USDA claims more cows but less milk in latest forecast bombshell, slashing milk price to $21.60. Is Washington playing games with your dairy business?

EXECUTIVE SUMMARY: The USDA’s March WASDE report has reduced the 2025 all-milk price forecast by a full dollar to $21.60 per cwt, creating significant financial implications for dairy operations nationwide while raising serious questions about forecasting methodology. The report contains a puzzling contradiction—predicting higher cow numbers but lower productivity per cow—leading industry experts from the National Milk Producers Federation and CoBank to question the underlying assumptions. With cheese, butter, nonfat dry milk, and whey prices all facing downward revisions, producers now confront a challenging economic environment requiring immediate strategic responses. The upcoming April 10th WASDE report will prove critical in determining whether these reduced projections represent a new baseline or if further adjustments are forthcoming. Successful producers will need to implement targeted component optimization strategies based on their specific milk utilization patterns while closely monitoring market signals beyond government forecasts.

KEY TAKEAWAYS

• USDA has cut the 2025 all-milk price forecast to $21.60 per cwt, down $1.00 from February, with reductions across cheese, butter, nonfat dry milk, and whey prices.
• The contradiction between expanded cow numbers and lower productivity per cow raises significant questions about USDA’s forecasting methodology and reliability.
• Different operation types require specific strategies: smaller farms should focus on feed efficiency and component optimization, while larger operations should leverage economies of scale and advanced analytics.
• Component optimization is increasingly crucial, with butterfat focus recommended for Class IV utilization and protein enhancement for Class III utilization.
• Mark April 10th at 12:00 PM ET on your calendar for the next WASDE report, which will indicate whether March’s downward adjustments represent a new baseline or a temporary shift.

The USDA delivered concerning news for dairy producers in its March 2025 World Agricultural Supply and Demand Estimates (WASDE) report released on March 11. The all-milk price forecast for 2025 has been slashed by a whole dollar to $21.60 per hundredweight (cwt), signaling potentially tighter margins for dairy operations nationwide.

This substantial reduction comes alongside lowered projections for cheese, butter, nonfat dry milk, and whey prices, creating ripple effects throughout the dairy supply chain. While cow numbers are slightly higher than previously estimated, the USDA claims productivity per cow has declined enough to more than offset this increase—a contradiction raising questions about the agency’s forecasting approach.

“The all-milk price forecast for 2025 has been slashed by a full dollar to $21.60 per cwt, creating tangible economic consequences for dairy operations nationwide.”

Production Puzzle: More Cows but Less Milk?

According to the March WASDE report, the 2025 milk production forecast now stands at 226.2 billion pounds, representing a substantial 700 million-pound reduction from February’s estimate. The USDA explicitly attributes this significant adjustment to “lower expected milk output per cow more than offsetting slightly higher cow inventories.”

This creates a puzzling situation where producers are maintaining or slightly expanding herd sizes—investing capital based partly on earlier projections—only to be told expected returns will be lower than previously forecast. Why would milk per cow suddenly decline when producers invest in genetic improvements and management strategies designed to increase efficiency?

“The milk production forecast for 2025 is reduced on lower expected milk output per cow more than offsetting slightly higher cow inventories.”

For context, the 2024 production estimate remains unchanged at 225.9 billion pounds, which would be 400 million pounds less than the 2023 total of 226.3 billion pounds. Despite the reduction in the 2025 forecast, production is projected to increase slightly from 2024.

However, the substantial downward revision raises essential questions about the reliability of these projections for farm planning purposes.

The production forecast reduction will likely create tighter supply conditions than anticipated, particularly for processors dependent on specific volumes to fulfill commitments. This adjustment represents approximately 0.3% of expected annual production—enough to potentially alter market dynamics and pricing structures throughout the supply chain.

Your 2025 Milk Check: Lower Prices Across All Classes

The price forecasts in the March WASDE report directly impact dairy farm profitability. The all-milk price is now projected at just $21.60 per hundredweight (cwt), a dollar below February’s estimate.

