Milk prices are under pressure, and the people closest to the numbers say it starts with one simple reality: producers are pumping out more milk.
It’s an interesting dynamic for dairy. Milk output has surged, while dairy cow numbers are also at a 30-year high. And export demand may be at records, but weaker demand for dairy products like cheese are what’s also weighing on the market. But lower feed prices and strong beef-on-dairy demand is helping offset some of those losses for dairy producers.
During Farm Journal’s MILK Business Conference this week, Phil Plourd, head of market intelligence for Ever.Ag, Rick Naerebout, CEO of Idaho Dairymen’s Association, and Chip Nellinger, co-founder and owner of Blue Reef Agri-Marketing, dig into the what’s at play today, and what comes next, across dairy, cattle and grains.
The Market Demanded More Milk, And Farmers Answered
Plourd says the market is living out what the industry asked for not long ago — more production to meet expanding capacity.
“Last year at this time, and the whatever year preceding that, we are asking dairy farmers for more milk, right? We have these huge investments in capacity, billions of dollars investment, and we kind of needed more milk. Prices are high. Bring the milk. And well, here we are. The farmers have brought the milk,” Plourd says.
That supply response is showing up in USDA data in a way he calls historically significant.
“The last two USDA reports, we are at 3.8%, 3.9% growth. That’s on the strong side of strong historically. We have the most cows since 1993. We’re up 200,000 head.”
When the conversation turns to whether that continues into 2026, Plourd points to how the cycle typically works — and how long it can take to shift.
“Low prices cure low prices. It’s a sad reality, but I think we’re kind of in that,” he says. “We’ve been in the more milk cycle, more money, more milk, and now we’re in the less money, less milk. We’re going to transition into that phase, but it’s going to take a while.”
He says one reason it can take longer this time is the cash coming in from another side of the farm.
“It’s going to take a while because cue beef income, that’s a big deal right now, and it is creating a real question mark about how producers will respond to low milk prices when what I’m calling their ‘cow-calf side hustle’ is making so much money,” Plourd adds.
The Dairy Growth Gripping Idaho
Naerebout says Idaho’s growth rate is running well above its recent pace, and he puts hard numbers on what that means in daily production.
“Yeah, so Idaho, we see about an 8% year-over-year growth rate this year. To put that in context, the previous five years we’ve been at a growth rate of 1%,” Naerebout says. “For us, the size of our dairy state, an 8% growth rate is 4 million pounds of milk a day that our producers have turned on.”
He says profitability has mattered, and so has the direction of feed costs — which is helping ease some of the pressure of lower milk prices.
“We’ve had good economics. 2024, 2025 have both been profitable years for our dairymen. We’re seeing feed costs lessen, which has added to that profitability this year,” he explains.
He also points to what changed at the processor level, limits that had been in place, then weren’t, which is helping.
“We did see our processors take off their base restrictions for the first time in a number of years. So, for the first time, our dairymen had that opportunity to grow at more than just a very modest rate,” he adds.
How Can Producers Weather $13 Milk?
When asked directly how producers ride out this price pressure, Plourd goes straight to the beef line item and how different it is now.
“I think the beef income is a big deal because it’s $4 per hundredweight, maybe $4.50, and it used to be a $1 to $1.25 or $1.50,” Plourd says. “That’s providing some padding.”
He says risk management matters too — especially when farmers have windows to lock in protection.
“A lot of these folks have risk management programs in place too. You had an opportunity to put big time coverage on 8 to 12 weeks ago, and I think we have farmers that have done that,” Plourd says.
And when the market turns against you, he says the response is as much operational as it is financial.
“It’s like it always is, right? You stick to the little things and hunker down and you know, it turns around,” he says.
Can These Record-High Cattle Prices Last?
Nellinger says cattle markets are also governed by cycles — and he believes the market has likely already put in its highs.
