Despite Challenges, Dairy Herd and Milk Production Continue to Grow

amy55735
May 8
1 min read

The T.C. Jacoby Weekly Market Report Week Ending May 2, 2025

Despite the challenges, the national dairy herd and milk production continue to grow. In addition to rising year over year output, the spring flush is also driving ample milk availability in most parts of the country. Bottling demand is stable to softer and freeing up plenty of milk for processing. Spot milk for manufacturing could be obtained for about $5 under Class III prices in the Central region this week – significantly lower than the $1.50 discount available at the same time last year.

Ailing domestic consumption and dimming export prospects have weighed on dairy commodity values, and in turn, milk prices. The April Class III price was announced this week at $17.48/cwt. while Class IV came in at $17.92/cwt., representing the first time since October 2021 that both prices were below $18. Modest relief may be on the way as futures markets currently predict that both Class III and Class IV values will improve slightly later in the year.

Bowing to the pressure of lower milk prices, the milk margin over feed cost reported by the Dairy Margin Coverage (DMC) program slipped to $11.55/cwt. in March. This represented a decrease of $1.57/cwt. compared to prior month and more than a $4/cwt. decline versus the peak margin obtained in September of last year. Though margins are still soundly above the $9.50/cwt. threshold at which the DMC program begins to issue payments, the decline is nevertheless an indication that milk prices are getting worryingly close to the cost of production for many producers.

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