Milk Prices - News & Analysis

Dairy Demand Keeps Pace With Rising Milk Production

Thu, 28 May 2026 20:06:20 GMT

April milk production numbers are in and have increased 2.8 percent from April 2025. Milk production totaled 19.2 billion pounds for April and after March revisions, March was up 71 million pounds or 0.4 percent from last month’s estimates. Production did decrease slightly from last month, however still well above last year.

(USDA)

The number of cows has also increased above even the highest quarter of 2025 coming in at 9,618,000 head. That is trending 120,000 above last year’s average. Milk production per cow is 6,093 pounds for first quarter, close to last year’s average. The combination of the two data points leads to milk production totaling 58,598 million pounds for the first quarter of 2026. That is 3 percent higher than first quarter of 2025.

With all of the extra milk production we have seen in recent years, the question is, where does all the milk go? Demand has steadily increased with the higher availability of milk supply. On a milk-fat basis, exports in the first 3 months of 2026 totaled 5,001 million pounds, about 40.6 percent higher than last year. On a skim-solids basis, exports totaled 12,190 million pounds, about 5.7 percent higher than the same period for 2025.

International demand is strong, especially for cheese and butterfat productions. Due to the quantity of supply the U.S. has available, our pricing is competitive, our production is rampant so exports are expected to continue to increase as we move further into 2026.

(USDA)

Domestic use for all dairy products was also higher in the first quarter of 2026. On a milkfat basis, domestic use was 52,719 million pounds, up 0.9 percent higher than the same period a year ago. On a skim-solids basis, domestic use was 47,108 million pounts, up 3.3 percent from 2025. Dry skim milk products and whey protein concentrates have had the largest year over year increases, up 22 percent for dry skim production and 74 percent higher for whey protein concentrates, on par for the increasing demand for protein products. Domestic usage for butter and cheese have also increased from 2025 however domestic uses for dry why and lactose have declined this year.

Overall, with the export program thriving, and domestic usage increasing for most products, the 2026 March ending stocks declined 5.9 percent on a milkfat basis and 5.7 percent on a skim-solid basis. Butter, American cheese, dry skim milk and whey protein concentrate stocks all declined year over year despite the rising increases in production.

Forecasts for 2026 all seem to be positive for U.S. Dairy products. The USDA believes exports will continue to increase due to high global demand. We could also see more demand from China as trade talks have been positive and China has committed to buying more U.S. Agricultural products over the next few years. Details on how much dairy that will include are still unknown.

Overall, the U.S. dairy market has a lot to look forward to. While naysayers are focused on the overwhelming supply, the story has turned favorable for demand and it is not slowing down anytime soon.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions

Nonfat Dry Milk Rally Leads to Depooling

Mon, 18 May 2026 16:11:18 GMT

The recent rally in the spot nonfat dry milk (NDM) market is welcome news to dairy producers, but the rewards of the price increase won’t be felt equally. That’s because Class III and IV milk prices have diverged dramatically. At the end of the day on May 7, the May 2026 Class IV futures contract was $5/cwt. higher than the June 2026 Class III contract.

In June 2020, when USDA’s Food Box program was active to combat food supply issues during the Covid pandemic, Class III futures were $8.14/cwt. higher than Class IV contracts, but this month’s difference between Class IV and Class III is the highest ever.

“Typically, when one Class of milk has a sizable price advantage, depooling occurs if it is advantageous for the handler,” said Betty Berning, analyst with the Daily Dairy Report. “For Class I processors, who must pay the higher of the Class III or IV price and who cannot depool, this adds to their costs.”

The all-time high for the Class IV price was set in March 2022 at $24.82/cwt., still more than $2/cwt. above May and June 2026 futures. However, the sizable spread between Class III and IV futures makes it advantageous for some Class IV processors to depool to receive the higher Class IV value of the milk, rather than the lower blend price from the pool.

(USDA)

“In other words, the large gap between Class III and IV prices could not only negatively affect producer milk checks in cheese-centric federal orders, such as the Upper Midwest, where not a lot of Class IV milk is pooled, but also for producers who are not members of co-ops in orders where Class IV processors depool to take advantage of record-high nonfat dry milk prices,” Berning noted.

The Class I base price for May, which was determined by spot prices in late March and early April, was recently announced at $20.15/cwt. That price was below the current May 2026 Class IV futures contract, which could mean more milk will be depooled.

In the California federal order, the impact of depooling is already evident. In March, 1.82 billion pounds of milk were pooled in the order, compared to more than 3 billion pounds in March 2025, Berning said. In March 2025, 40% of California’s pool was Class III milk, and 44% was Class IV. However, in March 2026, Class III utilization was 68%, and Class IV was just 3%, highlighting the current depooling occurring in the order, she said.

Cheese Exports Hit All-Time High in March as Global Appetite Grows

Tue, 12 May 2026 13:00:00 GMT

Records were broken with over 63,435 MT exported in the month of March of cheese alone, an all-time high for single month exports, jumping over 29% from March of 2025. Butterfat and AMF exports also set a single month record at 17,074 MT shipped, 109.9% higher than March of 2025.

The world wants U.S. cheese with a shift in desire for western-style foods, more restaurant and food service demand at a competitive price not found in other countries due to our abundance of supply available her in the United States. Cheese exports are trending higher, with the first quarter of 2026 totaling an increase of 23.2% higher year over year.

Meanwhile, butter production was up 1.2% in March while butter exports year-to-date are up nearly 93.2% from the same quarter last year. Which raises the question if the U.S. can keep up with the export demand despite the increasing production. Churns are running seven days a week with growing milk and cream supply and spring flush is here with outstanding weather for cow comfort.

(USDA)

While cheese and butterfat are the stars of the show, milk powders are the most vulnerable in the export category. Nonfat dry milk (NFDM) and skim milk powder (SMP) broke their four-month year over year growth streak with a decline of 8% lower volume in the month of March 2026 when compared to the extremely high volume traded in March of 2026. All is not lost though, March 2026 was still the highest export volume we’ve seen in five months, it’s comparison to March 2025, being the highest export volume of the whole year, makes the year over year data look poorer than it is.

(USDA)

When looking at the dairy export data, the volume is certainly impressive, however the economic impact is outstanding. The value of dairy products exported reached the high dollar amount of $892.4 million in March, the highest monthly value seen in nearly four years. This is an increase of 6% more value year over year as reported from the USDA’s Foreign Agricultural Service.

The biggest markets for U.S. exports of dairy products in total value during the first quarter of the year were Mexico at $675.4 million, up 10% YoY, Canada who declined 19% YoY still came in second with total dollars purchased coming in at $295.4 million, Japan at $156.4 million, up 8%; South Korea at $145.5 million, up 19%; and China dropping 24% in 2026 with ongoing trade negotiations coming in at $123.9 million. All other major customers were under $100 million with anywhere from Colombia up 77% YoY to Philippines down 10% with most showing big increases YoY.

So, while the market wants to focus on the massive amount of production the United States is producing, the export program continues to be a bright light. World demand is continuing to increase, and we have the supply to feed it.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

The Great Rebalancing: Why 2026 Milk Prices are Defying the Supply Tsunami

Fri, 01 May 2026 12:48:04 GMT

As the calendar turned to 2026, the U.S. dairy industry found itself standing at a complex crossroads. For producers, the view out the tractor cab window was one of cautious optimism, tempered by the sobering reality of a global market that was, quite literally, overflowing. The story of the 2026 dairy market is not one of a simple boom or bust, but rather a great rebalancing — a period defined by record-breaking production, a revolution in protein demand and the looming shadow of international trade negotiations.

The Tsunami of Milk

The entry into 2026 was defined by a singular, staggering fact: There was a lot of milk. The industry was coming off a 2025 campaign that saw U.S. production grow at a pace rarely seen in recent history. For the full year of 2025, production had climbed 2.8% over the previous year. However, it was the second half of 2025 that truly signaled the coming tidal wave, with production up nearly 4% compared to the same period in 2024.

For example, in Idaho, the state has seen consistent growth rates of 5% to 8% per month year-over-year for the last 18 months. For 2025, Idaho is projected to be up 7.5% in total milk production.

“That 7.5% is on a very big base,” explains Rick Naerebout, chief executive officer of the Idaho Dairymen’s Association. “It equates to roughly 3.5 million lb. of milk a day more this year than we had last year. We’ve definitely turned on the milk production.”

This isn’t just an American phenomenon. Europe, too, saw a 4% surge in the latter half of 2025. By the time the industry reached January 2026, the momentum was undeniable. Production was up 3.4% year-over-year, fueled by a national herd that had expanded by 189,000 head.

As the spring flush approached — that annual period where cows reach peak production — the sheer volume of milk began to test the physical limits of the supply chain. In California, the nation’s dairy powerhouse, the system began to buckle. Reports of milk being dumped due to capacity constraints sent a chill through the industry. It was a stark reminder that even when prices are stable, the physical reality of moving and processing millions of pounds of a perishable product remains the industry’s greatest logistical hurdle.

The Protein Pivot: Why Prices Held Firm

In any other era, a global oversupply of this magnitude would have sent prices into a tailspin. Yet, as Ben Laine, senior dairy analyst with Terrain noted in his report, the market took a sharp turn higher, sooner than many experts expected. The savior of the 2026 balance sheet was not a shortage of milk, but a fundamental shift in what the world wanted from that milk.

“Consumers want more protein. There has been a convergence of GLP-1s, new Dietary Guidelines and marketing dollars aimed at developing new products that have accelerated the demand shift. And high-protein dairy products are well-positioned to meet that need,” he says.

The industry has indeed witnessed a protein boom. Consumer demand for high-protein yogurts, ultra-filtered milks and milk protein concentrates reached a fever pitch. This demand fundamentally altered the value of the milk components. Whey, once considered a humble byproduct, became a market leader, benefiting from a steady, multimonth climb in value.

This protein pivot created a fascinating ripple effect. As more milk solids were pulled into the production of high-protein consumer goods, there was less surplus skim left to be dried into nonfat dry milk. This scarcity in the skim market provided a sudden, unexpected lift to nonfat dry milk prices. By early 2026, the market was optimistic that Class III and Class IV prices could be supported despite the heavy supply. However, this strength was uneven. While whey and protein-heavy products soared, cheese and butter remained stubbornly low compared to 2025 levels, creating a disjointed market that signaled volatility ahead.

“The support for milk prices right now is being driven by high whey and nonfat dry milk values as opposed to cheese and butter. Since that’s a reversal from the norm, the market might spook easily at any unexpected signals from the data over the next couple of months,” Laine adds.

The Export Lifeline and USMCA Shadow

While domestic protein demand provided the floor, it was the export market that provided the ceiling. In 2025, exports played a critical role in driving demand. U.S. dairy exports grew by 3.8% on a total solids basis, coming just shy of the record set in 2022. The total value of these exports reached a staggering $9.51 billion.

“Over the last two years, the majority of the new cheese made in the U.S. has gone into the global market as international demand surged. The international demand is also helping pull U.S. milk overseas,” says William Loux, senior vice president of global economic affairs at USDEC.

However, as the second quarter of 2026 began, the industry’s eyes turned toward the borders. The United States-Mexico-Canada Agreement (USMCA) was scheduled for a joint review in July. For the U.S. dairy farmer, the stakes could not be higher. More than 40% of the total value of U.S. dairy exports flows to our North American neighbors — $2.58 billion to Mexico and $1.31 billion to Canada.

Although, Loux doesn’t anticipate any disruption to trade with our dairy partners.

“2025 was unequivocally a successful year for exports. The U.S. continues to establish itself as an essential supplier to global consumers, helping meet the growing global demand for dairy products, in particular cheese, dairy proteins, and, surprisingly in 2025, butterfat,” Loux says. “Market access is vital to U.S. dairy exports. In order to continue supplying high-quality nutritious products to consumers around the world, the U.S. must continue to maintain and expand our trade agreements. Those agreements have not only proven to benefit U.S. dairy farmers and exporters but also have enhanced local supply and dairy product manufacturing in our partner markets.”

The Forecast: A Volatile Path to 2027

Looking at the numbers, Laine’s outlook for the remainder of 2026 suggests a more favorable environment than originally feared, but one that requires a steady hand on the wheel.

In Terrain’s most recent quarterly outlook, Laine forecast Class III milk prices to average $17.00/cwt, while Class IV is forecast to reach a robust $19.50/cwt. As we move into the second half of the year, the forecast remains resilient, with Class III averaging $16.75 and Class IV holding strong at $19.20.

However, the long-term horizon suggests a gradual cooling. By the first half of 2027, the forecast dips slightly to $16.60 for Class III and $17.80 for Class IV. These numbers reflect an industry that is successfully navigating a period of high supply but is also wary of the cracks appearing in the durability of the recent price moves.

“Markets continue to move and have surpassed those forecast levels, but with the risk of more volatility. I’d view that as an opportunity to take some risk off the table rather than banking on prices continuing to rise,” Laine says.

Strategy in the Face of Uncertainty

The lesson of early 2026 is clear: the market is rewarding those who are proactive. The jump in prices during the first quarter was not a guarantee of future riches, but rather a window of opportunity for risk management.

With volatility expected to ramp up as the spring flush peaks and trade negotiations intensify, the reliance on tools like Dairy Revenue Protection and other hedging strategies has never been more vital. The great rebalancing of 2026 means that while the outlook has improved, the margin for error has narrowed.

