US milk output closes the year strong note amid margin pressure

US milk production ended in 2025 with a strong supply growth, with herd expansion and rising yields driving production higher across most regions. Annual volumes also closed firmly above last year’s level. Yet behind the impressive output figures, short-term and structural challenges remain. Falling milk prices and tightening farm margins are steadily wearing down incentives for expansion, while replacement dynamics are affecting the long-term outlook. Meanwhile, the seasonal risk of winter disruptions is becoming increasingly concerning for the sector.Milk production in the 24 Selected States of the United States reached 8.54 million tons in December. This represented a 4.6% increase over the previous year, continuing the strong momentum in milk production observed across the country throughout the year.Growth was driven both by an increasing number of dairy cows in the herd and by improved yields per animal. The US dairy herd expanded by 2.5% year-over-year to 9.14 million heads, while milk yields increased by 2.08% to 934.4 kilo per cow on average.At the state level, milk output expanded across most producing regions. In December, the most relevant contractions were observed in Washington (-6%), New Mexico (-4.9%), Pennsylvania (-2.44%), and Illinois (-1.42%). These contractions were more than offset by a strong growth in production in the rest of the US, especially in California, where production increased by 9.6% to 1.58 million tons. California’s output recovery is likely associated with a recovery from the disruptions experienced a year earlier due to Avian Influenza.The US milk output totaled 100.91 million tons throughout the whole year, a 2.6% increase compared to 2024. The notable output expansion observed in Idaho (+6.9%) and Texas (+6.8%) was essential to the national growth, although were partially offset by a significant contraction in Washington (-6.5%). Overall, the US production environment was supportive, underlined by herd growth and stable yield improvements.Herd growth may not be sustainableThe growth of the dairy herd was an essential driver of the growth in the US milk output, even as the whole US cattle inventory declined in 2025. That said, the expansion of the milking herd does not consider the tight replacement inventories in the country. The availability of replacement heifers is still restricted, in part due to breeding strategies that favor the production of beef-on-dairy. While this approach has resulted in the growth of the dairy herd and favored milk output, this increases the share of older cows within the herd.As a result, the current growth strategy is increasingly dependent on maintaining older animals, instead of sustained structural growth of the herd. This could have an effect on the efficiency of production in the medium and long term.Output weighs on market pricesAccording to the United States Department of Agriculture, the US milk prices averaged $19.7 per hundredweight (cwt) in December, reflecting a 1.5% decline compared to the previous year and a substantially weaker level compared to earlier price peaks. Annual declines were reported across all 24 Selected States, with Minnesota (-11.9%) and South Dakota (-14.7%) showing relatively greater resilience. Meanwhile, Arizona (-29.9%) and Colorado (-26.5%) experienced the sharpest declines.The lower milk prices have translated into weaker margins for farmers. The milk-to-feed price ratio (16% protein) reached 2.38 in November, declining 0.8% over the previous month and 17.6% over the previous year.This indicates a shift away from the more favorable margin environment observed earlier in the year. As profits tighten, the incentives for farmers to further expand their herd or to invest are reduced.Potential effects of extreme weather conditionsWeather conditions remain a short-term risk factor as the sector enters 2026, as the US faces severe winter weather. A major winter storm bringing snow, ice, and extreme cold temperatures could disrupt activities such as feeding, transport, and operations. The extreme weather conditions could influence feed availability, cow comfort, and farm logistics, potentially reflecting on lower milk yields and increased farm costs in the short term. Overall, the US dairy sector closed in 2025 with a strong production footing. Yet, most signals indicate a slowdown in growth, deriving from price pressures, tighter margins, and structural constraints.