Dairy in 2026: Cutting costs, improving resilience, and staying profitable

Milk prices set to fall this year

Last year I joined Barber’s Cheese as Farms Sustainability Manager (part time), which has given me a clear view of the carbon footprint and cost structure on many dairy farms. My role is to help farmers make practical changes that are more environmentally friendly - under the banner Barber’s Nature Positive” - while keeping the business financially robust.

From my earlier work with Lloyds Bank and the Soil Association, I have become convinced that nature positive performance is often a useful proxy for profitability - sometimes the closest indicator farmers have, particularly when detailed management accounts are missing or out of date.

Why common figures can mislead

Many farms still lean on Margin Over Concentrates, but it does not tell you what cash is left once the full system costs are included. At the other end, annual taxation accounts are often prepared to minimise reported profit rather than help you run the business. In some cases, they even nudge decisions - such as buying a new tractor - that increase depreciation and complexity without improving true profitability.

The missing piece: Comparable Farm Profit

What most farms benefit from is a Comparable Farm Profit (CFP): detailed annual management accounts designed for discussion-group comparison, where every cost is considered reducible - not “fixed” by default.

A particularly useful method is expressing costs as a percentage of milk and livestock sales, because it gives a fast measure of efficiency and makes benchmarking far easier.

Groundswell 2025: reducing cost, labour, and machinery load

In 2025 I spoke at Groundswell about reducing high costs on dairy farms by lowering working time and tightening the system - particularly labour, power, and machinery. The principles were simple:

·        Keep cows yielding enough milk to retain flexibility

·        Extend grazing into the shoulders of the year when conditions allow

·        Use rotational grazing and consider herbal leys

·        Where feasible, explore self-feeding and simpler winter systems

·        Aim to maximise grass intakes - because grass is still the cheapest feed

A practical example: milk solids and cow type

Consider a herd on a milk manufacturing contract producing:

·        9,000 litres per cow at 4.3% butterfat and 3.4% protein

·        150 cows producing close to 104 tonnes of milk solids

If you moved to a smaller cross-bred animal producing:

·        7,500 litres per cow at 4.7% butterfat and 3.6% protein

·        …you would only need around 17 additional cows to produce similar milk solids

This does not have to mean Jersey - Irish Friesian or Scandinavian Red crosses, for example, can deliver the components while supporting grazing efficiency.

Yes, extra space is needed. But if grazing increases and the housing period shortens, you may only need temporary accommodation for those additional cows for weeks rather than months.

None of this is an overnight fix. But planning ahead of the next housing season can be surprisingly effective - and many farmers are pleasantly surprised by how adaptable cows can be when rotational grazing and grass intakes are improved.

A tool that helps immediately: the Backward Budget

One of the most useful exercises I share with farms is a Backward Budget spreadsheet. It starts with the one number that matters:

1) Set your Target Cash Surplus (non-negotiable)

This is the cash the farm must generate to support the family and the business - food, education, holidays, and other personal commitments.

2) Confirm total farm cash income

Include:

·        Milk sales

·        Calf and cull sales

·        SFI and other scheme income

3) Subtract Target Cash Surplus from income

Your Target Cash Surplus is set in stone. The remaining figure is your spending limit for running the farm.

4) Stress test spending across four cost categories

·        Category 1: True fixed commitments: Tax, insurance, leases/HP, land rent

·        Category 2: Semi-fixed overheads: Electricity, water, council tax, subscriptions

·        Category 3: Variable costs: Machinery repairs, fuel, paid labour, fencing, vet & med, breeding, parlour/livestock sundries

·        Category 4: Most variable and most discretionary: Feed, fertiliser, seeds, sprays, contractors, plus capex funded from cashflow

The result is either negative (a warning sign) or - ideally - positive. Either way, it forces a practical conversation about what must change, especially if low milk prices continue through 2026.

If you would like a copy of the Backward Budget spreadsheet, please get in touch and I will send it over.

Grazing: start earlier, but plan for sustainability

Getting cows out as early as possible saves forage, concentrates, and labour. A grazing plan helps - and it does not need to be complex or technology-heavy.

When I was in Ireland I'd hear that: “Cows can achieve three-quarters of daily dry matter intake in a few hours.” That can be true - but only with the right infrastructure and planning. The key is to make early turnout sustainable, not just possible.

If you would like help with a simple grazing plan, rotational grazing setup, or a cost-and-labour review, please contact me.