What will shape the dairy industry in 2025? Are you ready for it?



In this episode of The Milk Check, we tackle the big question: what’s ahead for the dairy market in 2025? Spoiler alert: There’s no shortage of opinions—or uncertainty.






🐮 Heifer shortages vs. USDA projections: are we heading for a reality check?



🐄How will shifting cow populations reshape regional American production?



🧈 What is going on with butter? What's ahead for 2025?



🌏 Will export demand stabilize or shake up the market?






Our team debates critical factors impacting the year ahead, including herd dynamics, regional processing capacity, and export competition.



From farmers to Futures buyers, this is your go-to episode for staying ahead of the dairy market’s evolution.



🎙️ Listen now to gain insights about cows, cream, and commerce on this episode of The Milk Check.











Intro (with music):



Welcome to The Milk Check, a podcast from T.C. Jacoby and Company, where we share market insights and analysis with dairy farmers in mind.



Ted Jacoby, III (T3):



Welcome everybody to our January 2025 version of the Milk Check podcast. Today, we will do a bit of a market outlook for 2025, and I've got most of our traders on with me to share their thoughts on what might be coming down the pike. That would include my brother Gus, who runs our fluid group; Greg Scheer, who's head of our milk division; Joe Maixner, who handles our butter desk; Don Street, who does a lot of our analysis in terms of milk production, heifer supply numbers, cold storage, those kinds of things. Josh White, head of our dairy ingredients, runs our whey protein desk. Diego Carvallo, head of our international sales and runs our nonfat book; Jacob Menge, head of risk management; and Brianne Breed, head of our cheese group. Today, the group of us will get together and talk about the different segments of the industry and what we think is in store for us in 2025. So, thanks for listening. I think you'll enjoy this podcast.



We have been talking a lot internally about the heifer supply and the fact that there just may not be enough heifers to grow the milk supply, but I was talking to someone whose opinion I think pretty highly of the other day, and he told me that he knows of 60,000 cows that are going on new dairy farms in 2025, which makes me wonder if what we've been talking about with the heifer supply is true or if maybe the numbers we're getting from the USDA are wrong. Do you think the cows are really going to be out there? Do you think we'll be able to grow our milk supply in 2025, or do you think the shortage of heifers is real?



Greg Scheer:



Well, I think some areas may have a shortage of heifers. Obviously, some big farms have planned expansions that may not be counted in that number, but there are still tight supplies of heifers. Some of the bigger farms have their own replacements available. So, I do think it'll limit how much milk production can grow.



Gus Jacoby:



Yeah, it’s hard to argue with what Greg just said. I mean, the economics are there for Garmin to continue to go to beef, and therefore, we don't foresee the heifer supply growing, only shortening. Now, that doesn't mean that some larger farms that have some affiliations with calf ranches can't manage their heifer supplies as they need to grow into some new farms or current farms that require more production for new plant capacity coming on in their regions, but I don't think there's any doubt that we're going to have a limiting factor on cows that puts a lid on it.



To be clear, Teddy, we had a big influx of cows in the middle of the year when some new capacity came on in the southwest. We only ended the year with 20,000 cows up, including over 300,000 fewer cows culled. So, to keep the cow numbers relatively the same, we must continue culling fewer cows. We're just going to find out whether that's something we can get away with for the foreseeable future because the herd will certainly get older, and we'll see how that affects milk production, yields, solids, components growth, and so on.



Ted Jacoby, III:



So, I'm hearing from some of our traditional dairy economists that they think we can add as many as 100,000 cows this year. Is that high?



Gus Jacoby:



I think that's high, but let's say you have 100,000 come on, and we continue to cull 300 to 350,000 less than we did in 2023. It's a plausible scenario, although I don't perceive that happening. What I perceive is maybe another 20 to 50,000 cows increase. It will increase more in the areas around the new plant capacity. It will decrease less in other regions and continue to cull at very low rates because farm economics will be good enough for dairymen to do so. We'll lose cows in certain regions, but those regions are without plant capacity, so we'll still increase yields and components.



