Optimism remains for 2025

At the start of 2025, market sentiment and supply and demand risks are tilted toward the downside, but I think we’ll see decent milk prices and margins for dairy farmers despite the risks.

The industry is concerned about new cheese capacity coming online, milk production growing, mixed signals on domestic demand, and the possibility of trade wars that could dent exports. On the bullish side of the ledger is the continued tight supply of heifers, relatively bullish global butter and cheese markets, and the fact that trade disputes had only mild impacts on U.S. dairy prices in the past.

The production picture

One of the biggest points of discussion over the past year or more has been the new cheese plant capacity that would be coming online between the fourth quarter of 2024 and the middle of 2025. If all new plants ran at full capacity and all existing plants continued to run at their current rate, we would see U.S. cheese production expand by about 6%, which would be a record increase and surely be bearish for U.S. prices.

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