DAIRY MARKET REPORT
2/20/2025
OVERVIEW
Fluid milk sales in the United States showed their first year-over-year gain in 15 years during 2024, rising by 0.6% over 2023. 2024’s fourth quarter was a rather weak one for U.S. dairy exports, but cheese exports were a bright spot, reaching a new high for exports as a percentage of domestic production, at 7.9% for the entire year. Following the first two months of last year’s fourth quarter with significant increases in U.S. dairy cow numbers, December’s number was only 3,000 head above the previous year’s, raising questions about what previously appeared to be an unambiguous and rather vigorous growth trend emerging in the national dairy cow herd. Total milk solids growth was almost a full percentage point higher than growth of liquid milk production during the quarter.
Overall retail price inflation ticked up again in January, up 3% from a year earlier. The CPI for all dairy and related products came close in January to matching the all-time high it reached in February 2023, but some major dairy products, including whole milk and cheese, remain below the records they reached late in 2022.
The December margin under the Dairy Margin Coverage (DMC) Program was $13.38/cwt.
COMMERCIAL USE OF DAIRY PRODUCTS
Fluid milk sales in the United States showed their first year-over-year gain in 15 years during 2024, rising by 0.6% over 2023. Fluid sales last rose in 2009, by 0.8%. Since then, sales dropped steadily through 2023, by an average of 1.6% per year. Sales in 2024 consisted 93% of conventionally processed milk, which rose by 0.1% from
the previous year, and 7% of organic milk, which was up by 6.9%, all measured on a leap-year adjusted basis. Other highlights for domestic commercial use during the fourth quarter last year were near double-digit growth in yogurt and butter and small increases in all milk equivalent measures.
U.S. DAIRY TRADE
Last year’s fourth quarter was weak for U.S. dairy exports compared to the prior three years. The traditional drivers of export volume, namely dry skim milk and the whey complex products, showed continued weakness. Cheese exports were a particular bright spot, reaching a new high for exports as a percentage of domestic production, 7.9%, for the entire year and far surpassing the prior annual record of 7.1% set in both 2014 and 2022.
Butter is one of the few major non-ingredient dairy products for which the U.S. runs a significant trade deficit. The country exported 3.1% of its domestic production in 2024 but imported the equivalent of 7.7%. The United States uses increasing amounts of its domestic cream supply in other dairy products, and U.S. consumers are increasing their consumption of European-style butters, leading to a tight domestic supply-demand situation and increased imports.
MILK PRODUCTION
USDA’s Milk Production report for December scaled back its previously-reported U.S. dairy cow numbers for last October and November, reducing its reported year-overyear growth from 15,000 to 11,000 head for October and from 20,000 to 15,000 head for November. More tellingly, its preliminary December national dairy cow number was only 3,000 head above December 2023, raising questions about what previously appeared to be a clear growth trend in the national dairy cow herd. Meanwhile, the
December production report scaled back its previously reported large drop in November production per cow while seeing a continued drop in December. The net result is a revised reported reduction of 0.4% in November U.S. milk production, a preliminary reported 0.5% drop for December, and a 0.1% drop for last year’s entire fourth quarter. Total milk solids production growth was almost a full percentage point higher than growth of liquid milk production during the quarter.
DAIRY PRODUCTS
Greater Italian-type cheese production continues to counterbalance declines in American-types during the fourth quarter, keeping overall cheese production relatively steady. Production of dry skim ingredient products
continues to drop, reflecting export weakness, while the growing supply of U.S. milk solids is getting chanelled into other products besides cheese and ingredients, including fluid milk, butter and yogurt.
DAIRY PRODUCT INVENTORIES
Month-ending stocks of butter and cheese show clear seasonal trends, particularly in butter. Stocks of both American-type and all other type of cheese showed very muted upturns in 2023, to the extent that they have declined almost steadily since shortly before the middle of that year.
Monthly stocks of American-type cheese in November were their lowest since November 2020; stocks of all other cheese were their lowest since January 2019. Dry skim ingredient inventories continued to grow in December, reflecting export weakness.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
The monthly NDPSR survey prices were relatively steady from December to January for butter and nonfat dry milk but showed stronger increases for cheese and dry whey. As a result, the Class III price rose by $1.72/cwt during that time, while the Class IV price was basically unchanged.
Retail price inflation ticked up again in January by the closely watched measure of year-over-year change in the Consumer Price Index (CPI) for All Items, which rose to 3% from 2.9% in December. The index itself hit a clear
all-time high in January, as did the CPI for all food and beverages. The CPI for all dairy and related products came close in January to matching the all-time high it reached in February 2023, but some major dairy products, including whole milk and cheese, remain below the record levels they reached in the last months of 2022. Exceptions are the CPIs for fresh milk other than whole, which backed off slightly in January from the record it reached in December, as well as for ice cream and related products, which rose significantly in January to hit a new high.
MILK AND FEED PRICES
The monthly margin under the Dairy Margin Coverage (DMC) program lost $0.91/cwt from a month before to come in at $13.38/cwt in December. The U.S. average all-milk price lost $0.90/cwt, to $23.30/cwt, while the DMC feed cost
formula gained just one cent from a month earlier, to $9.92 per hundredweight of milk. A higher corn price was almost exactly offset by lower soybean meal and premium alfalfa hay prices.
(per cwt of milk)
LOOKING AHEAD
In its World Agricultural Supply and Demand Estimates (WASDE) monthly report for February, USDA again reduced its forecast of 2025 annual milk production, to 226.9 billion pounds, which is roughly within a billion pounds of the U.S. annual milk production levels during the prior four years.
USDA’s lowered its Federal Order class price and some of its dairy product price forecasts to reflect the updated price formulas of the Federal Milk Marketing Order, as published in the Federal Register on Jan. 17 by the Agricultural Marketing Service. An exception was the cheese price, which USDA raised on recent prices and
Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org
*DMC calculations are not revised
tight inventories from 2024, expected to carry into 2025. The WASDE currently forecasts the 2025 all-milk price at $22.60/cwt, essentially the same as it averaged in 2024. At the time the February WASDE report was released, the CME dairy futures were more optimistic on the 2025 average Class III and Class IV price outlooks for this year.
Various mid-February forecasts indicate the 2025 average DMC margin would be higher than last year and not likely to dip below the $9.50/cwt level that would trigger payments in any month. Enrollment for the 2025 DMC program is now open and scheduled to close March 31.
Dairy Management Inc.™ and state, regional, and international organizations work together to drive demand for dairy products on behalf of America’s dairy farmers, through the programs of the American Dairy Association®, the National Dairy Council ® , and the U.S. Dairy Export Council ®
The National Milk Producers Federation (NMPF) develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies.