U.S. feed supply should be more than adequate in 2025, if the weather cooperates. Given the expected lower feed prices, dairy farm margins should continue to improve in 2025.
Expect a big 2025 corn crop after a “normal” 2024 crop
In mid-February, the May 2025 corn futures contract rallied a dollar from its August 2024 low. However, the futures price gave back 30 cents from the mid-February highs immediately following the USDA Agricultural Outlook Forum on February 27, 2025, with planted corn acres for 2025 forecast at 94 million (up 4%, or more than 3 million acres, compared to 2024). While the December 2025 new-crop corn futures contract has followed direction with the May 2025 futures contract, it has had more muted rallies and corrections, as the market has been anticipating a larger 2025 acreage number.
In August 2024, the USDA initially estimated a record yield of 183.1 bushels per acre (bu./ac.) for the 2024 crop, but revised January and February 2025 estimates to show yields pegged at 179.3 bu./ac. — closer to the 10-year average trendline yield growth of more than 2 bu./ac. per year. Given the forecast acreage improvement, corn stocks-to-use will rise to just shy of 13%, fueling the USDA’s forecast for the average farm price paid to farmers in 2025 at $4.20 per bushel, down nearly 4% compared with 2024.
Other major crops are currently experiencing lower prices at or below the cost of production. The USDA Agricultural Outlook Forum’s estimated acreage for the 2025 crop year included 84 million soybean acres, a decline of 4% from last year; 47 million wheat acres, a bump of 2%; and 10 million cotton acres, a drop of 11%. With the case made for strong corn acres, the December 2025 contract may resist reaching the $5 per bushel threshold.
Domestic and global demand for corn
Domestic demand for corn has been strong. Weekly ethanol production has outperformed most weeks compared with last year and feed demand has increased. The USDA forecasts an increase in use of nearly 150 million bushels in 2024, as of the February update.
On the global stage, corn production has continued to tighten. While U.S. corn total supply was relatively flat from 2023 to 2024, the USDA has reduced global output by 7 million metric tons (MMT) and increased demand by 15 MMT. Outside the U.S., the Russia-Ukraine conflict has lowered their corn production by nearly 25% or 9 MMT.
The top corn customer for the U.S., Mexico, also suffered nearly 20% lower corn production in 2023 (down almost 5 MMT compared with 2022) due to drought conditions. Mexico will likely be relying on imports for at least the first half of 2025. Additionally, drought conditions look to be emerging again this year. If tariffs are not an issue, U.S. corn exports to Mexico should stay strong. The U.S. has also seen nine more countries purchasing corn this year. If the pace continues, corn prices should stay higher throughout the summer.
Other feed ingredients
We continue to see strong weekly ethanol production this year, and the USDA forecasts flat growth for the 2025 crop year. Production of dried distillers grains (DDGS) has increased along with ethanol, up 7% or 22 MMT, in 2024 compared with the prior year. According to the USDA’s Foreign Agricultural Service, in 2024, DDGS exports accounted for 50% of demand, up 12% versus the prior year. Mexico was the U.S.’s largest export partner for DDGS. If trade flows are disrupted for DDGS, this would be positive for lower prices domestically.
Burdensome production and carryover stocks of domestic soybeans will be supportive of increased U.S. crush and meal supply throughout 2025, according to the USDA. Four new soybean crushing plants began operations last year. According to the National Oilseed Processors Association, U.S. soybean processors crushed a record number of soybeans in December 2024, and the January 2025 crush was almost 8% larger than a year earlier.
According to the USDA's recent supply and demand estimates, a larger crush will contribute to a 24% decline in soybean meal prices for the 2024-2025 marketing year, with an average full crop-year price of $310 per short ton. The USDA forecasts prices will remain flat for this coming crop year. Throughout 2025, soybean meal exports will be pressured by increased global competition, which would further support lower domestic prices.
In 2024-2025, the U.S. is expected to consume nearly 5 MMT of canola meal for feed. The U.S. produces only 25% of its canola meal consumption, relying on imports for the remaining 75% of supply — all of which comes from Canada. Should canola meal be subject to a sustained tariff, expect a steep climb in prices.
Impact on milk margin over feed costs
Milk supply is beginning 2025 in a position of slow growth, continuing the pattern of the past couple of years and setting the stage for modest milk price strength. There is potential for volatility in milk prices, particularly with any disruptions to exports, but low feed costs will leave some breathing room in milk-feed margins.
Bottom line
With expectations for the All-Milk price to average above $22 per hundredweight for 2025, and feed costs holding, dairy farm profitability looks to improve upon the average income-over-feed-cost margin in 2024.
