We are setting up for an interesting and potentially volatile dairy market in 2025. We have the normal supply and demand drivers to contend with plus the unknowns around government policy, animal disease, a record amount of new cheese processing capacity coming online and changes to the Federal Milk Marketing Order pricing formulas. It’s always hard to write a long-term outlook, but it feels especially hard right now.
Let’s start with the milk supply. Animal disease issues have been a significant story on the supply side during 2024 and early 2025. First, bird flu made the jump to dairy cows in the U.S. and is continuing to spread in early 2025. Then blue tongue showed back up in Europe and dented milk production there over the summer. Then in mid-January foot and mouth showed up in Germany. As of writing there is only one case of foot and mouth confirmed in Europe. If the spread is contained, the impact on milk supply will be minimal, but if it spreads widely, we could see a lot of dairy cattle destroyed to stop the spread.
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