“Keep an eye on what consumers are looking for, both here and abroad, and work it into your marketing plan,” Laine says. “During major shifts like we’re seeing now, that might mean more active risk management, but it also means keeping an eye on where the demand for protein is showing up in revenue streams on the farm. At this point, that might not be protein prices on the milk check directly, but it could include ongoing opportunity for beef calf sales.”

Success in this environment isn’t just about producing more milk. It’s about understanding the global flow of protein, the geopolitical climate of North American trade and the discipline to take risk off the table when the market offers a favorable price. As the spring flush continues, the U.S. dairy farmer remains — as always — a resilient fixture in a world that is increasingly hungry for what they produce.

The Silent Strength of Cheese

Wed, 29 Apr 2026 13:34:00 GMT

Over the years, cheese demand has slowly crept its way up to one of the most utilized dairy products. Per capita, the United States consumes the highest amount of cheese at 19.3 kg (about 42.5 pounds) annually. In second place, Canada consumes 14.5 kg per capita while the United Kingdom, Australia, New Zealand and Argentina trail shortly behind at 12.5-9.40 kg respectively.

While Cheese dominates consumer demand at record levels, it also dominates a big part of the milk supply. Cheese is the leading user of U.S. milkfat, at 65% of manufactured milk being utilized for cheese production. That is a huge help when we see record setting milk production month after month here in 2025 and 2026.

Earlier this month, the USDA forecasted the 2026 milk production to increase 1.5% from 2025, coming in at 235.3 billion pounds, more than 600 million pounds from a month earlier. Despite this increase in milk production, the USDA increased the projected cheese price due to recent strength in the cheese market.

The cheese price strength has been slowly creeping up from the January lows. While milk production increases, the Cold Storage Report shows available supply fading. Last week, the report showed total natural cheese stocks up 1% from the previous month but down 2% from the previous year. When you compile these facts on top of the knowledge that milk production is growing year-over-year, you can see the story building as to why cheese is the silent strength behind the dairy market. Should milk production decline, cheese will be a major factor in future price hikes.

In the short term, traders do not expect cheese to lead any major rallies. However, when looking at long term trends, with consumer demand more than doubling per capita in the last 45 years, it is hard to ignore the steady growth in the U.S. alone. Therefore, it may be the support that places a solid price floor for dairy products in the months to come.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

Organic Dairy Groups File Lawsuits Over Federal Milk Pricing System

Tue, 28 Apr 2026 17:54:05 GMT

Organic dairy farmers are challenging their required participation in the Federal Milk Marketing Order (FMMO) program through a series of federal lawsuits, arguing the system does not reflect how organic milk is produced or marketed.

Members of the Coalition for Organic Dairy Exemption (CODE), including Aurora Organic Dairy , Horizon Organic Dairy and CROPP Cooperative/Organic Valley , have recently filed three federal court actions questioning the constitutionality of including organic milk in FMMOs. A separate class action claim seeks compensation for payments farmers say were collected over the past six years without providing a return.

At the center of the filings is a request to exempt organic dairy from the FMMO system, rather than dismantle the program entirely.

“The federal government has locked in an updated dairy pricing regulation that actively harms organic dairy farmers,” says Elvin Ranck, an organic dairy farmer plaintiff from Pennsylvania. “It systematically siphons revenue generated from organic dairy sales and redistributes it to non-organic dairy producers and their partners.

He continues: “This is effectively a government taking. CROPP Cooperative, of which I am an owner-member, pays millions of dollars each year into the Federal Milk Marketing Order pools, yet those dollars never return to organic farmers like me, and under the current system, they never will. At some point, we have to stand up for ourselves.”

Separate Supply Chains, Shared Pricing Rules

The lawsuits argue organic and conventional milk are treated the same under FMMO pricing and pooling rules, even though they operate under different production systems.

Organic milk cannot be intermingled with conventional milk under federal regulations and typically moves through separate supply chains. Organic production also comes with higher feed, certification and handling costs, along with additional processing requirements.

While organic milk represents about 3% of total U.S. milk production, it accounts for roughly 7% of fluid milk sales. More than 10% of U.S. dairy farms are certified organic.

Plaintiffs argue the current structure pulls revenue out of organic milk checks instead of supporting investment in that segment.

Previous Attempts Through USDA

According to CODE, the legal filings follow multiple attempts to address the issue through USDA’s administrative process.

The group submitted proposals in 2015 that were not advanced and presented organic-specific recommendations during the 2023 national FMMO hearing that were not considered. Concerns raised in post-hearing comments in 2024 were not reflected in the final rule, and administrative challenges filed in 2025 were opposed.

“USDA, under both Republican and Democratic administrations, has spent more than a decade protecting a Depression-era pricing system that forces organic dairy to subsidize conventional products, while refusing every administrative avenue that might have resolved the dispute without litigation,” CODE members said in a press release. “There is a growing movement in this country, across party lines, that wants to know where food comes from and how it’s produced. Organic farmers help make that possible. The federal government should not be making it harder for us to survive, and it has had every opportunity to fix this.”

What the Lawsuits Would Change

The lawsuits emphasize that the goal is not to eliminate FMMOs, but to remove organic milk from a pricing structure plaintiffs say was not designed for it.

“Federal law already recognizes organic as different. USDA’s own organic standards treat our milk as a distinct product with distinct requirements,” CODE members said. “We are not asking to tear down the FMMOs. We are asking FMMOs to reflect a distinction that the law already makes – and that consumers already understand.”

If successful, the cases could change how organic milk is handled within federal pricing orders and whether producers remain subject to pooling requirements moving forward.

How One Dairy is Using Embryos to Replace Jerseys With Holsteins

Thu, 23 Apr 2026 15:32:41 GMT

As milk markets evolve, some dairies are starting to pull back on Jerseys, driven by a combination of shifting milk pricing, weaker replacement demand and changing revenue opportunities beyond the bulk tank.

For some, that shift has meant leaning into crossbreeding to capture flexibility and hybrid vigor. For others, it has meant doubling down on Holsteins to produce more milk volume, capture stronger beef-on-dairy premiums and improve cull value. That has been the case for Triple G Dairy and LegenDairy in Arizona, where a closer look at whole-herd economics, not just components, has prompted a gradual move away from Jerseys and toward a more Holstein-focused system.

When Fairlife expanded into the state six years ago, it reshaped breeding priorities for several dairies. For Triple G Dairy and its sister operation, LegenDairy, the focus on higher components triggered a transition away from Jerseys and toward Holsteins.

(Skylar Gericke)

“When Fairlife came in, they said that they had their bottom line on components, and we needed to be above that number on protein and fat,” says Skylar Gericke, part-owner at LegenDairy. “We originally did not meet their threshold for components, but we are now well over past component tests from when we milked a mixed herd”.

At the time, the fastest way to raise components was to bring Jerseys into the system. Since then, genetics, nutrition and management improvements have helped the Holsteins catch up.

“When we built LegenDairy, we moved all the Jerseys to that location and focused the Holstein herd at Triple G,” Gericke says. “But now the Holsteins have come up in components. We’re around 3.3 protein and about 3.7 fat now. At this point, we’re really working toward a Holstein herd and phasing the Jerseys out.”

Looking Beyond Components

The decision to move away from Jerseys was not based on components alone. When Gericke evaluated the economics across the entire system, several factors began favoring Holsteins.

“We still ship milk to a fluid market,” Gericke says. “And with the way our Holsteins are milking today, I need to ship more hundredweights in order to spread that fixed cost.”

Additional revenue streams also played a role in the decision.

“The more and more you look into breeding, the Holstein cows are becoming more efficient,” Gericke explains. “And when you factor in beef-on-dairy calves, the beef calves have a $500 to $1,000 premium on them. Even culling those Holstein cows, you get another $300 to $400 per cow. So profitability wise, we’re better off Holstein.”

Replacement market signals reinforced that direction.

“There’s just no good market for Jerseys right now,” he says. “Everybody is either trying to get out or breeding them terminal.”

Read: Crossbreeding Gains Ground as Some Dairies Scale Back Jerseys

(Skylar Gericke)

How Embryos Are Reshaping the Herd

As the farm shifted away from Jerseys, LegenDairy used Holstein semen on Jerseys to create some crossbred animals. The focus was on high genomic Holstein bulls with strong udder and health traits.

“We went back through the bulls we had been using and looked at the calves that had already been genomically tested,” Gericke says. “From there, we picked the top performers based on udder traits and component levels, and those top three bulls were the ones we used on the Jerseys.”

But as Gericke dug deeper into the economics, he concluded that building a herd of more purebred Holsteins made the most sense. Embryo transfer became the main tool driving that change.

“We make our own Holstein embryos through IVF,” Gericke says. “It gives us control over the progress, and I like having that control.”

That approach has helped accelerate the shift toward a more uniform Holstein base by multiplying higher-end genetics and reducing reliance on natural turnover.

(Skylar Gericke)

Genetics Is a Long Game

While reproductive tools like IVF can speed up progress, genetic change still takes time to work through a herd.

“Once you start implementing a breeding strategy, you have to think long term,” says dairy consultant Jason Anderson. “Unless you’re selling your cows and buying a different breed, it can take five to seven years from the time you change the semen in the tank before that new herd is fully in place.”

That delay means breeding strategies must also align with milk markets.

“Having a clear understanding from your processor about what they want from your milk helps define your strategy,” Anderson says. “It’s important to know what they are looking for and how that fits with the breeding decisions you’re making on the farm.”

For Gericke, that long-term mindset is exactly why he has leaned into embryo transfer.

“We can make management changes pretty quickly, but genetics don’t move that fast,” Gericke says. “Embryos help us speed things up, but once you pick a direction, you still have to stick with it and let it play out in the herd.”

The Kansas Explosion: Cow Numbers Surge as U.S. Milk Production Climbs

Thu, 23 Apr 2026 15:15:09 GMT

The latest USDA Milk Production report paints a picture of an industry in the midst of a significant geographic and structural shift. Led by a massive surge in the High Plains, milk production in the 24 major states reached 19.6 billion lb. in March, a 2.4% increase over the previous year.

While the production increase is notable, the real story lies in the “where” and “how.” The U.S. dairy herd is expanding at a clip rarely seen in recent years, with cow numbers in the major states climbing to 9.18 million head — an increase of 188,000 cows compared to March 2025.

The Kansas Phenomenon

If there is a gorilla in the room in this report, it is Kansas. The Sunflower State has officially become the epicenter of American dairy expansion. In March 2026, Kansas saw a staggering 25.4% increase in milk production compared to the same month last year.

This growth is driven by a massive influx of cattle. Kansas cow numbers jumped from 187,000 head in March 2025 to 234,000 head in March 2026 — a net gain of 47,000 cows in a single year. This explosion suggests the state’s aggressive strategy to attract processing capacity and foster a pro-growth business climate is paying massive dividends. Large-scale operations are not just moving to Kansas; they are thriving there, leveraging the state’s access to feed and central logistics.

“I almost always look at cow numbers first because that’s going to tell us a lot about short-to-medium-term prospects,” Phil Plourd, president of Ever.Ag Insights says. “For March, the U.S. herd increased 8,000 head month-on-month and 187,000 year-over-year to a new 30-plus year high. That says we’re going to have plenty of milk for a while. And, while performance varies from region to region and farm to farm, prospective margins seem decent enough to keep things rolling.”

This 30-year high in cow numbers indicates that despite the volatility of the global market, U.S. producers are betting on growth. However, that growth is highly concentrated.

High Plains Powerhouses and Regional Shifts

Kansas isn’t the only state in growth mode. The High Plains and West continue to consolidate their positions as the industry’s heavy hitters:

Texas: Added 31,000 cows year-over-year, bringing its herd to 719,000 head and boosting production by 4.7%.
South Dakota: Continued its steady climb with a 6.9% production increase, supported by 15,000 additional cows.
Idaho: Reached 724,000 cows (up 24,000 head), with production rising 3.4%.

The Regional Retreat: A Tale of Two Coasts

The report also highlights a stark contrast: as the High Plains boom, the Pacific Northwest and parts of the Southwest are in retreat. Washington saw a significant 5.8% drop in production, losing 15,000 cows over the past year as regulatory pressures and changing land use take their toll. New Mexico also faced a decline, with production falling 3.2% as its herd shrank by 9,000 head. Even traditional strongholds like Pennsylvania saw a dip, with production down 2.3% and a loss of 12,000 cows. These numbers tell a story of a national dairy industry that is not just growing, but migrating toward regions where modern, large-scale infrastructure can be built from the ground up.

Efficiency Meets Scale

It isn’t just about more hooves on the ground; it’s about the brilliance of modern management. Production per cow in the 24 major states averaged 2,133 lb. for March, 7 lb. higher than a year ago. This marriage of scale and efficiency has pushed the January-March quarterly production to 58.5 billion lb., up 2.9% from the same period last year.

As the industry moves into the second quarter of 2026, the data confirms a new reality. The era of localized, fragmented production is giving way to a high-precision, geographically concentrated model. With Kansas leading the charge, the U.S. dairy industry is proving through innovation and strategic expansion, it can reach heights not seen in three decades.

Crossbreeding Gains Ground as Some Dairies Scale Back Jerseys

Wed, 22 Apr 2026 14:59:37 GMT

Not long ago, Jerseys were gaining ground on many dairies. Strong butterfat tests and a reputation for feed efficiency made the smaller brown cows an attractive option for producers chasing component premiums. In many herds, Jerseys filled that role well, especially when milk checks heavily rewarded fat.

