Archive for dairy risk management

6 Months. 113 Outbreaks. Farmers vs. Riot Police. France’s Lumpy Skin Disease Crisis Is Writing North America’s Playbook in Real Time

Military helicopters dropping vaccines. Farmers in riot gear standoffs with police. A disease that jumped 300 kilometers in weeks despite aggressive containment. France’s lumpy skin disease crisis is writing the playbook for foreign animal disease preparedness in real time—and the rest of us get to learn before it’s our turn.

EXECUTIVE SUMMARY: Six months after France confirmed its first case, lumpy skin disease has exploded to 113 outbreaks and 3,300 cattle culled—with military helicopters deploying vaccines and riot police confronting farmers who’ve blockaded roads rather than surrender herds to mandatory slaughter. This disease has never reached North America, but France’s crisis is exposing failures that matter everywhere: veterinary surge capacity that couldn’t scale, cold chain logistics that collapsed under pressure, and a culling-first policy that shattered the farmer trust essential for disease surveillance. When reporting sick cattle means losing everything, producers stop reporting—and containment becomes impossible. EFSA research shows that vaccination outperforms culling even when vaccines aren’t perfect, yet France chose aggressive depopulation anyway. The economic precedent is sobering: India lost $2.44 billion to endemic LSD in two years; Canada spent 22 years rebuilding export markets after BSE. For North American producers—especially those with genetics programs dependent on trade—the window to establish biosecurity protocols, quarantine procedures, and veterinary relationships is now, while there’s still time to prepare rather than improvise.

Lumpy Skin Disease Crisis

You know, there are moments when agricultural policy stops being abstract and becomes deeply, painfully human. December 12, 2025, was one of those moments.

Police in riot gear faced off against hundreds of farmers who had barricaded a small farm in France’s Ariège region with chopped trees, hay bales, and sheer desperation. Tear gas filled the evening air. The standoff wasn’t about wages or trade policy—it was about cattle marked for slaughter in the name of disease control.

What made the scene even more gut-wrenching? The farm belonged to two brothers. One had agreed to the government’s culling order. The other refused. That division within a single family tells you something about the impossible choices this disease is forcing on people across the French countryside.

And for those of us watching from North America, Australia, or anywhere else still free of lumpy skin disease, France’s unfolding crisis offers something genuinely valuable: time to learn before the same pressures arrive at our gates.

QUICK REFERENCE: Know the Threat Landscape

 Lumpy Skin DiseaseH5N1 (Avian Influenza)Bluetongue (BTV-3)
Primary VectorBiting insects (stable flies, midges, mosquitoes)Direct contact, aerosol, contaminated equipmentCulicoides biting midges
Species AffectedCattle, buffaloDairy cattle, poultry, wild birdsCattle, sheep, goats, deer
Current SpreadFrance: 113 outbreaks (Dec 2025)US: ~1,790 herds/18 states (Dec 2025)Netherlands, Belgium, France, UK, Germany
Incubation Period4-14 days (up to 28 days)2-5 days (in cattle)5-20 days
Milk Production ImpactSignificant (18%+ drop in affected animals)Severe: ~73% drop at peak; ~2,000 lbs cumulative loss/cow over 60 days~2 lbs/cow/day for 9-10 weeks
Human Health RiskNoneYes (rare but serious)None
Vaccine AvailableYes (live attenuated)LimitedYes (serotype-specific)

Sources: WOAH, EFSA, USDA APHIS, CDC, Hoard’s Dairyman, Frontiers in Veterinary Science

How a Single Case Became 113 Outbreaks in Six Months

Here’s where the timeline gets troubling.

LSD first appeared in Western Europe when Italy confirmed a case in Sardinia on June 21, 2025—the European Commission’s Animal Disease Information System flagged it almost immediately. Six days later, France confirmed its first positive case on a dairy operation near Chambéry in the Alpine department of Savoie, as Dairy Global reported at the time.

French authorities moved fast, I’ll give them that. Vaccination campaigns launched by mid-July. Protection zones extending 50 kilometers went up around affected areas. The response looked impressive on paper:

  • Over 220,000 cattle vaccinated within two months, according to Reuters
  • Mandatory movement restrictions across affected regions
  • Military logistics deployed by December, including transport aircraft and army medical personnel

And yet by mid-December, Reuters was reporting 113 confirmed outbreaks with approximately 3,300 cattle culled. The disease had spread from two eastern departments to span regions across the country—including southwestern areas near the Spanish border, more than 300 kilometers from where it started.

The disease jumped containment lines that should have held. What happened? The answer isn’t any single failure. It’s a cascade of interconnected problems that overwhelmed even a well-resourced system.

