The latest USDA Livestock, Dairy, and Poultry Outlook (July 2025) offers a detailed snapshot of the U.S. dairy industry, highlighting shifting product prices, herd expansion, rising production, and an evolving trade environment. Below are key takeaways shaping the current market and forecasts through 2026.
📈 Market Snapshot: Prices Adjust Across Dairy Categories
According to the USDA National Dairy Products Sales Report, wholesale dairy prices as of early July showed:
-
Butter: Rose from $2.45 to $2.57/lb (+$0.12)
-
Nonfat Dry Milk (NDM): Increased to $1.28/lb
-
Dry Whey: Rose slightly to $0.56/lb
-
Cheddar Cheese (40-lb blocks): Dropped to $1.83/lb (-$0.10)
Globally, butter prices surged in Oceania ($3.59/lb) and Europe ($3.90/lb) amid low milk supply. However, Cheddar and skim milk powder prices declined in Oceania due to seasonal slowdowns.
🐄 Production and Herd Growth
In May 2025, U.S. milk production reached 19.93 billion pounds, up 1.6% from the previous year. Key factors:
-
The national herd grew to 9.445 million cows, 114,000 more than May 2024.
-
Milk yield per cow increased by 7 pounds to 2,110 pounds.
-
High-producing states like Texas, Idaho, and Michigan continue to lead expansion, driven by new processing capacity.
-
Milk fat output rose 3.3%, and skim solids grew 2.1%.
💸 Dairy Margins and Feed Costs
Margins tightened slightly. The Dairy Margin Coverage (DMC) program reported a May 2025 margin of $10.40/cwt, down $0.12 from a year earlier, largely due to a $0.70 drop in the all-milk price outpacing a $0.58 decline in feed costs.
Meanwhile, cow culling remains lower than historical levels, signaling producers are extending the productive life of older animals due to high replacement costs and tight heifer supplies.
🌎 Trade Trends: Record Cheese Exports and Competitive Pricing
-
Dairy exports on a milk-fat basis soared to 1.34 billion pounds in May 2025, a 25.3% increase year-over-year.
-
On a skim-solids basis, exports dropped 6.2% to 3.90 billion pounds, with declines in dry whey and lactose.
-
Cheese exports hit a record high for a single month.
-
Imports of cheese and butter fell, while infant formula imports rose.
Competitive U.S. pricing, especially for butter and cheese, has helped expand market share globally despite supply constraints in other export regions.
🍽 Domestic Use and Foodservice Demand
U.S. domestic use showed mixed results:
-
On a milk-fat basis, use fell 1.7% to 18.3 billion pounds in May.
-
Skim-solids use rose 5.4% to 16.6 billion pounds.
-
Cheese, butter, and whey protein concentrate all saw increased domestic demand.
The Restaurant Performance Index showed growth from March to May 2025, suggesting recovering demand from foodservice, especially for high-fat dairy products.
🔮 Forecasts for 2025 and 2026
Milk Production:
-
2025 forecast revised up to 228.3 billion pounds (+0.5 billion)
-
2026 expected to rise to 229.1 billion pounds
All-Milk Prices:
-
2025: Forecast at $22.00/cwt (+$0.05)
-
2026: Forecast at $21.65/cwt (+$0.35)
Product Price Forecasts (2026):
-
Butter: $2.535/lb (+$0.055)
-
NDM: $1.235/lb (+$0.02)
-
Dry whey: $0.515/lb (+$0.005)
-
Cheddar cheese: Unchanged at $1.810/lb
Class III and IV Milk Prices:
-
2025 Class III: $18.50/cwt (↓ $0.15); Class IV: $19.05/cwt (↑ $0.20)
-
2026 Class III: $17.85/cwt; Class IV: $18.60/cwt
📚 Learn More
Livestock, Dairy, and Poultry Outlook: July 2025 Download PDF
Dairy forecasts Download XLSX
Conclusion:
The U.S. dairy industry is currently benefiting from herd expansion and steady productivity gains, while export strength and cautious domestic growth shape the market outlook. With stable margins and global demand remaining strong, the industry is poised for modest growth through 2026—though cheese markets may face headwinds from subdued domestic consumption.