But the advantage that once set Jerseys apart has narrowed. Years of genetic progress have pushed Holsteins to improve components while maintaining their high production levels. As that gap closes, some dairies that once leaned into Jerseys are beginning to reconsider the role the breed plays in their herds.

Changing Views on Herd Composition

This shift is easy for Jason Anderson to spot. As a dairy consultant with Progressive Dairy Solutions, he works with dairies across the western U.S. and says herd makeup conversations are happening more often.

“Jerseys made a lot of sense when butterfat premiums were really strong and producers were chasing components,” Anderson says. “But now that Holsteins are improving components and still bringing the production, some dairies are reevaluating that balance.”

(Jason Anderson)

That change is showing up in herd composition in different ways. Some producers who once expanded Jersey numbers are now leaning more toward Holsteins or rebalancing their breed mix, while others are turning to crossbreeding programs.

In each case, the goal is the same: select cows that fit the environment and the way milk is paid.

Payment Signals Are Shifting

Behind many breeding decisions is a change in how milk is valued. In some regions, processors are not only reducing premiums for high butterfat but also applying deductions when fat levels run too high relative to protein.

“[Processors] have taken the premium off fat a little bit because there’s been so much of it produced,” Anderson says. “Essentially, they’re trying to bring the protein-to-fat ratio closer together.”

Protein is playing a larger role as processors adjust product mixes, shifting emphasis in how milk is evaluated.

“We’re continually trying to increase protein content,” Anderson says. “You can push protein nutritionally with amino acids, but that can get expensive. Doing it genetically is a much cheaper approach.”

Because genetic change takes time to reach the bulk tank, producers are making breeding decisions based on where they expect markets to go, not just where they are today. For many operations, that outlook is shifting herd direction away from Jerseys and toward more Holstein influence.

Those market signals are also showing up in herd economics.

“Using data from our high-producing herds within PDS, Holsteins show about a $3.20 per cow advantage in gross margin compared to Jerseys,” Anderson says. “That comparison used the Adisseo MilkPay model, assuming a Jersey at 68 pounds of milk with 5.3% fat and a Holstein at 94 pounds with 4.3% fat, while holding feed efficiency constant.”

Crossbreeding Gains Momentum

While crossbreeding is not new to the industry, interest has grown as producers look for improvements in fertility, longevity and overall herd performance.

As production levels climbed through purebred genetics, some herds began to see more challenges with reproduction, metabolic stress and cow turnover, prompting them to rethink breeding goals.

By combining breeds, producers have been able to capture hybrid vigor, which often shows up in fertility, survival and resilience. Crossbreeding can also help improve production consistency and better balance components to match today’s milk pricing signals.

Anderson says many dairies are now several generations into structured crossbreeding systems.

(Jason Anderson)

“About half of one of my client’s herd is crosses, F1, F2, F3s, HoJos, whatever you want to call them,” Anderson says. “Our strategy is we’re breeding these crosses back to F1 bulls, and we’re working on our fifth generation.”

The result is improved fertility and lower replacement needs as cows remain productive longer.

“When cows stay in the herd longer, that changes the economics pretty quickly,” Anderson says. “You’re not raising as many replacements, and the cows that are in the herd have already paid off their rearing costs.”

Crossbreeding can also moderate cow size, helping animals fit more comfortably into modern facilities.

“A lot of producers want a more moderate cow that still produces well but is easier to manage,” Anderson says. “You can get that balance when you start combining breeds.”

The Herd Continues to Evolve

The way producers think about breed balance is shifting, and herd makeup is changing with it. Jerseys still have a place on many farms, but their numbers may slide back in some regions as producers rethink the balance with Holsteins.

(Jason Anderson)

“The industry used to have a very specific picture of the ideal cow,” Anderson says. “Now producers are thinking more about what works in their system and what makes the most economic sense.”

That flexibility is reshaping herds across the country, whether through crossbreeding or more targeted selection within Holsteins and Jerseys.

A decade ago, herd dynamics looked different from what we see today. Walk through a dairy barn ten years from now and the cows may look different once again. What will stay constant is the goal behind them: building a cow that fits the farm, the market and the future.

What’s Driving a Better Dairy Outlook in the Second Half of 2026

Tue, 21 Apr 2026 19:59:57 GMT

Milk prices started 2026 on a soft note, but the outlook has improved somewhat as the year has progressed. Futures markets now suggest slightly stronger prices later in the year, offering some optimism for dairy margins.

Still, the improvement is measured. Strong protein demand, shifting consumer habits, global trade dynamics and record beef values are all shaping today’s dairy outlook. Those same forces could also introduce volatility over the next year.

“We have a lot better story to tell today than we did a few weeks ago,” says Kathleen Wolfley, market intelligence director with Ever.Ag. “We’re looking at a market today that is significantly higher than where we were trading at the beginning of the year. Class IV prices are around $19 a hundredweight. Class III prices are around $18 a hundredweight average.”

Even with prices looking a bit better, tight budgets and higher costs are still weighing on dairy demand. During a recent Standard Dairy Consultants webinar, Wolfley and Mike North, president of the producer division at Ever.Ag, gave their take on the current economic outlook for dairy.

A Split Consumer Economy

Energy costs are emerging as one of the biggest economic pressures affecting food demand, particularly for middle- and lower-income households.

“Fuel prices are the top item I’ve been watching here in the last few weeks,” Wolfley says. “I’m in New York, so if I pay over $4 a gallon, it pinches a little bit more than it did back in February when gas prices were in the mid-$2 range.”

But when fuel gets more expensive, family budgets feel it in a hurry.

“In our estimation, it’s costing a family $30 to $40 more per week to fill the tank. That’s basically takeout for a family of four,” Wolfley says. “It’s an easy way to cut back, especially in an environment where folks are feeling pinched.”

The result is a split consumer economy.

“You have some consumers, middle-to-lower income, that consistently say, ‘Hey, I am struggling with affordability,’ versus higher-income consumers that are going to feel the pinch of these energy prices a lot less,” Wolfley adds. “They’ve been absorbing the inflation over the last few years and just kind of taking it in stride.”

That uneven spending environment creates uncertainty for dairy demand.

“I’m a bit concerned about domestic demand here in the U.S. and the ability of domestic demand to recover on the backside of all this uncertainty,” Wolfley notes.

Protein Demand Off the Charts

(Stock Photo)

If one theme defines today’s dairy markets, it is protein. Nonfat dry milk, skim milk powder and whey are increasingly tied to demand for high-protein foods and beverages.

“We’re sitting at $2.06 per pound on the CME nonfat dry milk market, Wolfley says. “That’s a really exciting move, especially for those of you that have a lot of Class IV exposure.”

But the story goes beyond price. Milk solids are increasingly moving into higher-value uses.

“There’s solids now going into cheese production or yogurt production, or into ice cream, or even into the fluid bottle that is no longer making its way into the dryers,” she adds.

Ultrafiltered milk and protein beverages are capturing a growing share of milk solids, pulling more wet solids away from traditional drying channels and into high-protein beverage production. At the same time, U.S. powder markets remain tighter than global supplies, creating added competition pressure for exporters.

“It’s really important to consider that the tightness in this nonfat dry milk market is just a U.S. issue,” she says. “In the rest of the world, they’ve got a lot of supply, and they’re making a lot of powder.”

European milk production rose about 5% year-over-year early in 2026, increasing global powder availability. With U.S. powder priced 50¢ to 60¢ above global competitors, export buyers may start looking elsewhere.

“If you’re a buyer in Southeast Asia, why would you go to the U.S. for your nonfat dry milk or your skim milk powder needs when you can buy it cheaper out of New Zealand or the EU?” Wolfley asks.

Mexico, one of the largest buyers of U.S. dairy products, may already be exploring alternatives.

“I think those Mexican buyers are now looking at alternate sources to say, ‘Can I get it cheaper out of the EU even with the freight costs? Can I go to the GDT auction and get supply that helps alleviate some of that price pressure?’” she says.

For U.S. producers, that means the current rally in nonfat prices could face pressure if exports slow.

Butter Markets Swing with Global Trade

(iStock)

Butter markets have already experienced volatility this year.

“Butter prices rallied all the way above $2 a pound to begin the month of March,” Wolfley says. “Fast forward six weeks, and we’re basically back to where we were in early February.”

The early butter rally was largely fueled by strong export demand, with significant volumes moving through the CME spot market and a steady flow of fat heading into international channels.

February butter exports totaled about 22 million lb., with a large share headed to the Middle East. But geopolitical tensions quickly disrupted that trade. As exports slowed, more butter stayed in the domestic market.

“I think that does open up more potential that we’re keeping fat in the domestic market that may have otherwise been earmarked for the international space,” Wolfley says.

Even so, retail demand has been strong.

“Butter has been crushing it. Cheap butter has allowed retailers to promote aggressively. To see the four-week average on butter and butter-blend sales up 10% is pretty astounding,” she notes.

Still, Wolfley cautions the Class IV complex faces potential downside risk if powder markets weaken or exports slow.

Cheese Markets Lean on Exports

Cheese markets tell a similar story of volatility and global competition. Wolfley points to how prices dropped sharply earlier in the year.

“We hit sub-$1.30 cheese in mid-January. Sub-$1.30 cheese is pretty dang cheap, especially when you compare it to the $1.70 to $1.80 price points at the end of October,” she says.

Those low prices encouraged stronger demand.

“Low prices tend to cure low prices,” Wolfley adds. “We’ve seen more advertising in food service, more promotional activity in retail and opportunities in the export market.”

Cheese production continues to climb, with February output up 4% compared to a year earlier. At the same time, exports have helped absorb some of that additional supply and keep the market more balanced.

“We shipped 129 million lbs. of cheese in February, 30% more than last year, a record-high volume,” Wolfley says. “At the same time, we’re importing less.”

Exports have become essential to keeping the market balanced.

“It tells me we have to stay competitive,” Wolfley says. “If we want to move that cheese, and the domestic consumer isn’t saying ‘Hey, I want a bunch more,’ it ultimately comes down to staying competitive versus the European mozzarella market.”

Price gaps between U.S. and European cheese have narrowed recently, reducing the cushion U.S. exporters have relied on to stay competitive in global markets. With that spread tightening, the risk of oversupply in the domestic cheese market increases if export demand softens.

“Without a big splash into the international marketplace, we could find ourselves with a lot of product looking for a home,” Wolfley notes.

GLP-1 Drugs Shift Dairy Demand

(Lori Hays)

Another emerging factor shaping dairy consumption is the rapid rise of GLP-1 medications used for weight loss and diabetes management.

“I joke that you can’t talk about dairy now without talking about GLP-1, because I think it is a really important piece of the puzzle,” Wolfley says. “About 12% of U.S. adults are using it today, compared to 6% in 2024.”

These drugs reduce overall food intake, with users typically consuming about 20% to 30% fewer calories, and that shift is starting to show up in dairy demand, particularly across categories tied to indulgence and higher-calorie foods.

“We’re seeing less pizza consumption because it doesn’t sit well with people’s stomachs on GLP-1. We’re seeing less ice cream consumption,” Wolfley says.

But the change is not entirely negative for dairy. Protein-rich foods are gaining traction.

“We’re seeing more cottage cheese consumption,” Wolfley adds. “There’s a big boom in cottage cheese production and investment because of opportunities to hit high protein needs. There’s also growth in yogurt and whey protein.”

The shift may ultimately move dairy demand away from indulgent products and toward nutrient dense, protein-focused foods.

Milk Production Expands

At the same time demand patterns are shifting, milk production continues to grow.

“We’ve asked for more milk in terms of processing,” Wolfley says. “We’ve added a lot of capacity in a short amount of time here in the U.S. — about $11 billion worth of investment expected between 2025 and 2030 — and producers have responded.”

U.S. milk production rose nearly 3% in February, showing continued strength in output as the year gets underway. Cow numbers are also increasing, up about 211,000 head year over year, signaling ongoing herd expansion across the industry. At the same time, productivity continues to improve.

“Every cow that’s out there is making more milk today than she was last year and the year before that, and she’s making more components,” Wolfley says.

Advances in genetics and feeding strategies are pushing component levels higher across the U.S. dairy herd. As a result, Wolfley has adjusted her production outlook, reflecting stronger-than-expected gains in milk output potential.

“If you’d asked me this question at the beginning of January, I would have said we might see contraction by the end of 2026,” Wolfley says. “I’m singing a little bit of a different tune today. I expect around 1.5% growth in milk production in 2026 compared to 2025.”

Beef-on-Dairy Income Remains Strong

(Wyatt Bechtel)

Strong beef markets have added another layer to the dairy profitability picture. What once served as a modest income source has grown significantly.

“The more crowds of producers I get in front of, the more I hear how important beef revenue is to the operation,” North says. “This went from casual spending money to something that’s much more substantive and really a big part of the overall profitability picture on a dairy.”

Revenue from beef-on-dairy has increased sharply.

“From late 2022, we estimated revenue on a per hundredweight basis of beef to the bottom line of about $1 to $1.50. Today, that number has grown to anywhere between $4.50 to $5,” North says.

Day-old beef-on-dairy calf prices reflect the strength of the market.

“Recently reported numbers coming in from out of the East Coast show $1,700 for a wet calf,” North says. “It seems insane, but the market has been going up for the better part of three and a half years.”

These high prices are sending a strong message to producers, pushing them to take a closer look at how beef-on-dairy plays a role on their operation.

“If you aren’t addressing beef prices in your operation right now, what are you waiting for? These prices are called record prices because we don’t get to touch them very often,” North says.

