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United States Department of Agriculture

Dairy Outlook 

Thursday, February 24, 2022
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Agricultural Outlook Forum 2022 Presented: Friday, February 25, 2022

OUTLOOK FOR U.S. DAIRY

Carolyn Liebrand

Agricultural Economist

Agricultural Marketing Service-Dairy Program, USDA

The U.S. dairy sector entered 2021 still in flux following the extraordinary events brought about 

by the COVID-19 pandemic. As the virus mutated into its variants, the economic shock 

stemming from the first year of reacting to the pandemic reverberated throughout 2021. There

were labor issues, logistical challenges and rising inflation. COVID cases and quarantine 

requirements caused labor deficiencies in dairy manufacturing plants, where some plants had to 

forego production runs due to inadequate staffing. The labor issues factored in the difficulties in 

the trucking industry and at the ports, which contributed to the rising freight rates and logistical 

challenges. The congested dynamics at the ports and in transit hindered efforts by dairy 

exporters. Rising costs of inputs countered the increase in milk and dairy product prices, 

impacting producer and manufacturer margins. 

Thus, doing business in 2021 was complicated and challenging. Yet in the face of uncertainty 

and turmoil in the economy, the dairy industry succeeded in providing ample dairy products to 

domestic and world markets. The dairy farm sector showed productivity growth in 2021--milk 

production of 226.31 billion pounds increased by 1.6 percent following a remarkable 1.9 percent 

growth in 2020 (percentages adjusted for leap year).

U.S. consumption of milk fat continued on its upward trajectory in 2021 as measured by the 

amount of farm (“raw”) milk needed to provide the fat in the various products consumed in the 

U.S. (referred to as the “milk-equivalent, milk-fat basis”). Except for September and October 

2021, domestic consumption on a milk-fat basis was higher each month compared to the same 

month in 2020, a total increase of 4.0 billion pounds over 2020. In contrast, domestic use of skim 

solids increased just 0.2 billion pounds in 2021, as measured by the milk equivalent, skim-solids 

basis.

Despite the snarls at the ports, commercial exports increased in 2021 (2.3 billion pounds, 24.7 

percent, on a milk-fat basis and 3.9 billion pounds, 8.3 percent, on a skim-solids basis).

USDA/Agricultural Marketing Service (AMS) Dairy Program Grading Services Branch issued 

62,000 export certificates (a 13 percent increase over 2020) to 126 countries to help facilitate the 

$7.7 billion of dairy product exports in 2021. U.S. -produced milk components were exported in 

various forms to every continent of earth and to over 150 different countries. While exports 

increased substantially from 2020 to 2021, they would likely have been higher without lost sales 

due to additional costs to exporters and delays in shipping schedules.

1 This does not reflect any revisions published in the USDA/National Agricultural Statistics Service (NASS) 

February 23 Milk Production report.
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The month-to-month variation of average prices for cheese (and to a lesser extent, butter and 

nonfat dry milk) settled down somewhat in 2021 compared to 2020. Average prices for butter,

non-fat dry milk and whey rose in 2021, averaging 15, 23, and 21 cents higher than 2020, 

respectively. However, cheese prices averaged 25 cents lower. The keywords of this forum, 

“Sustainability, Productivity Growth,” have been exemplified by the U.S. dairy industry as it 

adapted to difficulties arising from a variety of arenas.

Outlook for 2022: Slower Worldwide Milk Supply Growth 

Growth in milk supplies of the world’s major exporting countries (European Union-27 countries, 

the U.S., New Zealand, Argentina and Australia) slowed in the second half of 2021 and 

contracted in the fourth quarter of 2021. Slow growth is presumed to persist in 2022 as the sector 

works though global supply chain and pandemic constraints. The major exporting countries of the 

European Union and New Zealand are each expected to grow by less than 1 percent2, as they face

inflated costs and increased environmental regulations which are likely to put downward pressure 

on cow numbers in both areas (USDA/FAS). Weather-related issues affected both New Zealand 

and Australia’s 2021-22 milk production seasons. Expectations are for slow growth in U.S. milk 

production also to 227.2 billion pounds in 2022, just 0.4 percent growth.

