That July report just flipped the script—but here’s what most producers are missing about what comes next.
You know that feeling when you’re scrolling through your phone over morning coffee and suddenly stop mid-sip? That’s exactly what happened when the USDA’s July 2025 WASDE report hit my desk last week. After months of producers bracing for financial pain, milk prices got a significant boost that should have every dairy operation rethinking their entire strategy.
Here’s the thing, though—and I’ve been mulling this over since the numbers dropped—while everyone’s celebrating the all-milk price forecast jumping to $22.00 per hundredweight for 2025 (up from those dire earlier projections), most folks are missing the real story. Sure, 2026 forecasts at $21.65 per hundredweight look decent too, but what strikes me about this latest data is how perfectly it demonstrates the kind of market whiplash that’s become our new normal.
Just think about it… months ago, producers across Wisconsin and Iowa were making contingency plans for $19-20 milk. Now we’re looking at $22+ projections. For your typical 500-cow operation, that’s not just numbers on a spreadsheet—that’s the difference between scraping by and actually having room to breathe.
But here’s what’s got me both excited and concerned: the USDA raised milk production forecasts for both 2025 and 2026 based on higher cow inventories and increased milk per cow. According to recent analysis from the University of Wisconsin’s dairy markets program, this kind of supply response to improved pricing often sets us up for the next volatility cycle. The industry learns to respond to good news… sometimes a little too well.
What’s particularly fascinating—and this might surprise you—is that these price improvements actually reinforce why building what I call “financial fortresses” has become more critical than ever. The operations that will thrive aren’t just those riding the good news cycles; they’re the ones using this window to build systems that can handle whatever volatility comes next.
Because let’s be honest—if markets can swing from pessimistic to optimistic this fast, they can swing back just as quickly.
What’s Really Driving These Numbers
The thing about the July WASDE report is that it tells a story that’s both encouraging and complex, and frankly, most of the trade press is missing some crucial details that could impact your decision-making over the next 18 months.
The Milk Price Reality Check
The latest WASDE data shows some genuinely positive developments. That $22.00 per hundredweight forecast for 2025 represents a meaningful improvement, but here’s what’s particularly interesting—and this is where my conversations with dairy economists get really valuable—the breakdown across different classes tells us where the real strength is coming from.
Dr. Mark Stephenson from Wisconsin’s Program on Dairy Markets and Policy recently pointed out in his monthly outlook that the Class IV price increase is being driven by higher butter and nonfat dry milk prices, while Class III actually got lowered due to cheese price adjustments. For 2026, butter, NDM, and whey prices are all projected higher, suggesting strength in component markets that smart producers can leverage.
What’s really exciting—and I’ll admit, I get a bit nerdy about export data—is that commercial dairy exports are being raised for both 2025 and 2026 on both fat and skim-solids basis. According to the USDA’s Foreign Agricultural Service, this indicates stronger international demand that’s supporting domestic pricing. This export strength provides some foundation for optimism that goes beyond just domestic supply-demand dynamics.
But here’s where it gets interesting… and a little concerning. Recent research from Cornell’s dairy program suggests that rapid price improvements often coincide with production expansions that can create oversupply situations down the road. We’re seeing exactly that pattern in the current forecasts.
Feed Costs: The Other Half of the Equation
While everyone’s celebrating milk prices, the feed cost story is equally important—and honestly, it might be even better news for your bottom line. The July report shows corn production forecast at 15.705 billion bushels for 2025/26, down 115 million bushels from June projections due to lower planted and harvested area.
Now, you might think lower corn production means higher feed costs, but here’s the interesting part: the season-average farm price for corn is staying put at $4.20 per bushel. Feed and residual use was actually cut by 50 million bushels based on lower supplies, which suggests we’re looking at relatively stable input costs for the immediate future.
What’s got me particularly optimistic is how soybean meal prices were lowered $20 to $290 per short ton. For dairy operations—especially those in the Midwest, where transportation costs are lower—this combination of stable corn and cheaper soybean meal could improve feed cost margins by $0.30-0.50 per hundredweight when combined with the higher milk price forecasts.
