Dairy farmers are riding a wave of market uncertainty in 2025, with trade battles, feed price swings, and booming cheese production shaking up the industry. Experts Sarina Sharp and Katie Burgess break down the top trends shaping the year ahead.
Dairy farmers are facing a fast-changing market in 2025, with trade wars, tariffs, and export shifts shaking up the industry. From fluctuating feed costs to unpredictable milk prices and new cheese processing capacity, one thing has become clear in the first quarter—staying flexible is key to managing risk and finding opportunities.
Sarina Sharp, a dairy market analyst for the Daily Dairy Report, emphasizes the challenges ahead.
“These are pretty wild times in markets of all kinds, and the dairy markets are not immune from that,” she says.
Sharp, along with Katie Burgess, director of risk management at Ever.Ag, breaks down the top five market trends dairy farmers should keep an eye on for the rest of the year.
Feed Costs: An Opportunity to Lock in Prices
With spring planting on the horizon, feed costs have been an area dairy farmers are switching their focus towards. According to Sharp, corn acres are expected to increase while soybean acres decline.
“Corn should be relatively inexpensive, but in these wild markets, I would advise dairy producers, when they do see prices start to fall back, to just start buying some of next year’s corn, get those prices locked in,” she suggests.
Soybean and soybean meal prices are currently at multi-year lows, creating an opportunity for producers to secure affordable feed.
“I am relatively bearish on the soybean markets, but we do have lower acres,” Sharp adds. “It’s wise to start buying some soybean meal now while prices are favorable.”
Feed costs are one of the largest expenses for dairy producers. While 2025 is expected to bring opportunities for cost savings in feed, farmers should remain cautious about market volatility. Weather conditions, global trade policies, and geopolitical issues can still disrupt these projections. Farmers who secure their feed needs early may have a competitive edge if markets become unpredictable later in the year.
Class III Milk Prices: A Risk of Decline
Milk prices, particularly in the Central Plains, are another area of concern. Sharp warns that Class III milk prices could see a significant setback.
“We are starting to see cow numbers and milk production climb, and a lot of that milk is going into cheese, particularly cheddar, which is the price that determines our Class III milk” she notes.
The fate of cheese exports will also play a crucial role in determining milk prices.
“We’ve got a lot of uncertainty on the trade front. We need big cheese exports if we’re going to make more cheese. If we start to lose those, then the cheese and Class III prices will probably drop back,” Sharp explains.
Dairy farmers who rely on Class III milk pricing will need to keep a close eye on cheese demand and exports. With more processing capacity coming online, increased milk production could lead to an oversupply if consumer demand does not keep pace. Risk management strategies such as hedging and forward contracting may help farmers mitigate potential losses.
Cheese Production: A Pivotal Year Ahead
Burgess highlights the critical role of cheese exports in 2025.
“For this year, exports are going to be so important because we have increased processing capacity,” she explains. “By the end of the year, we will have significantly more cheese production, so we need consumers to help us eat all this cheese.”
However, domestic cheese demand has shown signs of weakening.
“It’s getting really expensive to go out to eat, so restaurant traffic has slowed,” Burgess adds. “Grocery store cheese sales remain steady, but consumers are looking for value rather than high-end specialty products.”
With domestic demand struggling, strong cheese exports will be crucial to stabilizing the market. Adding to the uncertainty are potential trade disruptions.
“Last year was a record year for exports,” Burgess notes. “We’re off to a good start in 2025, but where we go from here will be a major driver of prices.”“It’s getting really expensive to go out to eat, so restaurant traffic has slowed,” Burgess adds. “Grocery store cheese sales remain steady, but consumers are looking for value rather than high-end specialty products.”
With domestic demand struggling, strong cheese exports will be crucial to stabilizing the market. Adding to the uncertainty are potential trade disruptions.
“Last year was a record year for exports,” Burgess notes. “We’re off to a good start in 2025, but where we go from here will be a major driver of prices.”
This increased production capacity in the U.S. dairy industry could be a double-edged sword. While more processing plants can help create new market opportunities, it also means there is more supply to move. If global trade disputes or economic downturns reduce demand for U.S. cheese, the industry could face a supply glut, further pressuring prices.
Beef Markets: Strength with Some Vulnerabilities
Dairy producers have been benefiting from historically high beef prices, as the beef-on-dairy trend continues to add value to calves.
“I think something that’s really hopeful for dairy producers is all the income that they’re getting from the beef market,” Sharp says. “When they sell their cull cows and crossbred calves to the beef industry, it just puts a floor under the value of every animal on the farm. That’s really helpful for their bottom line, especially if we start to see the feed versus milk margins start to shrink. Having that higher beef income can backstop some of what might be red ink on the farm.”
Read More: India Tops Global Milk Production, Sets Ambitious Target
While prices are likely to remain elevated for the foreseeable future, there are some risks on the horizon.
“If we enter into a recession, beef prices are already so high that consumers might start to feel stretched,” Sharp warns. “They may be less willing to pay top dollar for beef, which could cause markets to inch down from their lofty levels.”
Milk Supply and Risk Management: A Strategic Approach
Burgess also points out that U.S. milk production is rising.
“In February, milk production was up 1%, the strongest growth we’ve seen in a while,” she says. “Production is growing in areas with new processing capacity, but there’s also some uncertainty with ongoing animal health concerns like influenza.”
Given these moving pieces, Burgess stresses the importance of risk management.
“We don’t know what’s going to happen but protecting your bottom line through strategic planning will be critical,” she advises.
With increasing milk production, farmers should consider the impact on milk prices and the importance of risk management tools such as Dairy Margin Coverage (DMC), Dairy Revenue Protection (DRP) and Livestock Gross Margin (LGM) insurance. These programs can help mitigate price swings and provide stability in an unpredictable market.
Looking Ahead
With so many variables in play, Sharp and Burgess advise dairy farmers to be proactive in their financial and operational strategies throughout the remainder of the year.
“There’s a lot of uncertainty, but smart purchasing decisions, especially on feed costs, and keeping an eye on export markets will be key factors in staying profitable through 2025,” Sharp says.
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