Changing Industry Dynamics Ahead for U.S. Dairy
Daniel Munch
Economist
Chad Smith
Associate News Service Editor, NAFB
photo credit: Mark Stebnicki, North Carolina Farm Bureau
Daniel Munch
Economist
Chad Smith
Associate News Service Editor, NAFB
U.S. milk output is reaching record levels, but that data doesn't tell the whole story. Chad Smith has details.
Smith: As farmers and ranchers work to adapt to changing economic conditions across the farm economy, one sector in particular is undergoing significant shifts. Danny Munch, an economist with the American Farm Bureau Federation, said that U.S. dairy production is reaching record levels but warns that trend may not last long.
Munch: That output is being propped up by older cows staying in production longer, not by new herd growth. At the same time, the pipeline behind the herd is shrinking. Replacement heifers are at their lowest levels since 1978, and the number expected to calve in the future has fallen sharply. So, while milk supplies are high today, the system supporting that future supply of milk is thinner.
Smith: He said one of the factors driving trends in the dairy industry is beef economics.
Munch: So, strong beef prices and beef-on-dairy premiums, those have encouraged dairy farmers to breed more cows to beef genetics and keep those milk cows in production longer. That boosts short-term revenue for calf sales. We see about $4-to-$5 per hundredweight for dairy farmers, but it also means fewer dairy-bred heifers entering the replacement pool. So, the result is higher milk output now, but greater risk of sharper adjustments later in the milk markets.
Smith: Munch says one factor to keep an eye on is the global milk supply, as the U.S. has some tough competition.
Munch: So just like the United States, we've seen increases in milk production in some of our competitors, like the European Union, New Zealand, and Argentina, and that has weighed heavily on milk prices at home as well. The U.S. all-milk price fell more than $4 a hundredweight throughout 2025. The flip side is that lower prices have made U.S. dairy pretty competitive overseas.
Smith: Learn more on the Market Intel page at fb.org. Chad Smith, Washington.