CLINICAL SIGNS: What LSD Looks Like in Your Herd

Early Warning Signs (First 1-2 Days):

  • High fever exceeding 40.5°C (105°F), sometimes reaching 41°C (106°F)
  • Watery discharge from the eyes and nose
  • Enlarged superficial lymph nodes (subscapular, prefemoral—easily palpable)
  • Decreased milk production in lactating cows
  • Depression and loss of appetite

Characteristic Signs (Days 7-14 Post-Infection, can extend to 21 days):

  • Firm, raised skin nodules 2-5 cm in diameter
  • Nodules appear on the head, neck, limbs, udder, genitalia, and perineum
  • Nodules involve skin, subcutaneous tissue, and sometimes underlying muscle
  • Nasal discharge becomes thicker (mucopurulent)
  • Excessive salivation
  • Limb swelling and brisket edema

In Calves:

  • More severe clinical presentation than adults
  • Higher mortality risk, especially in calves under 3 months
  • Generalized weakness and diarrhea

Report any suspected cases immediately to your state/provincial veterinarian

Sources: WOAH, Merck Veterinary Manual, Animal Health Australia

The Infrastructure Gap Nobody Talks About

One of the most important lessons coming out of France—and this applies to all of us—involves the difference between having resources on paper and actually deploying them under pressure.

France has world-class veterinary infrastructure. The ANSES laboratory network ranks among Europe’s best. The animal health surveillance system is sophisticated and well-funded. What France lacked, and what most countries lack, is surge capacity.

Vaccine supply became the first bottleneck. France had to access the European stockpile after the first case appeared rather than drawing on pre-positioned reserves. That created delays—days in some areas, weeks in others.

The veterinary workforce was the second constraint. If you’re already struggling to get your herd vet out for a routine visit, imagine what happens when your whole region needs emergency vaccinations. Dairy Global reported in 2023 that of Germany’s roughly 22,000 practicing veterinarians, only about 3,500 still work with agricultural livestock. France faces similar ratios. When mass vaccination required hundreds of additional personnel, the civilian system simply couldn’t scale.

Cold chain logistics emerged as the third challenge. Distributing temperature-sensitive live attenuated vaccines to remote rural areas proved harder than planned. By December, Reuters confirmed the French government had brought in military transport aircraft specifically because civilian logistics couldn’t keep pace.

What’s interesting here is that none of these constraints were invisible beforehand. Agricultural ministries across Europe have documented veterinary workforce shortages for years. But there’s often a significant gap between recognizing a structural problem and having a solution ready when a crisis hits.

The practical takeaway for those of us elsewhere? Even countries with excellent veterinary services face significant delays when novel diseases appear. Operations with established biosecurity protocols and regular veterinary relationships will respond faster than those depending entirely on government systems.

HOW LSD SPREADS: Understanding Transmission

Primary Route: Biting Insects (Mechanical Vectors)

Unlike many viral diseases, LSD spreads mainly through biting insects that carry virus particles on their mouthparts—not through the air or direct animal contact.

INFECTED ANIMAL → BITING INSECT FEEDS → INSECT MOVES → HEALTHY ANIMAL INFECTED

  • Virus present in skin nodules and blood
  • Virus retained on mouthparts for 6-10 days
  • Virus deposited into the skin during the next blood meal
  • Infection is established in a new host

Known Vectors:

  • Stable flies (Stomoxys calcitrans) — Primary mechanical vector
  • Mosquitoes (Aedes aegypti, Culex species) — Can retain virus 6-10 days
  • Biting midges (Culicoides species) — Field evidence of involvement

Why This Matters for Biosecurity:

  • Vector control (fly management, standing water elimination) directly reduces transmission risk
  • Disease can spread without animal-to-animal contact
  • Infected insects can travel significant distances, especially with the wind
  • Peak transmission occurs during warm, wet conditions when vector populations surge

Minor Transmission Routes:

  • Direct contact with infected animals (considered inefficient)
  • Contaminated equipment or fomites (limited evidence)
  • Semen from infected bulls (documented but uncommon)

Sources: WOAH, PMC research (Paslaru et al. 2022), EFSA

What This Means for Your Genetics Program

For operations with significant genetics investments—AI programs, embryo transfer work, show herds, or A2A2 breeding programs—LSD introduces complications that go well beyond direct animal health.

Here’s the reality: The Canadian Food Inspection Agency has confirmed that importation of live cattle or water buffalo from LSD-infected countries is prohibited outright. Semen and embryos collected more than 60 days prior to an outbreak may be eligible, but only following case-by-case evaluation. That’s not “business as usual”—that’s bureaucratic uncertainty at exactly the wrong moment.

The international standards are even more restrictive. WOAH’s Terrestrial Code requires donor animals to have been resident for six months in an LSD-free country or zone before embryo collection can begin. For semen, PCR testing on blood samples is mandatory at commencement, conclusion, and at least every 28 days during collection.

What does this mean practically? If LSD ever reaches North America, operations with high-value genetics face immediate complications: AI studs would need to implement enhanced testing protocols, export markets would close pending disease-free certification, and movement restrictions could strand valuable animals in the wrong locations. Premium genetics programs—particularly those reliant on international trade—face heightened exposure to these disruptions.

Australia’s response to Italy’s outbreak offers a preview. Within days, the Australian Department of Agriculture removed Italy from its LSD-free country list and suspended imports of bovine fluids and tissues, as Dairy Global reported. That’s how fast market access disappears.

