VOLUME 28 | ISSUE 6
DAIRY MARKET REPORT
6/25/2025
Strengthening domestic sales of yogurt, butter, cheese and dry skim milk drove higher gains in overall domestic commercial milk use from February through April. Dairy exports dropped back during that period, as losses in dry skim milk and whey protein exports more than offset gains in butter and cheese exports. U.S. milk and milk solids production growth is accelerating, with milk production up 1.2% year over year during the period, milk solids production up by twice this rate, and milkfat production up almost three times faster.
New U.S. cheese processing capacity is drawing heavily on the growing milk supply, with cheddar cheese production up 8.1% annually in April. The monthly NDPSR survey product prices and the Class III and Class IV prices were all higher in May than a month earlier. And a milestone to note: USDA in May announced its first price reports calculated using the updated Federal Milk Marketing Order formulas announced in January.
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
Overall U.S. domestic commercial use strengthened during February-April. Yogurt, butter, cheese and dry skim milk all showed stronger year-over-year gains, while
fluid milk sales were down again in April, by 1.8%. Fluid’s most recent month of gains was February, when sales increased by 1.3% on a leap year-adjusted basis.
U.S. DAIRY TRADE
Total U.S. dairy exports were 2% lower than a year earlier on a milk solids equivalent basis during February-April, losing 0.7 percentage points as a proportion of U.S. milk solids production during the period. Losses in dry skim milk and whey protein concentrate and isolate exports more than offset gains in butter and cheese exports in terms of milk solids.
U.S. butter imports dropped by 30% year-over-year in April, pulling down import growth of that product. During February-April, imports were equivalent to the following proportions of domestic production: butter, 5%; cheese, 3%; and MPC 40%.
MILK PRODUCTION
U.S. milk production growth is accelerating. USDA revised its national dairy cow numbers for March from 57,000 more than a year earlier, which was in line with January and February dairy herd growth, to 73,000 more; it also reported the April preliminary herd size at 89,000 more than in April last year. The April number would represent the largest number of dairy cows added from a year earlier since July 2021. April preliminary U.S. milk production
was reported to be 1.5% more than in April last year, which would be the fastest YOY growth rate since August 2022. Increasing growth in raw milk production is being augmented by the continued rapid increase in the average component composition of producer milk, resulting in total milk solids and milkfat production growing, respectively, twice and almost three times as fast as raw milk productioin during February-April.
DAIRY PRODUCTS
The recent addition of significant new U.S. cheese processing capacity is placing a heavy draw on the nation’s milk supply. That supply has so far risen to this challenge, proving adequate to fuel an 8.1% annual increase in cheddar cheese production in April. The continued drop in national
production of dry milk and whey products raises the question of whether this increase in cheese production is drawing skim solids away from production of those dry skim ingredient products.
DAIRY PRODUCT INVENTORIES
Stocks of butter, cheese, dry skim milk and dry whey were all down from their levels a year ago at the end of April. Butter stocks were down by 25 million pounds, the first year-overyear drop since the end of January 2024. USDA’s Dairy
Market News suggested this sparked the sizeable jump in CME daily butter prices at the end of May. But both could be attributed to the recent sizeable growth in U.S. butter exports on top of higher domestic sales.
DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES
The monthly NDPSR survey product prices were all higher in May than a month earlier. The Class III and Class IV prices accordingly both rose on the month, while the Class I and Class II prices, which are based wholly or partly on
advanced prices from different periods, both fell on the month. The May Class III and Class IV prices are the last ones to be calculated entirely based on the “old” Federal Order price formulas.
The May 21 Announcement of Advanced Prices and Pricing Factors that reported those prices for June is the first official regulatory announcement showing the new Federal Order prices calculated using the updated formulas announced in the January Final Rule. Of particular note is the new Class I skim milk price, which now includes an adjustment for Extended Shelf Life (ESL) products. The May 21 announcement reported the June Class I mover (for non-ESL milk) as $8.55/cwt and the June Class I ESL adjustment as $1.38/cwt, thus setting the June base Class I skim milk price for milk used in ESL products at $9.93/cwt. Prior to June, the base Class I skim milk price for all milk, using the previous mover and without the ESL adjustment, would have been $9.24/cwt.
The Announcement of Class and Component Prices for May
will also be the last one that will report, and incorporate into the Class III price calculations, a monthly NDPSR price for barrel cheese, as a result of the same price formula changes. The May 21 advanced price announcement has already done the same for the advanced base Class I skim milk prices.
The Bureau of Labor Statistics reported the Consumer Price Index (CPI) for all items was 2.4% higher in May than a year earlier, while the CPI for all food and beverages was up by 2.8% from a year earlier. Both indices themselves reached all-time high levels in May. By contrast, the CPI for all dairy products rose by 1.7% from a year earlier in May and was still slightly lower than the all-time high level it reached early in 2023.
MILK AND FEED PRICES
The monthly DMC feed cost calculation rose $0.13/cwt on a milk basis from March to April, mostly on a higher premium alfalfa hay price, as smaller corn and soybean meal price changes were nearly offsetting in the formula. The all-milk
price was down $1/cwt in April to $21.00/cwt. Together, these monthly changes dropped the April margin by $1.13/ cwt from March to $10.42/cwt of milk.
*DMC calculations are not revised
LOOKING AHEAD
U.S. annual milk production averaged 226.2 billion pounds during the four years 2021-2024, with none of these years deviating from that average by more than 0.15%. However, this virtually unprecedented period of milk production stability is almost certainly ending.
USDA’s World Agricultural Supply and Demand Estimates (WASDE) monthly report in June estimates that 2025 milk production will be 0.9% higher than last year’s and that 2026 production will add another 0.2%, with both higher cow inventory numbers and increased milk production per cow driving these production growth forecasts.
Together with expected continuation of milk solids composition growth, both domestic and export markets will be challenged to absorb the increased dairy product production that would result. However, the recent WASDE reports are expecting those markets to rise to this challenge, as its June forecasts for milk and dairy product prices were mostly raised for both this year and next. The DMC Decision Tool on the USDA Farm Service Agency website currently projects the DMC margin will increase steadily from April through November and average $12.55/ cwt for the year.
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 ®
Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org
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.