Dairies are entering 2025 in a much stronger position than they were a year ago, and all indications point to much stronger returns for dairies in the coming year. Feed is inexpensive and readily available. Western dairy feed costs dropped by more than 20% in 2024, with hay prices at their lowest levels in the past four years. Despite downward pressure on milk prices throughout 2024 Q4, cheese and butter prices have steadied since December, with milk prices likely to follow suit. Notwithstanding lower milk prices during Q4, margins for the period are still expected to be the highest in the last decade for most producers. Dairy margins for Q1 of 2025 are projected to be in the profitable given stronger milk prices and low feed costs.
Highly Pathogenic Avian Influenza (HPAI) continued to slow national milk production. Since November, more than 700 California herds have been infected, leading to a record 9.2% year-over-year drop in the state’s November milk production. California’s December milk production numbers will likely show an even sharper decline. In response, the Governor of California declared a state of emergency to provide funding and resources to combat the spread. In AgWest’s territory, HPAI has been detected in California, Idaho, and Nevada so far and it is likely to spread to other states in 2025, causing temporary drops in milk production. To identify HPIA cases faster and limit spread of the virus, USDA has mandated bulk testing of milk supplies starting Dec. 16, 2024. USDA has created Financial Assistance Programs to help offset the cost of testing and milk losses.
Profitability
Dairy: Slightly profitable - Neutral 12-month outlook
While cheese plant capacity and strong consumer demand for dairy products support prices, global competition and potential market volatility pose headwinds to profitability. The ongoing pull of dairy and dairy-cross cattle to feedlots is slowing the expansion of dairy herds.
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