US domestic milk output is set to be the highest ever this year and US farmers are dumping their milk because they can't find buyers for it, the Washington Post reports.

However, it says that farmers are still making money as prices fall because of cheaper and more abundant feed.

Supplies of raw milk are topping capacity at processing plants in parts of the US and compounding a global surplus even with demand improving, it says.

One 1,200-cow co-op in New England, last month started pouring skim milk into areas used for slurry, the paper reports.

US dairies in the northeast of the country have already dumped 14m kg (13.5m litres) of milk in the first five months of 2015, it says.

US Department of Agriculture (USDA) data shows that Northeast dairies dumped 31% more milk this year through May compared to 2014.

The Washington Post reports that in May alone 3.5m kg (3.3m litres) were dumped in May, a 67% increase on the same month last year.

Bob Wellington, Senior Vice President at Agri-mark, said that usually they would find someone to buy it at a reduced price or ship it to the midwest.

"But those plants are full. There's no way to process it in the time needed for a perishable product."

In June, the USDA said that domestic output in May hit 8.34 billion kg (8 billion litres) and is on pace to reach a record 94.66 billion kg (90 billion litres) this year.

Global production

Globally, the USDA said production will rise 2.1% to a record 582.52m tonnes as top exporter New Zealand sells the most ever and the EU ends limits on dairies that had been in place since 1984, the paper says.

Global dairy prices have dropped 39% from an all-time high in February 2014 and are the lowest in five years, United Nations data shows.

The Washington Post says that US farmers expanded after futures on the Chicago Mercantile Exchange surged to a record in September, fuelled partly by rising cheese demand and a jump in purchases by China.

Since then, it says that warmer weather has brought a seasonal increase in supply, demand slowed from importers, and a stronger dollar eroded exports.

President of Highground Dairy, Eric Meyer said that the world needs less milk

In Chicago, the paper says that benchmark Class III milk futures, used in cheese making, are down 36% to $16.23 per 100 pounds from a record $25.30 in September.

Tom Bailey, Rabobank Analyst said that prices may fall to $14.41 by the end of the year before recovering in 2016.

New Zealand's dollar has tumbled to a five-year low as falling milk prices amplified speculation the nation's central bank will cut interest rates this month and the kiwi slid against almost all of its 16 major peers this year, the Washington Post says.

US government data shows that domestic surplus has been compounded due to the Dollar's rally against most of the world's currencies helping to spur a 10% drop in US milk exports in the first four months of 2015, as imports rose 12 per cent.

The paper says that demand remains strong with Americans eating more dairy than ever while the USDA estimates global milk demand will rise for a sixth straight year to a record 582.7m tonnes.