Managing Risk in a Volatile Environment

Feed markets add another layer of uncertainty. Large U.S. crops could keep pressure on corn prices, but geopolitical events and energy markets continue to create volatility.

For dairy producers, it’s another reminder to keep an eye on risk.

“There are plenty of headwinds that crude oil prices bring into our economy,” North says. “GLP-1s are real. We see big growth as we come through 2026. It’s going to create domestic headwinds for demand that we may not fully understand yet.”

Even with those challenges, the outlook for margins is cautiously optimistic.

“We are cautiously optimistic about margins as we look at the 2026 year,” North notes. “But we cannot overlook managing the risk around strong beef and dairy prices. The bottom line is: manage risk. It’s too volatile to just leave it to chance.”

An Industry in Transition

Taken together, today’s dairy markets reflect an industry in transition. Prices are improving but remain tied closely to global trade. Protein demand continues to reshape product markets. New consumer trends and medications are shifting how dairy is consumed.

At the same time, milk production continues to expand, beef-on-dairy revenue is strengthening farm balance sheets and risk management tools are playing a larger role in protecting margins.

The opportunity for growth remains strong. But in a market like this, North and Wolfley say it comes down to making the most of the good opportunities while keeping a handle on the risks.

The Cost of the Squeeze: Inside the Strategic Shift Reshaping U.S. Dairy

Thu, 16 Apr 2026 14:04:13 GMT

As we pull the curtain back on the first quarter of 2026, the U.S. dairy industry is presenting a paradox that has even the most seasoned market analysts leaning in. On the surface, the numbers look familiar: the national milking herd is growing. But a closer look at milk check components reveals a surprising deceleration.

According to the National Milk Producers Federation (NMPF) Dairy Market Report released on March 30, 2026, “while the milking herd continues to grow, component growth surprisingly decelerated to start 2026, indicating that producers are responding to strong economic incentives from beef-on-dairy but not pushing for maximum milkfat tests with the fall in butter prices.”

This isn’t a fluke of biology; it’s a calculated business pivot. We are witnessing a strategic shift where producers are weighing the cost of the squeeze against the reality of the global market.

The Beef-on-Dairy Influence

The primary driver behind this deceleration is the sheer economic gravity of the beef-on-dairy market. In 2026, the incentive to produce a high-value crossbred calf has, in many cases, outpaced the incentive to push for that extra tenth of a point in milkfat.

Curtis Bosma with HighGround Dairy told “AgriTalk” host Chip Flory earlier this year that there are cows in the herd today that might not economically deserve a spot based on their milk production alone.

“But farmers are keeping them because they are pregnant with a black calf. It’s essentially a rebate that keeps the cow in the stall until that calf arrives,” Bosma says.

Producers are making a sophisticated management choice: If the butterfat market is softening, why invest in high-energy, higher-cost rations required to maintain record-breaking tests? Instead, they are diverting that management focus toward the black ink provided by the beef-cross side of the ledger. It is a vivid example of the margin revolution in action — producers aren’t just chasing production; they are chasing the most efficient path to profitability.

The Not-So-Burdensome Supply

Normally, a growing herd combined with heavy milk production would be a recipe for a market glut and burdensome inventories. Yet, as we move through early 2026, the warehouses aren’t overflowing. While component production remains at record highs, the market feels tight because surging domestic protein demand and robust butterfat exports are rapidly absorbing what is still a historically large volume of milk.

This has created a unique support system for key dairy products:

Nonfat Dry Milk (NFDM): Despite U.S. milk production rising 3.4% in January, NFDM production continued to slide. Extraordinary demand for high-protein products — such as Greek yogurt, cottage cheese, and ultrafiltered milk — is pulling protein away from the dryers. This limited supply is supporting a price rally, though analysts warn U.S. prices are now sharply higher than other major exporters. A convergence in global prices may be necessary to maintain long-term export momentum.
Butter: Even as milkfat tests failed to grow at a normal pace, butter production jumped 6% in January. However, inventories have noticeably tightened (12% lower than January 2025), helping prices rally. Strong export orders have balanced the market, with January exports nearly tripling prior-year levels as buyers prebook deliveries well into 2026.

The Genetic Floor

Despite the current deceleration in components, the long-term potential of the American herd remains at an all-time high. Corey Geiger, lead economist at CoBank, points out 61% of the gain in butterfat over the current era is tied directly to genetics.

“The dairy cow is the most researched animal on Earth,” Geiger shared at the IDFA Dairy Forum earlier this year. “We have more tools in the toolbox to change butterfat levels than ever before, and those genetic gains are permanent.”

The story of early 2026 is one of agility. The industry is proving it can grow its footprint without crashing its own price floor. By responding to the beef-on-dairy incentive and pulling back on expensive nutritional pushes when the market doesn’t reward them, U.S. producers are demonstrating a level of market maturity unseen in previous decades.

The most valuable pound of milk isn’t always the one with the most fat — it’s the one that fits the current economic roadmap.

Record Breaking Prices in Grade A Non-Fat Dry Milk

Wed, 15 Apr 2026 13:49:51 GMT

The slow sneak higher Grade A Non-Fat Dry Milk has caught traders by surprise as the rest of the dairy sector is knee deep in doom and gloom from high milk production woes. The last week has left everyone in awe at the strength of the cash market to continue to find demand for Non-Fat Dry Milk and Skim Milk Powders.

(Sarah Jungman)

Exports have been strong; however traders are beginning to speculate as to when we will hit the threshold of value to the world market, especially in the last week as prices skyrocketed higher. At some point, high prices weigh on demand, and the fear is that we are there now. But buyers keep buying, even today, after an impressive close last week, buyers secured another 5 loads, increasing the price to new heights by another 1.75 cents.

Class IV milk has reaped the benefits of the strength of Nonfat Dry Milk as butter has fallen back in price despite the strength of the milk powders. For every penny that Grade A Nonfat Dry Milk increases, it heavily influences the Class IV milk price by approximately 9 cents. Dry Whey, on the other hand, only impacts price by 6 cents for every 1 cent move.

While the question of if the demand will continue is on the forethought of traders’ minds, what goes up usually comes back down. In the meantime, we are going to be thankful for the one bit of shining light in the dairy market today and hope to reap the benefits in the Class IV price for a bit longer.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

The Hidden Squeeze: Why the $5 Make Allowance is the New Battleground for the U.S. Milk Check

Wed, 08 Apr 2026 11:58:29 GMT

In the world of dairy economics, there is a term that often flies under the radar of the average consumer, yet it keeps thousands of dairy farmers awake at night: the make allowance. To a processor, it is a necessary calculation of the cost to turn raw liquid milk into cheese, butter or powder. To the American Dairy Coalition (ADC) and the farmers they represent, it has become an invisible, multidollar tax that is fracturing the foundation of the family farm.

As of March 30, 2026, the tension between the barn floor and the processing plant has reached a boiling point. After requesting an extension March 20, which was not granted, ADC submitted final comments by the March 30 deadline to the USDA Agricultural Marketing Service (AMS) regarding the Advance Notice of Proposed Rulemaking (ANPR).

Math of the Margin: A $5 Deduction

For years, the make allowance was a relatively stable figure. However, following the 2025 Federal Milk Marketing Order (FMMO) changes, the math has shifted dramatically in favor of the processor.

According to a deep dive by Sherry Bunting, ADC market analysis and policy adviser, the first eight months under the new 2025 rules have seen total make allowances surge.

“When translated from cents per pound into real milk check impact, and paired with rising component levels, total deductions now range from $3.22 to as high as $5.04 per cwt at pool average test,” she says.

Using federal pricing formula calculations developed with longtime expert Calvin Covington, former CEO of Southeast Milk and National All-Jersey, Bunting points out that the eight-month average deduction for Class III increased $1 at $4.74 per cwt, with Class IV up $0.93 at $3.32.

“In practical terms, that’s a multidollar deduction built into the pricing system on the front end,” says Laurie Fischer, CEO of ADC.

The impact of this front-end deduction is staggering. ADC analysis shows that while estimated processor gross margins have jumped by 26% to 39%, the minimum milk value paid to farmers has plummeted by 5% from this change alone. To put that in perspective, that 5% reduction effectively wipes out nearly two decades of modest, hard-won price gains for producers — at a time when the cost of diesel, labor and feed is at an all-time high.

Transparency Gap

One of the primary green flags producers were looking for in USDA’s mandatory survey was transparency. If farmers are going to pay for the processing, they want to see the receipts. However, the process has been marred by what ADC calls a “lack of meaningful engagement.”

USDA provided a 30-day comment period — a window so small that many producers were unaware the conversation was even happening. With limited public outreach, the very people whose checks are being “audited” were left on the sidelines.

“Farmers didn’t have time to fully engage in a process that directly affects how their milk is priced,” Fischer explains. “There is a real expectation that this survey will provide transparency, and USDA needs to ensure that expectation is met.”

Efficiency Paradox: Where are the Savings?

Perhaps the most compelling argument raised by ADC involves the massive leap in plant efficiency over the last quarter-century. Historical data compiled by Covington shows that in 2000 it took 99.47 lb. of milk to produce 10 lb. of 38% moisture cheddar cheese. By 2025, that dropped to 87.2 lb.

“In more practical terms, it required almost 25 less tankers (50,000 lb./tanker) of milk per day to produce 1 million pounds of 38% moisture cheddar cheese compared to 2000,” Covington notes.

The logic is simple: If it takes fewer trucks, less milk volume to handle, less time to process the same amount of product and more product to spread the fixed plant costs, why are the deductions for processing costs reaching record highs? In its comment, ADC seeks distinction between fixed and variable costs to recognize this yield gain.

ADC is urging USDA to ensure the survey accounts for these gains in plant efficiency. They are also sounding the alarm on “cost shifting.” Modern dairy plants produce an array of high-value products — ultrafiltered milks, specialized proteins and niche ingredients — that aren’t even part of the federal pricing formulas. Without a clear separation of costs, farmers fear they are subsidizing the production of high-margin items that don’t actually contribute to their own milk checks.

Price Taker Dilemma

The fundamental struggle of the U.S. dairy farmer is their status as a “price taker.” In almost every other sector of the economy, if your costs go up, you raise your prices. In dairy, the farmer ships the milk weeks before they even know what they will be paid for it.

“Dairy farmers remain the only participants in the supply chain without the ability to set prices or recover costs through a built-in mechanism,” Fischer says.

Processors have the make allowance to protect their margins. Retailers have the ability to adjust the price on the shelf. The farmer, standing at the beginning of the chain, has only the hope that the federal formulas remain fair. But when the gap between the All-Milk price (used for risk management programs like DMC) and the mailbox price (what actually hits the bank account) widens to over $1 per cwt, the system begins to break.

Road to a Fair Formula

ADC’s message to USDA is one of focus and fairness. They are calling for an end to scope creep within the cost survey; the survey must remain strictly focused on the physical cost of converting milk into the four specific products used in federal formulas: butter, nonfat dry milk, cheese and dry whey.

As the industry moves toward the next chapter of the margin revolution, the demand for a stable, legal workforce and high-tech efficiency must be matched by a regulatory environment that values the producer.

The domestic supply chain is more than a logistical network; it is a promise of food security for a growing world. However, that chain is only as strong as its first link: the producer. If the $5 make allowance continues to deepen its impact without transparency or justification, the heartbeat of U.S. dairy — the family farm — is at risk of stopping.

“This is about transparency and fairness,” Fischer says. “Farmers should not be paying for costs tied to products that do not determine their milk price.”

The Strategic Blueprint for Dairy Expansion: Engineering Resilience in a Volatile Market

Fri, 03 Apr 2026 12:53:06 GMT

In the dairy industry, a period of low milk prices often creates a sharp paradox. While many producers retreat into defensive postures, the “top one-third” of operators — those with a clear vision and a robust balance sheet — often view these downturns as a strategic buy low window. However, transitioning from a stable operation to an expanded one during a market trough is not a matter of intuition; it is a rigorous exercise in financial engineering and operational discipline.

To successfully navigate this transition, producers must look beyond the herd and into the mechanics of their financial engine. By synthesizing the insights of financial industry veterans like Gary Siporski and lending experts like Jim Moriarty, vice president of animal ag lending - dairy for Compeer Financial, we can map out the essential blueprint for growth in the modern dairy economy.

1. The Strategic Audit: “Buy Low” Opportunity Versus High-Risk Gamble

The distinction between a calculated expansion and a reckless gamble lies in the pre-existing health of the farm’s financial ecosystem. Before a shovel hits the dirt, a loan committee looks for a foundation of trust with current suppliers. An operation that is not current with its local vendors is rarely a candidate for institutional growth.

According to Siporski, the primary indicator of readiness is the equity position. Entering an expansion, a top-tier operation should ideally sit at 70% equity. The critical analysis, however, is the pro-forma or post-expansion reality. If the debt required to grow pulls the total equity below 45%, the operation may be over-leveraging its safety net.

Moriarty adds a layer of practical flexibility to this, noting while 50% to 60% equity is a strong starting point, the mission-critical goal is maintaining at least 45% owner equity after the new facilities, cows and equipment are added.

“Dairy farms can be successful at as low as 40% owner equity,” Moriarty explains. “But the operation needs to be performing at a high level when leverage gets in that range.”

The goal is to invest while milk prices are low to be positioned for the rebound, but only if the farm can absorb the stubbornly high overhead of modern expansion.

