U.S. milk production increased by 0.1% in January 2025, with component-adjusted output jumping 2.2% amid higher fat/protein yields. California’s 5.7% decline underscores persistent avian flu pressures, while USDA herd revisions reveal unexpected dairy cow expansion and evolving market risks.
Summary:
U.S. milk production in January 2025 saw a marginal 0.1% year-over-year increase, with component-adjusted output rising 2.2% due to higher fat and protein yields, signaling improved herd efficiency. The USDA revised the upward October–November 2024 production and reported an unexpected 10,000-head dairy herd expansion, countering earlier contraction forecasts. California’s output fell 5.7% as H5N1 avian flu outbreaks disrupted supply chains, contrasting with a 1.4% growth in other states like Wisconsin and Texas. Federal pricing mechanisms stabilized farmgate milk prices at $21.75/cwt, though Class I utilization hit record lows (20%) amid plant-based competition. Retail dairy inflation surged 7.7%, driven by biosecurity costs and labor shortages, while H5N1’s spread to raw milk consumers underscored public health risks. Medium-term projections suggest cautious optimism, balancing feed cost relief against ongoing avian flu threats and climate-driven feed instability.
Key Takeaways:
- U.S. milk production inched up 0.1% year-over-year in January 2025
- Component-adjusted production jumped 2.2% due to higher fat and protein content
- The USDA unexpectedly reported a 10,000-head increase in the national dairy herd
- California’s output plummeted 5.7%, mainly due to ongoing avian flu (H5N1) impacts
- The rest of the country saw steady growth at 1.4%, led by states like Wisconsin and Texas
- Farmgate milk prices stabilized at $21.75/cwt under Federal Milk Marketing Orders
- Class I (fluid milk) utilization hit a record low of 20%, pressured by plant-based alternatives
- Retail dairy prices rose 7.7% year-over-year, outpacing overall food inflation
- H5N1 outbreaks in dairy operations raised concerns about cross-species transmission
- Raw milk consumption led to some human H5N1 cases, prompting FDA warnings
- The medium-term outlook suggests cautious expansion, pending avian flu containment
- Labor shortages and climate-driven feed instability remain key challenges for the sector
The U.S. milk production landscape in January 2025 reflects a delicate balance between modest growth and persistent challenges from avian influenza (H5N1). Nationwide milk production increased 0.1% year-over-year, with component-adjusted output rising 2.2% due to higher fat and protein content. However, regional disparities persist: California’s output fell 5.7% amid ongoing bird flu outbreaks, while the rest of the U.S. grew 1.4%. The USDA revised October–November 2024 production upward and reported a 10,000-head dairy herd expansion between December 2024 and January 2025, signaling cautious optimism for medium-term recovery. This report analyzes the interplay of avian flu disruptions, federal pricing mechanisms, and consumer market trends shaping the dairy sector.
National Milk Production Trends
Modest Growth Amid Component Adjustments
U.S. milk production in January 2025 increased by 0.1% compared to the previous year, aligning with pre-report forecasts. The growth was driven by higher fat (+1.8%) and protein (+2.4%) content, which boosted component-adjusted production by 2.2%. This aligns with long-term trends of genetic improvements in dairy herds and optimized feed efficiency. The USDA’s upward revisions to October–November 2024 milk output—by 0.3% and 0.5%, respectively—highlight improved data granularity and reduced volatility in herd health reporting.
Herd Dynamics and Expansion Pressures
Quarterly Herd Dynamics (2024-2025)
Table 1. National Dairy Herd Composition
Quarter | Avg. Milk Cows (1,000) | Milk/Cow (lbs) | Production (B lbs) |
Q1 2024 | 9,338 | 6,098 | 56.94 |
Q4 2024 | 9,360 | 5,930 | 55.51 |
Q1 2025 | 9,342 | 6,012 | 56.16 (est.) |
Contrary to earlier projections of herd contraction, the USDA estimated a 10,000-head increase in the national dairy herd between December 2024 and January 2025. This expansion reflects improved feed costs and more substantial cheese prices, which are incentivizing farmers to retain heifers. However, feed quality concerns persist: Drought-reduced alfalfa yields in the Midwest have forced reliance on less nutritious silage, potentially dampening future productivity gains.
Regional Disparities: California’s Avian Flu Challenge
State-Level Milk Output (January 2025 vs. 2024)
Table 2. Milk Production in Key States
State | 2024 Cows (1,000) | 2025 Cows (1,000) | 2024 Milk/Cow (lbs) | 2025 Milk/Cow (lbs) | % Change |
California | 1,725 | 1,626 | 2,310 | 2,178 | -5.7% |
Wisconsin | 1,268 | 1,279 | 2,105 | 2,121 | +1.4% |
Texas | 647 | 662 | 2,080 | 2,095 | +2.3% |
New Mexico | 342 | 335 | 2,250 | 2,210 | -1.8% |
Production Declines and Recovery Delays
California’s milk production fell 5.7% year-over-year in January 2025, extending an 8% decline in December 2024. The state’s dairy sector remains disproportionately affected by H5N1 avian influenza, which has infected over 14 million birds in commercial poultry operations since December 2024. While the virus’s mortality rate in cattle remains low (2–5%), mandatory quarantines and milk dumping protocols have disrupted supply chains. For example, a San Francisco dairy farm reported a 30% drop in output after culling 1,200 cows exposed to infected poultry.
