Domestic price of milk

IBISWorld estimates that the domestic price of milk will increase at a compound annual rate of 10.2% over the five years through 2024-25 to an average of 37.1ppl. The price of milk has been especially volatile in recent years with the average milk price declining by 19.7% in 2015-16 then increasing by 23.4% over the year through 2017-18. The volatility of domestic prices is because milk is a commodity that is produced worldwide and subtle changes in world supply and demand in different parts of the world can alter the price UK farmers get for their product at the farm gate. Milk is rarely traded across border in liquid form but powdered derivative products are traded, which can filter through to farm gate prices.

Farmgate prices remained constant over the following year. Although supermarkets have pressured farmers in recent years to keep their prices low, the price of milk has fallen to such an extent that it became unsustainable for farmers to provide milk, prompting them to protest the low prices they were receiving for their output. This forced many farmers to leave the market, eventually resulting in a supply shortage which has fuelled an increase in price of 23.4% over 2017-18. Farmers remain price takers in the market which means supermarkets are able to set prices to weigh on average margins.

The pandemic led to an initial decline milk price in early 2020-21 as demand from food service operators shrunk due to their forced closers after lockdown measures were implemented in March 2020. The sharp decline in demand led to oversupply in the market and downward pressure on prices. However, prices quickly recovered as home consumption of milk grew. Overall, prices rose an average of 0.4% over the year. In 2021-22, the reopening of food service outlets coupled with general food inflation caused by rising energy prices and supply chain issues caused prices to rise by 13.4%. Defra's farm gate prices reached 40.4p per litre in May 2022 as prices continue to trend upwards. However, farmers across the United Kingdom reported that price increases have failed to keep up with input costs. In 2022-23, average prices expanded by 43.5% because of severe weather, higher feed costs. Prices dropped sharply by 19.2% in 2023-24 due to an expansion in production and the easing cost of energy, fuel, feed and fertiliser.