Contributing to the slowdown in U.S. milk production growth is the drop in cow numbers. On 

January 1, 2022, the surveyed inventory of 9.375 million milk cows was 0.7 percent lower than 

the 9.442 million on January 1, 2021. The average number of milk cows in December 2021 was 

about the same as August 2020 (9.375 v. 9.374 million head). Expectations are for continued, 

moderate decline in numbers through 2022 for an annual average of 9.36 million head, down 

88,000 head from the 2021 average of 9.448 million. The January 1, 2022, USDA/NASS Cattle

report shows tightness in dairy cow replacement availability. The ratio of dairy heifers expected 

to calve to milk cows was 47.5 percent, the lowest since 2009, and down from 48.8 percent in 

2021. (From 2010 through 2020 there was more than 1 heifer for every 2 milk cows at the 

beginning of the year, peaking at 51.7 percent for January 1, 2016.)

Prices in 2022 for feed items are expected to be high relative to 2021, which also had high prices

relative to the year prior. With tighter milk supplies and total use of dairy products (domestic use 

plus exports) growing 0.1 and 0.4 percent respectively (on a milkfat and skim-solids basis), milk 

prices are expected to improve in 2022. The higher milk prices expected in 2022, are likely to 

offset the higher feed prices and improve the dairy farmer milk income-over-feed cost outlook

over 2021. 

Dairy producers will likely continue to face higher production costs, such as freight, fuel,

fertilizer, rents, and other inputs, as well as feed, that will squeeze margins through much of the 

year. Labor availability and costs are also ongoing issues on farms. With rising inflation, in real 

dollars, the rising milk prices may be more than offset by the higher input costs. Expected 

2 Projections for export growth are taken from the December report, Dairy: World Markets and Trade, published 

by USDA, Foreign Agricultural Service.
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inflation is likely to erode real margins throughout 2022. These factors combine to likely keep 

the brakes on the dairy herd expansion in 2022.

Output per cow is expected to increase 1.3 percent in 2022, with the larger year-over-year gains 

coming in the second half of 2022. High feed prices are expected to put downward pressure on 

the improvement in yield per cow in the first quarter of 2022.The second-half year-over-year 

gains reflect in part, the weather-related lowered production in late summer 2021. 

Component levels in milk are expected to continue their upward pattern in 2022. As a result, total 

production of U.S. milk solids is expected to be more than the 0.4 percent growth in projected 

U.S. milk production.

2022 Imports and Exports

Higher U.S. butter prices are expected to attract additional imports in 2022 as they converge with 

international price levels. Strong demand for premium butter and to a lesser extent, the lifting of 

import tariffs in early 2021 are also contributing factors. Compared to 2021, 0.4 billion pounds 

more imports on a milk-fat basis are expected, totaling 6.9 billion pounds. Conversely, on a skimsolids basis, imports in 2022 are expected to be 0.1 billion pounds lower, totaling 5.7 billion

pounds, despite rising prices for non-fat dry milk and whey. This is due to lower domestic nonfat 

dry milk and whey prices relative to international prices expected in 2022.

Likewise, the relatively high U.S. prices for products high in milk-fat content are expected to 

result in 0.6 billion pounds fewer exports on a milk-fat basis to 11.0 billion pounds. Exports on a 

skim-solids basis are expected to be up slightly from 2021, 0.1 billion pounds to 51.2 billion

pounds. High nonfat dry milk and whey prices relative to international prices will likely limit 

export growth in 2022. Relief in port congestion is an unknown for 2022 and may continue to be 

an ongoing factor during the year.

