Dairy Market Report - January 2025

DAIRY MARKET REPORT

1/23/2025

OVERVIEW

Fluid milk sales in 2024 are on track to exceed 2023’s; which would be the first time fluid would see a yearover-year gain since 2009. Year to date through November, total commercial use last year was above the same period in 2023 for all cheese, butter and yogurt but lower for the main dairy ingredient products. U.S. dairy exports were lower in November, with cheese exports a bright spot on the strength of volume going to Mexico, South Korea and Japan. Growing butter imports from Ireland are raising total U.S. dairy import volumes.

Meanwhile, on production, following three months of levels above a year ago, U.S. milk production dropped in November by 1% due to an unusually large drop in milk production per cow.

The Consumer Price Index (CPI) for All Items, the benchmark for measuring overall retail price inflation, was relatively stable during the fourth quarter of 2024, as were the CPIs for all Food and Beverages and for all Dairy and Related Products, with the former averaging almost 5% higher than that for All Items and the latter averaging 14% lower.

The November monthly margin under the Dairy Margin Coverage (DMC) program was $14.29/cwt, the third highest since margin protection became the basic safety net program for dairy in 2015.

COMMERCIAL USE OF DAIRY PRODUCTS

Fluid milk sales rose year over year during Q1 and Q2 last year, but were down in Q3 and so far in Q4. But yearto-date overall is still up over last year by 0.4% through November, thus having a good chance to exceed last year’s sales on a calendar year basis, the first full-year increase since 2009. This will occur if December’s sales do not fall by 3.8% or more below December 2023 sales.

Year to date through November, total commercial use,

domestic and export, was above the prior year for all cheese, butter and yogurt, but were lower for the dairy ingredient products of dry skim milk, dry whey, whey protein concentrate and lactose. Stronger export sales helped power these results for the first group of consumer-focused products, while weaker domestic sales reduced the totals for the ingredient group. All relevent comparisons are on a leap-year adjusted basis.

U.S. DAIRY TRADE

The months around the turn of the year are typically ones with reduced dairy export volumes. This past November was no different, with even a bit of a jump start on that period.

November exports were equivalent to 15.4% of November U.S. milk solids production, which compares with an average of 16.5% for this measure during the first eleven months of 2024. Individual products for which November export volumes fell particularly below their year to date averages were among the usual products with the larger volumes, including nonfat dry milk/skim milk powder, modified whey, and lactose.

Meanwhile, cheese continues to set export records this year, reaching 7.9% of domestic cheese production year to date, up from the previous annual record of 7.1% in both 2022 and 2014. U.S. cheese exports were shipped to 92 different countries during these eleven months, with the largest share, over one-third, sent to Mexico, and twothirds sent to the top five destinations. These top five also

included South Korea, Japan, Australia and Canada, the last of which likely re-exported most of this under its Imports for Re-export (IREP) program, which allows Canadian companies to import supply-managed agricultural products, including dairy, for further processing and reexportation.

November imports were equivalent to 4.4% of U.S. milk solids production that month, the highest such monthly percentage since December 2008. The largest product category in terms of milk solids for November was butter, followed by milk protein concentrates, isolates and caseinates. Year to date butter imports have been setting new records, reaching the equivalent of 7.7% of domestic butter production as of November, up from the previous annual record of 5.6% in 2023. The United States imported butter from 34 different countries during this period, with the largest share, 71%, coming from Ireland, and 95% from the top four exporting nations, which also included New Zealand, France and Australia.

MILK PRODUCTION

USDA revised its preliminary estimate of October U.S. dairy cow numbers upward by 5,000 head, thereby indicating the U.S. dairy industry broke its prior 16-month steak of below year-ago cow numbers with a 15,000-head jump over a year earlier that month. The department’s preliminary cow numbers estimate for November was 20,000 head above a year earlier.

However, it also reported an unually large drop from a year

earlier in November production milk per cow, 23 pounds, or -1.2%. Only during six of the 311 months since January 1998 were there larger drops in per cow milk volume at the national level. The result was a return in November to lower U.S. milk production than during November 2023, by 1%. Annual drops in November milk per cow were particularly noticable in California, New Mexico, Texas and Michigan, compared with the month before.

DAIRY PRODUCTS

Since commercial use reports by USDA are based on production data, adjusted for changes in stocks, the two reports tend to reflect approximately the same types of changes for individual products as well as for milk use in all products. The similarities are relatively evident in the current use and production reports for the SeptemberNovember period.

DAIRY PRODUCT INVENTORIES

Month-ending stocks of the key dairy products tended to fall from October to November for those products showing increased commercial use in recent months, while stocks

rose for products showing lower sales, with American-type cheese being an exception.

DAIRY PRODUCT AND FEDERAL ORDER CLASS PRICES

December NDPSR survey prices for cheddar cheese, both blocks and barrels, again fell rather steeply from the previous month, as they did a month earlier, while butter prices joined them in doing so in December. Nonfat dry milk and dry whey prices continued to rise in December. These price movements again caused a relatively sharp drop in the December Class III price and a more moderate one in the Class IV price.

Retail price inflation ticked up in December by the

closely watched measure of year-over-year change in the Consumer Price Index (CPI) for All Items, which rose to 2.9% from 2.7% in November. However, the All Items CPI was essentially the same in October, November and December. The CPIs for all Food and Beverages and for all Dairy and Related Products were also relatively stable during those three months, but the former averaged almost 5% higher than that for All Items while the latter averaged 14% lower.

MILK AND FEED PRICES

The November monthly margin under the Dairy Margin Coverage (DMC) program lost $0.88/cwt from a month before, yet still came in, at $14.29/cwt, as the third highest since margin protection became the basic safety net program for dairy in 2015. The November U.S. average allmilk price dropped by $1/cwt from October, to $24.20/cwt, while the DMC feed cost formula declined by $0.12/cwt of milk. A lower soybean meal price more than offset a higher corn price; the premium alfalfa hay price was little changed.

*DMC calculations are not revised

LOOKING AHEAD

After raising its forecast last month for 2024 and 2025 annual U.S. milk production, USDA’s World Agricultural Supply and Demand Estimates (WASDE) January monthly report reversed course and dropped both forecasts. USDA now expects last year’s production to fall slightly below production during the three years before that and this year’s production to exceed last year’s by 0.6%, at 227.2 billion pounds. The January WASDE report raised its estimates of all key product and class prices for 2025 “due to less milk production and supportive demand.”

The report raised its estimate of the U.S. average all-milk price during 2025 to $23.05/cwt, $0.45/cwt higher than its current estimate of the 2024 average.

As of mid-January, the DMC Decision Tool on the USDA Farm Service Agency website forecasts the 2025 U.S. average all milk price at $23.41/cwt and the average DMC margin at $13.81/cwt, with a $13.32/cwt lowest monthly margin in July. Enrollment for the 2025 DMC program starts Jan. 29 and is currently scheduled to end March 31.

Peter Vitaliano, National Milk Producers Federation pvitaliano@nmpf.org www.nmpf.org

Dairy Management Inc.™ and state, regional, and international organizations work together to drive demand for dairy products on behalf of America’s dairy farmers, through the programs of the American Dairy Association®, the National Dairy Council ® , and the U.S. Dairy Export Council ®

The National Milk Producers Federation (NMPF) develops and carries out policies that advance dairy producers and the cooperatives they own. NMPF’s member cooperatives produce more than two-thirds of U.S. milk, making NMPF dairy’s voice on Capitol Hill and with government agencies.