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Archive for milk price trends

CME Daily Dairy Market Report: July 9, 2025 – Butter Tumbles 5.5¢ – But Feed Cost Relief Softens the Blow

Wednesday, July 9th, 2025

Butter tanked 5.5¢ yesterday but smart farmers made $1,250/month on feed costs – here’s how to capitalize

EXECUTIVE SUMMARY: Look, I get it… seeing butter drop 5.5¢ in one day makes your stomach turn. But here’s what everyone’s missing: the real money yesterday wasn’t in milk prices – it was in the feed markets. Soybean meal crashed $11.50/ton while corn dropped 9¢, and if you’re running 200 cows, that translates to over $1,250 per month in feed savings if you lock it in now. Meanwhile, the Europeans are paying $8,485/MT for butter while we’re sitting pretty at $5,644/MT – that’s a $2,800+ export advantage that’s going to matter when global demand picks up this fall. The USDA’s projecting Class III futures above $18.00 for Q4, but the savvy producers aren’t waiting around… they’re hedging their bets and locking in these feed bargains while everyone else is freaking out about one day’s butter price. You should be doing the same thing.

KEY TAKEAWAYS

  • Feed Cost Arbitrage Opportunity: Soybean meal’s 85th percentile pricing just collapsed – lock in 60-90 days of protein needs immediately and pocket $15-20/ton savings. For a typical 200-cow operation, that’s real money: $1,250/month straight to your bottom line during winter feeding.
  • Component Premium Play: Class IV’s trading at a $1.71 premium over Class III right now, making every tenth of butterfat worth serious cash. Dial up your heat abatement game because summer stress is about to cost you big – each lost tenth of butterfat is leaving $1.00+ per cwt on the table.
  • Export Window Opening: U.S. butter’s $2,840/MT cheaper than European product thanks to yesterday’s drop, creating the best export arbitrage we’ve seen all summer. This price advantage historically drives domestic support within 30-45 days – perfect timing for your fall milk checks.
  • Risk Management Sweet Spot: Q4 Class III futures still holding above $18.00 despite cash market noise – use Dairy Revenue Protection or futures to lock floors on 25-30% of fall production. With USDA forecasting only 0.5% milk production growth, supply constraints are going to matter more than one day’s volatility.
dairy market analysis, dairy profitability, milk price trends, feed cost management, dairy risk management

Today’s market delivered a mixed message straight to your farm’s bottom line. Butter’s sharp 5.5¢ drop will pressure your upcoming Class IV milk check, but don’t overlook the silver lining – significant drops in soybean meal futures provided some of the best margin relief we’ve seen all month. Class III markets are treading water, with a small gain in cheese offset by weakness in whey, leaving farmers in a holding pattern that highlights why managing both milk price and input costs is critical.

Today’s Price Action (Make It Real for Farmers)

ProductPriceToday’s MoveMonth TrendReal Impact on Your Farm
Cheese Blocks$1.6950/lb+0.25¢+0.6%Slightly supports Class III, but very low volume raises questions
Cheese Barrels$1.7275/lbNC+1.0%The market is taking a breather, waiting for a clearer signal
Butter$2.5625/lb-5.50¢-2.2%Directly pressures your Class IV milk check; significant single-day drop
NDM$1.2675/lbNC+0.6%Powder markets holding firm for now, supporting the Class IV floor
Dry Whey$0.5900/lb-1.50¢-1.2%This weakness is a direct drag on the Class III price calculation

Market Commentary

The story of the day was butter’s sharp sell-off. After holding strong above $2.60, the market broke decisively lower on decent volume. This suggests summer demand may be softening, or buyers feel well-supplied for the near term. This will weigh heavily on the July Class IV price.

On the Class III side, the picture’s murky. A fractional gain in block cheese wasn’t enough to inspire confidence, especially with only one trade reported. More concerning is the 1.50¢ drop in dry whey, which acts as an anchor on Class III pricing. The fact that July Class III futures managed to close up $0.10 to $17.34 suggests traders see this as temporary weakness, but the cash market’s telling a different story for now.

Trading Floor Intelligence & Market Mechanics

Bid/Ask Spreads & Volume Analysis

  • Butter: Sellers were motivated. Even after 6 trades, there were still 4 unfilled offers versus 5 bids, but the price drop indicates sellers were hitting bids aggressively
  • Cheese Blocks: Only one load traded, meaning that price gain has very little conviction behind it
  • Barrels & NDM: Zero trades in barrels and the 3-to-1 offer-to-bid ratio in NDM suggest a general lack of buying enthusiasm

Order Book Analysis

Butter sliced right through the psychological support level of $2.60/lb. The next key level to watch will be around $2.55. For cheese, resistance remains firm near $1.70 on the blocks.

Intraday Patterns

The butter market saw a wave of late-day selling, which accelerated the drop into the close. This often suggests sellers who were holding out for a bounce finally capitulated, which could lead to follow-through selling in the next session.

Global Market Competitive Landscape

International Production Watch

  • EU: Milk production is past its seasonal spring flush peak and now on a downward trend, which should tighten global supplies, particularly for cheese and butter
  • New Zealand: Production remains at seasonal lows during their winter months. Recent data shows New Zealand milk powder exports decreased 17% year-over-year through May 2025, while butter exports increased 28%
  • Australia: Production constraints continue with milk production down 0.4% from July 2024 through April 2025. Australian milk export volumes totaled 136,089 metric tons, down 11.3% from the previous year

Where We Stand Globally

Today’s butter price drop to ~$2.56/lb ($5,644/MT) makes U.S. butter more competitive against European offers. Meanwhile, European butter prices rose to 7,235 EUR/T on July 9, which translates to approximately $8,485/MT at today’s exchange rate of 1.1725 USD/EUR, maintaining a significant premium over U.S. offers and creating a favorable export window for American producers.

U.S. NDM at $1.2675/lb ($2,794/MT) remains competitive in key markets, with U.S. dairy exports starting 2025 with a 0.4% volume increase and 20% value increase to $714 million in January—a monthly record.

Feed Costs & Your Bottom Line

The best news for your operation today came from the feed markets:

  • Corn (Dec ’25): $4.16/bu (down 9¢)
  • Soybean Meal (Dec ’25): $282.90/ton (down $11.50 from Monday)

Milk-to-Feed Price Ratio Improvement

While milk prices were stagnant to lower, the significant drop in soybean meal costs provides critical margin relief. Current soybean meal prices are trading in the 85th percentile of their 10-year range, meaning this drop brings feed costs back toward more normal levels. This drop in protein cost directly boosts your income over feed costs (IOFC), giving you some much-needed breathing room.

Production & Supply Reality Check

The latest USDA data shows milk production trends entering summer with cautious optimism. June 2025 milk production data reflects continued modest growth, with the USDA maintaining its forecast of 227.3 billion pounds for 2025, up 0.4 billion pounds from previous projections. Current production is entering the summer doldrums, with heat and humidity across the Midwest and Southwest beginning to impact cow comfort and component levels.

