USDA’s latest WASDE report signals shifts in the dairy landscape. Lower milk production, updated pricing formulas, and HPAI impacts reshape the 2025 outlook. All-milk price forecast dips to $22.60/cwt. How will these changes affect your dairy operation? Read on for key insights and strategies.
Summary:
The February 2025 WASDE report outlines significant changes in the U.S. dairy industry, including decreased milk production due to fewer cows and a potential export drop. New pricing formulas aim to match current market conditions better. The report highlights challenges like avian flu and impacts from Mexican cattle imports, affecting production and pricing. The all-milk price forecast for 2025 is set at $22.60 per cwt. These changes mean dairy farmers must focus on herd health, diversify their products, and use risk management strategies to handle market changes.
Key Takeaways:
- USDA reduces 2025 milk production forecast, lowering by 300 million pounds to 226.9 billion pounds.
- Average cow numbers are projected at 9.390 million, with a decrease in milk per cow estimations.
- Updated Federal Milk Marketing Order formulas for milk pricing reflect current market trends.
- All-milk price forecast for 2025 adjusted to $22.60 per cwt.
- Cheese prices are expected to rise, while butter, nonfat dry milk, and whey prices will decline.
- Skim-solids basis exports for NDM and whey products are projected to decrease.
- HPAI risks milk production, emphasizing the need for strong biosecurity measures.
- Import dynamics from Mexican cattle could alter domestic production capacities.
- Opportunities arise through value-added products and proactive risk management.
The February 2025 WASDE report, released Tuesday, reveals a shifting U.S. dairy landscape with reduced production forecasts and nuanced price projections that could reshape farm strategies.
Milk Production and Supply Outlook
The USDA has lowered its 2025 milk production forecast due to expected decreases in cow inventories. Key production figures include:
| Item | 2023/24 est. | 2024/25 project. (Jan) | 2024/25 project. (Feb) |
|---|---|---|---|
| Production | 226.4 | 227.5 | 227.2 |
| Farm Use | 0.9 | 0.9 | 0.9 |
| Marketings | 225.5 | 226.6 | 226.3 |
| Beginning Stocks | 16.2 | 16.3 | 16.3 |
| Imports | 7.0 | 7.0 | 7.0 |
| Total Supply | 248.7 | 249.9 | 249.6 |
| Exports | 12.8 | 12.8 | 12.7 |
| Ending Stocks | 16.3 | 16.4 | 16.4 |
| Total Use | 248.7 | 249.9 | 249.6 |
| All-Milk Price ($/cwt) | 22.61 | 23.05 | 22.60 |
On a fat basis, domestic use is projected to decrease as lower production and imports tighten supplies. Fat basis exports are expected to decline, with increases in butter exports offset by decreases in fluid, dry, and cream products.
Price Projections and Market Implications
The USDA’s price forecasts reflect recent market trends and regulatory changes:
- All-milk price estimate for 2024: $22.61 per cwt (raised)
- All-milk price forecast for 2025: $22.60 per cwt (lowered)
These projections incorporate the new Federal Milk Marketing Order (FMMO) pricing formulas published on January 17, 2025, which include:
- Updated milk composition factors: 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids
- Revised manufacturing allowances: $0.2519 for cheese, $0.2272 for butter, $0.2393 for nonfat dry milk, and $0.2668 for dry whey
Commodity-Specific Outlook
The report offers a mixed outlook for individual dairy commodities:
| Item | 2023/24 est. | 2024/25 project. (Jan) | 2024/25 project. (Feb) |
|---|---|---|---|
| Cheese | 1.9740 | 2.0350 | 2.0450 |
| Butter | 2.7270 | 2.5550 | 2.5150 |
| NDM | 1.3370 | 1.4450 | 1.4250 |
| Dry Whey | 0.3870 | 0.4450 | 0.4350 |
Class III milk is lowered to $19.10 per cwt, and Class IV is reduced to $19.70 per cwt for 2025.
Export Projections
Skim-solids basis exports are projected to decrease, particularly for NDM and whey products. This shift in export dynamics could impact overall market balance and pricing structures.
Industry Challenges and Opportunities
The dairy industry is navigating a complex landscape of regulatory changes, animal health challenges, and shifting trade dynamics. Key factors include:
- Highly Pathogenic Avian Influenza (HPAI) Impact:
- Reduced milk production due to infected herds experiencing decreased output and changes in milk consistency
- Potential market disruptions from biosecurity measures and movement restrictions
- Increased focus on herd health and biosecurity practices across the industry
- Mexican Cattle Imports:
- Influence on domestic cattle inventory and pricing
- Potential changes in milk production capacity
- Federal Milk Marketing Order Reforms:
- A return to the “higher-of” pricing mechanism for Class I skim milk prices
- Better alignment of pricing with current market conditions and production costs
Given these developments, dairy farmers should consider:
- Optimizing herd health and productivity to maximize output in a tighter market
- Exploring value-added product opportunities, particularly in the cheese sector
- Utilizing risk management tools to navigate potential price volatility
- Staying informed about FMMO implementation and its impacts on farm-level pricing
The WASDE report’s incorporation of these factors provides a more comprehensive view of the U.S. dairy sector’s current state and future outlook.
Learn more:
- US Dairy Farmers’ Revenue and Expenditure Rise Slightly in March
- Is 2024 Shaping Up a Disappointing Year for Dairy Exports and Milk Yields?
- Unveiling the USDA Milk Report: Find Out Which States are Leading and Lagging!
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