Moriarty also offers a sobering counter-narrative to the traditional buy low strategy. Unlike previous cycles, today’s low milk prices have not translated into lower costs for construction, equipment or cattle. External economic factors — inflation and supply chain constraints — mean that while the milk check is smaller, the cost of concrete and steel remains at a premium. This creates a unique challenge: the opportunity for well-managed operations to invest during a downturn is still there, but the entry price for that growth is historically high.

2. The Efficiency Mandate: Getting Better Before Getting Bigger

Growth without efficiency is a liability. In a business context, getting better is defined by a specific set of key performance indicators (KPIs) that prove the management team can handle increased complexity.

The financial discipline begins with a monthly cash flow projection completed every December, reconciled against an accrual adjusted income statement at year-end. Operationally, the farm must demonstrate elite-level management across several pillars:

Quality & Health: A somatic cell count (SCC) <100,000, heifer survivability at 95% and a cull cow rate <30%.
Cost Control: An operating expense rate of <80% and a cost of production (COP) ideally under $17/cwt.
Human Capital: Low labor turnover is a hallmark of a stable business.

Moriarty emphasizes expansion is not a cure for existing inefficiencies.

“While new facilities can provide efficiencies, expanding is not a cure for cost of production challenges. If a farm’s cost of production is above [industry averages], it suggests that dialing in on areas of improvement in the existing operation should be the area of focus,” he warns.

High-performing operations today are showing COPs in the $15 to $17/cwt range. Exceeding this suggests dialing in existing performance should be the priority before adding more cows to the system.

3. Capital Structure and the Liquidity Oxygen

Expansion requires a long-term commitment, often referred to as being “in it for the long pull.” Success depends on matching the life of the asset with the term of the debt while maintaining enough liquidity to survive a black swan market event.

Structuring the Debt

Long-Term Debt: Real estate and major infrastructure should be structured on a 15-to-25-year amortization. Securing and locking in the lowest possible interest rates is a defensive necessity.
Intermediate Debt: Cattle and machinery should be amortized over 5 to 7 years, ensuring debt is retired before the asset’s peak utility is exhausted.

The Liquidity Buffer

Perhaps the most vital component is the unadvanced Line of Credit (LOC). A top-tier producer ensures a $500/cow LOC remains available at all times. Moriarty points out a strong working capital position — often exceeding $1,000 per mature cow — provides the necessary cushion for the cash flow disruptions that inevitably occur during an expansion.

Loan structuring tools can further protect liquidity, such as:

Interest-only periods: 12 to 18 months during construction.
Revolving herd loans: Often called borrowing base loans, these require only interest payments as long as the herd value remains within parameters, allowing principal pay-downs during high-price cycles.

4. The Lender’s Perspective: Green Flags in a Down Market

When a loan committee reviews an expansion application, they are looking for proof of concept. In the current economic climate, lenders prioritize several key benchmarks:

Profitability History: Lenders look for net income levels of $800 to $1,200 per cow annually over the last 3 to 4 years.
Capital Costs: Moriarty emphasizes the “financial danger zone” when evaluating capital costs (depreciation, interest and leases).

“Capital costs may increase to $3.25 or even $3.50/cwt for a several-year period but will hopefully be offset by labor and production efficiencies. If capital cost per cwt. gets to $4.00 per cwt or over, the stress on cash flow and profitability can be a significant challenge,” he says.
Transparency: Quality and timeliness of financial information are paramount. Producers who provide up-to-date balance sheets and comprehensive pro-forma budgets receive faster feedback and more favorable terms.

5. Risk Management and the Professional Network

For the modern dairy, expansion is no longer a solo endeavor. It requires a professionalized board of advisers, including financial consultants to stress-test pro-formas and commodity brokers to manage volatility.

Moriarty advocates for a layered approach to risk management to diversify coverage:

Layer 1 (DMC): Dairy Margin Coverage should be the foundation for the first 6 million lb. of production.
Layer 2 (DRP): Dairy Revenue Protection provides a floor price by quarter while leaving upside potential open.
Layer 3 (Options): Spread positions can offer a higher price floor at a lower cost, though they require more active management.
The Beef Component: With higher beef values today, Livestock Risk Protection (LRP) on beef calf sales is a sound strategy to protect this growing secondary income stream.

Farms do not need to cover 100% of their milk, but a combination covering 50% to 75% of production balances the cost of premiums with the necessity of protecting the expanded debt load.

The Vision of the Top-Third Producer

Expansion in a down market is a hallmark of a visionary producer, but that vision must be validated by cold, hard metrics. By maintaining strong equity, keeping a competitive COP and prioritizing better over bigger, a dairy operation transforms from a family farm into a resilient agricultural enterprise.

As the industry evolves, the successful top-third producers will be those who don’t just see the cows, but the entire financial engine that sustains them. They understand while the milk price is out of their control, their equity position, their cost of production and their risk management strategy are firmly in their hands.

The Dairy Margin Revolution: Why You’re Not Just in the Milk Business Anymore

Wed, 01 Apr 2026 16:26:36 GMT

In the 2016 film The Founder, there is a pivotal moment where Ray Kroc is told a hard truth that would change the course of business history: “You’re not in the burger business; you’re in the real estate business.” Most people thought McDonald’s became a global titan by flipping more patties or perfecting the kitchen assembly line. In reality, the breakthrough was a shift in how the business was structured. The burgers created the traffic, but the real estate underneath the golden arches provided the wealth.

For today’s U.S. dairy producer, a similar paradigm shift is underway. Curtis Bosma of HighGround Dairy says the most successful producers are realizing they are no longer in the milk business or the efficiency business. They are in the margin business.

The Metric Trap

For decades, dairy farmers have been taught to optimize a specific set of operational metrics: milk production per cow, butterfat and protein percentages, feed efficiency and pregnancy rates. While these are critical indicators of how a farm operates, Bosma argues none of them actually measure profitability.

“Dairies are not in the efficiency business,” Bosma notes. “Dairies are in the margin business.”

The problem is even if a producer does everything perfectly — hits 100 pounds of milk, maintains a 30% preg rate and keeps the cows healthy — the market can still force a negative financial outcome. Looking at the last 10 years of Income Over Feed Cost (IOFC) data, the volatility is staggering. We have seen margins swing from more than $14.00/cwt to as low as $4.00/cwt. In this environment, Bosma points out even an elite dairy producer must shift their focus from the parlor to the profit-and-loss statement.

The 2026 Landscape: A Surplus of Success?

The current state of the industry is a paradox of high performance and market pressure. The February 2026 USDA Milk Production report showcases the U.S. dairy herd is the largest size since 1993, with an increase of 211,000 head year-over-year.

While this efficiency is a testament to American ingenuity, it creates a heavy load for the market to carry. Nowhere is this more evident than in the cheese sector. December output hit a record 1.238 billion pounds. While exports have been stellar — exceeding 110 million pounds in seven different months of 2025 — the sheer volume of supply is capping the upside. HighGround Dairy projects that without a major fundamental shift, cheese prices will struggle to push past $1.60/lb. in the first half of 2026.

The Year of Protein and the GLP-1 Tailwind

While cheese and butter have faced supply-heavy headwinds, the whey market is telling a different story. We are currently living in “The Year of Protein.”

Demand for Whey Protein Isolate (WPI) and WPC-80 is at record highs, driven by a structural shift in consumer behavior. Interestingly, Bosma points to a GLP-1 tailwind. As weight-loss medications like Ozempic and Mounjaro become more prevalent, users are actively seeking out high-protein, nutrient-dense foods to maintain muscle mass while losing weight. This isn’t a passing fad; it’s a structural change in the American diet that favors dairy components.

However, even this gold rush has a ceiling. As WPI prices climb, lower-income importing nations may pull back, shifting production back to dry whey. For 2026, the expected sweet spot for dry whey is between $0.60 and $0.70/lb.

The Beef-on-Dairy Gold Mine

Perhaps the most significant supplemental income stream for the modern U.S. dairy is beef-on-dairy calves. The U.S. beef cow herd has hit a record low since 1965, sitting at just 27.9 million head. A combination of the 2022 drought, high cattle prices incentivizing liquidation and an aging beef operator demographic has created a massive supply hole.

For dairy producers, this is a strategic gift. Beef revenue per hundredweight of milk has climbed from roughly $1.00 in 2019 to nearly $5.00 in 2026. Feeder cattle futures are trending near $370/cwt.

The elite operator isn’t just treating these calves as a byproduct; they are managing them as a core revenue pillar. By using Livestock Risk Protection (LRP) to floor the value of unborn calves and cull cows, dairies are bulletproofing their bottom line against the inevitable cycles of the milk market.

Feed: The 2025 Surplus Versus The 2026 Risk

On the input side, the 2025 corn crop was the largest ever recorded, yielding 17.021 billion bushels. This has led to ending stocks at their highest levels since 2018, providing some relief on the feed bill.

However, Bosma warns against complacency. As of February 2026, approximately 41% of corn production areas are experiencing some level of drought. While the 2025 surplus provides a buffer, the 2026 crop is far from guaranteed. Similarly, alfalfa hay acres and production have been on a steady decline since 2000, making high-quality forage a persistent challenge for the Western and Midwestern milksheds.

The Elite Operator Mindset: Strategic Versus Operational

To navigate this complexity, Bosma suggests adopting an “Elite Operator Mindset.” This requires a clear division of labor within the farm’s leadership:

Employees Operate: Following established protocols for milking and feeding.
Managers Review Tactics: Adjusting rations and allocating labor to achieve specific, short-term outcomes.
Owners Strategize: This is where the “Margin Business” is won. Owners must focus on long-term, high-impact decisions like risk management, succession planning and capital investment.

“Make better decisions faster,” Bosma advises. “70% certainty is enough — move fast, correct often.”

Ken McCarty of McCarty Family Farms in Kansas says his operation has seen a total transformation in how it views its calf crop.

“It wasn’t that long ago that a bull calf was almost a liability or an afterthought,” he says. “Today, depending on the market, those beef-cross calves can represent nearly 50% of our total calf revenue. It’s no longer a side project; it’s a core pillar of our financial stability that helps us weather the volatility of the milk check.”

Owning Your Financial Position

Finally, the path to clarity and control requires producers to understand who is looking at their financial statements and why.

The Banker wants to know if you can repay the loan (cash flow coverage).
The Accountant wants to know how to reduce the tax bill (depreciation).
The Business Owner (You) must ask: “Am I earning a return on my labor, my land and my capital?”

The tools to manage these margins are more accessible than ever. Dairy Revenue Protection (DRP) and Livestock Risk Protection (LRP) are no longer optional luxuries; they are the “real estate” of the modern dairy.

Reclaim the Legacy

The goal of shifting from an efficiency mindset to a margin mindset isn’t just about the money— it’s about clarity and control. It’s about ensuring the markets do not determine your legacy.

By thinking like an elite operator, understanding the structural shifts in the beef and protein markets and aggressively using risk management tools, producers can bridge the gap between “flipping burgers” and building a durable, scalable empire. The dairy engine may be changing, but the mission remains the same: protecting the land, the cows and the family’s future, one margin at a time.

More Cows, More Milk, More Global Concerns

Tue, 31 Mar 2026 16:05:25 GMT

The USDA released the February Milk Production report shortly after my last article, showing much of the same numbers as expected. Milk production in the United States is higher compared to a year ago, coming in at 18.3 million pounds, that is 2.9% higher than February 2025. However, that is 595 million pounds lower than the January report.

Milk cow numbers also increased from 2025, to 9.615 million cows, that is 204,000 cows more than a year ago. What did change in February is production per cow decreased 168 lbs., the lowest production per cow we’ve seen in a year.

Class IV milk has been steadily increasing in prices for the last 45 days due to strength in the butter and powder markets. Butter continues to see support from the strong export market as well as Easter season demand, but the Cold Storage Report showed an increase in inventory. Butter inventory is 253.8 million lbs., an increase of 27 million lbs. from last month, however still 17% from a year ago.

Cream supplies have gotten tighter than expected but not enough to bring a big influx of buying the cash market. Milk components have declined but still higher than last year and with spring flush around the corner, they have not gotten in a hurry to secure supply, leading to some weakness in the market.

There is a lot of talk about export demand facing its own set of challenges. With fuel and energy prices rallying, the cost of commodities and moving products could be concerning for world demand. Insurance costs of ships, fuel to move products are on the forefront of fears, however it goes deeper than that with concerns over the availability of the petroleum products to make the plastic containers for dairy products.

Some exports fear that even if the Strait of Hormuz gets back to business-as-usual today, should the conflict be resolved, we could still cause issues for months to come with the disruption in the supply chain. Between fuel cost, insurance costs, energy costs, or something as small as a container shortage, there are a lot of unknowns the dairy market has yet to face.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

Lock in Gains: How LRP Can Help Protect Beef-on-Dairy Profits

Wed, 18 Mar 2026 19:20:23 GMT

Record-high beef-on-dairy prices have reshaped the balance sheet for dairy farmers, turning a once-small revenue source into a major part of the bottom line. But without protection, those gains could disappear just as fast, underscoring how quickly momentum can shift in today’s cattle markets.

Experts caution today’s opportunity demands a more deliberate approach.

Mike North, president of the producer division at Ever.Ag, and Will Babler, principal at Atten Babler Risk Management LLC, made two points clear during the Professional Dairy Producers conference:

Beef-on-dairy is now a significant part of a dairy’s financial picture.
Tools like Livestock Risk Protection, or LRP, are critical to protecting those profits, especially at today’s historic highs.

Beef-on-Dairy Income Becomes a Major Revenue Stream

In just a few years, beef-on-dairy revenue has expanded dramatically. Strong demand from feedyards and packers, combined with tight U.S. cattle supplies, has pushed prices for beef-on-dairy calves to levels few producers expected even five years ago. For many farms, those calf checks now add several dollars per hundredweight to the milk check equivalent.