U.S. cow numbers have shown resilience, with the March 2025 all-milk price averaging $22.00 per cwt, up $1.30 year-over-year. Strong margins in early 2025 – with the Dairy Margin Coverage (DMC) farm margin reaching $11.55 per cwt in March, $1.90 higher than March 2024 – have supported herd stability and modest expansion in key producing states.

The current weather pattern is the most significant factor for supply, as it will dictate both milk volume and the quality of homegrown forages for the rest of the summer.

What’s Really Driving These Prices

Domestic Demand

  • Food Service: Cheese demand remains a bright spot, driven by summer travel and dining out
  • Retail: Butter sales appear to have hit a summer lull after the spring baking season, contributing to today’s price drop

Export Markets – The Complete Story

Mexico Deep Dive

Our number one customer continues to be a steady buyer of U.S. cheese and NDM. U.S. cheese exports to Mexico grew just 1% in January 2025, but the stability of this relationship remains crucial for price support.

Southeast Asia & Global Expansion

The real export story is diversification. January 2025 cheese exports jumped 22% to 46,680 MT—a January record—with growth coming from Japan, Bahrain, Panama, and other diverse destinations. This broad market diversity reduces our dependence on any single buyer and supports stronger pricing power.

Risk Scenario Analysis

Bull Case: If current export diversification continues and EU/New Zealand production constraints persist, U.S. dairy could see Class III prices reach $19.00+ by Q4 2025.

Bear Case: A significant U.S. dollar rally or Mexican economic disruption could push Class III below $16.00, making risk management critical.

Base Case: Current USDA forecasts project Class III averaging $17.50-18.50 and Class IV at $18.75-19.75 through 2025.

Forward-Looking Analysis with Official Forecasts

USDA Projections Integration

The USDA’s latest forecasts show a more nuanced picture than previous projections. The revised 2025 milk production forecast of 227.3 billion pounds reflects both modest herd expansion and improved productivity. While milk production growth of 0.5-0.8% appears modest, regional variations are significant. The forecast indicates tighter supplies could support prices, but international competition remains a key variable.

Futures Market Guidance

  • Class III Futures: August settled at $17.65 and September at $17.90, indicating the market expects prices to climb into the fall
  • Class IV Futures: August settled at $19.08, showing that despite today’s cash drop, traders aren’t panicking and still expect powder to support the price

Current futures indicate a $1.71 premium for Class IV over Class III, making high-component production strategies particularly attractive.

Regional Market Spotlight: The Upper Midwest (WI, MN)

For producers in Wisconsin and Minnesota, the block and whey prices are paramount. Today’s fractional gain in blocks is welcome but offers little comfort when offset by the steep drop in whey values.

Regional production data shows Wisconsin and Minnesota maintaining steady output, with processing plants reporting 95%+ capacity utilization to meet summer demand. Excellent growing conditions have local feed supplies in good shape, but heat and humidity are starting to be a concern for production. Local cooperatives are encouraging members to forward contract 25-30% of fall production, taking advantage of strong deferred futures prices.

What Farmers Should Do Now

Feed Purchasing – Act Now

This is a clear opportunity. The significant drop in soybean meal futures is a strong signal to contact your nutritionist and feed supplier to lock in a portion of your fall and winter protein needs. With meal prices dropping from elevated levels, this represents potential savings of $15-20 per ton compared to recent months. For a 200-cow herd consuming approximately 2.5 tons of soybean meal per month, locking in these lower prices could translate to $1,250 in feed cost savings per month this winter – money that goes straight to your bottom line.

Hedging Strategy

With Class III futures for Q4 2025 still holding above $18.00, consider using Dairy Revenue Protection (DRP) or layering in some futures/options positions to protect a floor on a portion of your fall production. The $1.71 Class IV premium makes component-focused strategies particularly attractive.

Production Focus

With heat setting in, double down on heat abatement. Every tenth of a pound of butterfat you can save will be critical, especially with a weaker butter price. The current Class IV premium means butterfat optimization could add $1.00+ per cwt to your milk check.

Industry Intelligence

Regulatory Update

Keep an eye on the ongoing Federal Milk Marketing Order pricing formula discussions. Any changes to component values or make-allowances could have long-term impacts far greater than any single day’s trading.

Cooperative Note

Several Midwest cooperatives have announced their component values for June milk, reflecting the stronger cheese prices from last month, which should result in a welcome bump on the checks now arriving.

Export Infrastructure

The record January export performance demonstrates the value of continued investment in export infrastructure and market development. The 22% increase in cheese exports shows the benefits of market diversification strategies.

Put Today in Context

Today’s 5.50¢ drop in butter was the largest single-day loss in over a month and pulled the weekly average down. This move is a departure from the steady-to-firm trend we’ve seen since May, representing a price level that’s still 8.4% higher than a year ago but down 2.96% from recent peaks.

Conversely, the cheese market continues its slow, sideways grind. Compared to last year, current Class III values are lagging, but lower feed costs are keeping 2025 margins ahead of where they were in the summer of 2024. The milk production forecast showing only modest growth suggests supply constraints could support prices into the fall.

Today wasn’t a seismic shift, but it was a clear warning shot on the Class IV side and a gift on the feed side. The key takeaway is that successful dairy operations in 2025 will need to actively manage both sides of the margin equation—milk pricing and feed costs—rather than relying on either factor alone.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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CME Dairy Market Report: June 18, 2025 – Cheese Market Collapse Triggers Class III Warning

Wednesday, June 18th, 2025

Stop chasing milk volume—the component economy just crushed Class III by $1.75/cwt. Smart producers pivot now or lose $2,500/month per 100 cows.

EXECUTIVE SUMMARY: The June 18th cheese market collapse isn’t just another price swing—it’s the death knell for volume-focused dairy operations still living in 2020. While conventional producers panic over 6.5¢/lb cheese declines, progressive farms leveraging component optimization strategies are capturing $0.25/cwt premiums and positioning for FMMO reform windfalls. New processing capacity worth $1.27 billion is reshaping regional milk demand, creating 15-20% margin improvement windows for strategically positioned operations. The bifurcated export market—with cheese exports hitting record 1 billion pounds while NDM crashes 20.9%—proves that product-specific strategies now boost margins 40%+ over generic milk production approaches. Feed cost relief (corn down 6.8%, soybean meal down 7.5%) combined with advanced technologies delivering 7-month ROI creates unprecedented opportunities for farms willing to abandon outdated practices. Current milk-to-feed ratios at 1.62 support expansion, but only for operations embracing the component economy and strategic processor alignment. Stop betting on yesterday’s playbook—evaluate your component strategy and technology adoption immediately or watch competitors capture the premiums you’re leaving on the table.

