Dairy operations are showing improvements in milk production following disease-related reductions, even as concerns about tariffs weigh on markets.
January's increase in national milk production highlights the recovery of western dairy herds from Highly Pathogenic Avian Influenza (HPAI). National milk production rose for the first time since October, up 0.1% year-over-year. This modest rise indicates HPAI has passed through California, which had been weighing down overall U.S. production. Although California's January production was still 5.7% lower year over year, January's year-over-year milk production drop is an improvement from previous months, signaling herd recovery. Idaho also saw milk production gains, increasing by 6.4% in January.
The announcement of tariffs has caused steep price downturns in dairy markets, posing risks to the long-term outlook for dairy profitability. Producers need strong milk prices to maintain recent profitability. While lower feed costs help, they vary by region. In California, feed costs are expected to rise in 2025 due to Sustainable Groundwater Management Act (SGMA) pumping restrictions. Producers may need to reconfigure cropping plans to optimize water use, impacting feed costs. Across the West, hay and corn silage prices are discouraging plantings. Producers should explore risk management options, and assess feed sources and costs to mitigate volatility.
Profitability
March 12, 2025
Dairy: Slightly profitable - Neutral 12-month outlook
Profitable milk prices and a tight supply of replacement heifers have provided tailwinds to dairy profitability. However, current market volatility will pose challenges.
