Despite political uncertainty, dairy producers across the Midwest are feeling positive and optimistic as we begin 2025, largely due to higher milk prices, improved profitability and a strong beef market.
“The financial situation is probably the best it has been in a number of years,” says Charles Krause of Krause Holsteins Inc., Buffalo, Minnesota. “Coming off strong second-half prices in 2024, along with relatively strong margins, has given dairy farmers the ability to reinvest in their operations. Strong butterfat and protein demand have also elevated pay prices.”
Dairy producers in Michigan are also enjoying the higher pay prices.
“For once, Michigan has had a decent stretch of solid milk prices. Nothing crazy but enough to help us catch up on some bills and have some breathing room,” says Ashley Messing-Kennedy of Sheridan Dairy, Bad Axe, Michigan.
In addition to higher milk prices, David Duitscher from Dutchland Dairy in Rolfe, Iowa, cites cheaper feed costs, homegrown crops and strong beef prices for bolstering financial stability.
“In Iowa, our strength always comes from the abundance of crop ground, which works great with a dairy farm since it makes for a sustainable partnership,” Duitscher says.
David Trimner from Miltrim Farms in Athens, Wisconsin, agrees that beef markets have been helpful in boosting dairy profitability.
“The biggest point of optimism for me is the fact that the beef supply is still tight and replacement heifers are still very low, which will hopefully continue to keep prices strong for milk, beef calves and cull cows through 2025,” Trimner says.
He adds that rebuilding forage inventories after last year’s wet season will be important in the months to come.
Looking ahead, risk management strategies are one way to extend positive margins, says Steve Obert, executive director of Indiana Dairy Producers.
“2024 profitability was strong, especially in the third and fourth quarters,” Obert says. “These positive margins helped producers clean up payables and build working capital. Time will tell, but current margins will likely lead to new expansion projects.”
Expansion is on the minds of many producers throughout the Midwest now that financial conditions have improved.
“We have optimism about a potential expansion and the next generation possibly coming back to our farm,” Duitscher says.
Trimner says many herds are also continuing to expand in Wisconsin.
Shelly Mayer, executive director of Professional Dairy Producers, says she is most excited about the people involved in the dairy industry.
“It’s inspiring to see young talent discovering dairy and bringing their skills into agriculture because they genuinely want to be part of it. The mid-career professionals who are innovating and driving progress in dairy also bring tremendous energy to our sector,” Mayer says.
Bird flu
Despite significant impacts on poultry operations across the Midwest, most dairies were not as affected by bird flu or highly pathogenic avian influenza (HPAI) H5N1 as in some other regions. That said, many dairy producers are reviewing biosecurity protocols and keeping an eye on how other states are handling outbreaks.
“We are definitely more vigilant, whether it be noticing all the wild birds that flock here during the winter months that could pose a threat or when we hear of another farm in the tri-state area that had an outbreak in a poultry flock,” says Craig Lindauer of Francis Lindauer and Sons Dairy Farm LLC, Ferdinand, Indiana. “Some tighter biosecurity measures, such as dip pans for boots, have been used more often than in the past.”
As part of their biosecurity protocols, producers are “taking a strong look at their bird management programs,” Krause says.
“From a herd health standpoint, I think we are all hoping for a vaccine to be developed that will give us a tool to use in this issue,” Krause says.
Although bird flu has been relatively quiet on Michigan dairy farms lately with only a few cases, Messing-Kennedy says they are all anxiously waiting to see what happens this spring.
“Our state has put biosecurity practices into place and farms are working around those,” she says. “The main biosecurity changes involve logbooks, our state and federal inspectors disinfecting their tires and those types of things.”
Tom Peterson, executive director of South Dakota Dairy Producers, noted the relationship between South Dakota’s dairy industry and their state veterinarian, along with the importance of keeping lines of communication open.
“We are fortunate not to have realized much disruption from H5N1, but it certainly heightened the focus of farms on biosecurity,” Peterson says. “We have a great relationship with our state veterinarian and South Dakota Department of Agriculture and Natural Resources, which kept an open line of communication since the virus was first identified. Since mid-2024, it has been very quiet, which is a real positive.”
Currently, there are no known cases of bird flu on dairy farms in Iowa, although there are some poultry operations affected, Duitscher says.
“There were a number of farms hit hard by HPAI last year in northwest Iowa,” Duitscher says. “We have tried to limit birds on the farm and have probably not visited as many other farms as normal this year. We are isolated from a lot of dairies in the area we live in, so that has helped.”
Bird flu raises concerns for Krause not only in terms of herd health but also from a trade standpoint.
“We have not had many herds in Minnesota that have been affected by bird flu, but it’s a serious issue for all of us. Anytime the export markets are impacted, that directly impacts our pay price. One percent up or down really does make a big difference,” he says.
Among the growing concerns due to bird flu is the potential emergence of new strains.