KEY TAKEAWAYS

  • Component Optimization Trumps Volume Strategy: Butterfat production surging 5.3% annually while milk volume grows just 0.5%—progressive producers targeting 4.50%+ butterfat levels capture additional $0.15-0.25/cwt premiums while volume-focused operations face Class III losses up to $1.75/cwt from market volatility.
  • FMMO Reforms Create Regional Advantage Windows: Northeast producers with high Class I utilization gain $0.30-0.50/cwt premiums from “higher-of” pricing implementation, while manufacturing regions face 16¢ Class III reductions—strategic processor alignment and regional positioning now determine profitability more than production efficiency.
  • Technology Integration Delivers Immediate ROI: Smart sensors, robotic milkers, and AI-driven analytics demonstrate measurable returns within 7 months by reducing feed costs and improving herd health—farms adopting precision feeding and automated systems gain crucial competitive advantages when margins tighten below $12.37/cwt DMC thresholds.
  • Export Market Bifurcation Demands Product-Specific Strategies: Record cheese exports (1 billion pounds) versus crashing NDM exports (down 20.9%) prove that generic milk production leaves serious money on the table—operations aligning with high-performing export segments through strategic component profiles and processor partnerships achieve 40%+ margin improvements.
  • Processing Capacity Shifts Create Premium Opportunities: $1.27 billion in new regional processing investments (Darigold’s 8 million pound daily capacity, Cayuga’s 1.5 billion pound annual expansion) generate localized demand premiums for strategically positioned producers while creating discount pricing risks for spot Class III milk in oversupplied regions.
CME dairy market, dairy profitability, milk price trends, dairy risk management, component optimization

Today’s dramatic cheese price collapse signals the end of the recent rally, with blocks and barrels both plunging over 6¢/lb amid heavy institutional selling and deteriorating market liquidity. While NDM provided modest support with a 1.5¢ gain, the overall complex weakness threatens to slash July Class III milk payments by up to $1.75/cwt for operations heavily exposed to cheese manufacturing.

Today’s Price Action & Farm Impact

ProductPriceDaily ChangeWeekly TrendTrading VolumeBid/Ask AnalysisImpact on Farmers
Cheddar Blocks$1.6900/lb-6.50¢-6.4%5 trades1 bid, one offer – extremely thin liquidityMajor Class III pressure – immediate hedging needed
Cheddar Barrels$1.6900/lb-8.00¢-5.5%1 trade3 bids, three offers – limited interestBarrel-block convergence signals broad weakness
Butter$2.5275/lb-5.00¢+1.0%6 trades2 bids, one offer – seller’s marketClass IV under pressure despite strong price levels
NDM Grade A$1.2800/lb+1.50¢+0.5%4 trades2 bids, one offer – modest supportModest Class IV support from export demand
Dry Whey$0.5475/lb-0.50¢-2.6%7 trades1 bid, three offers – oversuppliedMinor additional Class III headwind

Enhanced Market Liquidity Analysis

The bid/ask spread analysis reveals issues concerning market depth. Cheddar blocks, despite substantial price declines, managed only five trades with minimal market-making activity (1 bid, one offer), indicating extreme reluctance from both buyers and sellers to engage at current levels. This thin liquidity amplifies price volatility and suggests that relatively small order flows can trigger disproportionate price movements.

Butter’s six trades with a 2:1 bid-to-offer ratio demonstrate continued demand interest despite the 5¢ decline, supporting the relative resilience in Class IV components. Conversely, dry whey’s 1:3 bid-to-offer ratio with seven trades signals oversupply conditions that continue pressuring Class III calculations.

Market Commentary

Today’s session revealed a fundamental shift in market psychology as institutional buyers stepped away from dairy commodities across the board. The convergence of block and barrel cheese prices at $1.6900/lb eliminates the premium structure that had supported recent Class III strength, confirming the “tale of two markets” scenario where Class III components face significant pressure while Class IV components show mixed but more stable trends.

The 24¢/lb disconnect between June cheese futures ($1.9220/lb) and current cash prices ($1.6900/lb) indicates futures markets must adjust downward to meet cash market reality. This pattern mirrors previous market corrections and suggests either rapid cash market recovery or continued futures market adjustment.

Enhanced Regional Market Analysis

FMMO Reform Regional Impact Assessment

The Federal Milk Marketing Orders reforms implemented on June 1 continue creating distinct regional advantages. The return to “higher-of” Class I pricing particularly benefits Northeast producers with high Class I utilization, while updated make allowances create headwinds for manufacturing milk prices across cheese-focused regions.

Regional Competitive Dynamics:

  • Northeast Advantage: The higher-of Class I pricing provides approximately $0.30-0.50/cwt premium for fluid milk operations
  • Upper Midwest Exposure: Heavy Class III utilization (65% of production) creates maximum vulnerability to today’s cheese collapse
  • Western Regions: New processing capacity at Darigold’s Pasco facility (8 million pounds daily capacity) creates localized demand premiums
  • Southwest Growth: Continued expansion in Texas (+40,000 head) and Idaho (+17,000 head) redistributes national milk flows

Processing Capacity Impact on Regional Pricing

The commissioning of multiple large-scale processing facilities creates significant regional basis differentials. Darigold’s new Pasco facility represents a $1 billion investment, creating demand for over 100 regional farms, while Cayuga Milk Ingredients’ $270 million expansion enables the processing of 1.5 billion pounds annually. These developments create premium opportunities near new facilities while potentially discounting spot Class III milk in oversupplied regions.

Feed Cost & Margin Analysis

Enhanced Feed Market Integration

Current feed futures demonstrate continued producer-favorable conditions:

  • Corn (July): $4.3275/bu – down 6.8% from recent highs, providing cost relief
  • Soybean Meal (July): $284.90/ton – declining 7.5%, offering $15-20/ton savings
  • Estimated Total Feed Cost: $11.50/cwt (16% protein dairy ration)

Milk-to-Feed Ratio Analysis

The current milk-to-feed ratio of 1.62 based on June Class III futures ($18.68/cwt) versus estimated feed costs remains above the critical 1.40 threshold that typically triggers production adjustments. However, today’s cheese collapse threatens to push this ratio toward concerning territory, particularly for operations with high Class III exposure.

Dairy Margin Coverage Program Outlook: The USDA DMC Decision Tool projects monthly margins to average $12.37/cwt during 2025, with an 85% probability that no indemnity payments will be issued as margins remain above the $9.50/cwt threshold.

Global Trade & Export Analysis

USDA Export Forecasts Integration

The USDA projects promising growth in U.S. dairy exports to $8.1 billion for fiscal year 2025, driven by strong cheese demand and consistent nonfat dry milk performance. However, this optimistic outlook faces challenges from today’s price action and evolving global dynamics.

Export Performance Bifurcation:

  • Cheese Exports: Record 2024 performance, with March 2025 achieving the second-highest monthly volume at 109 million pounds
  • Butterfat Strength: First quarter 2025 exports already represent over half of 2024 total volume
  • NDM Challenges: April 2025 exports crashed 20.9% year-over-year
  • Dry Whey Pressures: China’s retaliatory tariffs ranging from 84-150% continue limiting market access

Global Production Context

Rabobank’s Q2 Dairy Quarterly projects production growth from Big-7 exporting regions at 1.1% in Q2 and 1.4% in Q3, marking the strongest quarterly increases since Q1 2021. This accelerating global supply growth, particularly from U.S. and EU regions, creates additional headwinds for U.S. export competitiveness.