I was talking with a nutritionist friend in Ohio last week (this is becoming more common in our industry), and she mentioned that operations implementing precision feeding systems are seeing even better results when input costs stabilize like this. The technology works best when you’re not constantly adjusting for wild price swings.
Market Volatility: The New Constant
Here’s what really gets me thinking… the rapid shift from pessimistic to optimistic forecasts demonstrates exactly why resilient planning systems have become essential. Markets that can swing from concern to optimism within a few months—well, they’re going to swing back eventually.
Current milk production forecasts are being raised based on higher cow inventories and increased milk productivity per cow. Industry experts I’ve spoken with suggest that this reflects improved margins, encouraging expansion, but it also means we could be setting ourselves up for oversupply situations if demand doesn’t keep pace.
According to recent work from UC Davis’s dairy economics group, this pattern of supply response to price improvements has historically led to market corrections within 18-24 months. Not trying to be a pessimist here, but the data suggests we should use this favorable window strategically.
Building Financial Resilience: What Smart Producers Are Doing Now
The improved price outlook creates opportunities, but the producers I know who’ve survived multiple market cycles aren’t just celebrating—they’re using this period to strengthen their operations for whatever comes next.
Government Programs: Strategic Leverage
The Dairy Margin Coverage program becomes even more valuable as a strategic tool when markets are improving. Brian Gould from Wisconsin’s dairy markets program recently noted that with current price forecasts showing stronger margins, this is actually the optimal time to evaluate whether your coverage levels are positioned for the new market reality.
Here’s what’s interesting about the Dairy Revenue Protection program—it offers quarterly revenue protection that becomes particularly valuable when you’re operating with higher baseline revenues. I’ve been talking with producers who are using this combination to provide both margin protection and revenue stability, which honestly has become essential regardless of whether markets are moving up or down.
What many producers don’t realize—and this came up in a conversation with a risk management consultant in Minnesota—is that strong market periods are actually the best time to implement protective strategies. When cash flows are better, operations have more flexibility to invest in systems that will protect them when markets inevitably turn challenging again.
Advanced Risk Management: Capitalizing on Opportunity
The improved price outlook creates opportunities for more sophisticated hedging strategies. With milk prices at $22.00 per hundredweight for 2025, operations can consider forward contracting strategies that lock in profitable margins while maintaining exposure to potential upside.
Options trading becomes particularly attractive in improving markets because it allows producers to maintain upside potential while protecting against downside risk. Recent analysis from the Chicago Mercantile Exchange shows that current price environments provide opportunities to implement protective strategies at relatively attractive premium costs.
What’s working in practice—and I’ve seen this across operations in different regions—is using the improved market outlook to implement blended strategies. Smart producers are contracting maybe 40% of production to guarantee profitable margins while leaving exposure to capture additional gains if markets continue strengthening.
Operational Excellence: The Foundation
You can’t hedge your way to long-term success without operational excellence, and improving markets provide the cash flow flexibility to invest in productivity improvements that create enduring value.
Feed Efficiency in the Current Environment
With corn prices stable at $4.20 per bushel and soybean meal costs declining to $290 per short ton, precision feeding systems can deliver enhanced returns. Research from Penn State’s dairy nutrition program shows that operations implementing advanced feed management systems can potentially save $0.75-1.25 per hundredweight in production costs while optimizing milk components.
I visited a 1,200-cow operation near Lancaster last month that’s been running precision feeding for about 18 months. “The ROI is real,” the manager told me, “but the consistency is what really matters. We’re hitting our butterfat targets every month now, not just when everything goes right.”
The combination of stable feed costs and improved milk prices creates favorable conditions for these investments. Operations that implement precision ration formulation during this period can build sustainable advantages that serve them well, regardless of future market conditions.
Component Optimization Strategy
Current market conditions show particular strength in butter and NDM prices, making component optimization especially valuable. Each 0.1% increase in butterfat content can add $0.15-0.20 per hundredweight to milk checks, and the current price environment may provide even better returns.
