The dairy industry finds itself at a critical crossroads. With cheese hovering around $1.35 per pound and Class III milk barely topping $14 per hundredweight, the familiar “low prices cure low prices” cycle is in full swing, typically signaling a wave of supply liquidation.
“Typically, that means some liquidation on the supply side,” says Phil Plourd, president of Ever.Ag Insights. “But the beef situation makes things really interesting. Will high beef prices make producers stay (keep the quasi cow-calf thing going) or will they make them go (use high cattle prices to pave the exit ramp)? There’s no way to know for sure.”
The Rise of Beef-on-Dairy
For dairy operations like McCarty Family Farms Named 2025 Leader in Technology Award Winner, beef-on-dairy isn’t just a trend; it’s a five-year strategic cornerstone. The McCarty family is optimistic, projecting that strong beef herd trends, heifer retention rates and rancher retirements will maintain robust prices through 2026 and well into 2027.
“Of course, there is nothing certain in the ag economy, and black swan events seem to be occurring more often,” Ken McCarty says. “We are optimistic that [beef] values will remain strong for the foreseeable future.”
For them, beef-on-dairy has become a substantial, reliable non-milk income stream, bolstering profitability and, crucially, enhancing the long-term productivity of their farms through intensified genetic selection. They see “no tremendous downside risk in the beef-on-dairy market anytime soon.”
This growing confidence in beef-on-dairy isn’t anecdotal; it’s rooted in significant advancements. Patrick Linnel, director of market research for CattleFax, highlights in a recent Purina Report how smarter breeding decisions and genetic progress are transforming the landscape.
“Genetic suppliers have zeroed in on beef sires that are well suited for dairy cows,” Linnel explains, “and producers are making more targeted selections. The result? Stronger, more consistent cattle in which feedlots and packers are increasingly confident.”
While a small discount compared to native beef cattle might persist in some weight classes, its impact is far less dramatic, often offset by the reliability and superior feedlot performance of these crossbred animals.
Challenges and Opportunities
Despite this emerging lifeline, the dairy sector continues to face existential pressures. Corey Gillins, chief milk marketing officer for Dairy Farmers of America (DFA), reveals that their member survey from over a year ago anticipated a shrinking number of member farms. Then they projected the number of member-owner farms by 2030 to be 5,100. Gillins says they now believe the number will be lower than that. Although he says DFA’s data reveals a striking paradox: While the number of member farms is steadily declining, overall milk production remains robust, even increasing. This is also seen by other processors across the U.S.
“We’re losing dairy farms, but we’re not losing cows or milk,” he says, noting this consolidation often sees cows from exiting farms absorbed by other DFA members in the region, which is enabled by increasing processing capacity in growth areas such as Idaho, southwest Kansas, Michigan and New York. Gillins says they are even seeing milk production growth in areas such as southern Georgia and northern Florida.
Gillins agrees the beef-on-dairy revolution is a major factor mitigating the pain of low milk prices. DFA estimates 70% of dairy farmers are now engaged in beef-on-dairy, adding a significant $2.50 to $3.00 per cwt to their bottom line. Gillins also notes rising component values are adding another $1 to $3 per cwt to milk checks that are showing up even in Holstein herds that are now achieving high protein and butterfat levels.
From a different viewpoint, Gillins says for farms without succession plans, strong calf and cull prices offer a timely opportunity to exit the industry without incurring losses from prolonged milk prices.
“Some producers might think this is a good time for them to exit, rather than have some break even or negative cash flow months and wait for this price to come back around,” he says. “They don’t want to go backwards financially and will take advantage of the strong beef market to exit now.”
Yet, for others dairy producers, these additional revenue sources, combined with robust risk management tools like Dairy Revenue Protection and Livestock Revenue Protection (which can lock in beef calf and cull cow prices at significant levels), provide financial resilience to weather the current storm. As Gillins points out, producers who leveraged these tools in late 2025 were able to lock in favorable prices for 2026, setting themselves up for a profitable year despite the current milk price situation.
Embracing Change for Future Success
As dairy producers continue to navigate this complex financial landscape, the beef-on-dairy revolution stands as a testament to agricultural adaptability. While low milk prices continue to drive consolidation and farm exits, the strategic integration of beef genetics offers a tangible lifeline for many, transforming what was once a byproduct into a vital profit center. Gillins concludes that the industry’s future profitability is now a complex equation, far beyond the simple Class III milk price.
The long-term implications are still unfolding, but one thing is clear: The future of dairy profitability won’t solely be defined by the milk check. Instead, it will be shaped by producers’ willingness to innovate, diversify and strategically leverage every asset on their farm, ensuring resilience in an ever-changing market.
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