Weather & Environmental Impact Quantification

Enhanced Weather Risk Assessment

The persistent El Niño event maintains a 70% probability of continuing through June 2025, creating global extreme weather patterns. Specific production impact estimates include:

Heat Stress Quantification:

  • 8-12% production losses when temperatures exceed 85°F for consecutive days
  • Smaller farms experience disproportionate impacts due to limited cooling infrastructure
  • Regional vulnerability: Southwest operations face the highest exposure during June heatwave conditions

Drought Impact Measures:

  • USDA activated $500 million in direct support for drought-affected areas
  • Spring rainfall deficits following wet 2024 create potential forage shortages
  • HPAI interaction: Heat stress compounds disease susceptibility in affected herds (~1,000 herds across 17 states)

Forward-Looking Analysis & Risk Assessment

FMMO Implementation Timeline

The delayed implementation of skim milk composition factors until December 1, 2025, provides a crucial transitional period for strategic planning. Updated factors (3.3% true protein, 6.0% other solids, 9.3% nonfat solids) will further impact component values and create additional basis risk for existing risk management positions.

Seasonal Outlook Integration

Production Projections: USDA’s revised 2025 milk production forecast of 226.9 billion pounds (down 1.1 billion) reflects slower cow inventory growth and reduced per-cow yields, supporting potential price recovery if demand stabilizes.

Component Economy Emphasis: Average butterfat levels rising to 4.40% and protein to 3.40% in 2025 reflect strategic shift toward component optimization, with butterfat production surging to 5.3% annually while volume growth remains modest at 0.5%.

Enhanced Actionable Farmer Insights

Immediate Risk Management Protocols

48-Hour Emergency Actions:

  1. Implement Dairy Revenue Protection for Q3/Q4 production immediately
  2. Review component optimization to maximize butterfat premiums (4.50%+ targets)
  3. Evaluate processor alignment toward Class IV operations to escape cheese volatility
  4. Monitor DMC margin projections for potential program adjustments

Technology Integration for Competitive Advantage

Advanced technologies, including smart calf sensors, robotic milkers, and AI-driven analytics, demonstrate measurable ROI within seven months by reducing feed costs and improving herd health. Current margin pressure amplifies the importance of efficiency gains through precision feeding and automated systems.

Strategic Component Positioning

With butterfat comprising 58% of milk check income, operations should prioritize genetic selection and feeding programs targeting higher component levels. Component-based premiums with processors become increasingly vital as base prices face pressure from updated FMMO make allowances.

Regional Market Spotlight: Northeast Opportunity

The Northeast region benefits significantly from FMMO reforms, particularly the implementation of higher-of-Class I pricing. Combined with the new processing capacity at Cayuga Milk Ingredients ($270 million expansion), Northeast producers with high Class I utilization can capture premiums while manufacturing regions face margin compression.

Strategic Advantages:

  • Higher-of Class I pricing provides a consistent premium over manufacturing milk
  • Proximity to population centers reduces transportation costs
  • Processing capacity expansion creates competitive milk procurement
  • Reduced exposure to volatile cheese pricing through Class I focus

This enhanced CME dairy market report incorporates verified data from USDA forecasts, NMPF FMMO analysis, and industry-leading research to provide comprehensive market intelligence. TheBullVine.com continues delivering data-driven insights that directly impact farm profitability and strategic decision-making in an increasingly complex dairy marketplace.

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Join over 30,000 successful dairy professionals who rely on Bullvine Weekly for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.

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EU Dairy Prices Plateau: What You Need to Know About The 2025 Market Split

Tuesday, April 29th, 2025

EU milk prices plateau at 16% surge as butter defies gravity while powders slump. Costs ease but risks loom for 2025’s fragile dairy balance.

EXECUTIVE SUMMARY: Europe’s dairy rebound hit a pivot point in early 2025, with milk prices stabilizing at 53.7¢/kg after a 16% year-on-year surge. Butter prices held firm at €739/100kg amid tight supplies, while skimmed milk powder and cheddar slumped-exposing a market split driven by processors prioritizing cheese over commodity production. Input costs finally eased (energy -7.1%, feed stabilizing), but margins remain squeezed by structural hurdles like shrinking herds and Green Deal regulations. With EU milk supply flatlining and global demand shaky, farmers face a high-stakes year: China’s import appetite, disease risks, and trade tensions could upend cautious optimism. The takeaway? Adaptability trumps expansion in this new era of constrained growth.

KEY TAKEAWAYS:

  • Price paradox: Butter thrives (€739/100kg) as powders/cheddar slump, reflecting processors’ cheese-first milk allocation.
  • Supply squeeze: EU herds shrink (-0.2% to +0.4% 2025 output) amid regulations, while US/NZ ramp up production.
  • Cost relief: Energy (-7.1%) and feed trends boost margins, but remain 29% above pre-crisis levels.
  • Strategic shift: 0.6% cheese production growth steals milk from butter/powders, reshaping EU dairy economics.
  • Global gamble: China’s +2% import rebound could make/break 2025’s fragile balance-if inflation and HPAI don’t strike first.

The latest European dairy market data reveals a Jekyll and Hyde scenario: milk prices have stabilized at 16% above last year while a dramatic product divide emerges. Butter prices remain rock-solid, while SMP, WMP, and cheddar all face downward pressure – creating both opportunities and challenges for dairy operations across the continent.

Ever wondered what happens when dairy markets start behaving like they can’t make up their mind? That’s exactly what we’re seeing across Europe right now. The European Milk Market Observatory just released its latest batch of data, and I’ve spent the weekend digging through the numbers to bring you the real story behind the headlines.

Milk Prices Hit Ceiling After Year-Long Climb

The good news? EU average raw milk prices reached an impressive 53.8 cents per kilogram in February 2025, towering 16% above February 2024 levels. The reality check? That upward momentum we’ve been riding since late 2023 has finally hit a wall.

March data confirms what many farm managers suspected – prices dipped slightly to 53.7 cents, representing the first monthly decline after several consecutive increases. After climbing steadily from the brutal lows of 2023, the market appears to be catching its breath.

But let’s not lose perspective. Even with this plateau, prices remain significantly above historical averages. Remember those dark days of 2017 when prices hovered around €34/100kg? We’re still operating in a completely different universe compared to those times.

Why is this happening now? The answer lies in a complex interplay between tight supply, strategic processing decisions, and uncertain global demand signals.

Europe’s Price Premium Widens: Are We Becoming an Island?

Have you ever considered why European milk consistently commands higher prices than our global competitors? The gap just got even wider.

European producers are now enjoying an eye-popping 23% price advantage over New Zealand, with February figures showing EU milk at 53.8 cents/kg compared to just 41.5 cents/kg for Kiwi producers. The US isn’t far behind New Zealand at 48.4 cents/kg.

What’s fascinating isn’t just the size of the gap but the divergent trajectories. While EU prices rose 0.6% from January to February and New Zealand inched up 0.3%, American prices dropped 1.5% during the same period.