Here’s what’s working: I know a 350-cow operation in Vermont that worked systematically with their nutritionist to optimize components while maintaining overall production efficiency. They adjusted their TMR formulation, modified their breeding program to emphasize component traits, and invested in better feed storage. The result? Their average butterfat increased from 3.65% to 3.82% over 18 months, adding approximately $0.34 per hundredweight to their milk check.
Operations that focus on component optimization during favorable market periods often maintain those advantages even when overall market conditions become more challenging.
Climate Adaptation: Building for the Long Haul
Improved market conditions provide the financial flexibility to invest in climate resilience, positioning operations for sustained success regardless of weather challenges. And frankly, with the summers we’ve been having…
Heat Stress Management: The Numbers Don’t Lie
Current price forecasts make cooling system investments even more attractive from an ROI perspective. With milk prices at $22.00 per hundredweight, the revenue maintained through effective heat stress management becomes more valuable.
Research from the University of Florida shows that properly designed cooling systems typically pay for themselves within 18-24 months through maintained milk production, but higher milk prices accelerate these payback periods. I know operations investing in these systems during favorable market periods that are seeing payback in 12-18 months while creating enduring operational advantages.
A 500-cow operation in Texas that I worked with last year invested $125,000 in a comprehensive cooling system. The manager told me, “We wish we’d done this five years ago. Summer milk production increased by 8%, breeding efficiency improved by 15%, and our vet costs dropped by 20%. The investment paid for itself in less than two years.”
Genetic Selection: The Long Game
The integration of heat tolerance into breeding programs becomes more attractive when cash flows support long-term investments. Holstein Association USA’s genomic evaluations for heat tolerance allow producers to select for climate resilience without sacrificing production traits.
What’s particularly interesting—and this comes from recent research at the University of Georgia—is how heat tolerance traits are being incorporated without sacrificing production or component quality. The SLICK gene, which creates a short, sleek hair coat that enhances heat dissipation, is being used in crossbreeding programs across the South with impressive results.
Current market conditions provide the financial stability to implement breeding programs focused on long-term sustainability rather than just immediate production gains. These investments pay dividends over multiple market cycles.
Technology Integration: Investing for the Future
Favorable market conditions create opportunities to implement technology solutions that provide persistent operational benefits. But here’s the thing—not all technology investments are created equal.
Precision Agriculture: What’s Actually Working
The current price environment makes precision agriculture investments more attractive from a cash flow perspective. Wearable sensors, automated monitoring systems, and precision feeding technologies require initial investments but deliver ongoing advantages.
According to recent surveys from Progressive Dairy, operations implementing precision agriculture during favorable market periods can develop systems that enhance efficiency and reduce costs, regardless of future market conditions. The key is selecting technologies that address specific operational challenges, rather than pursuing technology for its own sake.
I’ve been tracking adoption rates across different regions, and what’s fascinating is how the Midwest and Northeast are seeing faster uptake due to labor constraints, while Western operations are focusing more on resource efficiency technologies. Current milk price forecasts provide the financial flexibility to invest in integrated systems that combine multiple technologies for maximum operational benefit.
Data Analytics: Making Sense of Information
Improved cash flows enable investments in data analytics platforms that track production trends and identify opportunities for efficiency. The most successful systems integrate seamlessly with existing management practices, providing valuable insights that support informed decision-making.
An 800-cow operation in Michigan that I know implemented a comprehensive herd management system integrating feed management, reproduction, and financial tracking. “The system helped us identify patterns we never would have seen otherwise,” the manager explained. “We discovered that our reproduction efficiency was directly correlated with feed delivery timing—something we’d never connected before.”
Regional Strategies: Adapting to Local Realities
The improved national price outlook affects different regions differently, and understanding these regional variations is crucial for effective strategy development. Because let’s face it—dairy farming in Wisconsin is different from dairy farming in California.
Midwest Opportunities
Midwest operations benefit from both improved milk prices and relatively stable feed costs. The combination of $22.00 per hundredweight milk prices and $4.20 per bushel corn creates favorable margins for efficiency improvements and technology investments.