“At the end of 2022, the average dairy was getting paid about a $1 to a $1.50 a hundred in beef revenue,” North says. “Today, that number is north of $5. We’ve tripled that part of the financials. It’s a massive, massive opportunity, and with it a massive growing potential risk.”

Babler described beef as a new pillar supporting dairy profitability.

“We now have this other leg to the stool, whether it be black calves or cull cows,” Babler says. “That also has become a major contributor to our revenue stream.”

But as beef revenue grows, so does exposure to market swings. North and Babler say this makes it a smart time for producers to think about expanding their risk management toolbox . Alongside programs like DMC and DRP for milk, tools such as LRP can help protect beef-on-dairy income, letting producers capture strong markets while buffering against sudden drops.

Are Beef-on-Dairy Calves the New $24 Milk?

For many dairy producers, beef-on-dairy calves have become one of the most valuable animals leaving the farm. Day-old calves have averaged $1,500 in some regions and pushed over $2,000 in others — a price that would have been hard to imagine just a few years ago. North says the current market feels similar to $24 milk.

“What should one do with $24 milk?” he asks. “Walk quietly into the sunset and say, ‘We’ll wait to see if it gets better?’”

With prices sitting at all‑time highs, he says this isn’t the moment to step back.

“We’re talking about all-time records, and you just don’t walk away from those and say, ‘Ah, I’ll check back in next month.’ That’s not how we approach markets like this. You’ve got to go after it,” he says.

Lock in Gains

As attractive as today’s beef-on-dairy calf prices are, North cautions markets at record highs rarely stay there forever. When you’re standing at the top of the mountain, the fall can be just as steep on the way down. That’s why he encourages producers to think carefully about risk management tools like LRP to help guard against sudden market swings.

The federally subsidized insurance program administered by USDA allows producers to establish a price floor while still participating in market rallies, functioning similarly to a put option. Unlike futures contracts, which require fixed contract sizes, LRP policies can be written to cover the actual number of animals in a group rather than standardized futures contract weights.

Babler notes how attractive the program has become in the current market.

“When we look at the tools available, LRP really stands out for cross calves right now,” he says. “There’s a lot of reach in the market, and premiums have collapsed. We’re talking about $30 a head floors.”

Babler explains if prices fall below the level you insured, LRP pays an indemnity equal to that gap. Because the program uses national price indexes rather than individual sale prices, it protects against broad market declines, not differences from one sale barn to another.

Recent changes to the program have also helped increase interest among dairy producers. New coverage options now exist for cull cows and unborn calves, including beef-on-dairy crosses that may be sold shortly after birth.

Subsidy levels have also increased significantly, rising from about 13% in earlier versions of the program to roughly 35% to 55%, depending on the level of coverage selected. Premium payments are now due at the end of the coverage period rather than upfront, which improves cash-flow timing for producers.

These changes have also helped to improve the program’s flexibility. Babler says cattle can now be sold up to 60 days prior to the coverage end date without affecting the policy, compared to the previous 30-day window. Producers may also purchase coverage for animals they have under a valid purchase agreement, as long as possession occurs at least 90 days before coverage ends.

Taken together, those updates have reduced out-of-pocket costs and made LRP more accessible as a risk management tool.

Playing Offense with LRP

North and Babler emphasize LRP isn’t just a defensive strategy. It’s also a way for producers to play offense, capturing opportunities when markets are strong.

“Risk management really has two sides,” Babler says. “You play offense when markets give you opportunities, like we’re seeing in cattle right now, and you lock in the gains. At the same time, you play defense to protect yourself from the downside when things turn. In the past, dairy producers mostly dealt with corn and milk, which often moved in opposite directions. But now there are more markets to work with — milk products, protein, and beef — so there’s a better chance that at least one of them is working in your favor. The goal is to capture those strong markets while still protecting yourself when prices drop.”

While prices are expected to remain strong for now, Babler and North emphasize risk management tools provide a safety net, letting producers play offense when opportunities arise, while still playing defense to protect the gains they’ve worked hard to earn.

High Milk Production Meets a Changing Cattle Market

Tue, 17 Mar 2026 20:54:13 GMT

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.

(USDA - Reports)

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

Global Demand Lifts U.S. Dairy Exports to Near-Record Levels

Tue, 03 Mar 2026 15:05:04 GMT

Every week, dairy news articles circle the impact of the growing milk production in the United States and what factors could possibly help support prices despite the looming supply. The one bright spot helping to elevate the massive supply issue is the extreme growth in exports we’ve seen over the last few years.

In 2025, the United States approached near record export values at a whopping $9.51 billion in dairy products exported. Second to 2022 in dollars of products shipped to other countries. That equates to a 15% increase year over year from 2024 in dollars and 5% more in total volume of dairy products exported.

Currently, the U.S. sells to 143 countries which saw the biggest increase in demand from a wide range of buyers in the Middle East, South Asia, North Africa and South America. We are third largest exporter of dairy products in the world.

In 2025, the U.S. saw a huge increase in butter and milk fat shipments, up over 165% from 2024. Whole milk powder also saw a massive increase, coming in 56% higher than 2024. Cheese and butter product demand is strong both domestically and abroad.

Globally, milk supply is plentiful with the U.S., New Zealand, and the European Union increasing steady. It can be seen when comparing prices as the World Milk Price which has been falling since early last June.

With supply being plentiful and exports strong, the world has all eyes on the conflict in the Middle East. Over the weekend, tensions between Iran and the United States led to strikes on U.S. bases in Bahrain and buildings in Dubai. While not a direct impact to the dairy industry, the tensions can be felt throughout.

For shipments, insurance and freight costs will be a factor, especially near the Strait of Hormuz. Most cargos will see increased cost with the added risk as well as some energy cost spikes, given the impact on crude oil. Insurance companies either drop coverage or increase prices enough to discourage travel through those areas as we saw with the Russian/Ukrainian war. Bottlenecks in logistics may also be a factor going forward.

As far as changes that will directly affect dairy, it is too soon to tell but something the United States, EU and New Zealand are keeping a close eye on. Butter so far has not factored in a risk to demand as Monday trade was higher on the day. Volatility is to be expected whether it comes directly in the futures markets for dairy products or indirectly from the impact seen on the stock market. This can create marketing opportunities, especially in the deferred months which have surpassed the $18 mark in Class III Milk futures for June and beyond.

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 .

The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.

Dairy's 2026 Safety Net: Producers are Moving from DMC to DRP

Tue, 24 Feb 2026 14:56:55 GMT

In the high-stakes world of dairy production, the margin between a profitable versus a catastrophic year is often measured in pennies. For decades, the industry relied on a relatively simple equation: the price of milk minus the price of feed. In 2026, that equation is more complex. The tools that once served as a reliable safety net are now facing a paradox – a reality where the data says producers are thriving, but the checkbook says otherwise.

To understand the future of dairy survival, the two pillars of the federal safety net must be dissected: Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP). While one is a legacy program struggling to adapt to a world of hidden costs, the other is a flexible, high-tech shield that is rapidly becoming the industry standard.

The Dairy Margin Coverage Era: A Foundation in Flux

The Dairy Margin Coverage program, created by the 2018 farm bill, was designed to be the ultimate insulator against market shocks. Through various iterations from the 2014 farm bill’s Margin Protection Program for Dairy (MPP-Dairy) to the current DMC program, the program has been a statistical success. For most producers, the math is compelling: An average premium of 15 cents per cwt yields an average payment of $1 per cwt.

The structure for DMC, which is administered by the Farm Service Agency (FSA), is simple. Tier 1 offers a “safe harbor” for the first 5 million pounds of production, allowing for coverage up to $9.50 per cwt. Tier 2 allows larger operations to cover their excess production at a lower $8 cap and higher premiums.

However, the “success” of the DMC has hit a wall and is increasingly becoming a thing of the past. The formula relies on four main ingredients: the National All-Milk Price, corn, soybean meal and premium alfalfa. When these crop prices are low, the “calculated” margin looks healthy.

This is where the paradox lies.

“When crop prices are this low, it makes the milk margin under the DMC program look really high on paper, which is why the program didn’t trigger payments at any coverage level between May 2024 and November 2025,” says Danny Munch with the American Farm Bureau Federation.

The December 2025 pricing data finally points to the first payments in more than a year, but only for producers covered at the highest available $9.50 margin (at a $9.42 per cwt margin), he adds.

According to Katie Burgess with Ever.Ag, the DMC program uses national numbers for both the milk price and feed costs, so it has never really reflected the reality of any individual dairy operation.

“For the sake of keeping it simple and straight forward, I believe [the DMC program] does a fine job of representing a margin over feed. Of course, it’s not capturing the non-milk or feed data, so it’s not accounting for the higher non-feed costs the past few years. It’s also not making any adjustments for higher cull cow and calf revenue either,” she says. “For a producer really looking to dial in their margins, it’s not perfect. But, for a producer looking for some basic coverage against falling milk prices or rising feed costs, it does the trick – especially when you consider it comes at an affordable premium cost of 15 cents per hundredweight for the $9.50-margin Tier 1 coverage.”

The “Hidden Cost” Crisis

The primary criticism of the current DMC is its simplicity. Grant Grinstead with Vir-Clar Farms in Wis., says the DMC formula doesn’t account for modern cost factors.

“There are so many other cost factors that come into play now versus just feed,” he says. “I think we’re still missing some of that for true risk protection ... it makes us look like we’re doing better than we are.”

“The additives, minerals and fuel costs — those costs play a role,” Munch adds.

Beyond inputs, there is the massive, uncounted elephant in the room: labor. In fact, since 2016, the cost of keeping a reliable team on the ground has surged by 30% to 50%, driven by a tightening rural workforce and rising cost of living. This especially holds true for farms in states that have mandated overtime laws for dairy employees.

As dairy operations scale, labor has moved from a minor line item to one of the largest expenses on the balance sheet. Because DMC only looks at feed, a producer can be losing money on every gallon of milk due to labor and fuel, yet USDA data will show they are operating in a “healthy” margin.

Industry leaders are now “ringing the bell” for a formula enhancement. Suggestions include a “floor” for feed costs to protect those who grow their own crops or the inclusion of a “total cost of production” index that accounts for the reality of additives, minerals and human capital.

The Rise of Dairy Revenue Protection

As the DMC program struggles with its rigid formula, producers are shifting to a more surgical tool: DRP. Launched by the USDA Risk Management Agency in 2018, the program covered nearly 30% of all U.S. milk production in 2025.

Unlike the DMC, which focuses on the margin, DRP is designed to insure against unexpected declines in quarterly revenue. It is a “fluid” policy — markets change daily, and the coverage can be adjusted to match. For the lifetime of the program through 2025, net indemnities to producers have totaled more than $850 million, proving its effectiveness in a volatile market. Through the first three quarters in 2025, the program paid out a net of $31 million, but according to Phil Plourd, president of Ever.Ag, that number will go up considerably once Q4 figures land, estimated at an additional $150 million.

Ken McCarty, co-owner of McCarty Family Farms in Rexford, Kan., says that in their experience DMC is less applicable to a farm of their size compared to DRP.

“We believe that it is important that all safety net programs are kept nimble enough to adjust to changing market dynamics and the evolution of the dairy industry,” he says.

Grinstead views risk management as a way to provide control points for the business, ensuring the farm survives the future. Since 2019, Grinstead has utilized DRP as a net-positive tool for Vir-Clar Farms, managing his strategy at least a year in advance to secure incremental margins. After experiencing a significant premium loss during the COVID-19 pandemic, he shifted to combining DRP with options to protect his financial downside while still participating in potential market rallies.

“We’re not looking for home runs,” he shares. “We’re looking for base hits and just kind of driving our business through some control points and being here for the next generation tomorrow.”

5 Pillars of the Dairy Revenue Protection Strategy

For producers, DRP offers five advantages DMC cannot match:

1. Class vs. Component Pricing. DRP allows producers to choose how their milk is valued. Class pricing (Class III and IV) is ideal for those focused on fluid volume. However, for the rising number of Jersey and high-component herds, component pricing is a game-changer. It allows producers to establish an insured price based on butterfat, protein and other solids.

2. Flexible Coverage Levels. Producers aren’t locked into a “one-size-fits-all” tier. They can cover up to 100% of their expected production at levels between 80% and 95%. This allows a producer to “buy what they need” based on their specific break-even points.

3. State-Level Indexing. DRP is not a national average; it is indexed to the state or region where the producer is located. This accounts for regional basis and production fluctuations, making the indemnity much more accurate to the producer’s actual loss.

4. Natural Market Protection. DRP is a pure market tool. It covers revenue loss caused by natural occurrences in market prices and yields. While it doesn’t cover the death of cattle or management errors, it provides a “floor” that allows a producer to keep doing business even when the global market turns sour.

5. The 2026 Evolution. The program is not stagnant. For the 2026 crop year, several key revisions are being implemented to protect the integrity of the program and the producer. This includes a new “Insured’s Certification Against Subsidy Capture,” ensuring the program remains a legitimate insurance tool rather than a speculative one. Most importantly for herd health, the 2026 revisions include language that considers animal disease a “natural disaster” event that can trigger coverage if it prevents a producer from marketing milk.

“We continue to see strong interest in DRP insurance, as it helps protect against falling milk prices regardless of what feed prices do,” Burgess shares. “It’s especially useful for producers with output of more than 6 million pounds annually who can’t fully cover their production with the DMC program.”

