Are your feed contracts ready for China’s next move? Learn the #1 step to keep your dairy thriving through 2026’s storm.
EXECUTIVE SUMMARY: China’s record soybean purchases are tightening feed supplies and driving up costs for dairy farmers in 2026. This analysis, backed by USDA and industry data, reveals how the new trade deal is fueling volatility—from rising soybean meal prices to a stronger dollar eroding export competitiveness. Dairy operations willing to act fast—locking in feed contracts, improving ration efficiency, and diversifying protein sources—stand to protect their bottom line. The article lays out a farmer-tested 90-day action plan, with examples and strategies suited for different regions and farm sizes. For many, the next few weeks could determine whether they stay in business, expand, or get squeezed out. With the right moves, surviving the feed storm of 2026 isn’t just possible—it’s within reach.
You know how it goes—you’re checking feed invoices on a Thursday afternoon when the big news breaks. That’s exactly what many Wisconsin dairy farmers were doing when the November 2025 China trade deal was announced. American agriculture had secured 87 million metric tons of soybean exports over three years, and honestly, the initial reaction from most of us was cautiously optimistic.
But here’s what’s interesting. As producers started running the numbers—and I’ve talked to quite a few over the past week—the optimism began to shift. When China commits to buying 25 million metric tons of our soybeans annually, those are beans leaving the domestic market. And as one producer near Madison put it to me, “Last I checked, my cows don’t eat soybeans in Shanghai.”
What I’ve found is that once you dig into the actual economics, there’s a supply squeeze developing that the celebratory press releases aren’t really highlighting. It’s not that anyone’s trying to hide anything—it’s just that the grain side of the story is getting all the attention.
Understanding the Supply Squeeze
So here’s where the math gets interesting, and why many of us are concerned. According to the latest USDA Economic Research Service data from October, U.S. soybean crushing capacity is already processing about 2.54 billion bushels annually. That’s 59% of our total production right there.
| Operation Size | Monthly Soybean Meal Use (tons) | Cost at $330/ton | Cost at $375/ton | Monthly Impact |
| 100-cow | 4.5 | $1,485 | $1,688 | +$203 |
| 300-cow | 13.5 | $4,455 | $5,063 | +$608 |
| 500-cow | 22.5 | $7,425 | $8,438 | +$1,013 |
| 1,000-cow | 45 | $14,850 | $16,875 | +$2,025 |
| 2,000-cow | 90 | $29,700 | $33,750 | +$4,050 |
Now add China’s commitment—another 918 million bushels of annual demand when you convert those metric tons. Factor in our existing exports to Japan, Mexico, and the EU, plus seed requirements… suddenly we’re operating at nearly 100% utilization with minimal buffer stocks.
Agricultural economists at places like Iowa State have been tracking this, and what they’re pointing out is worth noting: when stocks-to-use ratios drop below 12%, price volatility typically increases significantly. What are the projections for the 2025-26 marketing year? We’re looking at 10.2%. That’s uncomfortably tight by any measure.
Look, I get why grain farmers are celebrating—and they should be. They’ve been getting undercut by Brazilian beans for three years straight. The USDA Foreign Agricultural Service reports show Brazil’s production costs running about $8.67 per bushel compared to our $9.85 here in the States. That’s brutal competition. So yeah, they desperately needed this export market.
But here’s where it gets complicated for those of us in dairy. Current soybean meal futures on the CME were trading around $320-330 per ton in early November. Market analysts—and I’m talking about the conservative ones at places like CoBank—are projecting we could see 12-18% price increases once those export shipments ramp up in the first quarter of 2026.
For dairy operations where feed accounts for 45-60% of operating expenses —most of us, according to Cornell’s farm business data —we’re talking real money. Not hypothetical impacts—real cash flow consequences.
The Currency Connection Most Farmers Miss
Now, there’s another layer to this that even seasoned dairy producers often overlook. It’s the currency angle, and honestly, it took me a while to fully grasp this myself.
When China buys $9.6 billion worth of soybeans annually, they need U.S. dollars to complete those transactions. Basic economics, right?
