With milk prices trending lower, dairy producers have yet to cull enough cows to stem the flow of milk. While culling has picked up, it could take a while for producers to respond more vigorously to the economic signals provided by low prices, said Sarina Sharp, analyst with the Daily Dairy Report.
“But eventually, they will. They always do,” Sharp said. “Recent expansions, low feed costs, record-high revenue provided from selling beef calves and cull cows, and risk management programs will likely slow the transition from expansion to contraction.”
Following 13 months of year-over-year deficits in the slaughter rate, U.S. dairy cow slaughter since mid-September has outpaced year-ago volumes. In the four weeks ending Nov. 22, dairy cow slaughter topped 2024 levels by 3.8%.
“This significant shift has prompted industry participants to ask the billion-dollar question: when will low milk prices spur dairy producers to step up cull rates and restrain production? Slaughter data and anecdotal reports from dairy producers suggest that a meaningful decline in dairy cow head counts is still a long way off,” Sharp said. “The U.S. milk-cow herd is likely to remain large well into 2026, which suggests that low milk and dairy product prices will persist in the new year.”
Slaughter volumes now outpace prior-year levels, but they are still well below the historical average. In fall 2024, producers began to hold onto older cows, and now more than a year later, the dairy herd is significantly larger than it was a year ago.
“With head counts at a three-decade high and comparisons being made to last year’s extremely low slaughter volumes, producers can send more cows to beef packers than they did last year while still keeping cull rates low enough to maintain or even expand the dairy herd,” she said. “Reports from some producers suggest that expansion continues.”
Encouraged by substantial recent investments in dairy processing capacity, some producers have built new facilities or have added to existing operations. And major expansions are still underway, Sharp said, suggesting that over the next few months, some operations will continue to add cows to fill new barns. It typically takes six months of negative on-farm margins to force industry contraction, she noted, and many producers are still cashing checks that are adequate.
USDA announced the November Class III price at $17.18/cwt., up 27 cents from October. That’s still above many producers’ cost of milk production, thanks to inexpensive feed and record-shattering beef revenue. Moreover, nearly half of U.S. milk output is shielded from disastrously low milk prices by the Dairy Revenue Protection and the Dairy Margin Coverage (DMC) programs.
“All this is not to say producers are flush,” Sharp said. “Those who earn Class IV revenue were surely disappointed to see Class IV milk at $14.30 in October and $13.89 in November. In the Pacific Northwest, where a group of producers has suffered steep discounts for much of the year, auctioneers have been busy selling livestock to producers in other states.”
Washington producers milked 21,000 fewer cows in October than in the same month in 2024. Over the same period, the milk herd in Idaho increased by 49,000 head, and the national dairy herd was 205,000 cows larger than it was in October 2024.
