Things are looking up for U.S dairy, with steady domestic demand and robust exports. Dairy farmers are responding with increased milk production.

Production was up — albeit only slightly — in October year over year even with lower milk production in California due to bird flu, said Dustin Wilson, commodity market analyst with StoneX Group.

It was also up slightly in November, according to USDA.

Considering the increase in milk components, which determines how far the milk can be stretched in making products such as cheese, the U.S. is really turning on the faucet, he said.

“We’ve had two down months, year-over-year comparison, since January 2019. And we’re doing it, for the most part, with less cows,” he said.

Herd growth

But the U.S. has recently started to increase the dairy heard, adding 46,000 cows in the last couple of months.

“That’s been a good sign as well, and we expect that herd to continue to grow,” he said

Herd growth will come mostly from holding back more heifers and not so much from buying replacement heifers, he said.

The U.S. is also adding a lot of processing capacity in 2025 and added a lot in 2024. The increased capacity includes about 400 million pounds of cheese.

“The question is, could we handle an extra 400 million pounds of cheese … in a year,” he said.

Good demand

He thinks so because “demand is pretty dang good.” U.S exports have been growing the last three and a half years.

Cheese demand is particularly important to Idaho where about 60% of the milk goes into cheese. Domestic cheese demand has stayed steady, but “exports have been killing it.”

They’re up almost 20% in 2024 through October year over year.

With steady domestic demand and phenomenal export demand, U.S. cheese stocks are down about 100 million pounds compared with the last few years.

Continuing the trend line of domestic demand and exports, there’ll be a need for roughly another 300 million pounds of cheese.

“There was a plan when these processors put all this cheese manufacturing into place,” he said.

Cheese connection

Idaho has been increasing milk production and dairy cow numbers as well and is on pace with cheese production. The average Idaho dairy farmer got paid about $25 a hundredweight for milk in November, and feed costs have been cheap, he said.

Feed costs could go up a little, but he thinks they’ll stay fairly cheap.

“Things should be looking up … for the dairy farmer,” he said. “And we expect in 2025, it should stay fairly positive as well.”

Nationwide, margins between the milk price and feed costs are looking pretty good at more than $14.50 cwt. to start the year.

They probably peaked in September when they were north of $18.50 cwt, but StoneX expects reactionary expansion depending on market dynamics.

“Things are looking good for the dairy industry. Our demand is sticking around, staying steady enough at least domestically, and we are really good, especially here in Idaho, about making quality products that people want,” he said.