NFU Scotland has issued a warning that the Scottish dairy sector is facing a deepening crisis, with milk prices now falling below the cost of production for many farmers.
The union says the speed and scale of the price downturn is unprecedented, leaving producers under intense financial pressure and forcing some to consider reducing output or exiting dairy farming altogether.
Rising milk volumes in the UK and overseas have driven prices down sharply, while feed, energy and other input costs remain stubbornly high.
Although some farmers on organic or supermarket aligned contracts have limited protection, many are fully exposed to volatile market prices.
NFU Scotland says the situation risks undermining the long term viability of dairy farming and the rural communities that depend on it.
Vice President Robert Neill said the current downturn is hitting farmers at speed.
“We’ve seen highs and lows before, but the speed of this price drop is unprecedented.
“Farmers are under real pressure, and the supply chain must act responsibly.”
In response to the worsening outlook, NFU Scotland has joined forces with the other UK farming unions to press milk processors for urgent action.
The four unions have written jointly to processors calling for fairness, transparency and responsible behaviour during the downturn.
Milk Committee Chair Bruce Mackie said communication and trust were critical.
“Prices are falling fast while costs remain high.
“Processors must communicate clearly and fairly with suppliers.
“Farmers deserve transparency and trust during such a critical time.”
The joint letter reminds processors of their obligations under new Fair Dealing regulations, including farmers’ rights to request clear explanations of how milk prices are set.
It also marks the first major test of the new contract regulation adjudicator, designed to rebalance power in the supply chain.
NFU Scotland says many dairy businesses invested heavily over the past two years, supporting productivity, animal welfare and environmental standards.
Those investments also supported the wider rural economy, but falling incomes now threaten farmers’ ability to service loans and maintain businesses.
The union is engaging directly with banks and retailers, urging flexibility and support to help farms weather the downturn.
Mr Neill said the impact of the crisis extends far beyond individual farms.
“This is about more than milk, it’s about rural jobs, local food security, and the future of our communities.
“The supply chain must share the risk, not just the reward.”
NFU Scotland has pointed to major investments such as Arla’s £144m upgrade at Lockerbie and growing export opportunities as evidence of the sector’s long term potential.
However, the union warns that without urgent intervention, many farms may not survive long enough to benefit from that future growth.
Open letter to processors
Dear Processor,
As representatives of the four UK Farming Unions, we write collectively to encourage responsible behaviour across the dairy value chain during what is set to be a challenging period for all involved.
With global commodity markets under considerable strain, and record milk volumes being produced both domestically and abroad, trusted relationships between farmers and their milk buyers have never been more vital. The sudden, and largely unexpected, drop in milk prices, coupled with costs including wages and borrowing, remaining high is putting farmers under considerable pressure.
We wish to underscore the importance of ensuring that milk contracts are compliant with, and developed in the spirit of, the Fair Dealing Obligations (Milk) Regulations 2024. It is especially important that any adjustments to price, whether that be to increase or decrease, are made pursuant to the regulations and in line with contractual arrangements, including any agreed pricing mechanisms or factors set out in the milk purchase agreement. If a processor wishes to alter the terms of the contract, this must be done in accordance with the regulations and the terms of the contact.
We encourage processors to foster a culture of openness and transparency with their individual suppliers, ensuring farmers feel confident to raise questions and concerns directly with their milk buyers. It is also important that farmers understand how their feedback will be taken forward. Equally, as farmers we have a responsibility to make sure the milk we are producing meets the contractual and volume expectations of our buyers.
We strongly believe that where processors and farmers are committed to working together; where there is transparency and trust, the sector is in the best position to navigate the challenges we face. This in turn will help to secure a sustainable future for UK dairy, giving farmers the confidence to invest in their businesses and secure future production.
Yours sincerely,
| Paul Tompkins NFU Dairy Board Chair | Jonathan Wilkinson NFU Cymru Dairy Board Chair | Cyril Orr UFU Dairy Board Chair | Bruce Mackie NFU Scotland Milk Committee Chair |