Ted Jacoby, III:



So, we've got new plants coming online in the I-29 quarter up in South Dakota, Minnesota, that area, and we've got new capacity in Kansas and down in the southwest. So, I'm assuming that's where we'll probably add cows. Where do we lose cows?



Gus Jacoby:



I think you'll continue to lose cows out West, California, Pacific Northwest, and Southeast. These are the regions where you continue to show that trend of cows exiting. Obviously, in those areas where new plant capacity comes on, you will see some increases because people are bracing for that and preparing for that.



Ted Jacoby, III:



So if we summarize kind of what we think about milk production, we're probably going to increase milk production and increase cow numbers in the upper Midwest, specifically, the I-29 corridor and in the Southwest, lose cows in the West, California in that area, which also means increased milk into Class III, decrease milk in Class IV, and then also we haven't touched on it, but if we're going to increase cow numbers without increasing necessarily the heifer supply, that means we've got older cows, which will slow down the component increases we've been seeing the last few years at the same time.



Gus Jacoby:



It's not like we're getting that much older. It's a small percentage that are older. Obviously, if a dairyman has the ability to get one more calf out of a cow, considering the beef price and the opportunity to gain some revenue there, there's an incentive for them to do that. There are dairymen out there who have the wherewithal to bring on heifers, more so than others, and those tend to be the folks in those regions where plant capacity is being added. Right? There are bigger farms there. A bigger question is focused on the northeast as we add a little bit of capacity there. I don't think those dairymen have access to the heifers like those in the southwest, in the western portion of the upper Midwest.



I think that while there are some dairymen that will build new farms in that region that I'm aware of, to counter that argument, I also think that area hasn't really been hit with the bird flu to the degree that other areas have yet, and that's a concern for me as we try to fill capacity in that region. So, there are some unknowns on the eastern side of our country. I think there are some limiting factors on how those regions will be able to get more cows.



Josh White:



Guys, I want to jump in, too, because we've been talking about this new plant capacity, and we've talked about it a lot over the past year, but those facilities are just now coming online. Generally speaking, from the moment someone decides to move forward with it to the moment they're commissioning milk through a new facility, it is two to three years, from the moment you're signing up to the moment you're actually making milk. The Same happens with a dairy's decision to breed heifers that return to the dairy herd. Before that animal enters the milking herd, you breed it; then you have nine months of gestation, 22 to 24 months before that animal's in the herd.



So you're making those decisions to invest in dairy for two to three years forward. They align with each other; they're linear. The decision to build a plant and the decision to expand herds are about the same. So we've talked about the plants that are coming on right now. I mean, there are a few of them that just have started taking milk over the past six months and some that we'll be taking in milk over the next six months, but it seems like we haven't had any major announcements. How many more announcements do we have for 2026 and 2027, or do we have an air pocket?



Ted Jacoby, III:



In terms of plant expansions?



Josh White:



Yeah, and then will that also result in an air pocket in dairy heifer decisions, especially giving compelling alternatives to take those animals to beef?



Ted Jacoby, III:



Josh, I think you make a really good point. Any new capacity that I'm hearing about that isn't going to be coming online in the next, let's call it 10 months. I'm not really hearing much beyond that unless it's plants that haven't even broken ground yet, and so we're probably talking 2028.



Josh White:



So, that might be the missing piece in this equation because we are outperforming milk expectations right now. Would all of us agree? I mean, from a component standpoint and an animal standpoint, we've been on this narrative that the heifers aren't out there. The beef market is so attractive that, at some moment, it will be very difficult to grow this herd. Yet we've found a way to do it, and many are projecting, at least for the rest of 2025, that we're going to continue to do so, and we're skeptical, skeptical about how we are going to continue to grow. How long can we continue to retain animals in the herd? What's going to happen as the herd gets older?



All of this matters, and for sure as material, but is it also the result of structural decisions made in 2022 and 2023 to expand dairy capacity,