Regional feed cost advantages in the Midwest become more pronounced when national milk prices improve. I recently spoke with an operator in Iowa who is leveraging these advantages to invest in productivity improvements that capitalize on their natural cost benefits. Corn costs typically run $0.25-0.50 per bushel below national averages, while soybean meal costs are often $15-25 per ton lower.
The weather volatility is real, though. Spring flooding and summer droughts are becoming more frequent, making feed storage and climate adaptation investments increasingly important. Operations that have invested in climate-controlled storage and comprehensive drainage systems are maintaining more consistent performance.
Western Adaptation
Western operations face unique challenges, including water costs and extreme climate conditions, but improved milk prices provide better margins to invest in solutions. The higher price environment makes water-efficient technologies and advanced cooling systems more economically attractive.
Scale advantages in Western operations become more pronounced during favorable market periods. Operations with 1,000+ cows can justify technology investments that smaller operations can’t, including robotic milking systems, precision feeding, and comprehensive environmental monitoring.
Water costs and availability create unique constraints, though. In California, water costs can add $0.15-$ 0.25 per hundredweight to production costs, making water-efficient technologies and management practices essential.
Northeast Premium Markets
Northeast operations benefit from both improved national pricing and continued opportunities for premium pricing through direct marketing channels. The combination creates opportunities for value-added processing and direct sales that capture additional margins beyond commodity pricing.
Direct marketing opportunities are particularly strong in the Northeast. Operations with access to metropolitan markets can often capture premiums of $3 to $ 5 per hundredweight through direct sales to processors serving premium retail channels.
The key is balancing these opportunities with risk management. Higher costs mean less margin for error, making programs like DMC and DRP particularly valuable for smaller operations that can’t absorb major market swings.
Implementation: Making It Work in Practice
Improved market conditions create opportunities, but successful implementation requires systematic approaches that build on favorable conditions rather than simply hoping they continue. Here’s what I’m seeing work across different types of operations…
Quick Wins in a Stronger Market
DMC and DRP Optimization: This is something you can tackle this month. Review and optimize coverage levels based on current price forecasts and margin projections. Higher baseline prices may justify different coverage strategies than were appropriate during lower price periods.
The key is analyzing your actual feed costs and production levels to determine optimal coverage. Operations with lower feed costs (typically Midwest) often benefit from higher coverage levels, while operations with higher feed costs might optimize at lower coverage levels with supplemental private insurance.
Component Premium Analysis: Evaluate component premiums across multiple buyers to capture the full benefit of current market strength in butter and NDM pricing. Market improvements often create premium opportunities that weren’t available during weaker periods.
I know this sounds basic, but premium differences of $0.30-0.50 per hundredweight for the same milk in the same region are more common than you might think. It’s worth a few phone calls to make sure you’re getting paid fairly for what you’re producing.
Feed Efficiency Quick Wins: With stable corn prices and lower soybean meal costs, implement feeding improvements that deliver immediate returns while establishing long-term efficiency gains. Working with your nutritionist to evaluate current feeding practices often identifies immediate opportunities.
Simple changes like improving TMR mixing consistency, adjusting feeding schedules, or optimizing bunk management can deliver returns of $0.25-0.50 per hundredweight within 30-60 days.
Medium-Term Strategic Investments
Technology Integration: Use improved cash flows to implement precision agriculture and automation systems that provide enduring operational benefits. Current market conditions make these investments more attractive from both cash flow and ROI perspectives.
The most successful implementations I’ve seen start with specific problems—such as improving reproduction efficiency, reducing feed waste, or optimizing component levels—and then select technologies that address those problems. Operations that try to implement everything at once typically struggle with integration and training challenges.
Current implementation costs vary significantly by technology and operation size. Precision feeding systems typically run $15-25 per cow for smaller operations (under 500 cows) and $8-12 per cow for larger operations. Wearable monitoring systems cost $40-60 per cow initially, with ongoing costs of $8-12 per cow annually.
Infrastructure Development: Invest in climate adaptation systems, feed storage improvements, and facility upgrades that address multiple operational challenges while market conditions support capital investments.