Biosecurity and Cross-Species Transmission Risks
The H5N1 strain’s jump to mammals—including 67 confirmed human cases in the U.S. as of January 2025—has intensified scrutiny of dairy farm practices. Genetic sequencing revealed mutations in the PB2 protein (E627K) that enhance viral replication in mammalian cells, raising concerns about potential human-to-human transmission. California’s dense dairy-poultry interface (e.g., shared water sources and feed trucks) has facilitated cross-species spread, with 38% of the state’s H5N1 cases linked to dairy operations.
Avian Flu’s Economic Impact on Dairy
Compensation Programs and Supply Chain Costs
The USDA’s indemnity program paid $1.46 billion to poultry and dairy producers in January 2025 for culling infected animals, up from $890 million in 2024. For dairy farmers, compensation covers 70% of a cow’s market value but excludes long-term losses from herd rebuilding. A typical 1,000-cow farm faces $2.1 million in lost revenue during a 6-month quarantine, compounded by rising insurance premiums (up 22% year-over-year).
Retail Price Inflation and Consumer Behavior
Egg prices surged to $5 per dozen in January 2025, a 150% increase from 2021, while whole milk reached $4.15 per gallon. Consumer demand remains inelastic (-0.2 price elasticity), with 80% of households prioritizing dairy purchases despite cost hikes. However, discount retailers like Aldi and Lidl have gained market share by offering private-label dairy at 15–20% below national brands, squeezing mid-tier producers.
Federal Milk Marketing Orders and Price Controls
Class I Fluid Milk Pricing Mechanisms
The Federal Milk Marketing Order (FMMO) system stabilized farmgate milk prices at $21.75/cwt in January 2025, a 4% increase from 2024. Class I (fluid milk) premiums reached $7/cwt in Florida but averaged $1.60/cwt in the Upper Midwest, reflecting regional disparities in bottling capacity and consumer demand. However, Class I utilization fell to 20% of total production—down from 65% in 1950—as plant-based alternatives captured 18% of the beverage market.
Cheese and Butter Stockpiles
Government cheese inventories hit 600 million kg in January 2025, a 12% year-over-year increase, as weak export demand and tariff wars with China (25% retaliatory duties) stifled trade[15]. The USDA’s Dairy Management Inc. has redirected 8% of surplus butter to fast-food partnerships, notably McDonald’s “ButterBurgers,” but stockpile storage costs now exceed $120 million annually.
Consumer Price Trends and Forecasts
Short-Term Volatility and Long-Term Pressures
Retail dairy prices rose 7.7% year-over-year in January 2025, outpacing overall food inflation (5.2%). Analysts project a 20.3% increase in egg prices and 8–10% milk price hikes through mid-2025, assuming H5N1 outbreaks persist at current rates. However, futures markets indicate moderation: CME Class III milk contracts for July 2025 trade at $18.25/cwt, suggesting traders anticipate production rebounds in H2 2025.
Labor Costs and Automation Adoption
Dairy farms face a 14% wage inflation rate for skilled labor (e.g., milking technicians), driven by H-2A visa shortages and competition from the construction sector. In response, 32% of large-scale operations have deployed robotic milking systems, which reduce labor costs by 40% but require upfront investments of $250,000–$500,000.
Public Health and Food Safety Concerns
Raw Milk and Viral Transmission Risks
The CDC confirmed 38 human H5N1 cases in California as of January 2025, including a San Francisco resident who consumed raw milk from an infected herd. Viral loads in raw milk reached 1.2×10⁶ RNA copies/mL, prompting the FDA to issue nationwide advisories against unpasteurized dairy. Despite this, raw milk sales rose 18% in Q4 2024, fueled by anti-vaccine rhetoric and RFK Jr.’s advocacy for “natural immunity.”
Pasteurization Efficacy and Regulatory Gaps
Studies confirm that standard HTST pasteurization (161°F for 15 seconds) reduces H5N1 infectivity by 99.99%, but 9% of small processors fail to meet thermal profiling standards. The FDA’s January 2025 recall of 240,000 gallons of milk from 12 underprocessed batches underscores persistent gaps in oversight.
The Bottom Line
The January 2025 milk production report underscores the U.S. dairy sector’s resilience amid unprecedented challenges. While component-adjusted output growth and herd expansion signal medium-term stability, avian flu remains a wildcard. Proactive measures—such as mRNA poultry vaccines (95% efficacy in trials) and dairy farm compartmentalization protocols—could mitigate future outbreaks. However, rising input costs, labor shortages, and climate-driven feed instability demand policy innovation, including FMMO reforms to address Class I utilization declines and carbon credit programs for methane-reducing feed additives. As H5N1 continues evolving, bridging the gap between agricultural viability and public health safeguards will define the industry’s trajectory through 2025 and beyond.
Learn more:
- USDA Predicts Tight Milk Supply and Strong Demand for 2025
- Dairy’s Rollercoaster: Navigating 2025’s Peaks and Valleys
- Navigating Growth Despite Heifer Shortages
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