US milk surges 1.0% YoY as herds expand by 82,000 head since June! Component-adjusted output is up a massive 3.5% while California struggles with HPAI recovery.
Executive Summary:
The February 2025 US milk production report reveals more substantial than anticipated growth of 1.0% year-over-year (after leap year adjustments), significantly exceeding analyst expectations of 0.6% and indicating robust supply as the industry enters peak season. When factoring in milk components, the adjusted production increase reaches an impressive 3.5% year-over-year—the most vigorous growth since mid-2021—highlighting substantial improvements in valuable milk solids content. The national dairy herd continues to expand, with producers adding another 15,000 head in February, bringing total recovery to 82,000 head since June 2024, while regional disparities show California struggling with avian flu impacts (-3.7%) as the rest of the country demonstrates robust growth (+2.0%). This production surge amid weakening demand creates potential price pressure heading into spring flush, suggesting producers may need to emphasize component optimization and risk management strategies to navigate a challenging price environment in the coming months.
Key Takeaways:
- National milk production grew 1.0% YoY in February (leap-year adjusted), but the component-adjusted increase of 3.5% reveals producers are strategically maximizing valuable milk solids.
- Herd expansion continues, with 15,000 heads added in February. The herd has recovered 82,000 heads since June 2024, indicating producer confidence despite market challenges.
- Regional disparities remain significant—California’s avian flu recovery lags expectations (-3.7% vs. forecasted -3.0%) while other states show strong growth (+2.0% vs. forecasted +1.4%).
- Expanding production and stagnant demand could create downward price pressure, potentially similar to May 2023, when Class III prices fell sharply by $2.41.
- Producers should consider risk management strategies similar to those used in early 2023 when DMC payments became crucial for enrolled operations as margins tightened.
The February 2025 U.S. Milk Production Report reveals stronger than anticipated growth, with production increasing 1.0% year-over-year after adjusting for the leap year. This exceeded analyst expectations of 0.6% growth and suggests robust supply as the industry enters peak production season. After adjusting for components, production showed an impressive 3.5% year-over-year increase, marking the most substantial growth since mid-2021. Meanwhile, the national dairy herd continues its expansion trajectory, with significant regional variations in production patterns.
National Production Overview and Herd Dynamics
February 2025 milk production exceeded expectations with a 1.0% year-over-year increase after leap year adjustments, significantly surpassing the forecasted 0.6%. The January 2025 production figures received an upward revision from an initial report of 0.1% growth to 0.5% growth, accompanied by a substantial adjustment in the January herd size numbers, which increased by 25,000 head.
The national dairy herd continued its expansion in February, with producers adding another 15,000 head during the month. This brings the total herd recovery to 82,000 heads since June 2024, demonstrating a significant rebuilding period after previous contractions. This expansion pattern resembles trends in early 2023, when the February Milk Production report showed an increase of 0.8%, with cow numbers up 37,000 from the previous year and 12,000 head from the last month.
Production per cow in February 2025 aligned with forecasts, indicating that increased total production stems primarily from larger herd size rather than productivity gains. This represents a shift from historical patterns where productivity improvements often contributed more significantly to production growth. When factoring in the component composition of milk, the adjusted production increase of 3.5% highlights significant improvements in milk solids content.
Regional Production Disparities
The February data reveals substantial regional variations in milk production patterns nationwide. California continues to recover from avian flu impacts but at a slower pace than anticipated, showing a 3.7% decrease compared to February 2024. This decline exceeded the forecasted 3.0% decrease, suggesting extended recovery challenges for the nation’s largest milk-producing state.
In contrast, the rest of the country demonstrated robust growth, with production up 2.0% compared to the forecasted 1.4%. This strong performance outside California effectively counterbalanced the Golden State’s slower recovery, resulting in an overall 1.0% national increase.
Historical data from March 2023 shows that regional production patterns often vary significantly, with states like Texas (+4.7%), Idaho (+3.1%), New York (+2.1%), and Michigan (+2.9%) showing strong growth while Wisconsin experienced more modest increases (+0.4%). This regional diversification has become increasingly important to national production stability, particularly when central-producing states face challenges.
