2025 Dairy outlook: Cautious optimism amid trade uncertainty

The 2025 outlook for the dairy sector is a little murkier than last year. Slowing and uncertain population growth is likely to slow the growth in dairy product demand and producer prices are expected to remain relatively flat. However, demand is still increasing, and feed costs have eased from their highs of the last few years. We are projecting profitability (on a $/hl basis) to decline relative to 2024, but margins should remain better than the five-year average. The elephant in the room is trade and what the new U.S. administration means for the dairy sector. We discuss it all in our 2025 dairy outlook.

Increased production to drive revenue bump

One thing we know for sure is there will be a very slight decline (-0.02%) in the farmgate milk price. Each year, the Canadian Dairy Commission (CDC) conducts a cost of production survey to understand the average cost of producing one hectoliter (hl) of milk. The results are one of the inputs into determining what adjustment (if any) should be made to farmgate prices every February. By the time the survey results are published they are somewhat dated, so to get a better understanding of more recent costs, the data are indexed (adjusted) to reflect conditions up to August. It’s these indexed values that are used in determining the recommended price changes. The latest study showed that, while inflation was still high last year, feed costs were lower which drove total costs of production lower (Table 1).

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