But what happens next is where it gets interesting. Federal Reserve data going back decades shows that a 10% increase in agricultural exports typically correlates with a 1-2% appreciation in the dollar’s value against trading partner currencies. Doesn’t sound like much?
Let me give you a real-world example that brought this home for me.
Say you’re part of a cooperative that exports nonfat dry milk to Mexico—which, according to U.S. Dairy Export Council data, is one of our top three dairy export markets. Your product is priced at $1.20 per pound, and a standard container holds 44,000 pounds. At today’s exchange rate of roughly 17 pesos per dollar, that Mexican buyer pays 897,600 pesos.
But if the dollar strengthens by just 1.5%—and that’s conservative given the trade volumes we’re discussing—that same container suddenly costs your Mexican buyer 911,064 pesos. That’s 13,464 pesos more for the exact same product.
“You haven’t raised your price. Your co-op hasn’t changed anything. But from the buyer’s perspective, American dairy just got more expensive.”
Meanwhile, New Zealand dairy products? Their dollar typically weakens when global commodity prices rise, making their exports more competitive, not less. It’s a dynamic that puts us at a systematic disadvantage, and it compounds over time.
China’s Actual Dairy Demand: A Reality Check
Here’s what really caught my attention when I dug into the USDA Foreign Agricultural Service’s latest China dairy reports. They’re projecting just 2% growth in dairy imports for 2025. That’s after three consecutive years of declining imports. Two percent.
What’s worth understanding is that China’s government has set explicit targets—47 kilograms of per capita dairy consumption by 2030, up from the current 35 kilograms. But if you read their Five-Year Agricultural Plans carefully — and I’ve been going through these with some industry analysts — they’re planning to meet this demand primarily through domestic production expansion, not imports.
The numbers back this up. China’s raw milk production is forecast to increase by 3-4% in 2025, according to USDA FAS reports. They’re building massive dairy operations—we’re talking 10,000-head facilities—with government subsidies for everything from imported genetics to milking equipment.
And here’s the kicker that nobody wants to talk about: even with these new tariff suspensions, everyone’s celebrating, U.S. dairy products still face a 10% duty in China. Know what New Zealand pays? Zero. They’ve had a free trade agreement since 2008. Australia? Zero percent since 2015. The EU? Various agreements put them at zero or near-zero.
So we’re celebrating market access, where we’re still at a 10% cost disadvantage to our main competitors. That’s… well, that’s something to think about.
Regional Variations and Operational Realities
Now, I should mention that this isn’t hitting everyone equally. The impact really depends on where you are and how you operate.
California’s large-scale operations—I’m talking about those 2,000-plus cow dairies in the Central Valley—they’ve got some advantages here. Many can negotiate directly with soybean crushing plants, bypassing the dealer markup that smaller operations face. They’ve got the storage capacity to buy feed in bulk when prices are favorable. Some are even forward-contracting a full year out.
But in Wisconsin? Pennsylvania? Vermont? The 100-300 cow operations that still make up the backbone of dairy in these states face a different reality. I was talking to a Pennsylvania producer last week who told me he’d called three feed suppliers about locking in prices for next year. One wouldn’t quote him past December. Another wanted a 5% premium for a six-month lock. The third said to call back after Thanksgiving.
What’s fascinating—and concerning—is how this accelerates the consolidation we’ve been seeing for years. USDA National Agricultural Statistics Service data shows that 65% of the nation’s dairy cows now live on farms with 1,000 or more animals. That was 45% just fifteen years ago. When margins get squeezed by feed costs and currency headwinds, it’s the mid-size family operations that typically can’t weather the storm.
For organic and grass-based operations, there’s actually an interesting twist. Those farms feeding minimal grain might find themselves with a competitive advantage as grain-dependent neighbors struggle with feed costs. But even they’re not immune—organic soybean meal runs about double the conventional price, and those markets tend to move in parallel.
And what about seasonal calving operations? They might actually have some flexibility here, being able to time their peak feed needs around market conditions. It’s one of those operational quirks that could become an unexpected advantage.