Growth in Domestic Use Lackluster

Domestic demand for dairy products may be hampered by inflation, variation in disposable 

income, and continued fluctuation in food service demand as COVID variants cause ebb and 

flows in restaurant and food-away-from-home. Higher retail prices in 2022 are likely to constrain 

demand growth. Domestic use in 2022 is forecast to increase 0.8 billion pounds on a milk-fat

basis to 222.2 billion pounds and 0.9 billion pounds to 180.8 billion pounds on a skim-solids 

basis. 

Combining modest growth in domestic use, measured milk production growth, and the expected 

trade patterns in 2022, commercial ending stocks are expected to decline 0.3 billion pounds to 

14.1 billion in 2022 on a milk-fat basis. The highest level of ending stocks on a milk-fat basis was 

in 2020 (15.6 billion pounds). On a skim-solids basis, ending stocks are forecast at 10.6 billion 

(down 0.2 billion pounds). The highest commercial ending stocks (not including governmentheld) on a skim-solids basis were seen in 2017 at 11.8 billion pounds.
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Dairy Product Prices to strengthen in 2022

In 2022, dairy product production is likely to face issues carrying over from 2021 in various 

sectors such as packaging materials, labor, warehouse space, and transportation. USDA projects 

prices reflective of the AMS-reported average prices for butter, nonfat dry milk cheese and whey

that are used in Federal Milk Marketing Order milk price formulas.

Butter

Total butter supplies (beginning stocks, production, and imports) followed the typical seasonal 

pattern, but dropped below 2020 levels in the last 4 months of 2021, from 561.7 million pounds in 

September to 400.5 million pounds in December. Troubles with staffing due to covid cases meant 

some butter plants had to forgo some production runs (2021 monthly butter production was below 

same month in 2020 for every month July to December, where December butter production was 

down 13.2 percent). This, along with slow growth in milk production as cow numbers fell, led to 

declining butter supplies as 2021 progressed. Hence, we saw sharp price increases in butter prices

in November and December 2021, continuing in January 2022.

With tight world butter supplies and U.S. prices that were below the export prices for Oceania and 

Western Europe butter, opportunities arose for U.S. exporters of butter. U.S. prices for butter in 

2021 averaged 59 and 55 cents per pound below the USDA/AMS Dairy Market News reported

export prices for Oceania and Western Europe, respectively. In 2021, the U.S. exported over 

twice as much butter as in 2020, 98.3 million pounds and well-above all previous years since 

2014. Note however, that exports of butter are a small volume relative to domestic use (4.4 

percent of total disappearance in 2021). Domestic use of butter also continued apace through 2021 

(2.1 billion pounds, an increase of 2.4 percent over 2020). Domestic use in December 2021 was 

193.8 million pounds, below November but above December 2020 by 6.3 percent.

Butter prices in 2022 are expected to average $2.39 per pound, 66 cents higher than 2021. They 

are expected to decline gradually both domestically and internationally. Forecast U.S. prices are

expected to be below, but close to, Oceania butter prices.

Dry Skim Milk Products

Declining world production of dry skim milk products3 along with strong demand throughout the 

pandemic has put a persistent squeeze on dry skim milk markets. Prices for Oceania skim milk

powder were well-above U.S. nonfat dry milk prices (as reported in the AMS/USDA National 

Dairy Products Sales Reports) the first half of 2021. Export prices for skim milk powder in 

Oceania and Western Europe averaged 26 and 15 cents per pound, respectively above U.S. nonfat 

dry milk prices in 2021. This created export opportunities for U.S. dry skim milk powders in 2021

despite ongoing port congestion and elevated freight rates, and exports increased 10.2 percent 

over 2020 to 2.0 billion pounds. Exports of dry skim milk products in 2021 represented the 

highest share (74.7 percent) of their total commercial use since at least 1995. While the high 

world prices pulled 0.2 billion more pounds of U.S. dry skim milk products to destinations around 

the world compared to 2020, the high domestic prices contributed to lower U.S. domestic use by a 

similar amount to 665.5 million pounds, the lowest level since prior to 1995. Production of dry 

3 Dry skim milk products include nonfat dry milk, skim milk powder, and dry skim milk for animal use.
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skim milk products declined in the second half of 2021 leading to lower ending stocks. Stocks to 

total commercial use for the first half of 2021 averaged 49 days and declined to 36 days on 

average for the second half.

