The pressure that has come on dairy commodity markets in recent weeks highlights the fine balance that exists between supply and demand.

Until there are signs that supply is starting to tail off, traders hang back from the market in the hope of even lower prices. It is a downward spiral that could take months to correct.

The latest indications are that production is continuing to trend upwards in the US, Europe, New Zealand and Australia, so the situation isn’t going to change in the short term.

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The unfortunate reality is that it is probably going to take a few months of prices below the cost of production before output starts to fall and the market comes back into balance.

NI output

In NI, our output might be pretty negligible on the global scale, but we have contributed to the wave of new milk. Local production to the end of August is up by 8.6% and if that continues to the end of the year, it would result in total milk production of around 2.85bn litres. In 2015, this figure stood at 2.27bn litres.

Only once in the last 23 years have we seen annual growth above the 2025 figure. That came in 2014 after two years of pretty stagnant production and on the back of rising prices.

By the end of the year, the market had crashed, although it wasn’t until 2016 that farmers actually responded by way of lower milk output.

Hopefully something similar does not happen again, but it highlights the dangers that currently exist.

Over the coming winter, given stable concentrate prices and with silage pits full, it looks inevitable that local production will continue to push on.

In addition, while processors are warning of base prices below 30p/l, that reality is yet to hit, either here or in other parts of the world.

However, it is important to be aware of what lies ahead and budget accordingly.

For anyone thinking of making a major investment on their farm, it might be prudent to delay that until the situation becomes clearer in 2026.