Welsh dairy farmers are facing mounting financial pressure as higher production costs and depleted feed reserves continue to erode the benefits of recovering milk prices. NFU Cymru has warned that some producers are selling milk for less than it costs to produce, raising concerns about farm profitability and the sustainability of dairy operations.
The warning highlights the growing gap between farmgate milk prices and the expenses involved in maintaining dairy herds. Although milk prices have shown signs of recovery, rising fuel, fertiliser, feed and labour costs are limiting the financial relief available to producers.
Dry Summer Adds Pressure on Feed Availability
In a statement issued on October 20, NFU Cymru said the dry summer had restricted grass growth across Wales. As a result, farmers were forced to use forage reserves that had originally been intended for winter feeding.
This has created uncertainty over both the quantity and quality of feed remaining for the colder months. Reduced forage availability could increase reliance on purchased feed, adding further costs to already pressured farm budgets.
Martin Griffiths, vice-chair of NFU Cymru’s dairy board, highlighted the impact of these conditions on producers’ margins. Farmers are increasingly concerned that higher milk prices will not be sufficient to offset the rising cost of maintaining production.
Fuel and Fertiliser Costs Continue to Rise
NFU Cymru cited Agriculture and Horticulture Development Board (AHDB) figures showing significant increases in key agricultural input costs.
According to the figures referenced by the union, red diesel was 50% more expensive than in September 2025, while ammonium nitrate fertiliser prices were approximately 20% higher than in February 2026.
These increases affect several aspects of dairy production, including machinery operations, grassland management, fertiliser application and forage harvesting. Higher operating expenses can reduce the amount farmers retain from milk sales, even when farmgate prices improve.
The union has also called for amendments to Wales’s Sustainable Farming Scheme (SFS). Its proposals include a wider selection of habitat options that incorporate clover and more practical requirements for establishing and managing multi-species leys. Such changes could help make the scheme more workable for livestock and dairy farms.
Dairy Commodity Markets Show Mixed Trends
The pressure on Welsh dairy farmers is also linked to changing conditions in international dairy markets. AHDB’s October 23 market update reported contrasting movements across major dairy commodities.
Cream and butter markets were weakening, with substantial butter inventories placing downward pressure on prices. In contrast, demand for dairy protein was supporting skimmed milk powder (SMP) markets.
These differences are important because processors manufacture different combinations of dairy products. Their product portfolios and supply contracts influence how changes in wholesale commodity prices translate into farmgate milk payments.
Consequently, improvements in some dairy product markets do not necessarily result in higher milk prices for every producer. AHDB indicated that the mixed market environment raised questions about whether some autumn farmgate milk price increases could be maintained.
Welsh Government Increases Advance Farm Payments
To help agricultural businesses manage cash flow, the Welsh Government increased advance payments under both the Sustainable Farming Scheme and the Basic Payment Scheme (BPS).
The advance payment rate was raised from 70% to 80% of anticipated entitlement. Figures released on October 14 showed that 90% of claimants under the SFS Universal Layer had received advance payments, alongside 94% of BPS claimants.
The remaining payment balances are scheduled to begin in mid-December. However, farmers participating in the SFS must ensure that their Universal Dashboard is updated through RPW Online to avoid potential payment delays.
The government has also advised farmers to review their accounts and resolve any outstanding queries that could affect payment processing.
Profitability Remains a Key Concern for Welsh Dairy Farms
The situation highlights the financial challenges facing Welsh dairy producers as they enter the winter feeding period. Reduced forage reserves, higher fuel and fertiliser prices, and uncertainty across dairy commodity markets are combining to place pressure on farm profitability.
Although government advance payments provide some support for business cash flow, they do not directly resolve the underlying gap between production costs and milk revenue.
For dairy farmers, the coming months will depend on feed availability, input costs and the ability of processors to maintain sustainable milk prices. NFU Cymru’s warning underlines the importance of ensuring that farmgate returns reflect the actual cost of producing milk.
