10k fewer cows culled weekly? Milk prices crash as herds swell. Key trends every dairy pro needs to know.
EXECUTIVE SUMMARY: Dairy producers are holding onto 10,000 more cows weekly than historic averages, expanding herds despite downward USDA revisions. This retention-paired with record-high butterfat levels-has flooded markets, crashing cheese prices (-13.5¢/lb) and butter values (-6.25¢/lb) as fears of oversupply grow. Regional shifts see Texas (+45k cows) and Idaho (+29k) booming while Washington (-9k) collapses. With Class III futures at $17.07/cwt (below break-even for many) and Class IV at $17.50, margins tighten despite lower feed costs. Export reliance and lingering avian flu in California add volatility, forcing producers to rethink strategies.
KEY TAKEAWAYS:
- Herd retention backfires: 10k fewer cows culled weekly → swelling supply → price pressure
- Component chaos: Butterfat up 2.8% YoY amplifies milk’s manufacturing impact despite modest volume growth
- Regional shakeup: Texas/Idaho drive expansion; Washington’s cows head to auctions
- Price plunge: Cheese blocks/barrels hit $1.70s; butter nears March lows at $2.28
- Margin squeeze: June Class III at $17.07 won’t cover costs for many, despite feed relief
We’re watching a perfect storm unfold in the dairy markets. You’re keeping about 10,000 more cows in the barn each week compared to historical culling patterns, and those extra cows are pumping out component-rich milk that’s overwhelming processors. The result? Cheese and butter prices took a nosedive this week, with blocks and barrels plummeting 13.5¢ to nearly $1.70 per pound.
Every week, you and your fellow dairy producers send about 10,000 fewer cows to beef packers than you used to. That’s slowly adding up to more milk-producing capacity across the country. But here’s the twist – USDA just trimmed its estimates of January and February milk cow inventories after completing its quarterly survey.
They now count 9.404 million cows in America’s dairy herd for March, up 57,000 head from last year and 8,000 head more than February’s revised figure. But get this – March’s herd was 1,000 head smaller than USDA’s initial February estimate. Mixed signals, anyone?
THE GREAT DAIRY MIGRATION IS RESHAPING AMERICA’S MILK MAP
Have you noticed how dramatically the geographic center of America’s dairy industry is shifting? Texas added a whopping 45,000 more cows compared to last March. Kansas packed in 8,000 more, South Dakota said 9,000, and Idaho grew by an impressive 29,000 head.
But just across the state line from Idaho, Washington dairy farmers are calling it quits. Since last March, they’ve shed 9,000 cows, and auction listings show many more will exit soon. The writings on the wall for Washington dairies, while the Plains states are becoming America’s new dairy powerhouse.
These migrating cows will fuel expansion elsewhere, eventually allowing national cull rates to creep back up. It’s a massive regional shift reshaping where your milk competes in the marketplace.
BIRD FLU LINGERS WHILE COMPONENTS SUPERCHARGE PRODUCTION
U.S. milk output topped 19.8 billion pounds last month, up 0.9% from March 2024. That’s identical to February’s growth rate but still below what traders expected. Why? Because they thought rising cow numbers would make up for California’s bird flu struggles and Washington’s exodus.
California pumped out 2.1% less milk than in March 2024, though that’s an improvement from February’s 2.7% deficit. The number of California herds actively battling avian influenza continues to drop, but the virus isn’t done making trouble yet. When will the nation’s largest dairy state finally shake this production-draining disease?
THE COMPONENT EFFECT IS MULTIPLYING YOUR MILK SUPPLY
Let’s face it – the real story isn’t just about how many cows you’re milking but what’s in the milk. High components have supercharged production beyond what raw volume numbers suggest. Butterfat production outpaced last year by a whopping 2.8% in March, triple the rate of fluid milk growth!
This component amplification effect means each hundredweight of today’s milk yields substantially more product than it used to. Churns ran hard in response, but they couldn’t keep up. The result? Butter is piling up in cold storage.
EXPORTS CAN’T SAVE US FROM DROWNING IN OUR PRODUCTION
There were 323.7 million pounds of butter in cold storage at March’s end, 4% more than last year. Can exports bail us out? They’re trying! U.S. butter is dirt-cheap globally, especially after adjusting for currency effects, and exports are booming.
But even with strong exports helping to restrain inventory growth, it wasn’t enough to prevent prices from tanking. Spot butter plunged 6.25¢ this week to close at $2.28 per pound, dangerously close to those early-March lows.
The cheese market took an even bigger beatdown. While supplies aren’t particularly heavy yet, the trade fears they soon will be as new production outpaces sluggish domestic demand. Remember when cheese stocks were 8% below year-ago levels last fall? That deficit narrowed to 7% in January and shrank to 4.3% last month. See the pattern?
YOUR MILK CHECK IS ABOUT TO SHRINK – BY A LOT
The setback in cheese prices hammered Class III values this week. The June contract retreated 36¢ to $17.07 per cwt – a level that won’t even cover costs on many operations. No sugar-coating it – if you rely on Class III, you’re in for a painful summer.
Most other Class III contracts lost around 15¢, while most Class IV contracts gained a little ground, holding in the $18-$19 range. But even the June Class IV contract lost 11¢, closing at a disappointing $17.50 per cwt.
When did we last face such a dramatic shift in profitability prospects? You’ll see much smaller milk checks in your mailbox than those you’ve been cashing lately. Are you prepared for that reality?
IS FEED RELIEF ON THE HORIZON?
Spring planting season might be the bright spot in this otherwise gloomy forecast. Farmers jumped into fields with planters thanks to dry soils and sunny skies across the Plains and western Corn Belt. Now forecast models show beneficial rains heading their way, while warmer temperatures should finally allow eastern Corn Belt farmers to make progress, too.
The 2025-26 crop year is off to a home run start. Could lower feed costs offset some of the milk price squeeze you feel? Markets certainly think so – July corn futures closed at $4.84 per bushel, down 6¢ this week, while July soybean meal dropped $5 to $298.30 per ton.
THE BOTTOM LINE: TIME TO RETHINK YOUR STRATEGY
You’re facing a classic dairy dilemma – just as milk prices head south, you’ve got more cows in your barn producing component-rich milk that’s overwhelming the market. What’s your strategy for weathering this margin squeeze?
It’s time to examine your herd demographics, culling criteria, and overall cost structure. The most profitable producers won’t necessarily be those with the most cows but those with the right cows – efficient animals that produce at the lowest possible cost.
Buckle up – it will be a bumpy ride through the summer months. Falling milk prices and tightening margins will separate the financially resilient from the vulnerable. And while feed markets offer some potential relief, the biggest challenge is clearly on the revenue side.
The decisions you make in the next 30-60 days about culling, feed purchasing, and capital expenditures could determine whether you merely survive this down cycle or position yourself to thrive when margins eventually improve. What’s your plan?
Learn more:
- USDA Predicts US Leads Global Milk Production Growth Despite European Challenges in 2025
Explore why the U.S. is expected to outpace global competitors in milk production this year, and what it means for your farm’s future. - CME Dairy Market Analysis: Trade War Drama Sends Cheese Prices Plunging to 11-Month Lows
Get the inside scoop on how global trade tensions are hammering cheese prices and what savvy producers can do to protect their bottom line. - Transforming Young Heifers to Mature Cows: Boosting Dairy Herd Longevity
Unlock strategies to turn your heifers into long-lasting, high-yielding cows and build a more resilient, profitable herd.
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