to grow. However, to sustain this growth we need profitable dairy businesses that have the confidence and cashflow to invest in their future.
The problem at present is that our members’ confidence and financial resilience is being eroded by significant pressures and cost increases that are squeezing what are, already, very tight margins. In some instances, our farmers are supplying milk below the cost of production – they are operating on a day-to-day loss.
Summer aftermath
“In the aftermath of one of the hottest and driest summers on record for Wales, a large number of dairy farmers were forced to start feeding winter feed stocks to their herds early due to a lack of grass growth.
Whilst many farmers are hopeful that they can make late cuts of silage this autumn, many more are facing into a winter with forage stocks below the quantity and quality they would normally hope for.
“Concerns about the price of fuel are being felt across the economy and farmers are also feeling this strain. Data from the Agriculture and Horticulture Development Board (AHDB) shows that the cost of red diesel, a key farm input, has increased by 50% compared to September last year.
The figures also show that the price of ammonium nitrate fertiliser, an integral input on grasslands across Wales, has increased by around 20% since February 2026, impacting the ability of farmers to forward purchase the product, hence hedging the risk to their business for next year.
Tight margins
“With global commodity prices remaining lacklustre and fears about supply easing, there is uncertainty about the likelihood of further milk price increases. All of this means that as dairy farmers head into winter, the time of year when costs are at their highest, there are renewed concerns that tight margins are being further squeezed.
Given the pressures facing Welsh dairy farmers, NFU Cymru is encouraging Welsh Government to continue to evolve the Sustainable Farming Scheme (SFS) to help give stability to the sector.
Martin Griffiths added:
“With just over 50% of dairy farms currently participating in the SFS, NFU Cymru believes there is an opportunity to evolve the scheme to make it more attractive and accessible for more dairy farmers.
Whilst we recognise that this would not necessarily be a cure-all for the problems being experienced in the sector, it would help provide much-needed stability and confidence to dairy farm businesses at a time when margins are under pressure, while also supporting Welsh Government in achieving its wider climate and nature goals.
More can be done
“We welcome the progress already made by Welsh Government to evolve the scheme, for example by recognising the good work we are already doing with our vets under farm assurance as part of the AHIC requirement. However, we believe there is more that can be done.
In particular, the temporary habitat options must be expanded upon to allow for the inclusion of clovers and rules around multi-species leys must deliver both for the environment and agronomically to safeguard food production.”
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