The first benchmark milk price of 2025 headed higher following three consecutive declines. The January Federal order Class III price was announced by the USDA at $20.34 per hundredweight, up $1.72 from December, $5.17 above January 2024, and the highest Class III price since Oct. 2024. 

The futures report portend a February price at $20.34; March, $20.01; and April at $19.68. The USDA’s latest World Agricultural Supply and Demand Estimates report forecast a 2025 average at $19.70, up from $18.89 in 2024.

The Class IV price is $20.73, down a penny from December, but $1.34 above a year ago. USDA projects a $20.80 average for 2025, up from $20.75 in 2024.

The Feb. 4 Daily Dairy Report stated “In 2023, the United States exported $1.09 billion worth of dairy products to Canada out of roughly $8 billion in total dairy exports, while Canada exported $293.3 million in dairy products to the U.S.”

The DDR added “A White House memorandum issued January 20 directs stakeholders to begin studying the impacts of the United States Mexico-Canada Agreement (USMCA) on U.S. industries, particularly agriculture. Last week, Howard Lutnick, Trump’s pick to lead the Commerce Department, said Canada was treating U.S. dairy producers unfairly, implying the U.S. would seek more access to Canada’s dairy market when USMCA comes up for review next year.” 

Class III and Cheese futures initially traded sharply lower in response to the tariff spat and cash dairy prices took notice but the tariff postponements caused the markets to return to the main fundamentals. 

Cheese demand has strengthened in the Midwest, according to Dairy Market News, with a pickup in nearly all styles. Barrel suppliers say demand has settled down some, but is still active. A handful of regional processors were oversold. 

Cheese production is mixed in the West. Some manufacturers reported lighter schedules, others were either steady or busier. Retail cheese demand is steady to strong while food service is steady, according to DMN.

Cash butter continued its descent and had fallen to $2.40 per pound, lowest since June 26, 2023, after closing Friday at $2.4325.

Central butter makers point to cream availability and are turning down offers daily. Demand is subdued but not outside the seasonal norm, says DMN.

Cream is readily available in the West and multiples are lower. Sellers note demand as lighter or steady, with some hesitation from buyers.

Grade A nonfat dry milk was trading Thursday at $1.34, lowest since Aug. 30, 2024, and follows a Friday finish at $1.3450.

Dry whey had fallen to 59 cents per pound Thursday, lowest since Sept. 24, 2024, after finishing Friday at 64 cents per pound.

You’ll recall December milk production was down 0.5% from a year ago. The December Dairy Products report shows where the milk went. 

December cheese production totaled just under 2.0 billion pounds, down 0.7% from November, but 0.7% above Dec. 2023. Output for all of 2024 totaled 14.1 billion pounds, down 0.8% from 2023.

American output hit 470.2 million pounds, up 3.9% from November, but 3.9% below a year ago. YTD, at 5.6 billion pounds, was down 5.0% from 2023. Mozzarella totaled 417 million pounds, up 3.9% from a year ago, with YTD output at 4.7 billion pounds, up 2.8%.

Cheddar output climbed to 317.3 million pounds, up 3.5 million pounds or 1.1% from November output, which was revised up 3 million pounds. It was down 20.4 million or 6.1%, from a year ago. Cheddar output for all of 2024 fell to 3.8 billion pounds, down a hefty 7.0% from a year ago.

Butter production climbed to 198.1 million pounds, up 23.3 million pounds or 13.3% from November’s output, which was revised up 4 million pounds. It was up 4.4 million or 2.3% from a year ago. Output for 2024 hit 2.2 billion pounds, up 5.0% from 2023. Production was down 13.7% in California where bird flu continued to take a toll on milk output, impacting butter and cheese totals.

Yogurt totaled 375.9 million pounds, up 4.4% from a year ago, with output for the year at 4.8 billion pounds, up 4.5%. Hard ice cream, at 52.5 million pounds, was up 18.1% from 2023. YTD production hit 715.7 million pounds, up 2.0%.

 Dry whey output, at 69.0 million pounds, was up 4.2 pounds or 6.5% from November, but down 3.6 million or 4.9% from a year ago. Output for 2024 fell to 860.2 million pounds, down 8.3% from a year ago. Whey stocks grew to 60.2 million pounds in December, up 3 million or 5.3% from November, but down 9.1 million pounds or 13.2% from a year ago.

Nonfat dry milk output climbed to 129.8 million pounds, up 10.5 million or 8.8% from November, but was down 17.1 million pounds or 11.6% from a year ago. NFDM for all of 2024 came in at 1.6 billion pounds, down 11.8%. Stocks grew to 253.6 million pounds, up 16 million, or 6.7% from November, and were up a heavy 55 million pounds or 27.7% from 2023. 

Skim milk powder production, at 51 million pounds, was up 6.2 million pounds or 13.7% from November, but was down 13.2 million or 20.6% from a year ago. SMP for all of 2024 totaled 555.5 million pounds, down 20.0% from 2023.

Speaking in the Feb. 10 “Dairy Radio Now” broadcast, HighGround Dairy’s Curtis Bosma credited dairy farmer’s feeding and breeding practices for high butterfat for the increase in butter production. He also pointed to the shift away from powders to milk protein concentrates and other similar products that are higher on the value chain. He added that the jump in dry product stocks, even with the switch away from the production of those products, is a bit concerning. He concluded, warning of the volatility ahead as new cheese capacity comes on line and potential trade tensions rise with our trade partners and others.