Even if a producer can cover all their milk with DMC, it is also a good idea to have a DRP policy because many times DRP allows them to lock in a higher milk price than what would be protected by DMC, she adds.

“For instance, in 2025, many DRP policies saw sizable claim payouts whereas DMC only had an 8 cent payout in December,” Burgess notes. “Both DMC and DRP are useful programs, but knowing the strengths and weaknesses of each is important to make sure you are using the right tool for the job.”

The sign-up period for the 2026 DMC is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

Why High Protein Demand Isn’t Raising Your Milk Check

Mon, 23 Feb 2026 14:09:09 GMT

For the owner of a 700-cow dairy, the math of 2025 and 2026 isn’t just a line item on a spreadsheet — it’s a $275,000 hit to the bottom line. In an industry where margins are often measured in pennies, a slump of that magnitude can feel like a recession. But according to Ben Laine, Terrain’s senior dairy analyst, what we are seeing isn’t necessarily a total industry collapse; it is a high-stakes evolution.

In a recent deep-dive into the dairy markets, Laine dissected the inverse world of milk pricing, the growing reliance on beef-on-dairy revenue, and why the industry’s current short-term pain might be the necessary precursor to long-term gains.

High Demand Doesn’t Always Equal High Checks

Walk into any grocery store and the trend is undeniable. If a product doesn’t have “20g of protein” emblazoned on the label, it’s behind the curve. Consumers are insatiable for whey protein, shakes and bars. Logic suggests this surge in demand should be a windfall for dairy producers. However, Laine points out a unique quirk in federal order pricing that often leaves producers confused.

“The protein demand story is very positive,” Laine explains. “But the fact that protein values are high on milk checks right now is really more a function of the fact that butter values are low.”

Under the current federal order structure, protein value is often inverse to butter value. When butter prices fall — as they have recently — protein values automatically climb, regardless of whether a single extra shake was sold. This means producers must be careful not to mistake a pricing quirk for a long-term demand signal. While the long-term demand for protein is real and growing, the milk check doesn’t always reflect it in a straight line.

The Second-Half Rebound

The weak start to the 2025/2026 season is largely a result of a global oversupply. The U.S., Europe and New Zealand all saw production surges that hit the market simultaneously. However, Laine is optimistic this slump won’t be a multi-year trough like those seen in the past.

“I’m hopeful that this is a pretty short-lived trend,” Laine says. “We’re starting to see slaughter rates pick up, which moves us in the right direction toward reining in that oversupply. I expect to see prices improve in the second half of the year as global prices rise and our export values regain strength.”

The silver lining of low prices is that they often spur demand. As consumers find relief at the grocery store, and as U.S. cheese remains competitive on the global market, the surplus should begin to clear — setting the stage for a rebound by late 2026.

The Black Calf and the Aging Herd

Perhaps the most significant structural change in the industry is the beef-on-dairy revolution. Estimates from groups like Dairy Farmers of America (DFA) suggest 70% of producers are now engaged in breeding dairy cows to beef bulls — a number Laine suspects might actually be higher.

This isn’t just a side hustle; it’s a survival strategy. At current market rates, the revenue from these black calves can add $3 to $4 per hundredweight to a milk check. This buffer is what allows many farms to weather the current low milk prices.

However, this trend is creating a secondary effect: a tightening heifer inventory.

“We have the lowest ratio of heifers to milk cows since the ‘90s,” Laine notes. “Producers are holding onto older cows for an extra lactation just to get one more high-value beef calf.”

While this has caught the market off guard, Laine isn’t panicked. He argues the industry is becoming more surgical with its genetics. Producers are only breeding their absolute best animals for replacements, resulting in a smaller, but genetically superior, pool of heifers. While the industry may eventually find itself wishing for more replacements in the pipeline, the current expert management of the herd is keeping production levels surprisingly resilient.

The $11 Billion Question: Where Does the Milk Go?

The dairy industry is currently in the middle of a massive $11 billion processing expansion. New plants are popping up in regions like Kansas, where production is exploding to fill the new capacity. Laine notes that while this gives milk a place to go, it creates a new challenge at the other end of the plant.

“It’s a positive that we’re not seeing base programs or limitations because we have processing capacity,” Laine says. “But then we have to make sure there’s a place for the finished product — the cheese or the whey — to go. Often, that means exporting at lower prices than we’d like, but it’s better than having nowhere to send the milk.”

Diversification as a Shield

When asked if the industry is on the verge of a recession, Laine’s answer is a firm “no.” He views the current climate as an evolution rather than a decline. The modern dairy farm is no longer a single-commodity business. Between beef-on-dairy revenue, manure digesters producing natural gas, and carbon credits (LCFS), the revenue streams are more diversified than ever before.

“It’s not just about milk prices anymore,” Laine concludes. “We’ve developed better tools for managing risk, and we have additional revenue streams that help weather these storms better than in the past.”

For the American dairy farmer, the message of 2026 is one of grit and perspective. While the base milk price may feel like a flashback to leaner times, the tools at the farmer’s disposal — from genetic precision to renewable energy — are firmly planted in the future. The moment dairy is having is one of transformation, proving that even when the check stays stagnant, the farmer never stops moving forward.

Your Next Read:
Why the U.S. Milking Herd is Growing Despite Record-Low Replacement Numbers

U.S. Dairy Exports Surge to $9.51 Billion in 2025

Fri, 20 Feb 2026 17:50:01 GMT

The U.S. dairy industry closed 2025 just shy of an all-time export record, signaling strong global demand and growing diversification across international markets.

According to calendar year 2025 data released by USDA, U.S. dairy exports reached $9.51 billion, narrowly missing the record $9.54 billion set in 2022. That total is up 15% from 2024, showing how U.S. dairy continues to gain ground in global markets.

In addition to higher value, export volumes also increased. According to the International Dairy Foods Association (IDFA), U.S. dairy exports totaled 2.8 million metric tons in 2025, up 5% from the previous year. Growth was driven largely by expanding demand in the Middle East, North Africa, South Asia and South America, regions that are playing an increasing role in strengthening and diversifying U.S. dairy exports.

“This near-record year demonstrates that U.S. dairy exporters are succeeding in diversifying both markets and product portfolios,” says Michael Dykes, IDFA president and CEO. “Growth across North Africa, South Asia, the Middle East, South America and the European Union reflects a deliberate strategy to reduce concentration risk, deepen customer relationships and compete in emerging and established markets alike. Today, U.S. dairy exports reach 143 countries, and our product mix spans consumer-ready foods, high-value ingredients and specialized nutrition products — a level of diversification that strengthens long-term export resilience.”

Regional Growth Highlights

Export growth in 2025 was broad-based, with several regions posting double- and even triple-digit gains. The following breakdown from IDFA highlights how U.S. dairy exports performed by region:

North Africa — Exports surged 107% by value and 69% by volume, reflecting accelerating demand across the region.
Middle East — Exports grew 48% by value and 19% by volume, driven largely by processed cheese, sweetened milk powder, whey protein powder and concentrate, lactose and natural milk products.
South Asia — Exports grew 63% by value and 25% by volume, led by strong growth in India, Pakistan and Sri Lanka. U.S. dairy exports to India alone increased 71% by value and 31% by volume.
South America — Exports grew 14% by value and 7% by volume.
Central America — Exports grew 19% by value and 13% by volume.
North America — Exports grew 6% by value and 2% by volume.
East Asia — Exports grew 14% by value and 2% by volume.
European Union — Exports increased 61% by value and 69% by volume.
Sub-Saharan Africa — Exports grew 9% by value.

Higher-Fat Products Help Drive Momentum

Demand for higher-fat dairy products saw a sharp increase in 2025, contributing to overall growth in U.S. dairy exports. Global export volumes rose by approximately 165% for butter and milk fat and by 56% for whole milk powders, reflecting shifts in global purchasing patterns and increased use of these products in both consumer foods and food manufacturing.

Several other categories also posted solid gains. Dairy spreads, whey protein concentrates and cheese were among the stronger-performing products, indicating continued demand for both value-added ingredients and consumer-ready dairy products across a range of markets.

Combined with broader regional growth, higher export volumes and near-record export value, U.S. dairy continues to expand its role in international markets.

“Looking ahead, our industry is poised for even greater growth,” Dykes says. “A renewed trade agenda that expands market access, strengthens enforcement and opens new opportunities in Southeast Asia, Latin America, North Africa and the Middle East will allow U.S. dairy exporters to compete and win in markets around the globe.”

With momentum already built in 2025, the outlook for 2026 points toward continued export gains fueled by expanding opportunities.

Warm Weather Boosts Milk Output as USDA Projects Higher 2026 Production

Thu, 19 Feb 2026 22:00:37 GMT

In the previous article, we were discussing how the severe winter conditions were bringing a rally for dairy products, led by butter. A historic winter event which shut down most of the south and southeast parts of the country. Weather conditions brought a quick rush of buying, with retailers trying to stock shelves ahead of the storms. Today it is a much different picture outside, with historically warm temperatures. The extreme cold suppressed production temporarily. Now that temperatures have risen, it is being reported that not only has production come back to normal, but now many farms are starting to see an early spring production surplus.

Last week, the USDA released the February WASDE report, giving us data that confirms their stance on another year of higher production. Milk production increased another 200 million pounds from last month’s report, coming in at 234.5 billion pounds of milk projected for 2026. That is 3 billion pounds more than the 2025 estimates.

The USDA lowered domestic use for Fat Basis, which caused a 400 million increase in beginning stocks for the 2026 Fat Basis Supply, offset only slightly by an increase in exports and a decrease in imports bringing the 2025 ending stocks number up to 12.8 billion pounds of milk. For 2026, there was a 700 million increase in ending stocks, partially due to the beginning stocks increase, but also lower domestic use. 2026 also had a bright spot to offset some of the higher supply, there was a 500-million-pound increase in exports projected.

From a Skim-Solid Basis, the beginning stocks number for 2026 was actually decreased by 200 million pounds, coming from slightly higher domestic use in 2025. For 2026, the USDA lower export projections in this category slightly, bringing the 2026 expected ending stock for Skim-Solid Basis down to 9.0 billion pounds, the lowest expected ending stock number in years. 200 million lower than the 2025 estimate, 400 million lower than 2024, and 800 million lower than 2023. Domestic usage is the main driver to pull that ending stocks number as low as projected number published here.

As a result, the 2025 Dairy Prices were all unchanged, outside of a 2-cent increase to the estimated All Milk Price. For 2026, there were some fairly significant increases in every dairy category. This biggest increase happened to be in Class IV Milk which increased $1.25 cents from last month’s report to $15.70.

These numbers lay out an important snapshot of the state of the dairy markets today. Supply is plentiful, but usage is steady. Exports are the shining light on the market but we need domestic usage to increase if we want to significantly change the outlook for prices going forward. One way that could be possible is a combination of the new push for whole foods, especially when looking at school options available like we may see as early as this fall.

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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USDA to Buy $148 Million in Dairy Products, But Will it be a Major Market Mover?

Thu, 19 Feb 2026 19:14:47 GMT

USDA is helping create an additional outlet for milk, cheese and butter by purchasing millions of dollars’ worth of dairy products for food banks and federal nutrition programs.

In a recent announcement, U.S. Secretary of Agriculture Brooke Rollins shared USDA’s plans to purchase up to $263 million in agricultural products through the department’s Section 32 authority under the Agriculture Act of 1935. Of that total, nearly $148 million is earmarked specifically for dairy products, including butter, cheese and milk.

“These staples are essential for feeding families and sustaining America’s agricultural economy,” Rollins says, emphasizing the purchases are designed to deliver real food to Americans while injecting dollars back into rural communities.

The move by USDA closely aligns with a formal request made by the National Milk Producers Federation (NMPF) late last year.

“These are almost exactly the numbers that we sent [in] a request to the Secretary on Nov. 25,” says Gregg Doud, president and CEO of NMPF, during an interview with “AgriTalk” host, Chip Flory. “We ran our analysis, suggested what we thought aligned with USDA’s historical dairy Section 32 purchases, and USDA agreed and announced it this morning.”

What’s Included for Dairy

According to USDA, the planned dairy purchases will include:

Butter: $75 million
Cheddar cheese and cheese products: $32.5 million
Swiss cheese: $10 million
Fresh fluid milk: $20.5 million
Ultra-high temperature (UHT) milk: $10 million

For dairy farmers, the purchases could help absorb product during periods of tight margins and volatile milk prices.

“Dairy farmers have shared in the struggles faced throughout the agricultural economy, and these purchases will provide important relief to producers who will benefit from the additional demand, helping them provide nutritious dairy products to Americans and the world,” Doud says.

He notes NMPF has been particularly focused on the butter market, where supply and demand have been misaligned.

“We were especially looking at the butter market,” he says. “Right now, we’re looking for any demand under any rock we can find in the dairy business.”

Rollins emphasized the purchases are designed to support not only dairy farmers, but also the broader network of jobs tied to dairy production.

“These Section 32 purchases help stabilize farm income while supporting rural jobs tied to dairy processing, transportation and manufacturing,” Rollins says. “By turning farm production into meals, we’re supporting the farmers who feed America.”

Market Impact: Helpful, But Not A Game-Changer

While these new purchases made by USDA will help provide support, Phil Plourd, head of market intelligence for Ever.Ag, notes the impact on prices could be modest in scale.

