The U.S. dairy market is experiencing dynamic changes, influenced by various factors ranging from international trade relations to evolving consumer behaviors. Recently, Katie Burgess, the dairy market advising director with Ever.Ag, offered an in-depth examination of these ongoing developments at the Oregon Dairy Farmers Convention in Salem, Ore. Her insights shed light on the potential trajectories for the dairy industry in 2025.
The Importance of Exports for the U.S. Dairy Market
A key takeaway from Burgess’s presentation is the critical role exports play in the U.S. dairy market. In 2024, while exports started off slowly, they ultimately achieved record cheese export months, providing a crucial buffer for maintaining milk prices. Notably, cheese exports hit an all-time high last year, signaling growing global consumer interest in American dairy products—a trend particularly crucial as domestic production increases.
“This is really good news that consumers around the world are finding value in American dairy products, because as we grow here domestically, that’s going to be the key,” she said.
Impact of Tariffs on Trade Relations
The imposition of tariffs by the U.S. on countries like Canada, Mexico, and China has stirred significant repercussions, with these countries preparing retaliatory tariffs on American dairy products. This development poses a considerable risk, especially concerning Mexico, which accounted for nearly 40% of U.S. cheese exports in 2025. Burgess expressed concerns about a potential decline in export volumes to Mexico due to higher consumer costs there, although milk powder exports remain unaffected by Mexican tariffs, offering some reprieve.
“We do think that our export volumes to Mexico could be subject to pulling back a bit as they get more expensive from a Mexican consumer perspective,” she says.
Investment in Cheese Processing Capacity
Investment in the U.S. dairy industry is another critical factor at play. Significant expansions, such as the Leprino plant capable of processing 8 million pounds of products daily and the Valley Queen expansion in South Dakota, are set to elevate cheese production capacity further. Burgess points out the possible consequences of this growth, cautioning that the U.S. may face an abundance of cheese if exports do not keep pace. This situation could necessitate an increase in domestic cheese consumption, which typically grows by 1-2% annually.
“If we can’t get the cheese exported, and we’re making a lot of it, it means we’re going to need to eat a lot more cheese,” she says.
Consumer Behavior Trends in a Shifting Economy
Amidst these industry shifts, consumer behavior is also evolving. As food inflation impacts U.S. households, there is a noticeable trend towards reduced eating out, with more people opting for home-cooked meals. This shift, observed since 2024, persists into 2025 and drives increased grocery sales.
“It’s part of a continued trend that we saw across 2024 less foot traffic into food service. Grocery sales looked pretty solid as people rotated to eating at home. And this has really continued here into 2025, I think, with the uncertainty in the economy right now,” she says.
Predictions for Milk Production in 2025
Looking forward, milk production is forecasted to rise this year despite previous contractions in supply, partly due to factors like HPAI in key states like California. However, the dairy sector faces a unique challenge as the expected number of dairy heifers calving in 2025 reaches its lowest point in over 20 years. This production increase will likely vary across regions with new processing plant capacities.
“So even though our forecast shows milk production will grow this year, I think it’s going to be kind of a mixed story that we expect milk to grow in spots with new plant capacity,” she shares.
Risk Management Amidst Uncertainty
Given the pervasive uncertainties symbolizing the current economic climate, Burgess emphasizes the need for rigorous risk management strategies. Over the last decade, Class III prices often surpassed $19 per hundredweight, but at least once each year, market prices dipped below $16 per hundredweight. For many, a breakeven point higher than $16 necessitates protective measures to manage risks when prices fall. As Burgess aptly notes, “Hedging is not gambling. Hedging is when we take risk away.”
As we navigate the milk market’s changing dynamics in 2025, stakeholders must remain vigilant and proactive. Strategic investments, diversification of export markets, and effective risk management will be essential strategies to harness opportunities and mitigate challenges within this complex and evolving industry landscape.
Your Next Read: A Resilient Comeback: U.S. Bovine Semen Industry Sees Growth in 2024
