| Published: March 27, 2024

Ag Insights: Dairy

by Rob Goodling, on behalf of the Dairy Workgroup


A Review of 2023 

2023 was a year of weakening margins for the dairy sector. Milk prices trended downward faster than key input costs, causing margins to return to breakeven range. Horizon Farm Credit’s territory spans five states, each with unique opportunities for income in the dairy industry.  


A Horizon Farm Credit Indexed Milk Price was established to evaluate the weighted average milk price based on the PA All Milk Price, Federal Milk Marketing Order 1 Statistical Uniform Price with relevant location adjustments, and the annual production percentage by state. Individual producers may have realized a gross milk price outside of this range given their unique milk composition and market. Figure 1 depicts the 2023 Horizon Farm Credit Index Milk Price and range, as well as the five-year average. 2023 prices were similar to the five-year average or slightly below, reducing producer revenues. Most producers took advantage of prepaids and reserves from the prior year’s profits to help mitigate reduced revenue in 2023. 


Figure 1: 2023 Horizon Farm Credit Index Milk Price vs. 5-Year Average 

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Sources: United States Department of Agriculture, National Agricultural Statistics Service,  

United States Department of Agriculture, Economic Research Service,  

Northeast Milk Marketing Area Administrator, Uniform Price and Producer Price Differential,  


The rising cost of key inputs — feed, labor, fertilizer, fuel, etc. — plateaued in 2023, with some declines toward the end of the year. Feed costs remained well above the five-year average for all of 2023. The drop in feed cost realized in Q4 of 2023 continues into 2024 and should help margins weakened by lower projected milk prices. Labor costs and availability continue to be pressing expenses for dairies in 2023. From milkers to managers, tight job markets and elevated inflation saw wage increases continue across the dairy workforce.  


Key Factors Influencing the Industry 

Dairy operations within the Horizon Farm Credit territory continue to be relevant to the national industry. According to the 2022 USDA Census of Agriculture, the decline in regional farm numbers mimics the national trend of consolidation and expansion. Regional investment into expanded processing capacity and adjusting to the ever-changing consumer demands will strengthen the demand for milk and milk components, providing much needed market opportunity to producers.  

Producer margins have been strengthened through calf, heifer, and cull cow sales. Tight supplies of beef cattle continue to bolster the value of dairy calves and cull cows from dairy operations. In 2022, reported non-milk income, including items like calf sales, cull sales, crop sales, government payments as well as other non-milk income for the dairy, averaged $4.03/cwt within the Horizon Farm Credit Dairy Success and Profitability Review. It accounted for 13% of the income generated by the average operation that year. This was down from the previous two years — which realized higher than usual government payments — but was 27% above 2018 and 2019 values. Values in 2023 should realize or surpass those from 2022, and continue that trend into 2024. While cull cow, extra replacement heifer, and bull calf revenue will continue to be higher than the five-year average, extra crop sales and government payments will likely be lower in 2024. This increased revenue offsets some revenue loss due to weak milk prices and relieves pressure from higher-than-average expenses.  

A key factor to monitor in 2024 is the performance of dairy exports throughout the year. Currently, the national milk supply has held steady, primarily due to the slight reduction in the national dairy cow herd in 2023. Again, bolstered by strong beef prices and tight heifer inventories, adding milk cows in the short term has been limited. This contributes to stabilizing milk prices given the reduction in dairy exports in 2023 (Figure 2). USDA Foreign Agricultural Service is predicting all four quarters of 2024 will see dairy exports slightly below the previous year, and well below the highs of 2022. If exports trend lower than predicted, that will add further downward pressure on already weakened milk prices. 

Figure 2: 2018-2024 Annual Dairy Export Values by Quarter  

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Source: USDA Foregin Agricultural Service, December 2023. “Dairy: World Markets and Trade”. dairy.pdf ( 


Perspective and Projections for the Year Ahead 

Milk price values, though stabilized, currently sit within the five-year average, suggesting 2024 milk income will only be slightly better than 2023. Several factors — like the spread between Class III and IV prices, weakening export demand, and outdated make allowances — have processors and cooperatives passing some of their losses back to the producer through changes in premiums and basis deductions. This will weaken overall milk revenues for the time being. Razor thin margins will reward those producers that continue to focus on two key factors: controlling costs and engaging with risk management options.  

The current outlook indicates margins driven by weakening feed costs should rise from 5-year averages in Q1 2024 and stabilize in the $11/cwt range for most of the year, as shown in Figure 3. Given the variability in milk price across farms throughout the region, some farms will see margins reaching into the average range or below. Producers should implement risk management options, such as Dairy Margin Coverage and Dairy Revenue Protection, to help mitigate these challenges. 

Figure 3: 2024 Projected HFC Indexed Milk and DMC Feed Cost Margin vs. 5-Year Average 

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Sources: United States Department of Agriculture, National Agricultural Statistics Service,  

United States Department of Agriculture, Agricultural Marketing Service,  

CME Group, Agricultural Futures and Options,  

Program on Dairy Markets, 


In conclusion, dairy farms in Horizon Farm Credit’s territory have unique opportunities to remain relevant to the dairy industry. Farms that monitor costs, evaluate long term opportunities, and have contingency plans are poised to thrive and grow their operations. Business transitions continue to be a growing topic of interest and will dictate the growth or contraction of the industry for the next several years. 

Interested in reading our other 2024 Ag Insights? Check out our other articles on:  


The information in this article is a summary of select economic conditions and agricultural industries prepared by Horizon Farm Credit staff. This material is for informational purposes only and cannot be relied on to replace your own judgment or that of the professionals you work with in assessing the accuracy or relevance of the information to your own operations. The information provided in this report is not intended to be investment, tax or legal advice and should not be relied upon by recipients for such purposes. As with any economic analysis, the information is based upon assumptions, personal views and experiences of those who provided the source material as well as those who prepared this summary. These assumptions, conclusions and opinions may prove to be incomplete or incorrect. Economic conditions may also change at any time based on unforeseeable events. Horizon Farm Credit assumes no liability for the accuracy or completeness of the summary or of any of the source material upon which it is based. No commitment to lend, or provide any financial service, express or implied, is made by posting this information. In no event will Horizon Farm Credit be liable for any decision made or actions taken by any person or persons relying on the information contained in this report. 

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