Top States Production Trends
Looking at the historical context helps understand current regional patterns. In early 2023, the top six dairy states (Wisconsin, Texas, Idaho, New York, California, and Michigan) accounted for 52% of total U.S. production. Texas and Idaho led growth rates then, with Texas adding 22,000 cows and Idaho adding 15,000 cows between February 2022 and February 2023.
The 2025 regional distribution reflects the continuation of these trends and new developments, with California’s avian flu situation creating a significant divergence from historical patterns. If California’s recovery accelerates to -0.5% growth by April while the rest of the country maintains approximately 1.9% growth, national headline production could get 1.4% year-over-year growth before component adjustments.
Component Analysis and Production Value
A particularly noteworthy aspect of the February 2025 report is the significant difference between the headline production increase (1.0%) and the component-adjusted increase (3.5%). This 2.5 percentage point differential indicates substantial improvements in milk composition, reflecting higher concentrations of valuable milk solids like protein and butterfat.
Historically, component prices have significantly impacted producer returns. In early 2023, the protein was valued at around $2.40 per pound, butterfat at approximately $2.73 per pound, and other solids at about $0.23 per pound. The current component-rich production likely reflects producer adaptations to pricing structures that reward milk composition rather than just volume.
This shift toward component-focused production represents a strategic response by dairy producers to maximize returns in challenging market conditions. The significant increase in component-adjusted production suggests that even if fluid volume growth moderates, milk solids entering the market could continue increasing substantially, with implications for manufacturing capacity and product mix.
Market Implications and Pricing Outlook
The strong production growth indicated in the February report enters a market characterized by stagnant to weakening demand, potentially creating price pressure as we move deeper into the spring flush season. While the report is likely already priced into current markets, continued strong growth through spring could create additional downward price pressure if production outpaces demand.
Historical patterns provide context for potential market impacts. In May 2023, the Class III price fell sharply by $2.41 from April, reaching $16.11, $9.10 lower than the previous year’s record high. Similar price pressures could emerge if the current production trends continue without corresponding demand growth.
Risk Management Considerations
When margins tightened in early 2023, Dairy Margin Coverage (DMC) payments became significant for enrolled producers. In April 2023, producers enrolled at the $9.50 coverage level received indemnity payments of $3.66/cwt, equating to $2,735.38 for each million pounds after sequestration. For March 2023, producers with the same coverage realized payments of $2,551.48 per million pounds enrolled.
The current production environment, with strong growth amid potentially weaker demand, could create similar margin challenges for producers in 2025, making risk management strategies increasingly vital as the year progresses.
Production Outlook and Seasonal Expectations
The industry appears positioned for continued strong growth through the spring months. If California improves to a -0.5% growth rate by April while the rest of the country maintains approximately 1.9% growth, national production could reach 1.4% year-over-year growth before component adjustments.
The report suggests that producers are overcoming previously limited growth issues, potentially setting the stage for even more substantial production numbers during the peak spring flush. This timing raises concerns about market balance, as increased production typically coincides with seasonal demand patterns that may not absorb the additional supply without price concessions.
Conclusion
The February 2025 U.S. Milk Production Report reveals more substantial than expected growth in milk production, with significant increases in herd size and component-adjusted output. The 1.0% year-over-year increase in headline production and the remarkable 3.5% increase in component-adjusted output suggest robust supply conditions as the industry enters the spring flush period.
Regional disparities remain significant, with California’s slower recovery from avian flu dampening overall growth while the rest demonstrates substantial production increases. The continued expansion of the national dairy herd, which has recovered 82,000 head since June 2024, indicates producer confidence despite potential market challenges ahead.
As production is projected to remain strong through spring 2025, the industry may face downward price pressure if demand does not increase. Producers may need to focus on efficiency, component optimization, and risk management strategies to navigate what could be a challenging price environment in the coming months.
Read More:
- Boost Your Dairy Profits: Proven Breeding Strategies Every Farmer Must Know
- CME Dairy Market Report: March 13, 2025 – Dairy Prices Under Pressure
- Component Optimization – Survival Strategy: Navigating Lower Price Projections
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