Practical Steps That Actually Work
So what can we actually do about this? I’ve been collecting strategies from operations that successfully navigated the 2012 drought and the 2018-19 margin squeeze, and there are some consistent patterns.
Lock Your Feed Contracts—But Be Smart About It
The single most impactful decision, according to every successful farmer I’ve spoken with, is locking feed prices for January through June 2026. But here’s the thing—you’ve got maybe 10-15 business days before suppliers adjust their forward pricing to reflect the coming supply squeeze.
A Wisconsin producer I know well locked 70% of her expected soybean meal needs at $332 per ton with a 3% premium. Yeah, it felt expensive paying that $895 extra upfront. But if the meal hits $375 per ton by February—and many nutritionists think it could—she’ll save over $2,000 in six months.
What farmers are finding works best:
- Lock 60-70% of expected consumption, keeping some flexibility
- Include alternative proteins in your contracts—canola meal, distillers grains
- Negotiate volume commitments for better pricing
- Ask about price protection if markets drop more than 15%
Feed Efficiency: The Research Numbers
Here’s a number that should grab your attention: University of Wisconsin research shows efficient operations achieve 162 pounds of feed per hundredweight of milk produced. Less efficient operations? They’re using 243 pounds. That’s a 33% difference, and it becomes a survival factor when feed costs spike.
Feed Efficiency: Real Farm Results
I know a producer who made some simple changes that improved her feed conversion by 9% over 90 days. Started measuring feed refusals daily—discovered they were wasting 7% of delivered feed. Began testing forages monthly instead of quarterly. Adjusted feeding times to within 30-minute windows. Separated first-lactation heifers from mature cows for targeted feeding.
The result? About $60,000 in annual savings. No new equipment, no capital investment. Just better management of what they already had.
For those running robotic milking systems, there’s an added dimension here. Your feeding strategy is already more individualized, which could be an advantage. But you’ll need to adjust your pellet formulations and potentially recalibrate feeding rates as ingredient costs shift.
Diversify Protein Sources Strategically
What’s working for farmers who are getting ahead of this is a gradual transition, not panic switching. You can’t just swap soybean meal for canola meal overnight and expect the same milk production. But with careful testing and adjustment…
An Idaho producer I’ve been following started incorporating alternative proteins eight weeks ago. They’re now at 15% canola meal, 20% more distillers grains, and they’ve reduced soybean meal from 5.5 to 4.2 pounds per cow per day. Production’s holding steady, components haven’t dropped, and they’re positioned better for when soybean meal prices spike.
The Longer View: Industry Restructuring
Looking beyond the immediate feed cost concerns, this trade deal is accelerating something that’s been happening for years—the fundamental restructuring of American dairy.
Research from Cornell’s agricultural economics department shows that trade policies creating margin pressure don’t just affect current operations. They accelerate the shift from distributed, family-farm dairy to consolidated, industrial-scale production.
The advantages increasingly favor large operations that can negotiate directly with feed suppliers and processors, maintain capital reserves for extended contract positions, achieve superior feed conversion efficiency through dedicated nutritionists and technology, and access sophisticated financial instruments like currency hedging.
For small- and mid-size operations, the path forward requires either exceptional efficiency, niche-market development, or strategic partnerships that provide some of the scale advantages without full consolidation.
I’ve noticed something interesting when talking to younger farmers taking over operations: the successful ones aren’t trying to compete on scale. They’re finding ways to be exceptional at efficiency, developing direct-market relationships to capture more margin, or forming buying cooperatives with neighbors to secure volume pricing on inputs. It’s really adapt or exit.
And heifer raising operations? They’re in an interesting spot. Feed costs hit them too, but they might find opportunities as dairy farms look to reduce capital tied up in youngstock. Could be worth exploring contract raising arrangements if you haven’t already.
Your 90-Day Action Plan
Based on conversations with farmers who’ve successfully navigated previous margin squeezes, here’s what needs to happen:
Next 7-14 Days (Urgent)
Contact feed suppliers about January-June 2026 pricing. Even if you only lock 40-50% of your needs, that’s protection you won’t have if you wait until December. Get quotes from at least three suppliers—prices and terms vary more than you’d expect.