For perspective, the 2024 all-milk price estimate stands at $22.61 per cwt according to the USDA’s latest figures—meaning 2025 is now projected to deliver lower returns than the current year. Is this the beginning of a longer downward trend or a temporary adjustment?

“USDA has lowered cheese, butter, nonfat dry milk, and whey price forecasts based on recent market trends, with direct implications for Class III and Class IV milk values.”

The Class III price has been reduced to $17.95 per hundredweight, down from the 2024 estimate of $18.89. The Class IV price is now expected to average just $18.80, compared to the 2024 estimate of $20.75. These aren’t minor adjustments—they represent substantial reductions directly impacting producer revenues.

Dr. Peter Vitaliano, Chief Economist at the National Milk Producers Federation, has expressed concern about the continuous forecast adjustments: “These significant downward revisions create planning challenges for dairy producers who rely on consistent projections for business decisions. The contradiction between expanding cow numbers and reduced productivity expectations raises questions about underlying methodological assumptions.”

The USDA attributes these price reductions to “recent prices” for cheese, butter, nonfat dry milk, and whey—all of which have been lowered in the forecast. However, the report provides minimal explanation for why these commodity prices have weakened significantly in recent weeks, leaving producers to speculate about underlying market dynamics.

Michael Johnson, Vice President of Supply Chain at Great Lakes Dairy Processing, notes: “These forecast changes create significant planning challenges for processors as well. We base capacity planning and inventory decisions on USDA projections, so frequent revisions force us to readjust our operations constantly. The mixed signals about production volume and component values make it exceptionally difficult to optimize our product mix.”

WASDE 101: Why These Reports Matter To Your Bottom Line

For dairy producers who may be new to government reporting, the World Agricultural Supply and Demand Estimates (WASDE) are released monthly by the World Agricultural Outlook Board (WAOB). These reports provide annual forecasts for agricultural commodities, including U.S. supply and use of milk and dairy products.

The reports are developed by Interagency Commodity Estimates Committees (ICECs), which include analysts from multiple USDA agencies who compile and interpret information from domestic and foreign sources. This makes WASDE reports particularly influential in markets and pricing decisions throughout the supply chain.

When a WASDE report adjusts price projections, as the March report has done for dairy, these changes often influence processor behavior, futures markets, and, ultimately, the prices farmers receive. The hundredweight (cwt) measure—equal to 100 pounds of milk—is the standard pricing unit, making the $1 reduction in the all-milk price equivalent to a penny per pound reduction in expected milk value.

What’s Really Behind the Numbers?

The March WASDE report raises fundamental questions about how USDA forecasts are developed and what factors drive their frequent revisions. While official explanations focus on productivity adjustments, several market analysts suggest other factors may be at play.

Tanner Ehmke, lead economist at CoBank’s Knowledge Exchange division, notes a pattern in government forecasting: “We often see a tendency toward optimism in early forecasts that gets tempered by market realities as the year progresses. The key question is whether these adjustments reflect genuine changes in market dynamics or simply correcting initially overstated projections.”

Particularly striking is the timing of these downward revisions, coming amid heightened concerns about agricultural sector profitability in general. Are these forecast changes connected to broader economic policy considerations beyond dairy-specific factors? The USDA provides little transparency into the specific data points driving each month’s adjustments.

Sarah Williams, dairy futures analyst at Central States Commodities, observes: “The futures markets have reacted strongly to this forecast revision. We’re seeing significant repositioning in Class III and Class IV contracts, with traders pricing for further downward revisions in the coming months. The lack of clarity around what’s driving these changes creates additional market volatility.”

Furthermore, the methodology behind per-cow productivity projections deserves scrutiny. The contradiction between expanding herd sizes and reduced output expectations suggests either a significant shift in herd demographics or potential flaws in assessing productivity trends. Either way, producers deserve a more precise explanation of these consistent downward adjustments.

Mark Your Calendar: Critical Upcoming WASDE Dates

The following WASDE report is scheduled for release on April 10, 2025, at noon ET. For dairy producers navigating these uncertain projections, this upcoming report will provide critical insights into whether March’s downward adjustments represent a new baseline or if further revisions are forthcoming.

