The Government recognises the importance of greater transparency in the milk supply chain to support a fair and sustainable dairy sector.

The Fair Dealing Obligations (Milk) Regulations, which fully came into force in July 2025, requires that all dairy contracts must clearly set out the factors that determine the price of milk.

In addition, producers have the right to request a written explanation of how the price has been determined and, where applicable, how those factors have influenced the price. This improves transparency and ensures farmers better understand how the price received relates to the terms of their contract.

The UK dairy industry is a resilient and dynamic sector operating in an open market where profit margins are established by the interaction of those in supply chains including farmers, processors, wholesalers, retailers, and consumers.

Defra does not collect or hold information on profit margins for individual businesses at any stage of the milk supply chain. Defra does, however, work closely with dairy sector supply chains to monitor the dairy market via engagement with industry stakeholders and through the UK Agriculture Market Monitoring Group.

Defra publishes information for England on the cost of production of milk in the Defra Farm Business Survey, and gross margins for dairy enterprises in England in Table 14.2 of Farm Business Survey Farm Accounts for England.

The UK dairy industry is a resilient and dynamic sector which operates in an open market where the value of dairy commodities, including farmgate milk prices, is established by those in supply chains including farmers, processors, wholesalers, retailers, and consumers. Price fluctuations are a normal part of how the dairy market operates as it seeks to balance supply with demand.

The Government paid more than £2.6 billion to British farmers in 2024-25, the most funding in a single financial year since we left the EU. This included funding toward Environmental Land Management schemes, improving animal health and welfare on farm and grants to drive innovation in agriculture and food production across England.

The average cost of production for milk is shown below. Data is from the Farm Business Survey which covers farm businesses in England with a Standard Output of more than £21,000. Whilst it captures the majority of agricultural activity, it excludes smaller businesses (which account for 2% of output).

Production costs include all financial aspects of dairy enterprises such as unpaid labour, herd depreciation and an estimated rental equivalent for owned land. An allowance is also made for non-milk revenue (mostly the sale of dairy calves), which is applied as a reduction to cost. This reflects the value of by-products from milk production. The production costs therefore represent the price that would have to be paid on all milk produced for dairy enterprises to break even. The data includes organic production which is likely to incur higher production costs.

Average cost of milk production (pence per litre) 2020/21 to 2024/25

Source: Farm Accounts in England

Defra publishes monthly and annual milk prices on GOV.UK (Latest UK milk prices and composition of milk - GOV.UK). UK annual farmgate milk prices for the last five years are shown in the table below.

Table: UK annual farmgate milk prices 2021-2025, pence per litre (ppl)

Defra officials regularly engage with stakeholders from across the UK dairy industry on a wide range of issues including farmgate milk prices. Engagement is undertaken in various forms including through ad hoc and regular meetings with industry bodies and individual dairy businesses and milk producers, farm visits and attendance at industry events.

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At Autumn Budget 2024, the Chancellor announced her intention to review the Soft Drinks Industry levy (SDIL) to drive further product reformulation, whilst maintaining the fundamental design of the levy as a tax on pre-packaged soft drinks with added sugar.

Following this review, between April and July 2025 the government consulted on proposed reforms to the SDIL. The outcomes of this consultation were confirmed at Budget 2025.

As part of the consultation, the government considered responses on dissolvable powders. It also considered the significant redesign of the levy necessary to include them as beyond the remit of the SDIL review, as set out by the Chancellor at Autumn Budget 2024.

More information on the outcome of the Strengthening the Soft Drinks Industry Levy consultation can be found here:

https://www.gov.uk/government/consultations/strengthening-the-soft-drinks-industry-levy/outcome/strengthening-the-soft-drinks-industry-levy-summary-of-responses

The government will not make any further changes to the design of the SDIL.

The changes to the Soft Drinks Industry Levy (SDIL) confirmed at the Budget in November 2025 were informed by the ‘Strengthening the Soft Drinks Industry Levy’ consultation, which was open from 28 April to 21 July 2025. Representations from small manufacturers, and the trade bodies representing them, were received and considered as part of this process.

On 25 November 2025, the government published its summary of responses to the consultation, including a full assessment of the impacts of the announced policy changes to the levy. This is available here:

https://www.gov.uk/government/consultations/strengthening-the-soft-drinks-industry-levy/outcome/strengthening-the-soft-drinks-industry-levy-summary-of-responses

The smallest producers, producing less than a million litres a year, will remain exempt from the SDIL.

As of 17 November 2025, the Agricultural Supply Chain Adjudicator (ASCA) has received 1 formal complaint relating to areas of a milk purchase contract that was alleged to be not compliant with the requirements of the Fair Dealing Obligations (Milk) Regulations 2024. ASCA led an informal resolution which was fully agreed between the complainant and the processor resulting in an amended milk purchase contract being provided to the producer. No formal intervention was required from the ASCA as the complaint was withdrawn by the producer.

