The holidays and New Year are firmly in the rearview mirror, with the worst of winter bearing down on certain key dairy regions throughout the country. Looking ahead, significant questions persist in both the dairy and political landscape for the coming months, with uncertainty and volatility never taking a rest. Thankfully, farmer margins remain healthy, providing financial comfort to farmers after a tough beginning to 2024. From tariffs to demand, labor availability to highly pathogenic avian influenza (HPAI) H5N1, a variety of topics are likely to command attention throughout this year.
Consumption trends
U.S. dairy consumption trended higher throughout most of 2024, with data available through November at the time of this writing. For those 11 months of last year, total demand on a solids basis was up 0.3%. While positive, this is lower than the usual growth typically noted each year, which generally trends at least 1% or higher. Demand actually dipped lower into November, down 0.7% on a year-over-year basis, and was negatively impacted by a 9.8% year-over-year decline in exports that overcame the 1% growth in domestic demand. Into 2025, RaboResearch expects consumption to continue the slower growth, welcomed as milk production returns to growth in the year following three years of flat to lower milk output.
Export trends
U.S. dairy exports were choppy throughout 2024, showing strength in some months but struggling in others. Through November, total exports were down 0.3% versus the prior year, an unfortunate development driven by weakness in certain product categories. The uneven trend was evident in the back half of the year: third-quarter exports grew 7% versus the prior year, but shipments were lower into both October and November as nonfat dry milk and certain whey volumes struggled. On a bright note, foreign cheese demand was firm, with cheese exports likely setting a new all-time record high; shipments were up 18% year over year for January through November and showed growth in each of those 11 months. Opposite the cheese strength, November 2024 nonfat dry milk exports plummeted to the lowest monthly volume since February 2020, hurt by demand weakness from nearly every key region. Looking ahead to this year, headwinds are forming as the U.S. prepares to enact tariffs on imports from China, Mexico and Canada. Any retaliatory action from these nations that targets U.S. dairy products would negatively impact shipments in the coming months.
Milk production trends
It is likely that U.S. milk production will return to growth in 2025 following three consecutive years of flat to lower performance. RaboResearch expects an increase in excess of 0.5% versus 2024, with higher components also helping to drive dairy product production higher. A key wildcard factor will be the HPAI spread in the coming months. Currently, the virus is almost solely a California problem, denting the state’s output by 7.9% in November and 6.8% in December versus the prior year. With the bird migratory season beginning soon, the industry will be watching for reinfection in states hit first last year, including Texas and Kansas. Possible spread throughout this spring would reduce the milk production growth potential that is currently anticipated.
Financial/profitability
While milk prices are not expected to be as firm as the highs noted in September and October 2024, the outlook remains strong for a profitable year, much welcomed after the financial stress of 2023 and 2024. Healthy milk prices coupled with feed costs at four-year lows should drive positive margins. These positive expectations likely mean that farmers are attempting to drive milk production higher to capitalize on profits, but a tight and expensive replacement heifer market coupled with possible disease (HPAI) risks could make this difficult, keeping milk production growth slower regardless of a profitable expected year.
This article is provided for information purposes only. Readers should consult their own professional advisers for specific advice tailored to their needs. Information contained in this article may be subject to change without notice.
