Making milk later this year could be a lot less fun for dairy producers who are bracing for much slimmer on-farm margins than those provided in the first half of the year, according to Sarina Sharp, analyst with the Daily Dairy Report. That’s because higher feed costs, a slump in milk prices, and a steep drop in crossbred calf values will take a bite out of producers’ bottom lines.
Over the last several years, the dairy industry has been a valuable source of calves for the beef industry. A large contraction in the beef herd, which began in 2019, has left the industry short of young cattle. The contraction also led to record-high retail beef prices, which peaked in early 2026, helping to pull the value of beef calves higher as well. But that is changing.
“Consumer pushback on pricey beef, severe drought in the West, and USDA’s plans to open the border to Mexican feeder cattle to bring down beef prices have all weighed on the value of young beef cattle,” Sharp said.
Beginning later this month, feeder cattle from Mexico will be allowed to enter the United States through the border town of Douglas, Arizona, after undergoing inspection and passing through a disinfectant dip vat to prevent the spread of New World screwworm. Cattle imports from Mexico have not been allowed into the United States for more than year due to the parasitic fly. Previously, Mexico sent more than 1 million live cattle to the United States each year, and their absence has worsened the shortage of young livestock available to feedlots, Sharp said.
“Beef-on-dairy crossbred calf values peaked in June, when producers could sell newborn calves for $1,800 to nearly $2,000/head, depending on the region,” Sharp noted. “Calves at the end of July were worth about $400 less than at the peak, and futures prices for feeder cattle suggest values will continue to drop.”
A typical dairy breeding program in the United States produces more than enough dairy heifer calves to maintain an operation’s milking herd, with more than half of all calves considered extra. “Today, nearly all these surplus calves are beef-on-dairy crossbreds,” Sharp noted. “Assuming national average cull rates, death loss, and breeding practices, the $400 drop in crossbred calf values that occurred from the June peak to the end of July will reduce dairy revenues by about $1.25/cwt. of milk production.
All said, Sharp noted that even after the recent decline, beef calf revenues represent a substantial revenue stream for dairy producers. So far in 2026, revenues from the sale of beef calves have contributed the equivalent of more than $5/cwt. of milk production for the average dairy milking Holsteins, she said. And that’s up from less than $4/cwt. last year and about $2.70 in 2024. However, before 2023, beef calf revenue added less than $1/cwt. to dairy producers’ net revenues, she said.
“Calf sales will continue to play an important role in shielding dairy producers from the impact of lower milk income and higher feed costs,” Sharp stated. The revenue stream from these calves just won’t be quite as high as it was.
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