This transatlantic split creates both opportunities and challenges. The premium reflects Europe’s unique position – constrained supply, higher production costs, and a strategic focus on value-added products rather than commodities. But it also raises critical questions about global competitiveness – can we maintain this premium without losing export market share?

European dairy insiders point to three key factors driving this price differential:

  1. Our structural supply limitations from environmental regulations, high costs, and disease challenges (like that persistent bluetongue outbreak) restrict growth.
  2. Our processing strategy increasingly targets higher-value products rather than competing with New Zealand and the US in commodities.
  3. Our cost structure remains fundamentally higher due to stricter regulations and smaller average farm sizes.

The Great Dairy Split: Why Butter Defies Gravity

You can’t talk about today’s EU dairy market without addressing the elephant in the room – the dramatic split between product categories. While butter remains buoyant (+0.3% over four weeks), everything else is sinking: SMP (-0.6%), WMP (-0.4%), and cheddar taking the biggest hit (-2.4%).

“Butter’s strength amid general weakness is like watching a salmon swimming upstream,” one trader told me last week. “It’s defying market gravity.”

How is this possible? It’s not just random market noise – it reflects a fundamental realignment of Europe’s milk utilization. Processors are making a strategic pivot toward cheese, which will see production growth of 0.6% this year. This cheese-first approach directly creates the forecast production declines in butter (-1%), SMP (-4%), and WMP (-5%).

Let’s be honest – it’s a high-stakes game of dairy Tetris. Processors are shifting milk blocks into cheese, where they see the best returns, which leaves gaps in other product categories.

The butter market’s resilience stems from genuinely tight supplies. Industry reports consistently mention limited product availability and robust demand for milk fat. This tightness isn’t accidental – it directly results from strategic decisions prioritizing cheese manufacturing over butter production.

Cost Relief Finally Arrives – But Don’t Pop the Champagne Yet

After years of relentless input cost pressure, European dairy farmers are finally seeing some relief. Recent data shows energy costs falling 7.1% over four weeks while feed costs have stabilized.

What’s driving this improvement? We’re seeing a combination of better global grain harvests, normalized energy markets following the extreme volatility of 2022-23, and adjustments in supply chains. Irish forecasts project a 9% drop in feed expenditure per liter and a 5% decline in fertilizer prices compared to 2024.

Processing costs also benefit from moderating energy prices, with European electrical and natural gas declining month-on-month. Couldn’t this relief have come at a better time after the extraordinary input price volatility since 2022?

But don’t break out the champagne just yet. Despite these improvements, input costs remain significantly elevated compared to historical norms. The Irish analysis, while optimistic, still characterizes 2025 as operating in a “high-cost environment.”

The good news? Easing input costs and firm milk prices should deliver meaningful margin improvements. Irish forecasts project increases in net margin per liter (+29%) and per hectare (+35%) for 2025. That’s a welcome relief after the brutal squeeze many farmers endured in 2023/24.

Italian Market Spotlight: Premium Prices Under Pressure

Italy’s dairy sector, anchored by world-famous PDO cheese production, offers a fascinating microcosm of broader European trends with distinctive local dynamics.

Italian spot milk prices remain seasonally high but have softened recently. Early April saw prices ease to €0.55 per liter, continuing a gradual decline from February peaks. By late April, the price range had settled at €53.50-55.00/100kg.

Despite this dip, Italian dairy farmers maintain a relatively strong position. In five years, the early April price level was the highest recorded for that specific month. Italy also ranked among the member states, seeing the strongest year-on-year price increases.

What makes the Italian market particularly interesting isn’t just the raw milk price but how it connects to PDO cheese economics. Rather than focusing solely on generic milk prices, Italian farmers closely track indicators like the “Grana Padano Payout” – the theoretical value of milk destined for this prestigious cheese production.

Similarly, the critical “Milk: Feed Ratio” provides crucial insight into Italian dairy farm profitability. When this ratio falls below 1.5, farmers typically struggle to break even. The ratio’s recent improvements reflect higher milk prices and moderating feed costs.

What’s Next? The 2025 Outlook

Looking ahead through 2025, what can European dairy farmers expect? The markets face a delicately balanced outlook with encouraging signs and significant risks.

On the supply side, the structural limitations constraining EU milk production show no signs of easing. Neither major forecast suggests any meaningful production growth in 2025. The continued prioritization of cheese production at the expense of butter and powders will further reshape product availability.

In contrast, global milk production is expected to recover modestly, with aggregated growth across major exporters forecast between 0.6% and 0.8%. The US expansion continues, New Zealand is recovering output, and Argentina rebounds strongly.

The critical question mark hangs over global demand, particularly from China. After three consecutive years of import declines, Rabobank forecasts a modest 2% increase in Chinese dairy imports for 2025. But can we count on this recovery if China’s broader economic challenges persist?

Several key risk factors could disrupt market stability:

  1. Disease outbreaks like the bluetongue virus in Europe and highly pathogenic avian influenza in US cattle herds could unexpectedly limit supply.
  2. Trade tensions threaten established trade flows, including China’s investigation into EU dairy subsidies and potential protectionism elsewhere.
  3. Weather events could impact feed availability and production costs, particularly in pasture-based systems.
  4. Economic pressures from inflation, recession risks, and fluctuating consumer confidence influence purchasing power and dairy demand.

What This Means for Your Operation

For dairy producers across Europe, 2025 presents an opportunity for financial recovery after challenging years but demands continued vigilance and strategic thinking.

The potential for improved margins offers welcome relief, though it requires ongoing focus on cost management and operational efficiency. You’ll want to lock in feed costs when advantageous opportunities arise rather than assuming the current easing trend will continue indefinitely.

Evaluate your product mix and contracts to capitalize on the strong butter market while preparing for potential weakness in other categories. Monitor key indicators beyond basic milk prices, including product-specific returns and relevant cost ratios that provide deeper insight into profitability.

Perhaps most importantly, avoid dramatically expanding production based on current favorable prices. The structural constraints limiting EU growth aren’t temporary aberrations but the reality of the new market.

As one industry veteran said, “2025 isn’t about getting bigger – it’s about getting better.” In a market defined by complex regional dynamics, strategic production choices, and ongoing uncertainty, that’s advice worth heeding.

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USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers

Saturday, March 8th, 2025

USDA’s 2025 dairy forecast reveals tight milk supplies, evolving prices, and strategic opportunities. Are you ready to adapt and thrive?

Executive Summary

The USDA’s 2025 dairy forecast highlights a year of both challenges and opportunities for producers. Milk production is projected at 226.9 billion pounds, reflecting consistent downward revisions due to fewer cows and slower growth in milk per cow. Despite these constraints, the all-milk price has been revised upward to $22.75 per cwt, driven by strong demand for cheese and export opportunities for butter. However, weaker nonfat dry milk and whey markets create a mixed outlook. Farmers who prioritize component optimization, align with strategic processors, and implement cost management strategies will be best positioned to succeed. With supply tightening and market dynamics shifting, adaptability will be key to navigating the evolving landscape.

