The USDA is set to release the February Milk Production data later this week. If on trend with 2025 and the first numbers posted from January’s Milk Production, most are expecting another big number, if not continued growth in gallons of production.
High milk production has stressed markets despite efforts to increase value added products. Increased consumer demand here in the United States of some of these products such as protein products and ready-made dairy products has helped. Also, more exports of fluid milk and milk products to countries worldwide has lessened the blow of increased production, however the overload of production hasn’t been an easy hurdle to surpass.
Last week, the USDA released the monthly WASDE report. As expected, milk production was raised from last month, projecting February and March to be 3 billion pounds over the respective month in 2025, which was 5.6 billion pounds over the 2024 data. The balance sheet was not all doom and gloom though, Exports for Fat-Basis were projected to reach 18 billion pounds here in March of 2026. That is an increase of 500 million from the February projections for 2026, 1.3 billion pounds over March of 2025, and an astounding 6.2 billion pounds over 2024.
Expectations for the February Milk Production Report to be released Thursday are in line with the WASDE report, showing a steady increase in production. Much like what we saw all of 2025.
Looking for a reason behind the growing milk production numbers isn’t as simple as more cows equals more milk. Milk cow numbers are high, one of the highest in the last twenty-five years. However, beef cattle numbers are the lowest in 75 years. This has created a unique dynamic where cattle prices are high, but milk prices are low.
The story gets more confusing when you see dairy heifer retention at a near low. When you take all dairy cattle inventory, including calves, you see one of the lowest numbers of all dairy cattle in history. It is easily explained by the dairy dynamic beef we’ve seen since beef prices skyrocketed.
Beef-on-dairy calves are worth so much, that instead of keeping back a heifer and breeding for quality retention, we are breeding for immediate dispersal of a beef calf. Therefore, milk cow numbers are high, not due to wanting to produce a greater volume of milk, but to squeeze out another year or two of calf production out of a cow that would have previously been culled prior to the cattle value rally.
This sets the dairy industry up for a big problem for years to come as we eventually are forced to cull a large part of the herd and there are very few heifers to take their place. The question is timing of when we will see this impact on production and dairy prices.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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