Dairy Market Report - May 2025

DAIRY MARKET REPORT

VOLUME 28 | ISSUE 5

OVERVIEW

5/27/2025

Yogurt, butter and American-type cheese provided bright spots in domestic commercial use during the year’s first quarter. Total U.S. dairy exports have steadily increased over the past three months, as they typically do. First quarter U.S. milk production rose 0.8% from a year earlier, due mostly to increased cow numbers; milk solids production grew by 2.1% over the same period.

Mostly lower dairy product prices in April produced a drop in Class II and Class IV prices from both last month and a year ago. April Class III prices were down from a month ago up but well above a year earlier. The DMC Decision Tool is estimating that the DMC margin has already reached its lowest level for the year, $10.43/cwt, in April.

Note: The tables below for commercial use, trade, and milk and dairy product production show actual quantities; only the annual percentage changes are adjusted for the 2024 leap year.

COMMERCIAL USE OF DAIRY PRODUCTS

After gaining 1.3% on a leap year-adjusted basis in February, March fluid milk sales were down from last year by 1.5%, dropping first quarter fluid sales by 0.3% over Q1 2024. Yogurt and butter continue to provide bright spots in domestic commercial use, while cheese, specifically

American-type cheese, has newly joined this company during the first quarter. Strong leap year-adjusted growth in its skim milk solids equivalent kept growth in overall domestic milk solids use positive in the face of weaker growth in its milkfat equivalent during the quarter.

U.S. DAIRY TRADE

Total U.S. dairy exports have steadily increased over the past three months, as they typically do during the first quarter. Almost 95% of the increase in their milk solids equivalent was contributed by just five products, skim milk powder/nonfat dry milk, lactose, whey protein concentrate, dry whey and butter. U.S. butter exports have been modest over the past decade, averaging just 3.1% of production, as increased demand for dietary fats has consumed most domestic production during that period. However, recent rapid increases in U.S. producer milkfat composition have generated more exportable butter while domestic prices

have been very competitive on world markets of late. Exports amounted to 5.4% of U.S. butter production during the first quarter this year.

U.S. dairy imports have receded from a recent high, equivalent to 4.4% of domestic milk solids production last November, to 3.6% in March. Over three quarters of the milk solids equivalent of U.S. dairy imports during the first quarter consisted of milk and whey protein concentrates and isolates, casein, butter and other dairy fat products, cheese and whole milk powder.

MILK PRODUCTION

USDA reports that the nation’s dairy cow herd showed relatively stable growth during the first quarter of 2025, rising over a year earler by 65,000, 53,000, and 57,000 cows, respectively, during January, February and March. Adjusted for leap year, production per cow was just slightly north of flat during the quarter, which boosted total milk

production just slightly faster than growth of the national herd, on a percentage basis. Skim milk solids production grew almost twice as fast as liquid milk production during the first quarter, while milkfat production grew over four times faster.

DAIRY PRODUCTS

American-type cheese, and cheddar in particular, appears to have emerged from a period of significantly-reduced production from a year earlier, which stretched from the fourth quarter of 2023 through the end of 2024. It significantly outpaced production growth of Italian types

and mozzarella during the first quarter this year. Dry milk and whey products were the only major dairy product categories for which U.S. production was down markedly from a year ago.

DAIRY PRODUCT INVENTORIES

Butter stocks at the end of March were in line with the average gain over the past decade for that month from their seasonal low late in the prior year, usually in November. Stocks of other than American-type cheese have remained

relatively stable despite increased production, primarily reflecting increased exports. Dry whey and WPC stocks showed little change from February to March.

DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES

Monthly NDPSR cheese survey prices were higher than a year earlier in April, as were those for nonfat dry milk and dry whey, although less so. Butter prices, by contrast, were down significantly from their high levels of a year ago and in line with their average over the past decade. This combination of price changes dropped Class II and Class IV prices significantly from a year ago for the month and

raised Class III.

The Bureau of Labor Statistics reported the Consumer Price Index (CPI) for all items was 2.3% higher in April than a year earlier, indicating a continued cooling of overall retail price inflation by that common yardstick. The CPIs for all food and beverages and for all dairy products were, respectively, 2.7% and 1.6% higher over the same period.

MILK AND FEED PRICES

The monthly DMC feed cost calculation eased down just $0.03/cwt of milk from February to March, as the formula’s three feed components coincidentally ticked down just $0.01/cwt of milk each. However, this minor monthly change

in the DMC margin formula was dwarfed by a $1.60/cwt drop in the March U.S. average all-milk price from a month before, to $22.00/cwt, bringing the March margin down by a net $1.57/cwt, to $11.55/cwt.

(per cwt of milk)

*DMC calculations are not revised

LOOKING AHEAD

USDA’s World Agricultural Supply and Demand Estimates (WASDE) monthly report for May began providing its dairy outlook for next year. The report estimates total domestic commercial use of milk will continue to grow in 2026 at this year’s forecasted rate of just under 1% per year, on a milk equivalent of total milk solids basis. It foresees total U.S. dairy exports partially recovering in 2026 from this year’s expected slump of over 6%. It also projects that national milk production will increase this year at 0.6%, but that rate will slow to 0.3% the following year. Given the continued rapid growth in the milk solids content of producer milk, these various projected growth rates would be noticeably larger if converted to a milk solids, rather than a milk

equivalent basis.

The May WASDE report also foresees the NDPSR dairy product prices and the federal order class prices mostly dropping over both forecast years, with the U.S. average all-milk price dropping by a dollar a hundredweight this year from 2024, and by another almost half dollar to $21.15/ cwt in 2026. The declining prices are foreseen “primarily due to increased milk supplies”. The DMC Decision Tool on the USDA Farm Service Agency website currently projects the DMC margin will have reached a minimum for the current year of $10.43/cwt in April and will average $12.64/ cwt for the year.

Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org

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.