The U.S. dairy herd is at its largest size in 34 years, with cow numbers now above 9.7 million head. New milk-processing capacity and stronger returns from beef-on-dairy calves have fueled much of the recent growth. But as the industry approaches 10 million cows, dairy market analysts are weighing how much more expansion the market can support.
“I’m not going to rule out 10 million cows as a possibility. I think it’s on the table,” says Kathleen Wolfley, vice president of insights at EA Risk. “But when would it happen? Your guess is as good as mine.”
Ben Laine, senior dairy analyst at Terrain, also sees potential for further growth but expects the pace to eventually slow.
“I think there is a point where we plateau rather than just continuing at this rate for another couple of years,” he says. “I think there will be a break in this run before we hit that 10 million cow mark.”
The U.S. dairy herd has not topped 10 million cows in nearly four decades. According to Wolfley’s review of USDA data, the annual average last exceeded that mark in 1989, reaching 10.046 million head. Reaching that milestone again would mark the first time in nearly 40 years.
Processing Capacity Opens Room to Grow
The recent increase in cow numbers follows a period when some dairy producers faced limits on how much milk they could ship. Base programs and a lack of processing capacity restricted expansion in several areas. New cheese plants and other processing investments have helped ease those constraints.
“We were coming out of a period when producers couldn’t expand because there wasn’t enough processing capacity,” Laine says. “Once some of that pressure eased and new cheese plants started coming online, it created more opportunity for dairy expansion.”
Wolfley also points to new processing investment as one of the biggest forces behind herd growth, alongside beef-on-dairy revenue and better farm margins.
“There’s been a lot of new stainless steel that we’ve put up in the U.S. marketplace, and I think that has driven a lot of opportunity for expansion for U.S. dairies,” she says. “We’re adding cow numbers in part because we have a greater need for milk supply.”
Large processing investments in Texas, Kansas and South Dakota have helped support dairy expansion in those regions. Laine says processors and dairy producers have become increasingly coordinated. Plants need a dependable milk supply to operate near capacity, while producers need a reliable market before investing in more cows and facilities.
The growth in cheese, butter and other manufactured dairy products has also created opportunities beyond traditional milk-producing regions. Wolfley sees several regions with potential for further expansion.
“I think the Northeast is one of those key areas. As you look at the Upper Midwest and the Mideast, there’s also been some fairly notable expansion in those regions that may help to continue to grow the dairy herd,” she says. “The Southwest and the Pacific Northwest as well.”
California has faced more challenges. Laine says plant closures and less investment in processing capacity have made expansion more difficult there than in states such as Kansas and South Dakota.
Beef-on-Dairy Changes the Cow Equation
Processing capacity has created more room to ship milk, but beef-on-dairy revenue has given producers another reason to keep cows in the herd.
Wolfley says the combination of strong beef-cross calf prices and favorable milk margins has encouraged producers to hold on to more animals.
“Folks are holding on to more animals because there’s $1,000 or more beef-on-dairy cross calves potentially available on the backside of that breeding,” she says.
Laine says the value of beef-cross calves has changed the economics of keeping cows that might otherwise have been culled. When day-old calves approached $2,000, the additional revenue made the milk produced by those cows more attractive.
“The economics of the milk pencil out a lot easier when you’ve got what at one point was close to $2,000 day-old calves as part of that deal,” Laine says.
Beef-cross calf prices have eased from their peak near $2,000 in May, but at about $1,300 per head, they remain well above the roughly $200 level common before 2023.
Beef-on-dairy has also given producers more flexibility with replacement decisions. Rather than raising a replacement from every cow, dairies can breed their highest-genetic-potential animals to dairy semen and use beef semen on lower-ranking cows.
“It’s expensive to raise those replacements,” Wolfley says.
She says the approach allows farms to concentrate their replacement programs on their strongest genetics while generating additional revenue from beef-cross calves.
“I think it has allowed our industry to, in some respects, leapfrog on genetic capabilities because we’re choosing the best of the best to breed to,” Wolfley says. “We’re breeding the lower-end animals, the lower-genetic animals, to beef semen in a lot of cases.”
Laine says lower calf prices, higher feed costs and changes in cull cow values could eventually encourage more culling, but current returns remain attractive.
More Milk Needs a Market
Adding cows also means adding milk. Both analysts say processing capacity and demand will determine how much more growth the market can support.
Wolfley says another 300,000 cows would represent a substantial amount of additional milk. Continued processing investment will be necessary, along with enough domestic or export demand to move the added product.
“We’d need the capacity,” she says. “I think we probably also would need the demand growth to be there in the U.S. market or into the export market to absorb all that additional milk and product.”
Laine says exports have become increasingly important as U.S. cheese and butter production grows. More product moving into international markets also leaves domestic milk prices more exposed to global competition.
“If milk production continues growing at a rapid pace, we’ll need export markets to help absorb the additional supply,” Laine says.
Domestic demand offers some support. Consumers have shown interest in full-fat dairy products and butter, while protein remains a strong demand category. Laine expects the industry to continue adjusting its product mix as domestic and international markets develop.
However, global cheese production has also expanded, meaning supply may take time to catch up with demand. If U.S. milk production continues growing faster than markets can absorb it, milk prices could face additional pressure.
Farm Margins Could Slow Expansion
The economics supporting herd growth have started to become less favorable. Milk prices have softened, feed costs have increased and beef-cross calf values have come down from their peaks.
Laine says none of those factors are necessarily enough to change a producer’s plans on its own. Together, though, they are putting more pressure on margins.
“None of them individually are terrible, but I think once you see all of those kind of combining, it’s squeezing margins a little bit,” he says.
Wolfley also sees margins as a factor to watch heading into 2027. Lower Class III prices combined with higher feed costs and weaker beef-cross calf values could encourage more producers to cull cows.
“When we were looking at higher feed costs combined with low Class III prices, I’m certainly more concerned around margins for producers as we roll into 2027,” she says.
A sustained downturn in milk prices could slow expansion, although a few difficult months would not necessarily reverse the recent growth.
So far, however, Wolfley says slaughter data has not shown a meaningful increase.
“It’s always takes longer than we think to see contraction in the U.S. dairy herd,” Wolfley says. “My mantra is always, don’t bet against the U.S. dairyman’s ability to make more milk, and certainly don’t bet against the U.S. dairyman’s ability to milk more cows either.”
What to Watch Next
Over the next 12 to 24 months, Wolfley says cow slaughter numbers will offer an indication of whether producers are beginning to pull back.
“If we start culling more animals, we may not be milking as many animals, and if we continue to cull at low rates, then we may be holding on to more animals,” she says.
Laine will be watching milk and beef prices, export demand and additional processing investment. A major reversal in beef prices or a sustained decline in milk prices could slow expansion. Replacement supplies will also become a consideration if producers can no longer rely on keeping older cows in production to grow their herds.
“There’s still room for growth, but I think the industry will eventually reach a point where the economics and available markets determine how much further we can go,” he says. “The pace of expansion will depend on how those factors come together over the next few years.”
Reaching 10 million cows remains possible, but neither analyst expects the herd to continue growing at its recent pace indefinitely. More processing capacity could bring additional expansion, but producers will need a market for the milk and margins strong enough to support the cows.