“I think they’re likely in. And it kind of is the opposite of what Phil was talking about, right? Eventually high prices cure high prices, just like low prices cure low prices. Economics will work,” Nellinger says.
He points out how slow cow-calf rebuilding is intersecting with beef-on-dairy, and the impact that’s having on beef supply.
“What has been slow is rebuilding the cow calf herd,” Nellinger says. “And I think the beef-on-dairy has really come in the last few years and taken that function over with the lack of expansion, traditionally, for the cow-calf guy.”
When asked if fundamentals stay supportive into the end of the decade, he says yes, but stops short of predicting a smooth ride.
“I generally say yes, but you know, does that mean we stay here? There’s likely a lot of volatility coming,” he adds.
He also describes what he’s seeing recently in how the market is handling bearish headlines.
“I do think we’ve gotten back to fundamentals though, just in the last week or so and digested a lot of bearish news though,” Nellinger says.
Tyson Beef Processing Plant Shutdown
Late last month, Tyson Foods announced its plan to end operations at its Lexington, Neb., beef facility and convert its Amarillo, Texas, beef facility to a single, full-capacity shift. The news sent cattle prices limit down.
The shutdown could have major implications. According to Drovers, the Lexington plant employs nearly 3,200 people and can harvest 4,500 cattle a day, but it has been running 3,600 to 3,700 according to John Nalivka of Sterling Marketing. It is one of 11 beef facilities in the company and one of the largest. The transition in Amarillo is expected to reduce daily harvest numbers from 5,500 to 2,700 to 2,800 and impact 1,700 workers. Tyson says the changes will go into effect on Jan. 20, 2026.
Jeff Stolle, Nebraska Cattlemen’s Association director of marketing, predicts the Lexington plant closure will reduce Nebraska cattle harvest capacity by 15%.
The news of the shutdown wasn’t a major surprise for market analysts, as packers have been seeing losses. On the impact of packing plant closures and what that means for space and demand, Nellinger acknowledges the seriousness and then describes how the futures market reacts and recalibrates.
“Yeah, it’s a serious issue, obviously. But again, I think we’ve digested that news,” he says. “With the limit down day after the announcement of that, expanded limits the next day… and now we’ve rallied sharply.”
He says capacity doesn’t simply disappear — it can shift, which will help absorb the losses.
“A lot of that shackle space will be picked up regionally at other plants, though,” Nellinger says.
Another Piece of Good News?
Beef prices are a bright spot for those producers tapping into the beef-on-dairy demand, but lower feed prices are also softening the blow of lower milk prices, and those lower feed prices could continue to be a theme for 2026.
One of the reasons is the record corn crop USDA is reporting. Even though Nellinger argues USDA’s yield estimates on corn have room to decline, USDA is still printing a large number.
“I have said all along for months and months, I think we’re closer to last year, closer to 180 bu. per acre,” Nellinger says. “USDA says 186 bu. per acre. We only have one crack left in January. I’m not sure they’re going to change much.”
He also notes that even if the crop is smaller, that doesn’t automatically mean USDA changes its published estimate.
“We could have been at 181, 182, 183, 184, 185, 186 yield, but that doesn’t mean the USDA is going to change it,” he says.
If USDA does adjust in January, he says demand can amplify the reaction.
“I think it would help if USDA lowers yield in January,” Nellinger says. “The demand’s still very, very strong out there on the export side for corn.”
And he argues some bullish export information arrived too late to matter when it would have had the most impact.
“The last two weeks in October, we exported 180 plus million bushels of corn. That would have helped back then to know that. It’s old news and it’s not affecting the market,” he adds.
Soybean prices have remain mixed after the sharp surge after a reported trade deal with China. Nellinger says the soybean market this past week has been reacting to uncertainty, especially around trade details and timing.
“That’s really the big thing in the bean market. No market likes uncertainty, and there’s just no clarification on the details of this trade plan,” Nellinger adds.
He says the longer that uncertainty lasts, the more the market’s tone shifts.
