British milk production is forecast to grow by 1.1% this year following sluggish growth in the first half of the 2024-2025 milk year.
This is according to new analysis by AHDB, which notes that wet weather in spring and lower prices had led to reduced yields.
However, things started to turn around for the UK dairy sector in September, as prices climbed and margins improved.
Favourable weather allowed cows to stay out in the fields longer, contributing to a resurgence in milk flows, the levy organisation's report says.
By November and December, milk deliveries saw notable increases, with volumes up by 4.5% and 3.3%, respectively.
Susie Stannard, AHDB senior analyst, said that after a tough start to the season, the industry was showing signs of recovery.
She added: "Higher milk prices and a stronger milk-to-feed ratio are encouraging farmers to boost production.
"We're seeing solid growth, but we must also be mindful of global risks, from fluctuating commodity prices to disease outbreaks, which could disrupt this upward trajectory."
While milk prices are set to remain high in the short term, with an average of 45.14ppl recorded in October 2024, prices may start to decrease towards the back half of 2025.
Increased production could put downward pressure on prices during the spring flush, as milk supplies surge just as consumer demand starts to level out.
Retail milk demand is expected to remain stable, but volume per household could decline slightly as more workers return to office settings, reducing their in-home consumption.
Cheese demand will continue to rise, supported by promotions and the popularity of home-cooked meals, according to AHDB's report.
Butter consumption may decrease due to price competition with plant-based alternatives, while yogurt sales are expected to grow, driven by health trends.
Ms Stannard said that the dairy sector had demonstrated resilience in the face of significant challenges.
"However, the industry's ability to navigate these uncertainties will depend on how well it can balance production increases with fluctuating demand and external pressures."
The analysis concludes that with key issues like disease control, policy changes, and global supply chain dynamics in play, the year ahead promises to be one of cautious optimism for UK dairy.
The outlook for 2025 suggests that while growth is likely, dairy producers will need to stay resilient to adapt to changing market conditions, it says.