The ‘in confidence’ ASCA email channel was established to ensure producers could raise issues to the ASCA without fear of identification or reprisal. This was identified as a key barrier for producers to raise their concerns in an earlier ASCA survey. No formal complaints have been raised via this channel, but the ASCA has received over 15 separate issues in confidence. The confidential feedback has been used by ASCA to raise specific and anonymised issues with industry where possible.

The Fair Dealings Obligations (Milk) Regulations 2024 include a statutory review provision requiring an assessment of the regulatory provisions and a published report outlining the conclusions.

The review will consider whether the Regulations are meeting their intended objectives, how effectively those objectives are being achieved, and whether they remain appropriate. The review will be carried out in due course.

The Uk Agricultural Market Monitoring Group which was established by Defra and the Devolved Governments under the Devolution Framework is responsible for the oversight and monitoring of the UK agriculture market. This includes a review of prices, production, inputs and trade covering an assessment of current and future global demand for dairy products. The current position indicates broadly stable demand for dairy across the world alongside continued rising supply and falling prices.

Under the Fair Dealing Obligations (Milk) Regulations 2024, purchasers must explain variable price changes within 7 days of a price review. The Regulations now apply to all milk purchase contracts.

Breaches can be reported to the Agricultural Supply Chain Adjudicator (ASCA).

Whilst it is not appropriate to provide the details of any live investigations, to date, ASCA has received 1 formal complaint about a non-compliant milk contract (currently under investigation).

ASCA has also received a number of informal ‘in confidence’ concerns raised by producers across a range of issues. Where able to do so without revealing the identity of a producer, ASCA will raise these concerns directly with a milk purchaser.

The Agricultural Supply Chain Adjudicator (ASCA) is responsible for enforcing regulations developed under the Agriculture Act 2020 'Fair Dealing' powers (section 29). Regulations introduced using these powers promote fair contractual dealing and contribute to a more equitable relationship between producers and purchasers. To date, the powers have been used to create the Fair Dealing Obligations (Milk) Regulations 2024 (FDOM24) and the Fair Dealing Obligations (Pigs) Regulations 2025 (FDOP25).

The ASCA can investigate relevant complaints around compliance with these regulations, including ensuring parties agree a written contract as mandated by the FDOMM24. The ASCA also aims to be a convener across supply chains, working with producers and purchasers to improve business relationships and behaviours around contracts.

The National Child Measurement Programme (NCMP) collects data on the weight status of children aged four to five years old, in Reception, and 10 to 11 years old, in Year 6. Findings from the 2023 to 2024 NCMP annual report shows that the prevalence of obesity in children in Reception is not showing signs of decreasing, and remains in line with the stable pre-pandemic level. For Year 6 children, although the prevalence has decreased, it remains higher than pre-pandemic levels and is in line with the increasing pre-pandemic trend. Obesity prevalence also varies across ethnic groups, where a child lives continues to influence their weight status and health, and there remain large and persistent inequalities between the most and least deprived areas of England.

Data from the National Dental Epidemiology Programme oral health survey of five-year-old schoolchildren in England in 2024 showed that 22.4% of five-year-old children surveyed had experienced tooth decay. The most common reason children aged five to nine years old are admitted to hospital is for tooth decay.

Plain milk and water are the safest drinks for teeth. We have published the evidence base in support of this in Delivering Better Oral Health: an evidence-based toolkit for prevention, which states that only plain milk or water should be provided between meals for young children. Young children should not be given drinks sweetened with sugar or sweeteners.

In 2023, the Scientific Advisory Committee on Nutrition (SACN), published its report Feeding young children aged 1 to 5 years, a comprehensive assessment of the scientific basis of recommendations for feeding young children aged up to five years old. The report found no evidence that milk consumption is related to tooth decay and some evidence that there is no link between milk consumption and body fatness. The SACN recommended that plain milk or water, in addition to breast milk, should constitute the majority of drinks given to children aged one to five years old, and that pasteurised whole and semi-skimmed cows’ milk can be given as a main drink from one years old. These recommendations have been accepted by Government.

The Government’s dietary recommendations are based on robust assessments of the scientific evidence by the Scientific Advisory Committee on Nutrition (SACN) and its predecessor, the Committee on Medical Aspects of Nutrition Policy. Government advice on a healthy, balanced diet is encapsulated in the United Kingdom’s national food model, The Eatwell Guide.

In 2023, the SACN published its report Feeding young children aged 1 to 5 years, a comprehensive assessment of the scientific basis of the recommendations for feeding young children aged up to five years old. The SACN found that milk is an important contributor to energy intake and intakes of calcium and other micronutrients in children aged one to five years old. The SACN also found some evidence that there is no link between milk consumption and body fatness. The SACN recommended that:

- plain milk or water, in addition to breast milk, should constitute the majority of drinks given to children aged one to five years old; and

- pasteurised whole and semi-skimmed cows’ milk can be given as a main drink from the age of one years old.