The key is prioritizing investments that address multiple challenges simultaneously. A climate-controlled feed storage facility addresses feed quality, waste reduction, and weather resilience. Comprehensive cooling systems enhance animal comfort, improve milk quality, and increase reproduction efficiency.
Market Diversification: Explore direct marketing opportunities and value-added processing options that can provide revenue stability and premium pricing beyond commodity markets.
The key is to start small and build based on market response and operational capacity. Many successful diversification efforts begin with 10-15% of production and expand based on demonstrated success.
Long-Term Competitive Positioning
Genetic Improvement Programs: Implement breeding strategies focused on climate tolerance, feed efficiency, and component quality that deliver advantages across multiple market cycles.
The most successful programs integrate heat tolerance with production traits and component quality. Current genetic evaluation tools make it possible to select for multiple traits simultaneously without sacrificing overall performance.
Research from various land-grant universities suggests that operations selecting for heat tolerance genetics are seeing 10-15% better summer performance compared to conventional genetics, with some programs reporting even better results during extreme heat events.
Operational Scaling: Evaluate expansion opportunities or efficiency improvements that leverage improved market conditions while establishing long-term competitive positioning.
Whether expanding or optimizing existing facilities, scaling decisions require a comprehensive analysis of market conditions, financing, and management capacity. The most successful expansions I’ve seen are those that maintain focus on operational excellence while growing.
Where the Industry Goes from Here
The improved milk price forecasts in the July WASDE report provide welcome relief for dairy producers, but they also reinforce the importance of building operations that can thrive regardless of market conditions. And honestly, that’s what separates the survivors from the thrivers in this business.
Success Patterns in Volatile Markets
The most successful operations treat improved market conditions as opportunities to invest in systems that provide advantages during both good times and challenging periods. They’re not just celebrating better prices—they’re using the improved cash flows to create sustainable operational benefits.
What’s particularly interesting is how these operations approach market improvement. They recognize that favorable conditions are temporary and use them strategically to strengthen their foundations for whatever comes next. According to research from several dairy economics programs, operations that invest during favorable periods consistently outperform those that simply ride the cycles.
I’ve been tracking patterns across different regions and operation sizes, and the farms that consistently perform well share several characteristics: they treat risk management as a core business function, invest in people and systems that can adapt to changing conditions, maintain focus on operational excellence while implementing new strategies, and build relationships with service providers who understand their specific challenges.
Building Sustainable Advantages
The dairy operations that will thrive over the long term are those that use favorable market periods to invest in operational excellence, technology adoption, and protective systems that provide advantages regardless of market conditions.
Current price improvements create opportunities, but smart producers are using this period to build resilient operations that can handle whatever volatility the future brings. Because if there’s one thing we know for certain about dairy markets, it’s that they’ll keep changing.
Your Strategic Decision Point
The question isn’t whether to celebrate the improved milk price forecasts—it’s whether you’ll use this opportunity to create enduring operational advantages or simply hope that favorable conditions continue. And frankly, hope isn’t much of a business strategy.
The July WASDE report shows all-milk prices at $22.00 per hundredweight for 2025, providing improved margins that create strategic opportunities. But markets that can swing from pessimistic to optimistic forecasts within months will inevitably swing back, and the operations that prepare for that reality will be the ones that thrive long-term.
Here’s what I keep coming back to in conversations with producers across the country: the tools, strategies, and support systems exist today to build resilient, profitable operations that can prosper in any market environment. The question is whether you’ll implement these strategies while market conditions provide the cash flow flexibility to do so effectively.
Current market improvements provide a window of opportunity to build operational resilience, but that window won’t stay open indefinitely. The operations that recognize this reality and act strategically now will be positioned to thrive regardless of what market conditions emerge next.
Are you building operational resilience with the improved resources these market conditions provide, or are you simply hoping that good times continue? The choice is yours, but the opportunity to create sustainable advantages may not present itself again soon.
Because at the end of the day, the producers who build financial fortresses during good times are the ones who sleep well during bad times. And in this business, that peace of mind is worth more than any short-term price improvement.
