Global milk production costs have risen significantly over the past five years, and higher feed prices bear much of the blame, according to a recent report.
From 2019 to 2024, the total cost of milk production increased by an average of 14% across the world’s eight top-producing dairy regions: California, the Upper Midwest, Argentina, Australia, China, Ireland, New Zealand and the Netherlands, as noted by RaboResearch in a January survey. More than 70% of that increase happened since 2021 as a result of higher feed and fertilizer costs, more expensive transportation, the Russia-Ukraine war, weather patterns in key dairy regions, global trade and supply chain disruptions and other factors. Migrant labor shortages and higher interest rates also played a role, the report’s authors noted.
“Feed expenses have been the largest culprit in cost increases, with average feed bills across the eight regions rising by 19% from 2019 to 2024,” Emma Higgins, senior agriculture analyst with RaboResearch, wrote in the report.
Producers with good access to pasture grazing usually benefit from lower manufactured feed usage and therefore lower production costs. New Zealand, Ireland and the Netherlands — where pasture access is abundant and dairy operations tend to function on a smaller scale — devote about 30% of their total milk production costs to feed. On the other hand, large-scale and confined dairy farming systems like those used in the United States and China require higher feed usage. California, the Upper Midwest and China together devote about 55% of their total costs to feed on average.
China ranked first, with 64% of costs devoted to feed in 2024, down 3 percentage points from 2023 but still up 5 percentage points from 2019. California was close behind with 56% of costs for feed in 2024, down 7 percentage points from 2023 but higher than in 2019.
“In 2024, feed prices globally moved in a more affordable direction due to excellent yields, supportive weather conditions and growing global stockpiles,” alongside falling prices for corn and soybeans, Higgins noted. “California realized the sharpest reduction in feed costs, which fell by almost 30% in 2024 compared to the prior year.”
In the United States dairies with better access to locally grown feed tend to have lower production costs than those that must import feed from out of state, with transportation and energy costs playing a big role. Upper Midwestern feed bills generally are lower than California’s because of the former region’s close proximity to large corn and soybean growers.
“Californian feed bills averaged over 20% higher than in the Upper Midwest from 2019 through to 2024,” Higgins said. “However, Californian feed costs have recently benefited the most from lower feed prices (namely corn and soybean).”
Looking forward, whether that annual reversal turns into a trend that could ease milk production costs in the long run will depend upon a variety of features, including falling or firming feed-related commodity prices, new developments in global trade policies (i.e. tariffs), fluctuations in currency and energy markets and declining dairy demand from China.
As noted in the report, China is the milk producer with the highest costs, but it has become more cost competitive in recent years. Feed expenditures still make up more than 60% of China’s total milk production expenses, but its domestic feed production is advancing, and Chinese feed costs declined by 13% in 2024 compared with 2023 as a result.
“China’s improved production costs and lower domestic milk prices have had ramifications for the global dairy commodity supply and demand balance,” Higgins said. “This contributed to the downcycle in dairy commodity prices … as China’s increased self-sufficiency and weaker economy reduced its demand for imported liquid milk and milk powders.”
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