Source: Iowa State University Extension and Outreach
The 2025-2030 Dietary Guidelines have been released, and they prioritize meat, dairy, and fresh produce, while minimizing “highly processed, refined carbohydrates” like white bread, cereals, cookies, and chips. The focus is on whole and nutrient-dense foods. The new guidelines most likely will significantly impact federally funded food programs, such as school lunches. But will they affect milk prices?
“At long last, we are realigning our food system to support American farmers, ranchers, and companies that grow and produce real food,” says Agriculture Secretary Brooke Rollins. “Farmers and ranchers are at the forefront of the solution, and that means more protein, dairy, vegetables, fruits, healthy fats, and whole grains on American dinner tables.”
The scientific report that preceded the release of the guidelines showed that reducing or eliminating dairy from the diet resulted in undernourishment in key nutrients for millions of Americans. These guidelines promote the consumption of dairy products that are essential for human health. Meanwhile, not all fats are created equal, and because the guidelines acknowledge this, dairy’s benefits are better reflected in this iteration of the guidelines.
“Now that the guidelines are out, the federal government will begin applying them across federal programs. We look forward to working with the entire nutrition community to ensure that dairy is best used to generate positive health outcomes for families across America,” says Rollins.
The new dietary guidelines are expected to potentially increase the price of some milk and dairy products due to a projected rise in demand for full-fat options; however, with the current oversupply of butterfat in the market, this is unlikely to be the case.
Specifically, the new 2025-2030 Dietary Guidelines for Americans make significant changes from previous iterations:
- Recommendation for full-fat dairy: For the first time in decades, federal nutrition guidance recommends consuming dairy products at all fat levels, including whole milk, cheese, and butter.
- Increased Demand: This shift in official guidance is a “significant watershed moment” for the dairy industry, potentially increasing consumer demand for full-fat products over low-fat or fat-free versions. Increased demand for these products could lead to higher prices at the consumer level if supply does not keep pace with demand.
- Influence on federal programs: The guidelines directly impact federal nutrition programs, including school meals and the Supplemental Nutrition Program for Women, Infants, and Children. Incorporating full-fat options into these large-scale programs could boost demand for butterfat, potentially affecting market prices.
- Focus on ‘real food’: The overall emphasis is on eating whole, less processed foods while limiting added sugars and refined carbohydrates. Dairy fits well into this “real food” framework, which may also broadly support the dairy market.
It is essential to note that a separate, more direct regulatory change, the new Federal Milk Marketing Order (FMMO) reforms, has already taken effect, and it is unclear if they will yield a more favorable price for fluid milk.
The key FMMO changes include:
- Reverting to the “higher-of” formula for Class I (fluid) milk pricing.
- Updating manufacturing allowances for products like cheese and butter, reflecting current processing costs to the benefit of manufacturers.
While the new dietary guidelines are a separate policy, they align with a generally positive market outlook for the dairy industry, potentially contributing to stable or increasing prices for certain dairy products generally leading to higher baseline prices for Class III/IV milk and potential shifts in premiums/discounts, while promoting whole milk can boost demand, creating a complex outlook of possible gains from component value but also risks for lower-component herds.
Each of the pieces of the marketing puzzle, the guidelines and FMMO reforms work together to affect producer prices.
On one hand, the FMMO formulas focus on:
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- Higher Composition Factors: USDA updated pricing to reflect that milk actually has more protein and solids now (due to better genetics/nutrition), increasing base prices for Class III (cheese) and Class IV (butter/powder) milk, which supports overall farm income.
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- Tighter Fat-Protein Ratio: The increase in protein with stable fat levels tightens the ratio, altering how processors pool milk and impacting premiums, potentially benefiting high-protein herds but challenging those with low-protein levels.
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- “Higher Of” for Class I: Using the “higher of” Class III or IV for fluid (Class I) milk pricing helps stabilize fluid milk prices, benefiting farmers by encouraging movement to higher value uses.
On the other hand, the new guidelines focus on promoting whole milk demand:
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- Increased Demand: Recent guidance and legislation (like the Whole Milk for Health Kids Act) encouraging whole milk in school lunches and general diets can boost overall demand for dairy, potentially raising farm-gate prices.
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- Value for All Fat Levels: Recognizing that dairy at all fat levels (including whole milk) fits into healthy diets helps processors and consumers, supporting dairy’s role and value, according to the International Dairy Foods Association (IDFA).
Together, they have the potential to shift market dynamics:
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- Cost vs. Value: While formula changes increase baseline prices, some worry that adjustments to processing costs (make allowances) might still penalize farmers.
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- Component Focus: Farmers with high-protein milk benefit from the baseline increase, while those with lower components might see less premium, requiring diet adjustments to maximize value.
These are just two of the factors affecting the milk market, and the global milk market is too diverse to point to them as major change agents; however, they will contribute. Today, dairy margins declined by five cents per cow per day, and milk prices overall were weaker, offset by lower soybean meal prices.
