The dairy industry is wrapping up 2025 in a unique position. Milk production is up and prices are down, but balance sheets are holding together thanks to the price of cattle.
That conversation permeated the halls around the 2025 Milk Business Conference in Las Vegas, Nev. With roughly 1 million cows represented at the conference, attendees are keenly focused on 2026 and beyond.
“I think margin pressure is going to be there,” says Grant Grinstead, who dairies near Fon Du Lac, Wis. "[My questions are] how can we manage this [milk] crush, and what’s going to happen here with milk prices?”
It’s a fair question as milk prices continue to trend lower in 2025.
“I mean, if you look at one year ago, milk prices were $22 to $23, and right now the Class IV futures curve is in the $13s,” says Lucas Fuess, the U.S. senior dairy analyst for Rabobank. “That is well below cost of production. So it’s a clear market signal that that we have enough milk right now in the U.S.”
TJ Tuls who operates Tuls Dairy in Butler County, Neb., with footprints in Wisconsin and Kansas, has another opinion.
“Obviously, milk prices have dropped,” Tuls admits. “Everybody wants to talk about that, but as we know, in farming, there are highs and lows, and you just deal with it.”
Right now farmers aren’t dealing with it by culling cows. The latest USDA numbers show the dairy herd just hit a 30-year high.
“Historically speaking, there’s probably around a 150,000-cow swing that we are used to in the U.S. between the highs and lows on cow numbers,” Fuess explains. “From summer of 2024 to the fall of this year, we saw cow numbers grow by more than 200,000 head.”
That growth has pushed the herd size to 1990’s numbers. Behind the drive higher is the incredible price of cattle and the opportunity for dairy producers to cash in.
“Beef-on-dairy has been a game changer for, I bet, just about every dairy in the countryside that does beef on dairy,” Grinstead says. “That’s probably one of the things that’s kept black ink on our books.”
“We’ve come down a little bit in the past few weeks,” Fuess adds, “but a month ago, at our peak we saw $1,600 for a 4-day old-calf that had essentially zero feed costs.”
He estimates that price is worth $3 to $4 per cwt on the milk price. That extra money is keeping balance sheets in the black and herd sizes high, for now.
“So that is a big reason why we’re not seeing as much significant concern or huge red flags flying about where the milk price is right now because of the value of those calf sales,” Fuess says.
Farmers know neither the beef nor the milk prices will last forever. As the industry faces a global glut of milk, economists say it could take half the year before prices start to trend higher.
“I’m not optimistic for milk price growth, at least in the near-term months of 2026,” Fuess says. “In the middle of next year, I do think that the herd size will start declining as farmers take a look at exactly how many cows they need. Right now milk prices certainly are not good, but I think that it will be a little bit short-lived before we see some recovery into 2026.”
Another year starting with trepidation and turbulence is now being smoothed over by strong cattle prices.
“Do what you can do, control what you can control, and as long as we continue to make the milk and have that margin between our feed costs and our milk price while controlling our labor costs, we’re going to be good,” Tuls offers.