Key Takeaways

  • Milk Production Forecast: USDA projects 226.9 billion pounds of milk production for 2025, down 1.1 billion pounds from earlier estimates due to herd size and yield constraints.
  • All-Milk Price Outlook: Revised upward to $22.75 per cwt, reflecting strong demand for cheese and export competitiveness for butter.
  • Component Optimization: Cheese prices are strengthening; farms focusing on butterfat and protein components may capture premium returns.
  • Export Dynamics: U.S. butter and cheese exports are expected to grow due to competitive pricing, while dry whey and nonfat dry milk exports face challenges.
  • Strategic Positioning: Aligning with processors, managing costs, and staying informed on market trends will be critical for profitability in 2025.
USDA dairy forecast 2025, milk price trends, dairy production challenges, dairy farm strategies, component optimization

The latest USDA forecasts signal significant shifts for dairy producers in 2025, with revised estimates pointing to tighter supplies and evolving price dynamics across dairy categories. According to the most recent data released on March 6, 2025, the all-milk price forecast has been increased to $22.75 per hundredweight (cwt), up $0.25 from the previous month’s estimate. This adjustment comes amid continued downward revisions to milk production forecasts, creating a complex market environment that demands nationwide strategic positioning from dairy operations. This comprehensive analysis breaks down the latest USDA projections, their implications for your farm, and actionable strategies to navigate the evolving dairy landscape.

Production Constraints Creating Price Support: The Numbers Behind 2025’s Tightening Supply

The USDA has consistently revised its milk production projections downward over recent months, revealing a pattern that signals potential price support for producers. The February forecast reduced milk production by 300 million pounds to 226.9 billion pounds, following a January adjustment that had already lowered projections by 800 million pounds.

This consistent pattern of downward revisions reflects compounding factors affecting dairy production capacity. The primary drivers include smaller-than-expected dairy herd size and reduced milk yield per cow. According to USDA data, while the national dairy herd was initially projected to average 9.390 million head in 2025, more recent forecasts suggest continued constraints on herd expansion.

Production per cow has also been revised downward, with the forecast reduced by 85 pounds to 24,200 pounds per cow. This adjustment reflects lower-than-expected performance in late 2024 and changing expectations about productivity gains in 2025. Interestingly, the USDA notes that “the growth in milk components will likely balance out the lower-than-average growth per cow,” suggesting a shift toward quality over quantity in production metrics.

These production constraints differ from earlier projections that anticipated more robust growth. In December 2024, USDA forecast 2025 milk production at 228 billion pounds. By January, this was reduced to 227.2 billion pounds, and February brought a further reduction to 226.9 billion pounds. This cumulative 1.1 billion-pound reduction represents a significant adjustment in expected supply.

Divergent Price Trajectories: Why Component Values Matter More Than Ever

The most recent price forecasts reveal a fascinating divergence across dairy product categories that creates both challenges and opportunities for strategically positioned producers:

Table 1: Evolution of USDA Dairy Product Price Forecasts for 2025

Dairy ProductFebruary 2025 ForecastJanuary 2025 ForecastChange
Cheese$1.880 per pound$1.8650 per pound+$0.0150
Butter$2.645 per pound$2.6950 per pound-$0.0500
Nonfat Dry Milk$1.295 per pound$1.3400 per pound-$0.0450
Dry Whey60.5 cents per pound64.0 cents per pound-3.5 cents

This divergence is particularly significant because cheese prices continue to strengthen while other product categories face downward pressure. The February forecast raised cheese prices to $1.8800 per pound, citing “recent prices and tight inventories from 2024 that are expected to carry into 2025”. This positive cheese outlook contrasts the downward revisions for butter, nonfat dry milk, and dry whey.

These product-specific price projections translate directly into milk class prices, with notable implications for producer revenues:

Table 2: USDA Milk Class Price Forecasts for 2025 ($/cwt)

Milk ClassFebruary 2025 ForecastJanuary 2025 ForecastChange
Class III$19.10$19.70-$0.60
Class IV$19.70$20.80-$1.10
All Milk$22.60$23.05-$0.45

The most recent March 6th adjustment further revised the all-milk price forecast upward to $22.75 per cwt, up $0.25 from the previous month’s estimate. This latest adjustment suggests continued evolution in USDA’s outlook based on emerging market data.

The disparate movements between cheese prices and other dairy commodities create a market environment where component optimization becomes increasingly valuable. Farms that can align their milk component profiles with cheese manufacturing requirements may capture premium opportunities despite the broader adjustments in milk price forecasts.

Production Forecast Revisions: Understanding the Trend

Table 3: USDA Milk Production Forecast Revisions for 2025

Forecast ElementFebruary 2025 ForecastJanuary 2025 ForecastDecember 2024 Forecast
Total Production226.9 billion pounds227.2 billion pounds228.0 billion pounds
Change from Previous-0.3 billion pounds-0.8 billion poundsN/A
Cumulative Adjustment-1.1 billion pounds-0.8 billion poundsN/A

The consistent pattern of downward revisions to production forecasts has significant implications for market balance. The cumulative 1.1 billion pound reduction from December to February represents approximately 0.5% of expected annual production—enough to influence price dynamics throughout 2025 potentially.

This production constraint reflects several underlying factors. The dairy herd size was initially expected to expand, but recent data suggests more limited growth potential. Meanwhile, milk per cow projections have been reduced by 85 pounds to 24,200 pounds, reflecting recent performance trends and adjusted expectations about productivity gains.

Most significantly, these production adjustments come when domestic and export demand show potential strength. This creates a more balanced market dynamic than many had initially anticipated for 2025, with supply constraints potentially offsetting any demand weakness.

Strategic Positioning for 2025’s Market Realities

With the latest USDA forecasts pointing to a complex but potentially favorable market environment, strategic positioning becomes essential for maximizing profitability in 2025. Several key approaches warrant consideration:

1. Optimize Component Production

The price divergence between cheese and other dairy products creates a clear signal for component focus. With cheese prices strengthening while other products face challenges, milk component profiles that align with cheese manufacturing requirements may generate premium returns.

The USDA notes that “growth in milk components will likely balance out the lower-than-average growth per cow,” highlighting the increasing importance of component quality relative to simple volume metrics. This suggests breeding and feeding programs focused on components rather than volume may deliver superior financial results in 2025’s market environment.

2. Align with Strategic Processors

Understanding your local processing landscape becomes increasingly valuable in a market with divergent product price trajectories. Farms supplying processors focused on cheese production may benefit from more favorable pricing than those tied to butter or powder-focused facilities.

The consistent downward revision of production forecasts suggests processors may face increasing competition for milk supplies as the year progresses. This potential milk shortage creates leverage opportunities for producers, particularly in regions with processing capacity growth.

3. Monitor Export Opportunities

The latest USDA data suggests strengthening export potential for specific dairy categories. Following the January forecast, dairy exports on a fat basis were projected higher for 2025 “based on recent trade data and higher expected shipments of butter and cheese due to the US price competitiveness.”