Speaking of trade; December U.S. dairy exports were down 0.8% from Dec. 2023, driven by weaker shipments of dry whey and nonfat dry milk/skim milk powder (NDM/SMP). Whey powder exports fell 14.7%, lowest since July 2023, according to HighGround Dairy, due to sluggish demand from Southeast Asia and South Korea. NDM/SMP exports were even weaker, dropping to their lowest level since July 2019 as demand from Southeast Asia remained soft, says HGD.

Cheese sailings were up 21.2%, thanks to shipments to Mexico being up 28%. HGD says Mexico purchased a record volume of cheese in 2024, up 29% from 2023. Cheese exports for all of 2024 were up 17.5% from 2023.

Butter exports posted year-over-year growth for the seventh straight month but dipped slightly from November. Exports increased 7.1% over 2023, but remained below the record highs of 2021 and 2023. Butter imports set a new record, says HGD, surpassing those in 2023. On a brighter note, total U.S. dairy exports in 2024 increased 1% compared to 2023 but were lower than in 2021 and 2022. 

Another drop in the All Milk Price and higher corn prices pulled the December milk feed price ratio lower for the third month in a row. The USDA’s latest Ag Prices report has the ratio at 2.73, down from 2.88 in November, and compares to 1.97 in Dec. 2023. The ratio was above the 5-year average for the tenth month in a row, as the average ratio for December is 2.10,” according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri.

The All Milk Price averaged $23.30 per cwt., with a 4.46% butterfat test, down 90 cents from November, which had a 4.39 test, third consecutive month of decline, but was $2.90 above Dec. 2023 which had a 4.35% test. 

The national corn price averaged $4.23 per bushel, up 16 cents from November, but was 57 cents per bushel below a year ago. Soybeans averaged $9.79 per bushel, down 5 cents from November, and $3.31 below a year ago. Alfalfa hay averaged $165 per ton, down $1 from November, and $42 below a year ago.

The December average cull price for beef and dairy combined was at $121 per cwt., down $3 from November, but $20 above Dec. 2023, and $49.40 above the 2011 base average.

Quarterly milk cow replacements averaged $2,660 per head in January, up $60 from October, and $770 above Jan. 2024. Cows averaged $2,600 per head in California, up $150 from October, and $850 above a year ago. Wisconsin’s average, at $2,860 per head, was up $10 from October, and $800 above 2024.

The USDA’s annual Cattle Report showed just 3.914 million heifers as of January 1, down 0.9% from Jan. 2024, and the lowest level since 1978. The Department lowered its 2024 estimate by 108,000 to 3.951 million, according to the “Daily Dairy Report,” “Indicating that last year’s situation was more severe than previously believed. There isn’t much optimism for rebuilding the U.S. dairy herd any time soon either. Only 2.5 million heifers are expected to calve and enter the milking herd in 2025, 0.4% fewer than the start of 2024, says the DDR.

Milk production margins dropped for the third month in a row but remained at historically high levels and $1.02 per cwt. below November, according to Bill Brooks. “Income over feed costs in December were below $15 per cwt. for the first time since July at $14.78 and above the $8 per cwt. level needed for steady to higher milk production for the fourteenth month in a row.” 

Milk income over feed costs for 2024 were $13.45 per cwt., a gain of 8 cents per cwt. versus last month’s estimate. Income over feed in 2024 was above the level needed to maintain or grow milk production, and up $5.45 per cwt. from 2023.”

“Looking at 2025, milk income over feed costs (using Jan. 31 CME settling futures prices for milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $13.29 per cwt., a loss of 16 cents per cwt. versus 2024. Income over feed would be above the level needed to maintain or grow milk production, and down 80 cents from last month’s estimate, Brooks concludes.

Meanwhile, the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC reported “Dairy margins continued flat to slightly weaker over the last half of January with milk prices lower in deferred contracts while feed costs continued to advance on fund buying.”

“The butter market has been particularly weak,” the MW stated, “With CME spot trade sharply lower last week dropping to $2.45 per pound in heavy activity. Despite lower milk production, increased fat content in U.S. milk has caused butter production to swell along with cold storage stocks. According to FMMO data, the average butterfat test of milk in 2024 rose to 4.21% from 4.11% in 2023, implying that even though total U.S. milk production fell 0.5% last year, the amount of butterfat increased 1.9% to 9.482 billion pounds. Supplies of butter in Cold Storage at the end of December totaled 222.36 million pounds, up 8.7 million from November and 11.4% higher than December 2023. This was the highest year-end inventory since the pandemic disruption in 2020 when stocks swelled, and notwithstanding that year, the highest December figure since 1993.” 

Most products traded higher in Tuesday’s Global Dairy Trade. The weighted average was up 3.7%, following a 1.4% rise on Jan. 14. Volume fell to 52.6 million pounds, down from 61.3 million on Jan. 14, the lowest since July 16, 2024. The average metric ton price, crept to $4,296 U.S., up from $4,146.

North Asia purchases fell from last event and last year, according to StoneX. “Southeast Asia picked up a portion of the decline in volume, increasing from last year’s levels. Southeast Asia and the Middle East market share increased as a result of the decline in North Asia market share.”