Rising production, evolving prices, and shifting exports define the next phase of U.S. dairy industry dynamics.
U.S. milk production is accelerating, with a notable 1.5% year-over-year growth reported in April—the fastest increase since August 2021. Milk solids and milkfat are growing at double and triple that pace, respectively, driven by both larger herd sizes and higher component yields per cow. This surge supports booming domestic use of products like yogurt, cheese, and butter, but also raises concerns about how both local and export markets will absorb the extra volume.
On the export front, U.S. dairy shipments fell 2% year-over-year between February and April, primarily due to declines in skim milk powder and whey protein. While butter and cheese exports increased, they weren’t enough to offset losses. Butter imports also dropped sharply in April—down 30%—while imports of cheese and milk protein concentrate held steady relative to domestic production.
Domestically, the market is adapting to structural change. New cheese processing capacity is pulling more from the milk supply, driving up cheddar cheese output by over 8% in April. This shift may be reducing the availability of skim solids for dry milk and whey products, as inventories of all major dairy commodities, including butter and cheese, were lower than the previous year at the end of April. These tightening stocks contributed to sharp price increases, particularly in butter.
May marked a turning point in dairy pricing. For the first time, USDA price announcements incorporated the new Federal Milk Marketing Order formulas. This included a new Class I skim milk price with adjustments for extended shelf life (ESL) products, setting ESL milk at $9.93/cwt for June. This regulatory change also discontinues barrel cheese prices in Class III calculations. Meanwhile, dairy product prices rose more moderately than overall food inflation, with the dairy CPI up 1.7% in May.
Looking ahead, the USDA forecasts a 0.9% increase in U.S. milk production for 2025 and a further 0.2% rise in 2026. This would end the historically stable output of recent years. With milk solids composition also trending upward, both domestic and global markets must ramp up to absorb the expected supply. Encouragingly, USDA’s June outlook sees rising milk and dairy product prices, with the DMC margin projected to average $12.55/cwt for 2025—suggesting cautious optimism for producers navigating this growth phase.
Source: Wisconsin State Farmer – Read the full article here
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