U.S. prices of nonfat dry milk are expected to continue to rise in the first quarter of 2022 because 

the dampened world supply situation is expected to persist until the Oceania 2022/23 season 

comes on mid-year 2022. Prices should then ease somewhat, but the margin between Oceania 

and Western European skim milk powder prices and U.S. nonfat dry milk prices is expected to 

narrow. One question is what impact the problems and freight charges through the ports and 

shipping channels are having on pricing relative to export competitors and ability to get product 

overseas, and how quickly remedies can have an impact.

Cheese

Domestic use of cheese showed continued growth in 2021. Domestic use of all cheese was 13.0

billion pounds, up 2.7 percent over 2020. Imports of cheese increased each month (except for 

February and December) from the same month in 2020 and were up 13.2 percent to 0.3 billion

pounds in 2021. Production of cheese also increased 2.8 percent to 13.6 billion pounds in 2021.

Ending stocks of cheese on an annual basis continued their upward climb to end 2021 at 1.4 

billion pounds, the highest on record.

Exports of cheese grew in the second half of 2021 as international prices strengthened ahead of 

U.S. prices, increasing U.S. competitiveness. Oceania cheese prices averaged 34 cents per pound 

higher than U.S. prices in 2021. The January 2022 export price for cheese in Oceania was 63 

cents per pound above the U.S. price.

Cheddar cheese prices in 2022 are expected to average 22 cents above 2021 prices at $1.90 per 

pound. While slow milk production growth is expected to strengthen cheese prices, continued 

growth in cheese production capacity, inflation pressure on consumer income and trend 

improvements in milk components are expected to limit cheese price increases. This price 

represents a weighted average price for cheddar cheese in both 40-pound blocks and 500-pound 

barrels.

Whey Products

Similar to the dry skim milk markets, dry whey supplies tightened around the world. U.S. dry 

whey exports of 496.7 million pounds in 2021 were up 5.2 percent over 2020, but the increase all 

came in the first five months and then slipped below year-earlier levels. In the second half of 

2021, year-over-year domestic production declined, domestic use increased, and stocks tightened, 

perhaps dampening the volume of dry whey available, which could strengthen domestic prices 

and reduce export competitiveness. Dry whey production in 2021 of 924.4 million pounds was 

2.8 percent below 2020, squeezing U.S. year-end stocks to 58.3 million pounds, the lowest level 

since 2011.

The relatively high dry whey prices at the end of 2021 are expected to carry into 2022 because the 

supply and demand conditions are not expected to ease until possibly later in 2022 with increased 

US cheese production during the spring flush. In addition, high protein demand was reflected in 
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high prices for soybean meal and whey protein products in 2021 which partially influenced higher 

dry whey prices. 

The whey complex coming off of cheese vats includes whey protein products, permeate, and 

lactose. Lactose prices increased in 2021 over 2020 with good export demand, but stocks are 

building and may indicate softening in pricing of whey products in 2022. U.S. dry whey prices are 

expected to converge with Western European dry whey prices in 2022. Thus, 2022 dry whey 

prices are expected to average 70.5 cents per pound, 13 cents more than 2021.