“The emergence of new strains and ongoing unknowns add another layer of stress to farm management decisions and puts even more focus on the importance of strong biosecurity protocols,” Mayer says.
Policy
Tariffs, immigration, labor, Federal Milk Marketing Order (FMMO) changes and school milk are some of the top policy concerns and sources of uncertainty across the Midwest dairy industry.
“Many things will adjust with the new administration, but many of these factors – such as trade and immigration – will most likely settle out this year, but they will cause uncertainty in the markets until they do,” Trimner says.
Many in the dairy industry are closely watching how the new administration’s policies may impact labor on dairy farms.
“The uncertainty of the new presidential administration’s policies is causing angst for producers,” Obert says. “Producers want assurances that they can maintain their current workforce and be provided with a legal framework to get the people they need. Producers want a comprehensive fix.”
Peterson adds, “The lack of any guest worker program development coupled with questions surrounding the new administration has brought secure labor to the forefront again. While this is a decades-long issue, farmers remain hopeful that a path forward can be reached for secure year-round labor.”
Tariffs are also a concern.
“Milk prices were negatively impacted the last time tariffs were implemented,” Obert says. “It took market facilitation payments to ease the pain. Producers prefer strong, stable markets over government payouts.”
Trimner says a policy that would have a major impact on dairy is putting whole milk back in schools again on a federal level.
Lindauer agrees.
“As a member of the local volunteer fire department, we visit our local schools each year for fire prevention week, where we serve lunches and sit down to eat with the kids,” Lindauer says. “Every year, I reach out for feedback from the kids on their milk consumption habits, and it is consistently the same message: They don’t like the taste of the low-fat milks they are offered, and often the unwanted or partially drank containers are discarded in trash cans. This is and has been the biggest missed opportunity for bringing back the fluid milk consumption trends.”
The USDA released its FMMO final rule in January, and many dairy producers are waiting to see how the changes will impact their milk checks going forward.
“We are always cautious in regard to what might happen with milk price, how the new FMMO rule changes will affect the industry and how tariffs might affect global trade,” Messing-Kennedy says.
Mayer says the changes will be “critical” to watch in the Midwest.
“Maintaining a sustainable profit margin for both farmers and processors is essential – one cannot thrive without the other,” Mayer says.
On the state level, new labor legislation regarding earned time off in Michigan could impact dairies due to the lack of agricultural or small-business exemptions.
“It’s dictating how businesses offer paid and all other types of time off,” Messing-Kennedy says. “Since there is no ag or small-business exemption, it would make it hard for farmers to have a paid time off plan that works for their business.”
As for other pressing issues at the state level, Krause mentions the “increased scrutiny of dairy farmers regarding environmental regulations” in Minnesota, and Duitscher adds that tariffs and labor laws could “affect dairies in Iowa a lot.” In Indiana, there is a proposal to increase environmental inspections on Confined Feeding Operations (CFOs) and Confined Animal Feeding Operations (CAFOs).
Dairy processing
Processing expansion is creating a light at the end of the tunnel for many dairy producers interested in expanding their herds and/or having more market options.
“In the central states, we are finally seeing processors out procuring more milk,” Krause says. “It has been a number of years since farmers had options in regard to who or where their milk is sold or marketed. The signal out there for farmers that want to grow their production is that there is a home for that milk.”
He says they are seeing reinvestment and expansion in several dairy processing plants and that there are a few greenfield plant projects in the works.
“In the Midwest, we are seeing a number of plants increasing capacity by 1 to 3 million pounds per day,” Krause says. “There is continued growth year over year in South Dakota, and many of the I-29 corridor processors have expanded to facilitate that growth.”
Peterson says South Dakota continues to see balanced growth and investment in processing capacity.
“Dairy farmers are positive with the possibilities of herd expansion but are cautious with the amount of new cheese production in the Midwest and hopeful demand can support the growth while giving farmers a positive price point,” Peterson says. “Valley Queen Cheese came online in late 2024 with an additional 3 million pounds per day and recently Bel Brands in Brookings announced that a second line would be added to their plant, doubling their production of Babybel cheese snacks.”
The added processing capacity is shifting the milk shed and enabling access to new markets and buyers, he adds.
“The downside is that some smaller processing plants have shuttered, leaving some farmers in remote areas significantly challenged when trying to find a home for their milk,” Peterson says.
There has also been expansion in processing capacity along the I-90 corridor.
“Boone, Iowa is getting a new Daisy plant, and we are hoping that will be a positive for local milk,” Duitscher says.
A dryer fire led to the loss of a large powder facility in northern Indiana, but Obert says this closing had “minimal impact to producers due to the current tight milk supplies.”
“Aside from processing within the state, the new Walmart plant in Georgia may provide a positive ripple effect for those Indiana producers whose milk flows into the Southeast region,” Obert says.