“This is one of the ways that low prices can work to cure low prices,” Plourd says. “Without the details — especially on timing — it’s difficult to offer much specific commentary on potential price impact. At first blush, the commitment to buy butter seems substantial. Based on recent solicitations and purchases, we’d guess that the $32.5 million for cheddar cheese and cheese products might buy about 18 million pounds. That’s not nothing, but if our math is accurate, it’s only about 5% of one month’s worth of U.S. output and less than 1% of annual production. But, the bottom line is straightforward: $148 million in additional dairy purchases counts as supportive.”

Doud echoes that view, noting while the purchases won’t transform markets overnight, they do provide meaningful support — especially for butter and cheese.

“148 million isn’t anything that’s going to be a huge market mover, but it certainly helps, especially on the butter side of the equation,” he says.

Ben Laine, senior dairy analyst at Terrain, adds that even though the purchase won’t dramatically shift markets, it should be positive news for prices.

“The purchase announcement should be favorable for milk prices,” Laine says. “We’re starting the year in an oversupplied situation, and most of the positivity in dairy markets so far has been around nonfat dry milk and whey. Support for butter and cheese in particular through these purchases should help round things out and provide more strength to milk prices.”

In the global dairy sector, Doud says signals from the international dairy market are starting to improve, offering more support for prices.

“The good news is we’re seeing these markets — dairy markets, butter markets and cheese markets in Europe — begin to turn around here a little bit,” Doud says. “The world market’s starting to turn, and every little bit helps in this kind of environment.”

That comes against the backdrop of robust U.S. dairy exports.

“The year-end trade numbers came out today, and U.S. dairy exports were tied for an all-time record at $9.5 billion, ” Doud notes. “U.S. dairy is the third-biggest ag exporter, behind corn and soybeans. We had a really good year in exports. We did really, really well in 2025 on cheese exports, an all-time record by a country mile.”

That strong export base, combined with USDA’s planned purchases, contributes to a steadier overall demand picture, with international buyers drawing product abroad and federal programs taking in additional volumes domestically.

How Section 32 Works

USDA’s Agricultural Marketing Service (AMS) purchases domestic agricultural products when market conditions call for extra support. The products are then distributed through nutrition programs run by USDA’s Food and Nutrition Service (FNS), including food banks participating in The Emergency Food Assistance Program (TEFAP).

For dairy processors, these purchases often mean larger orders for products like butter and cheese, which can indirectly help support farm-level milk demand. Historically, Section 32 has acted as a pressure valve for farmers during periods of oversupply or weak commercial demand, moving dairy out of commercial markets and into programs that feed families while keeping milk flowing off farms.

Broader Ag impact

In addition to dairy, USDA plans to purchase fruits, legumes and tree nuts, including:

Chickpeas: $12 million
Dried Beans (Black and Pinto): $25 million
Fresh Pears: $15 million
Lentils: $14 million
Pecans: $10 million
Split Peas: $24 million
Walnuts: $15 million

USDA says the combination of products helps strengthen the nation’s food safety net while reinforcing agriculture’s role in economic resilience.

With this action, the Trump administration says it is aiming to bolster American agriculture, support rural communities and ensure families in need have access to nutritious, domestically produced food.

Why the U.S. Milking Herd is Growing Despite Record-Low Replacement Numbers

Thu, 19 Feb 2026 15:09:47 GMT

The traditional “manual” for running a dairy farm is being rewritten in real-time. For decades, the math was straightforward: cull underperforming cows, raise as many replacement heifers as possible, and focus almost exclusively on fluid milk volume. Today, that equation has been upended by a historic surge in the beef market and a genomic revolution that is fundamentally changing the biological output of the American herd.

According to Abbi Prins, a livestock analysis from CoBank’s knowledge exchange division, the industry is currently navigating a structural shift where the value of a cow is no longer tied solely to her milk production, but to her role as a surrogate for the high-value beef market. This beef-on-dairy movement is redefining heifer inventories, culling strategies and the very composition of the milk hitting the processing plants.

The Heifer Inventory Paradox

The current state of the U.S. heifer inventory is a primary point of concern for the industry. Historically, a tight heifer supply would signal an impending contraction in milk production. However, the U.S. milking herd remains robust, sitting at over 9.5 million head — the largest in over 30 years.

According to Prins, the reason for this paradox isn’t just producers holding onto older cows; it is a calculated shift in how they view their elite genetics.

“The beef-on-dairy movement has played a huge role in where total inventories stand,” Prins explains. “Dairy producers have found that when it comes down to profitability, they are breeding their elite animals for replacements and everything else to beef. You get a better price for that animal selling it as a beef-cross than you do making an extra replacement heifer that you might not need.”

This strategy has rewritten the traditional culling manual. In the past, if a cow wasn’t covering her feed costs or was underperforming in the parlor, she was sent to the back door. Today, the black calf in her uterus — often worth upward of $1,400 — acts as a high-value insurance policy.

“The equation is not as conducive to culling anymore because of where the beef market stands,” Prins says. “The value of that beef-on-dairy calf is worth more than just selling that cow off to be culled. It’s the reason we’re keeping cows longer.”

Holstein Cows Who Milk Like Jerseys

While the herd is skewing older, it is also becoming remarkably more efficient in terms of components. Prins notes a sentiment shared by International Dairy Foods Association CEO Michael Dykes: modern Holsteins are starting to milk like Jerseys.

“The shift in genomics to be able to produce more components is a big deal,” Prins says. “We are seeing record butterfat and protein levels. Even though the milk price is strained, producers are adding $3 to $4 a hundredweight to the bottom line because of these beef-on-dairy calves and high component values.”

Prins dismissed concerns that keeping older cows longer would result in a loss of genetic potential for the national herd. Because producers are being much more surgical with their breeding — using gender-sorted semen on only their top-tier animals — the next generation of replacements is genetically superior to anything the industry has seen before. The older cows are simply serving as surrogates for the terminal beef market, fulfilling a dual purpose that keeps the farm’s balance sheet afloat.

Weathering the 2026 Storm

As Prins looks toward the next six to 12 months, her forecast is one of “sadly optimistic” realism. She anticipates a slow, strategic pullback in the national herd size rather than a massive move.

“If we send too many cows to the back door at once, we create other issues,” she warns. “I’m hoping for a slow trickle down in cow numbers over the next six months, which should hopefully help the milk price rebound as we move out of this oversupply situation.”

Regarding the beef market, Prins is keeping a close eye on USDA’s cattle reports. While a rebuilding of the beef herd is inevitable, she believes the dairy-beef market has at least two more years of strength.

“Even if we start rebuilding the beef herd, we have to keep extra heifers on the cow-calf ranch, which further contracts the immediate beef supply. With strong consumer demand, that beef-on-dairy price should stay buoyant for the next couple of years,” she says.

The Bullish Bottom Line

When asked if the dairy industry is on the verge of a recession, Prins remains cautious. She points out traditional metrics, like how much Dairy Margin Coverage (DMC) is paying, don’t account for cull cow revenue, calf sales or labor costs, and therefore don’t tell the whole story.

“If you look at milk income over feed cost, it looks tough,” Prins admits. “But if you add beef-on-dairy into the equation, we’re not looking so bad.”

For Prins, the path to long-term gains requires enduring some short-term pains. She remains bullish on the industry’s future, citing massive investments in dairy processing and the stability of feed costs — barring any catastrophic weather events.

“Agriculture is cyclical. The highs eventually end, and the lows eventually come back up,” she concludes. “Between the processing investment and the beef-on-dairy market, there are a lot of things to be bullish about. The dairy industry is in a good position to rebound without turning the table.”

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One Week Remains for 2026 DMC Enrollment as Margin Pressure Builds

Wed, 18 Feb 2026 20:20:20 GMT

The sign-up period for 2026 Dairy Margin Coverage (DMC) is still open, but time is quickly running out. Producers have until Feb. 26 to lock in coverage, and current market conditions suggest payments can be expected throughout 2026.

Why DMC Matters in 2026

Milk prices have started the year on the weak side, and with more milk coming from U.S. farms, plus plenty of product available on the world market, margins are expected to stay tight for much of the year. Lower feed costs have limited some of the downside, but the gap between milk income and overall production expenses continues to be narrow.

Because of those squeezed margins, analysts say early 2026 DMC payments are likely, with estimates pointing to more than $1 per hundredweight in support from January through April, followed by smaller payments into July.

Expanded Coverage Now Available

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, reauthorized the DMC program through 2031 and made several updates intended to improve its usefulness and flexibility. The changes reflect how milk production and risk management needs have evolved, particularly for small- and mid-sized operations that rely on DMC as a foundational safety net.

These improvements include:

Higher Tier 1 coverage – Tier 1 production increase from 5 million lb. to 6 million lb., allowing more milk to be insured at the lower premium.
New production history – All operations must establish updated production histories based on the highest milk marketings from 2021, 2022 or 2023, while newer operations will use their first year of production data. Milk marketing statements or other documentation will be required.
Multiyear enrollment with discounts – Producers can lock in coverage for 2026–2031 and receive a 25% discount on premium fees.
Flexible coverage options – Multiple levels remain available, including a catastrophic option at a $100 administrative fee. USDA’s online dairy decision tool can help producers determine the best level of protection.

Your DMC Enrollment Checklist

With milk margins tightening and updated coverage options in place for 2026, producers may need to evaluate whether DMC fits into their overall risk management plans. This risk management plan is structured to provide payments when the margin between milk prices and feed costs falls below selected coverage levels and is commonly evaluated alongside tools such as Dairy Revenue Protection (DRP), Livestock Gross Margin (LGM) and futures or options strategies.

Before the enrollment deadline, producers should review the following items:

Verify Production History: Gather marketing statements from 2021, 2022 or 2023 to set your new baseline.
Evaluate Coverage Levels: Determine if the expanded 6 million lb. Tier 1 cap changes your strategy.
Compare Premium Costs: Weigh the 25% multiyear discount against your long-term cash flow goals.
Review Supplemental Tools: Consider how DMC works alongside Dairy Revenue Protection (DRP) or Livestock Gross Margin (LGM).
Assess Financial Goals: Determine how potential early-year payments fit into your 2026 budget.

How Do I Enroll in DMC?

To enroll in DMC, dairy producers must complete and submit an application to their local FSA office during the specified enrollment period, according to USDA. The application process includes providing production records and selecting the desired coverage level. Detailed enrollment instructions and deadlines are available through the local FSA office.

Dairy Faces a “Very Weird Situation,” Forcing Farmers to Rethink Revenue

Thu, 12 Feb 2026 17:27:19 GMT

Dairy farmers are standing on shaky ground. Milk checks are tight and input costs are up, but replacement heifers and beef-on-dairy calves are providing an unusually strong backstop. As Gregg Doud, president and CEO of the National Milk Producers Federation, puts it, dairy is in a “very weird situation” right now.

Beef-on-Dairy Helps Pay the Bills

With today’s market conditions, many dairy farmers are finding that the most valuable part of their operation is not in the parlor, but in the maternity pen.

“The milk check is not much,” Doud told “AgriTalk” host Chip Flory during Farm Journal’s 2026 Top Producer Summit. “But those calves are worth so much.”

In some regions, that beef-on-dairy value is staggering.

“The latest number I heard in the Northeast recently, a black day-old calf [is worth] $1,600,” Doud adds. “You talk to [dairy farmers] and they say, ‘We’re in the beef business now.’”

At a time when the milk check alone is not enough to carry the operation, beef-on-dairy has become a financial lifeline that is helping many farms stay profitable.

“Beef-on-dairy doesn’t have 100% penetration into the industry, but it’s close,” Doud says. “I would say it’s over 75% at this point.”

This shift is reshaping how farmers think about cow value, reproductive decisions and even culling strategies. A cow is no longer evaluated only on her milk production or longevity, but on the value of the calf she is carrying.

“If a cow is pregnant, she’s staying,” Doud adds. “The calves are worth too much to ignore.”

Fewer Replacements

That shift, however, comes with consequences for the future makeup of the herd.

With so many breedings going to beef, Doud says the number of replacement dairy heifers in the industry has dropped to levels that are noticeably short.

“The number of replacement dairy heifers is way below what it ought to be,” he says. “So, this is going to be interesting, and there could be a big swing in cow numbers at some point here.”

Doud notes the current reduction in replacement heifers is something the industry is watching closely.

Risk Management Remains Essential

As producers navigate all the shifting pieces in today’s market, Doud draws a firm line on risk management. In a margin environment like this, Dairy Margin Coverage (DMC) and Dairy Revenue Protection (DRP) are not optional tools in his mind. They are essential.

“The Dairy Margin Coverage program for dairy is something that I think everybody in agriculture needs to look at,” he says. “It kicks in when you need it.”

Although DMC has limits on how much milk can be covered at the highest level, Doud notes it still works well for most dairies. He follows that point with strong encouragement for producers to also consider DRP, explaining it offers another way to safeguard milk income by allowing farms to insure a portion of their future revenue against market swings.

“Every dairy farmer in America, my goodness, if you are not signed up for DMC and also DRP on the insurance side of the equation, get signed up for these things,” he adds.

In his view, these tools were designed specifically for moments like this, when margins are thin and markets are unpredictable.

Cautious Optimism in an Uncertain Market

Looking ahead, Doud acknowledges milk checks are likely to remain tight, but the value of beef-on-dairy calves is helping farms navigate a difficult margin environment.

With additional dairy processing capacity coming online and continued demand for protein, he is hopeful milk prices will improve. In the meantime, he views risk management tools and beef-on-dairy breeding decisions as practical safeguards for producers working through challenging market conditions.