However, exports on a skim-solids basis were lowered “on recent trade data and less competitive US nonfat dry milk and dry whey.” This divergent export outlook reinforces the importance of understanding your operation’s exposure to different product categories and their respective export potential.

4. Implement Cost Management Strategies

The March 6th revision suggests an all-milk price of $22.75 per cwt, a moderate increase from previous estimates but still indicating challenging margins for many producers. In this environment, cost management remains essential for maintaining profitability.

The forecasted production constraints suggest that operations focusing on efficiency rather than maximum volume may achieve superior financial results. With input and operational expenses continuing to pressure margins, systematic cost analysis and management programs provide essential protection against price volatility.

5. Develop Market Intelligence Capabilities

The frequent revisions to USDA forecasts highlight the fluid nature of dairy markets and the importance of staying informed about emerging trends. Investing in market intelligence capabilities—whether through consultants, industry publications, or internal analysis—provides critical decision support for strategic planning.

Farms with superior market intelligence will make better-informed decisions about culling, expansion, contracting, and capital investment in 2025’s evolving market environment.

Conclusion: Navigating 2025’s Dairy Landscape

The latest USDA forecasts paint a picture of a dairy market in transition—facing production constraints but potentially benefiting from price support and strategic opportunities. The March 6th revision raising the all-milk price forecast to $22.75 per cwt suggests cautious optimism despite earlier adjustments.

The consistent downward revision of milk production forecasts—from 228.0 billion pounds in December to 226.9 billion pounds in February—signals persistent challenges in production growth. However, these constraints may provide price support, particularly in categories with strong demand fundamentals like cheese.

The divergent price trajectories across product categories—cheese strengthening while butter, nonfat dry milk, and dry whey face pressure—create a market environment where component optimization and product mix exposure significantly impact revenue potential. This divergence encourages strategic thinking about milk component profiles and processor relationships.

For individual dairy producers, success in 2025 will likely come from combining tactical excellence in production management with strategic positioning aligned with emerging market signals. Component optimization, processing alignment, financial flexibility, and operational adaptability represent the core competencies needed to profitably navigate this complex market landscape.

The dairy operations that thrive in 2025 will recognize these market dynamics and position themselves accordingly—focusing on efficiency rather than maximum volume, optimizing components rather than simply producing more milk, and maintaining the financial flexibility to adapt to continuing market evolution.

Learn more:

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Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.

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Global Milk Supplies Expect to be Stable for the Remainder of 2024

Thursday, August 8th, 2024

How global milk production trends in 2024 might affect your dairy farm. Are you ready for changes in supply and demand? Read on to learn more.

Summary: Global milk production in 2024 is forecasted to remain stable, with a minor decline of 0.1%. Variability will be observed across different regions, with Australia showing significant growth and Argentina facing severe declines. Declining herd sizes in the US and Europe will stabilize, while input and output prices may improve margins for farmers. Despite rising prices, consumer demand, especially from China, remains weak, contributing to a slower market recovery. Better weather and cost stabilization are expected to boost production in some regions. Regional milk production trends show Australia and the EU growth rates of 3.8% and 0.6%, respectively, while the US, Argentina, the UK, and New Zealand face decreases. Australian farmers are hopeful, with rising milk output in the first half of 2024 and an anticipated 2.0% gain in the second half.

  • Global milk production will remain stable, with a minor decline of 0.1% in 2024.
  • Significant regional variations expected in production trends.
  • Australia shows notable growth at 3.8%; Argentina faces a severe decline of 7.4%.
  • US and European herd sizes stabilizing despite previous declines.
  • Possible margin improvements for dairy farmers due to stabilizing input and output prices.
  • Continued weak consumer demand, especially from China, slowing market recovery.
  • Better weather and cost stabilization might boost production in certain regions.
  • Mixed regional forecasts: modest growth in the EU (0.6%) and Australia (2.0%), moderate declines in the US, UK, and New Zealand.
dairy farmers, milk production, global milk supplies, 2024 milk forecast, dairy farm supply chain, milk price trends, regional milk production, dairy market stability, China milk demand, EU dairy trends, Australian milk production, US dairy forecast, New Zealand milk industry, Rabobank milk prices, dairy farming tips, feed costs management, dairy herd health, milk input costs, dairy consumption trends, sustainable dairy farming, dairy market fluctuations, El Nino impact on dairy, milk demand and supply, dairy farm profitability, future of dairy farming, dairy industry insights

Envision a year when an unanticipated shift in global milk output rocks the dairy sector. It is more important than ever for dairy farmers like you to be educated about what’s coming up in 2024. Global milk supply is expected to remain stable, but the production outlook paints a different picture. The dairy business is confronting a challenging problem as certain areas are seeing reductions, and others are seeing minor gains. Low prices compared to last year and no change in demand on the demand side are caused by disappointing demand for imports from China. In 2024, a lot will change. Will you be ready? Your ability to make a living may depend on your ability to recognize these changes and adjust appropriately.

Region2023 Growth (%)2024 Forecast Growth (%)
Australia3.8%2.0%
US0.2%0.2%
EU0.6%0.4%
UK-0.7%-0.7%
New Zealand-0.7%-0.7%
Argentina-7.4%-7.4%

What Stable Global Milk Production Means for You

The prognosis for worldwide milk production in 2024 is expected to be constant, with a small annual reduction of 0.1%. This slight decrease is compared to the 0.1% growth seen in 2023 and is a reduction from the previous prediction of 0.25 percent growth. Nevertheless, there is a noticeable lack of consistency across critical areas, which different patterns in milk production may explain. The dairy market may be somewhat undersupplied, with certain regions seeing moderate expansion and others seeing decreases.

Regional Milk Production: Winners and Losers of 2024 

When we break down the results in the first six months of 2024 by area, a clear trend emerges. While most areas experienced a general decrease in milk output, there were bright spots of growth. Australia and the European Union stood out with their 3.8% and 0.6% growth rates, respectively. These figures, driven by better weather, increased farmer confidence, and stabilizing factors, offer a glimmer of hope in an otherwise challenging landscape.

Conversely, several critical areas saw decreases. A decline in milk production in the United States, Argentina, the United Kingdom, and New Zealand highlighted the difficulties experienced by these countries. There was a slight decrease of 0.7% in the United Kingdom and 0.7% in New Zealand. Argentina’s precarious economic state was a significant factor in the country’s more severe predicament, which saw a 7.4 percent decline.

These geographical differences highlight the complexity of the global milk production dynamics. Even with a minor undersupply in the international dairy market, the need for a comprehensive understanding is clear. To successfully navigate this ever-changing market environment, dairy producers must familiarize themselves with these subtleties. This knowledge will not only keep them informed but also equip them to make strategic decisions.