Strategic Action Guide for Current Market Conditions
Immediate Opportunities (Next 30 Days): Start by optimizing your DMC and DRP coverage based on that $22.00 per hundredweight baseline pricing. Take a hard look at component premium capture with current butter and NDM strength—you might be surprised what you find. Implement feed efficiency improvements while corn costs are stable, and honestly assess technology investment opportunities now that cash flow has improved.
Strategic Investments (Next 3-6 Months): This is the time to develop those integrated protection systems we’ve been talking about. Build climate adaptation infrastructure that’ll serve you for decades. Integrate precision agriculture technology that addresses your specific challenges, not just the latest gadgets. Evaluate market diversification opportunities that make sense for your operation and region.
Long-Term Competitive Positioning (6-24 Months): Establish genetic selection programs for climate resilience and efficiency—this is a marathon, not a sprint. Complete operational scaling or efficiency optimization projects while financing is favorable. Implement advanced automation and data analytics that’ll give you an edge for years to come. Develop sustainable operational advantages that’ll serve you through multiple market cycles.
Key Performance Metrics: Monitor margin stability across market cycles, track operational efficiency improvements, measure component optimization progress, and evaluate technology ROI achievement. But remember—the best metrics are the ones that help you make better decisions, not just track what happened.
KEY TAKEAWAYS
- Lock in profitable margins while you can: With DMC and DRP programs, you can optimize coverage levels based on $22/cwt baseline pricing—higher baseline prices justify different strategies than what worked during $19-20 milk, potentially saving thousands in premium costs while improving protection
- Feed efficiency pays double right now: Precision ration formulation delivers $0.75-1.25/cwt savings when corn’s stable at $4.20/bushel and soybean meal dropped $20 to $290/ton—implement these systems during favorable cash flow periods for 18-24 month paybacks that compound over time
- Component optimization hits different in this market: Butter and NDM strength means each 0.1% butterfat increase adds $0.15-0.20/cwt to milk checks—work with your nutritionist now to capture these premiums while markets support the investment in better genetics and feeding programs
- Climate adaptation ROI accelerates with higher milk prices: Cooling systems that normally pay for themselves in 18-24 months are hitting 12-18 month paybacks when milk revenue per cow increases—invest in heat stress management while cash flows support the capital expenditure
- Regional advantages compound during price improvements: Midwest operations with $0.25-0.50/bushel corn advantages and Northeast farms capturing $3-5/cwt direct marketing premiums should leverage these natural benefits to implement technology and infrastructure that smaller margins couldn’t justify
EXECUTIVE SUMMARY
Look, I get it—seeing $22.00 per hundredweight for 2025 milk prices feels pretty good after the doom and gloom we’ve been hearing. But here’s the thing most producers are missing: the smart money isn’t celebrating these WASDE numbers, they’re using this window to build operations that can handle whatever volatility comes next. We’re talking about precision feeding systems that can save you $0.75-1.25 per hundredweight while corn sits stable at $4.20 per bushel, and component optimization strategies that add $0.15-0.20 per hundredweight for every 0.1% butterfat increase. The global dairy markets are showing us that what goes up comes down fast—just look at how we swung from pessimistic to optimistic forecasts in months. European producers learned this lesson the hard way after milk quotas ended, and the ones who survived built fortress operations during good times, not bad ones. You’ve got maybe 18 months of favorable conditions to implement the risk management systems, climate adaptation, and operational improvements that’ll keep you profitable when markets inevitably swing back—don’t waste it hoping good times continue.
Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.
Learn More:
- Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Reveals practical strategies for implementing layered financial protections, biosecurity protocols, and automation systems that reduce labor costs by 60%+ while delivering measurable ROI within 12 months.
- USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Demonstrates how to strategically position your operation around component optimization and processor relationships to capture premium returns as cheese markets strengthen and export dynamics shift.
- The Digital Dairy Revolution: How IoT and Analytics Are Transforming Farms in 2025 – Uncovers cutting-edge IoT technologies delivering 15-20% productivity gains and 30% health cost reductions, providing the competitive edge essential for thriving in volatile markets.
Join the Revolution!
Join the Revolution!Join over 30,000 successful dairy professionals who rely on Bullvine Weekly for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