Milk Prices

The boost in dairy product wholesale prices in 2022 is expected to lift the all-milk price4 to 

$23.55 per cwt, $4.86 above 2021. The all-milk price reflects the prices paid to producers for milk 

with the level of fat and other milk components in it as it comes off the farm. The Class III and 

IV prices are reported for milk at standardized component levels. Since average components are 

well-above the standard tests and are increasing over time, caution should be used when 

comparing the all-milk price with the Class prices. The forecast price for milk used to make 

cheese and whey is expected to average $3.22 per cwt higher in 2022, $20.30 per cwt of Class III 

with 3.5 percent butterfat. The relatively high butter and nonfat dry milk prices result in a $6.21 

per cwt increase in the average price for milk used to make these products. The forecast Class IV 

price for milk with 3.5 percent butterfat, $22.30 per cwt, is higher than the Class III price for 

2022, though the Class IV price is expected to move down, closer to the Class III price, as the 

year progresses. 

Additional information about the 2022 dairy forecast is available at: 

World Agricultural Outlook Board (WAOB)

World Agricultural Supply and Demand Estimates

www.usda.gov/oce/commodity/wasde/index.htm

Economic Research Service (ERS)

Livestock, Dairy, and Poultry Situation and Outlook

https://usda.library.cornell.edu/concern/publications/g445cd121?locale=en

Foreign Agricultural Service (FAS)

Dairy: World Markets and Trade

https://www.fas.usda.gov/data/dairy-world-markets-and-trade

Dairy Program/Agricultural Marketing Service

https://www.ams.usda.gov/about-ams/programs-offices/dairy-program

4 The all-milk price reflects the prices paid to producers for milk with the level of fat and other milk components in it 

as it comes off the farm. The Class III and IV prices are reported for milk at standardized component levels. Since 

average components are well-above the standard tests and are increasing over time, caution should be used when 

comparing the all-milk price with the Class prices. 
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Information on Federal Milk Marketing Orders

https://www.ams.usda.gov/rules-regulations/moa/dairy

Dairy Market News

https://www.ams.usda.gov/market-news/dairy

USDA Commodity Procurement

https://www.ams.usda.gov/commodity-procurement
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Source: USDA/WASDE, 621, February 2022 
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Supply and use of dairy products, 2020 and 2021

Year

Beginning 

commercial 

stocks Production Imports

Total 

supply

USDA net 

removals, 

etc. Domestic Exports Total

Ending 

commercial 

stocks 

Million pounds

Butter

2020 189.7 2,145.4 83.4 2,418.5 7.2 2,090.6 46.9 2,137.4 273.8

2021 273.8 2,063.2 100.6 2,437.6 - 2,140.3 98.3 2,238.6 199.1

Dry skim milk products

2020 260.0 2,704.5 1.6 2,966.1 7.3 876.1 1,786.1 2,662.3 296.5

2021 296.5 2,585.8 0.8 2,883.1 - 665.5 1,967.7 2,633.1 250.0

American cheese

2020 749.9 5,337.5 24.8 6,112.2 11.9 5,146.5 152.1 5,298.6 801.7

2021 801.7 5,532.1 28.3 6,362.0 - 5,323.7 192.1 5,515.7 846.3

Other-than-American cheese

2020 572.1 7,915.9 257.2 8,745.2 1.2 7,517.9 631.5 8,149.4 594.6

2021 594.6 8,092.5 291.0 8,978.1 - 7,679.3 700.1 8,379.3 598.8

Dry whey

2020 71.4 951.0 0.5 1,022.8 485.1 472.2 957.2 65.6

2021 65.6 924.4 1.6 991.7 436.7 496.7 933.4 58.3

Whey protein concentrate

2020 66.5 477.7 46.1 590.3 203.4 324.0 527.4 62.9

2021 62.9 496.3 46.3 605.4 236.1 299.2 535.4 70.0

Lactose

2020 110.7 1,102.8 7.1 1,220.5 266.2 831.2 1,097.5 123.0

2021 123.0 1,121.7 7.4 1,252.1 237.9 866.5 1,104.4 147.8

Supply Commercial use

Sources: USDA, National Agricultural Statistics Service; USDA, Farm Service Agency; USDA, Foreign Agricultural 

Service; U.S. Department of Commerce, Bureau of the Census; and USDA, Economic Research Service calculations.