The landscape for dairy farmers has experienced significant shifts recently. With favorable margins in 2024, the tunes in 2025 have changed dramatically. Dwayne Faber, a dairy farmer in Washington State, recently shared insights on “AgriTalk” about the challenges and opportunities currently facing the industry.
“I think margins were good for most people last year,” he says. “This year, things are tightening up again. We’re seeing milk price drop, particularly the Class IV markets have really softened.”
This downturn is causing concern for dairy farmers who must now navigate through this challenging period.
High input costs are similarly impacting farmers, putting pressure on the entire supply chain. Faber notes that being somewhat isolated, based on their location in the Pacific Northwest, their basis costs for importing corn from the Dakotas are substantially high. Across the board, expenses such as machinery, parts and labor have surged, mirroring the challenges faced elsewhere in the nation. Compared to beef prices, the discrepancy in costs is stark, illustrating the uphill battle that the agriculture sector is enduring.
“I mean, the input cost that farmers, ranchers, everybody’s facing has just been incredible,” he shares.
A lifesaving silver lining in the margin equation is the growing importance of the calf market within dairy operations. Faber says he is receiving $1,500 for a day-old Holstein Charlois cross calf, which is adding notable value per hundredweight to farm operations.
“For a lot of farms, it’s adding $2 to $3 per hundredweight to their to their operation,” he says. “I mean that’s a savior through this downturn.”
Huge Coupon Sitting Inside the Cow
This boom in beef calf revenue has provided a lifeline for many dairy farmers amid milk side downturns. With U.S. dairy cow numbers ballooning to a record 9.5 million, yet with low levels of dairy heifer replacements, farmers are milking every opportunity out of their herds. Cows that were once considered for slaughter due to low profitability now carry valuable calves, prompting farmers to optimize their asset cycles instead of simply offloading them.
“If a guy has a cow that’s not super profitable, but she’s got a $1,500 beef calf in her, you’re just going to keep milking her and dry her off and calve her out again and bring her back around, whereas historically, those low margin dairy cows end up going for butcher,” he says. “But now there’s this huge coupon sitting inside this dairy cow. And so, we’re just flooding the country with milk, and we’ve got too many cows with record low levels of dairy replacement heifers.”
This scenario that the U.S. dairy industry is witnessing in 2025 is reducing the number of cull cows heading to slaughter. The number of dairy cull cows has been low, reaching a 15-year low in June 2024, due to factors such as high prices and this continued beef-on-dairy phenomenon.
“I don’t know what changes that we’ll see, but the dairy cow value is significantly tied to the beef price,” Faber says.
Despite the much-needed boost this has provided in revenue generation, there is still a blanket of uncertainty that looms over future prices and market shifts.
Dan Basse, president of AgResources Company shared on the live taping of “U.S. Farm Report” at World Dairy Expo that milk prices are lower than a year ago because we have more cow numbers and the productivity per cow is rising.
“So that give us more volume, and we haven’t had the butterfat market that we needed, and the butter has kind of dropped,” he says. “So, putting it all together, when the dairy farmer sees a profit, he expands his herd. It’s a cycle that we’ve seen many times, and unfortunately, that’s where we’re at. So, we’re making money on the wet bull calves that are coming out. It’s much harder to make money on milk unless you’re sizable.”
As dairy farmers navigate these tumultuous times, they must continue to adapt, optimize and explore new avenues of revenue to maintain their livelihoods. It is a period of trial and transformation where the resilient will find ways to thrive amid adversity.
To listen to the full episode of “AgriTalk” with Dwayne Faber go to: AgriTalk-10-29-25-Farmer Forum - AgriTalk - Omny.fm
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