Schedule a sit-down with your nutritionist. Not a phone call—a real working session to develop contingency rations using alternative proteins. Test these on a small group first.
Pull your actual feed conversion numbers. If you don’t know your pounds of feed per hundredweight of milk, you’re flying blind.
Next 30 Days (Important)
Start measuring feed refusals daily. I know, I know—one more thing to track. But farms that do this consistently find 5-10% waste they didn’t know existed.
Test all your forages. Those three-month-old test results? They’re fiction at this point. Forage quality changes, and you’re formulating rations based on fantasy if you’re not testing monthly.
Evaluate storage capacity. Can you take a full semi load instead of partial deliveries? The per-ton savings add up fast.
Next 90 Days (Strategic)
Run the numbers on what happens if feed costs rise 15% and milk prices drop 5%. If that scenario puts you underwater, what changes now? Culling decisions? Expansion plans? Equipment purchases?
Build relationships with alternative suppliers. When primary suppliers run tight, having established relationships with secondaries can be the difference between feeding cows and scrambling.
Document everything you’re doing to improve efficiency. Your banker will want to see this when you discuss operating notes, and processors value suppliers who can demonstrate operational excellence.
The Bottom Line
Agricultural trade policy often involves tradeoffs between sectors. The soybeans leaving for China are soybeans not being crushed domestically for meal. The dollars flowing in for those exports strengthen our currency and make dairy exports less competitive.
None of this means the sky is falling. Farms that recognize these dynamics and position accordingly will navigate successfully—some will even find opportunities in the disruption. But the window for proactive positioning is measured in weeks, not months.
As one successful farmer told me recently, “The difference between the dairies that thrive and those that just survive often comes down to decisions made months before the crisis becomes obvious to everyone.”
The math suggests we’ve got about 90 days to position for what’s coming. The question isn’t whether feed costs will rise and margins will tighten—market dynamics make that increasingly likely. The question is whether your operation will be positioned to handle it.
Your cows will need feed in February regardless. The only variable is whether you’ll be paying $325 per ton because you locked it in November, or $375 because you waited to see what happens.
The clock’s ticking. What’s your move?
Key Takeaways:
- China’s soybean surge is tightening domestic feed markets—soybean meal spot prices could jump 12-18% by Q2 2026.
- Locking in feed contracts within the next 2 weeks can shield your dairy from volatile markets and protect 2026 margins.
- Efficiency wins: improving ration conversion and testing forages monthly can mean $60,000/year in saved feed costs.
- The producers who adapt now—by diversifying their protein offerings and working closely with nutritionists—will have the best shot at staying profitable through next year.
- Waiting for certainty isn’t a strategy: farms that act now have more options and a better chance of riding out the feed storm.
Data sources for this article include: USDA Economic Research Service (October 2025), USDA National Agricultural Statistics Service (2025), USDA Foreign Agricultural Service GAIN Reports (October 2025), CME Group futures data (November 2025), Federal Reserve Agricultural Finance Monitor (Q3 2025), CoBank Knowledge Exchange quarterly reports, Cornell Dairy Farm Business Summary (2024), University of Wisconsin-Madison dairy research publications, U.S. Dairy Export Council trade data, and various dairy market analysis reports.
Learn More:
- Feed Smart: Cutting Costs Without Compromising Cows in 2025 – Provides the direct, tactical “how-to” for ration adjustments, revealing methods for evaluating alternative proteins and maximizing high-quality forage to defend your margins against the exact price hikes this article predicts.
- 2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Delivers the crucial strategic context on revenue, demonstrating how to shift focus from just volume to the component-based pricing (butterfat, protein) that will determine profitability in this tight market.
- Genetic Revolution: How Record-Breaking Milk Components Are Reshaping Dairy’s Future – Explores the innovative, long-term solution by connecting genomics to feed efficiency and component value, showing how to breed cows that are inherently more profitable and resilient to feed cost volatility.
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