Source: USDA Office of Chief Economist, 2025

The consistent schedule of these reports—released between the 10th and 12th of each month—provides a predictable timeline for market information. Innovative producers integrate these release dates into their business planning calendars, recognizing how these projections influence short-term cash flow and longer-term investment decisions.

Survival Strategy: Navigating Lower Price Projections

The March WASDE report necessitates strategic reassessment for dairy producers. With the all-milk price now projected at $21.60 per cwt—substantially below earlier expectations—profit margins face increased pressure across many operations.

This environment elevates the importance of component-focused production strategies, as price trends across dairy commodities may create opportunities for farms that can optimize butterfat and protein levels.

“With the all-milk price now projected at $21.60 per cwt, dairy producers face a critical need to reassess operational efficiency and component optimization strategies.”

The reduced price projections demand a renewed focus on operational efficiency and cost management strategies. Farms operating on slim margins based on more optimistic price forecasts must now evaluate their cost structures and identify potential efficiencies.

Strategies for Different Operation Types

Small to mid-sized operations (under 500 cows) should prioritize these actions:

• Evaluate feed efficiency programs with greater urgency, as feed costs typically represent 50-70% of production expenses
• Consider component optimization through strategic breeding and nutrition adjustments
• Explore direct marketing or specialty product arrangements that may offer premium pricing

Large operations (500+ cows) should focus on:

• Leveraging economies of scale through negotiated input pricing for volume purchases
• Evaluating component premiums across multiple processor options
• Implementing advanced data analytics to identify efficiency opportunities across the operation

Component Optimization in Today’s Market

With the current price structure, component optimization becomes increasingly critical. The significant gap between Class III ($17.95) and Class IV ($18.80) prices highlights the importance of understanding your milk utilization:

• Focus on butterfat optimization if your milk primarily goes to Class IV utilization
• For operations with predominantly Class III utilization, protein enhancement should be prioritized
• Review current milk checks to understand component premium structures specific to your processor

According to dairy nutrition specialists at major land-grant universities, targeted nutrition strategies focusing on specific fatty acid profiles can enhance butterfat production by 0.1-0.3 percentage points—potentially offsetting a significant portion of the price reduction for producers effectively implementing such programs.

Tom Wilson, owner of Wilsonview Dairy in Wisconsin, has successfully navigated previous price volatility through component management: “When we saw forecast changes last year, we immediately reviewed our nutrition program with our consultant and made targeted adjustments to enhance butterfat. By focusing on rumen health and using specific feed additives, we increased components enough to offset nearly half the price reduction. You can’t control USDA forecasts but can control how you respond to them.”

Beyond The Numbers: What Every Dairy Producer Should Know

The March 2025 WASDE report represents more than just another data point—it signals potentially challenging market conditions requiring proactive management. The $1 reduction in milk price projections creates tangible economic consequences for dairy operations nationwide. This development comes as producers face rising input costs and continuing labor challenges.

What makes this forecast particularly significant is the contradiction between expanding herd sizes and reduced productivity expectations. This unusual pattern suggests fundamental changes in national herd performance or potential issues with the forecasting methodology.

As dairy producers navigate these challenging waters, staying informed about market developments becomes increasingly crucial. The April 10th WASDE report will provide the next official update, potentially confirming or adjusting the projections.

Until then, prudent producers will approach the current forecast with appropriate caution, developing contingency plans for the possibility of continued price pressure throughout 2025.

Your farm’s resilience depends on understanding these market signals and responding strategically. While government forecasts provide valuable perspectives, successful producers complement these projections with diverse information sources and flexible management approaches. Question the assumptions behind these projections, adapt your strategies accordingly, and remember that your operation’s specific efficiencies matter more than general market forecasts. What will you change in your operation based on this latest forecast?

Learn more:

• CME Dairy Market Report: March 11, 2025 – Mixed Results as Feed Costs Rise
• USDA Predicts Tight Milk Supply and Strong Demand for 2025
• USDA Revises Milk Production Forecasts for 2024-2025 – Higher Prices Amid Lower Output

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