A new report led by South West-based professionals shows the growing strain on dairy farmers in Somerset, raising concerns over farm viability in the months ahead.
The annual Milk Cost of Production report, produced by Old Mill accountants - who have offices in Wells, Yeovil and Ilminster - and the Farm Consultancy Group highlights that many UK dairy farmers are being paid less for milk than it costs to produce.
Bradley Causey, rural accountant at Old Mill, said: "Many in the industry are increasingly concerned for the future and feel squeezed on multiple fronts.
"Business confidence in the UK is not high overall, and farmers are very much part of the wider UK economy.”
He said challenges extend beyond fluctuating milk prices, including regulatory burdens, economic instability, and eroding political trust.
The 2025/26 reporting year saw a positive average, with production costs at 42.38p per litre and milk prices at 46.38p per litre.
When factoring in income from livestock sales, total earnings reached 54.81p per litre, yielding profits of 12.43p per litre - more than double the five-year average.
However, these results do not reflect current realities.
In 2026, milk prices have fallen, weather has remained unpredictable, and profitability now varies dramatically between farms.
The bottom 10 per cent of producers recorded losses of 2.56p per litre, despite the strong overall average.
Defra data shows that dairy producer numbers have fallen below 7,000 for the first time, with 160 herds leaving between October 2025 and April 2026.
The report forecasts further pressures in 2026/27, predicting average milk prices will fall to 39p per litre while production costs rise to 43.54p per litre.
This is due to increases in feed, labour, and energy costs.
Farmers also face a substantial income tax bill in January 2027, related to the more profitable 2025/26 year.
Despite these challenges, the report points to some areas of hope.
Allaster Dallas, consultant at the Farm Consultancy Group, said: "The speed at which information can be gathered is helping businesses to make decisions more quickly and implement changes to underperforming elements across the entire farming structure."
He noted that producers investing in technology - particularly those focused on reducing energy costs and improving genetics - are beginning to see returns.
Many farmers are also selling dairy and beef animals to supplement income and offset milk market volatility.
Mr Dallas said: "The beef sector is already creaking under rising input costs, and any further feed price increases may drive more producers to let others take the risk of livestock ownership.
"A lot has happened in a short space of time, and the fact that the farmers are here to tell the tale is a testament to their resilience.
"There is now some light at the end of the tunnel, and the UK remains a competitive place to produce milk, with processors meeting the needs of a generally supportive customer base.
"Hopefully, this report will inspire producers to review their costings and implement practical changes to maintain profitability."
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