It looked like good news in USDA’s September forecast: near-record net farm income for 2025. But Danny Munch, American Farm Bureau Federation (AFBF) economist says that’s not necessarily the case. During the Dairy Hot Topics seminar, hosted by American Dairy Coalition at World Dairy Expo 2025, he explained nearly a quarter of that income is expected to come from government payouts.
“It is a little bit misleading of a forecast when you say, ‘Oh, this looks pretty good this year for 2025: near record net farm income,’ when that $41 billion should be looked at as filling in gaps that many farmers faced in prior years,” Munch says.
Munch calls this inconsistency the tale of two farm economies. The livestock sector, including dairy, is hanging on, while row-crop margins disappear. Dairy producers are also seeing a difference in their milk checks, and Munch sheds some light on where that’s coming from.
Cheese Storage As An Indicator
“There are some fascinating things happening in terms of our cheese product demand and further-processed product demand,” Munch says.
For him, cheese storage metrics can help inform dairy product demand and predict where the prices might go. As of right now, food service demand and steady buying from Mexico and Korea are keeping U.S. cheese disappearance and exports strong.
“Americans are continuing to eat a lot of cheese, and cold storage has remained quite flat,” Munch says. “Those are fairly good metrics in terms of price. When exports and domestic disappearance start to stabilize or tick down, or domestic storage starts to tick up, then you’ve really got a problem for your prices.”
Make Allowances And Milk Check Transparency
June’s federal order updates raised the make allowance, or the estimated cost of processing milk into cheese, butter, powder and whey. This effectively reduced the minimum price paid to farmers. Processors say the increase reflects higher costs, but farmers are questioning the reasoning, noting the billions that have already gone into plant investments.
At the same time, dairy producers have been earning less than their milk’s true value because federal formulas haven’t kept pace with rising component levels. USDA plans to update those composition factors, but implementation is delayed until December 1, leaving farmers waiting on the positive change while the price-reducing updates took effect immediately.
The “One Big Beautiful Bill Act” requires USDA to conduct a biennial processor-cost survey – a key step toward transparency.
“There’s a lot of hope with the survey,” Munch says. “Our dairy farmers are looking for transparency in how their prices are being set, so we’re looking forward to USDA putting out how that will look.”
As a result of unclear line items such as “market adjustment” or “PPD,” both AFBF and ADC have a renewed interest in mandatory transparency for cooperatives and proprietary processors alike.
Munch says these line items from some handlers blur lines between regulated minimums and retained earnings, making it hard for farmers to see the real breakdown.
“When you are regulated under a governance system, you as a farmer want to trust that what you’re being paid and the terms on your milk check are consistent with regulations under that federal and government system,” Munch says.
Munch encourages farms to review milk checks carefully each month. If anything is unclear, redact any personal information and share the statement with ADC or your state Farm Bureau.
The Impact of Trade Rhetoric
When it comes to the global dairy market, Munch warns global perception and port performance matter as much as price.
“When a country stops buying from you because they don’t like your rhetoric, that’s real money,” he says. His point is demonstrated by Canada’s pullback on U.S. wine imports after political disputes.
Even with a willing international buyer, the U.S. faces significant logistical hurdles in getting dairy inventory out of the country. Munch notes there isn’t a single U.S. port that ranks in the world’s top 50 for efficiency, and there’s little chance to catch up to the automation already in place at leading ports overseas.
Why Engaging Makes a Difference
In closing, Munch encourages farmers to simply engage.
“The people writing the rules don’t always know how milk pricing works,” he says. “Sometimes you have to explain it like you’re talking to a toddler.”
That means sharing stories is more important than sharing data. Fair pricing, transparent reporting, functional ports and positive rhetoric have a direct connection to your livelihood, and explaining it in the right way could have a real impact on which side of the two farm economies you’ll land.
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