Key Exporting Regions’ Forecast for 2024 

Looking at the projections for 2024, we can see that in key exporting areas, milk production is characterized by small increases and significant decreases. With a 2.0% expected gain, Australia is in the lead. This is promising news, driven by improved weather, stable input prices, and a lift in farmer morale. The US is projected to advance little with a 0.2% gain, while the EU is projected to expand modestly with a 0.4% increase, even though dairy cow herds have been steadily declining.

Not every area, however, is seeing growth. An expected mild drop of 0.7% will affect the UK and ANZ. El Niño’s lack of precipitation has dramatically affected the cost and availability of feed in New Zealand. The worst-case scenario is that milk output would fall 7.4 percent annually due to Argentina’s difficult economic circumstances.

These forecasts demonstrate the dynamic variables impacting milk production in each location and the unpredictability of worldwide milk production. Dairy producers must carefully monitor these changes to navigate the uncertain market circumstances that lie ahead.

Factors Shaping Global Milk Production Trends

Changes in herd numbers are a significant element impacting milk production patterns. Significantly, the decrease in herd size has slowed in the United States. There will likely be a reasonable basis for consistent milk production in 2024, thanks to the continued stability of cow populations. Similarly, Europe’s dairy cow herd is declining at a slower pace of -0.5%. Nevertheless, the EU milk supply is expected to be primarily unchanged due to consistent input and output costs, even if it will show a slight increase of 0.4% for the year.

Natural disasters pose problems for New Zealand. The north island has been hit especially hard by the lack of rainfall caused by the El Nino impact. Due to rising prices and reduced feed supply, the current situation is far from optimal for dairy production. Although output is down, it could be somewhat offset by an uptick in milk prices and better weather.

Improved weather and stable input prices have made Australian farmers hopeful about the future. Rising milk output of 3.8% in the first half of 2024 and an anticipated 2.0% in the second half indicate this optimistic outlook. Improved farmer morale and stable input prices are the main drivers of this growing trend.

What’s Really Behind the Fluctuating Milk Prices and Demand? 

Therefore, the question becomes, why do milk prices and demand swing so wildly? Market dynamics are the key. One disappointing thing is the demand for products imported from China this year. Those days when China was the dairy market’s silver bullet are long gone—at least not at the moment. There is an overstock problem globally since, contrary to expectations, demand in China has remained flat.

Due to this lack of demand-side change, prices have remained relatively low in comparison to prior years. Even though prices are beginning to rise again, which is good news for dairy producers, there is some bad news. High input prices are still eating away at those margins. The cost of feed, gasoline, and labor is increasing.

Consequently, high input costs are the naysayers, even while increasing prices seem to cause celebration. To maximize their meager profits, farmers must constantly strike a delicate balance. Despite the job’s difficulty, you can better weather market fluctuations with a firm grasp of these dynamics.

Plant-Based Alternatives: The Rising Tide Shaping Milk Demand 

When trying to make sense of the factors influencing milk demand, one cannot ignore the growing number of plant-based milk substitutes. Is oat, almond, and soy milk more prevalent at your local grocery store? You have company. The conventional dairy industry is seeing the effects of the unprecedented demand for these alternatives to dairy products. A Nielsen study from 2024 shows that sales of plant-based milk replacements increased by 6% year-over-year, while sales of cow’s milk decreased by 2%. Health and environmental issues motivate many customers to choose this option.

As if the high input costs and unpredictable milk prices weren’t enough, this trend stresses dairy producers more. The dairy industry is seeing this change, not just milk. Traditional dairy farmers are realizing they need to innovate and vary their services more and more due to the intense competition in the market. Is that anything you’ve been considering lately?

Despite the difficulties posed by the plant-based approach, it does provide a chance to reconsider and maybe revitalize agricultural methods. The key to maintaining and perhaps expanding your company in these dynamic times may lie in adapting to consumer trends and being adaptable.

Future Outlook: Dairy Stability Amidst High Costs and Slow Recovery 

It would seem that the dairy landscape will settle down for the rest of 2024. Expectations of a pricing equilibrium between inputs and outputs bode well for dairy producers’ profit margins. This equilibrium may provide much-needed financial respite due to the persistently high input costs.

In addition, dairy consumption in the EU is anticipated to remain unchanged. The area hopes customers can keep their dairy consumption levels unchanged as food inflation increases. This consistency, backed by a slight increase in milk production despite a decrease in the number of dairy cows, implies that dairy producers in the European Union should expect a time of relative peace.

Be cautious, however, since Rabobank expects a more gradual rebound in market prices. While prices are rising, they could not go up as quickly as expected due to the persistent lack of strong consumer demand in most countries and China’s domestic production growth. In the end, dairy producers have a tough time navigating a complicated global market about to reach equilibrium, where more significant margins are possible but only with temperate price recovery.

Thriving in Unpredictable Markets: Actionable Tips for Dairy Farmers

Let’s discuss what this means for you, the dairy farmer. How can you navigate these fluctuating markets and still come out on top? Here are some actionable tips: 

Improve Herd Health 

  • Regular Health Checks: Consistent veterinary check-ups can catch potential health issues early, preventing them from escalating. Aim for a monthly health inspection.
  • Nutrition Management: Ensure your cows receive a balanced diet tailored to their needs. High-quality feed and supplements can make a difference in milk production and overall health. 
  • Comfort and Cleanliness: A clean and comfortable environment reduces stress and the likelihood of disease. Keep barns clean and well-ventilated. 

Manage Feed Costs 

  • Bulk Purchasing: Buying feed in bulk can significantly reduce costs. Collaborate with other local farmers to increase your purchasing power.
  • Alternative Feed Sources: Explore alternative feed options that could be more cost-effective yet nutritious. Agricultural by-products and locally available feed can sometimes offer savings. 
  • Efficient Feeding Practices: Utilize precise feeding techniques to minimize waste and ensure each cow receives the proper nutrients. Automated feeding systems can help in this regard. 

Navigate Market Fluctuations 

  • Stay Informed: Regularly monitor market trends and forecasts. The more informed you are, the better you can plan. Reliable sources like Rabobank’s reports can be very insightful. 
  • Diversify Your Income: Consider diversifying your income sources. Producing and selling dairy-related products like cheese or yogurt can provide additional revenue streams. 
  • Risk Management Plans: Develop a risk management strategy. This could include insuring against market volatility or investing in futures contracts to lock in prices. 

Focusing on these areas can help you better weather the ups and downs of global milk production trends and secure a more stable future for your farm. 

Remember, the key to success is staying proactive and adaptable. Like any other business, dairy farming requires savvy planning and flexibility.

The Bottom Line 

That concludes it. With just a little decrease expected globally, milk output will remain stable. Some areas are thriving, like Australia, while others, like Argentina, are struggling because of the economy. The environment will be molded by input prices, weather patterns, and unpredictable demand, particularly from influential nations like China. Farmers are being kept on their toes because prices could increase, and the process seems to be going slowly. The most important thing to remember is that being educated and flexible is crucial. Many elements, including weather and customer habits, impact the dairy business, which is dynamic and ever-evolving. In dairy farming, being informed isn’t only about being current—it’s about being one step ahead. Thus, in 2024, how will you adjust to these shifts?

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