June is National Dairy Month, a time to celebrate dairy producers while recognizing the challenges they face on the horizon.
U.S. milk production rose for the fourth consecutive month in April, up 1.5% year over year. This growth has been driven by improved producer margins and expanded processing capacity. However, challenges loom for producers as strong beef prices have reduced the availability of replacement heifers. As a result, many dairy producers are holding onto older, less efficient cows that would typically be culled. This could lead to longer-term productivity issues if herds are not refreshed with replacement heifers.
Concerns over Highly Pathogenic Avian Influenza (HPAI) have largely faded into the background, despite its continued prevalence and predicted heightened lethality during excessive heat. Idaho currently leads the nation in reported cases in the last 30 days, but the impact on producers has been less severe compared to the initial outbreak, with milk production continuing to rise. In California, milk production has steadily improved each month following a particularly challenging HPAI outbreak in late 2024.
The Federal Milk Marketing Order reform went into effect on June 1, bringing significant changes for western dairies. Key updates include increased processor make allowances, Class III payments now being derived solely from block cheddar prices, and an increase in butterfat recovery levels for the Class III formula. While designed to create greater transparency across the pricing system, for most western producers, these changes are expected to result in smaller milk checks. Some of these losses may be offset in December when component levels will be standardized in milk pricing formulas.
Profitability
June 18, 2025
Dairy: Slightly profitable - Neutral 12-month outlook
Dairy margins have improved over the past year due to expanded processing capacity, stronger milk prices and lower feed costs, but reforms to milk pricing formulas are likely to hurt prices received by western dairies.