What the Balkans Actually Did (It’s Not What You’ve Heard)

French officials have pointed to southeastern Europe’s successful LSD eradication from 2015-2018 as justification for aggressive culling. But looking closer at what Greece, Bulgaria, and Serbia actually did reveals a more nuanced story—and honestly, it’s one that should inform how we think about disease response.

When LSD spread across the Balkans beginning in 2015, affected nations achieved eradication within about three years. That success is often attributed primarily to stamping-out policies. The evidence, though, tells a different story.

Mass vaccination was the primary tool, not culling.

According to the WOAH Regional Representation for Europe, Bulgaria became the first country in the region to achieve 100% cattle vaccination coverage—by July 15, 2016. By 2017-2018, regional vaccination coverage exceeded 70% across all affected countries, with EFSA reporting over 2.5 million animals vaccinated annually to maintain that level of protection.

And here’s the key finding from the European Food Safety Authority’s 2016 analysis: “Vaccination has a greater impact in reducing LSDV spread than any culling policy, even when low vaccination effectiveness is considered.”

That’s significant. The modeling showed vaccination mattered more than culling even when the vaccines didn’t work perfectly. Greece—often cited as the culling success story—actually implemented vaccination as its primary strategy, while selectively using targeted depopulation.

Now, this doesn’t mean France’s current approach is wrong. Every outbreak involves different circumstances, trade considerations, and policy factors that aren’t always visible from the outside. But the Balkan experience does demonstrate that vaccination-centered strategies work against LSD when implemented at scale and sustained over time.

When Farmer Trust Breaks Down, Surveillance Dies

This might be the most important lesson from France, and it doesn’t show up in epidemiological models. It’s about psychology as much as biology.

By December 2025, the relationship between French farmers and authorities had deteriorated badly:

  • Farmers in southwestern France organized highway blockades with over 60 tractors
  • Some producers physically prevented vaccination teams from accessing properties
  • Reports emerged of farmers declining to report suspected cases
  • By mid-afternoon on December 19, Le Monde reported the Interior Ministry counted 93 protest actions nationwide involving nearly 4,000 people and 900 tractors

The economic pressure driving this isn’t hard to understand. French agricultural unions have documented that many farmers were already facing severe financial strain before LSD appeared. When total herd depopulation becomes the standard response to a positive test, farmers face an impossible choice: report disease and lose everything, or stay silent and hope.

It’s worth recalling what the FAO advised during the Balkan response back in 2017, as quoted by Dairy Global: “Stamping out—the proactive culling of all animals on an infected farm—should be used as a last resort because stamping out can have a drastic impact on farmers’ livelihoods, particularly those of smallholders.”

What makes this dynamic so dangerous for disease control is that effective surveillance depends entirely on voluntary reporting. The moment farmers believe that calling a veterinarian will lead to the loss of their entire operation, the information flow stops. Cases go unreported. Disease spreads invisibly. And containment becomes exponentially harder.

Here’s the trade-off France is learning—painfully: Vaccination protects herds but may delay disease-free certification. Aggressive culling accelerates certification but destroys farmer trust and surveillance cooperation. And the second trade-off may be worse.

The Endemic Scenario: What’s Really at Stake

In France’s substantial dairy sector, an important question is being discussed in industry circles: What happens if eradication fails?

Countries where LSD has become endemic offer sobering guidance.

India’s experience since 2019 illustrates the potential scale. A March 2025 study in Frontiers in Veterinary Science used stochastic modeling to estimate economic losses from LSD at approximately $2.44 billion over 2022-2023, with Rajasthan alone experiencing annual losses of around $314 million.

Thailand’s ongoing management since 2021 shows the persistent costs of endemic disease. Research published in Frontiers in Veterinary Science this past January found per-farm financial impacts ranging from $349 on farms that avoided outbreaks—covering vaccination and prevention costs—to $727 on farms that experienced active infections, including treatment and production losses. And those costs continue indefinitely.

For France specifically, endemic status would likely mean:

  • Loss of disease-free certification affecting cattle export markets
  • Restrictions on the genetics trade, including semen and embryo shipments
  • Ongoing vaccination expenses across the national herd
  • Competitive disadvantage relative to disease-free neighbors

Now, some argue that endemic management is economically preferable to aggressive eradication—that the costs of culling and farmer resistance outweigh the costs of living with the disease. There’s a case there for countries where LSD is already widespread. But for North American producers? We still have a disease-free status. And when BSE hit Canada in 2003, it took nine years to regain access to beef exports to South Korea and Peru, and a full 22 years before Australia reopened to Canadian beef in July 2025, according to CFIA. That certification represents real value that’s easy to take for granted until it’s gone.

Dairy Cattle Disease 2025: LSD in Context

France’s LSD crisis isn’t occurring in isolation—it’s part of a broader pattern of emerging disease pressures reshaping risk calculations for livestock producers worldwide. Understanding this context helps explain why France’s response capacity was already stretched thin when LSD arrived.

H5N1 in US dairy cattle emerged in March 2024, and by December 2025, CIDRAP reported cases in approximately 1,790 herds across 18 states. What’s striking is the production impact—peer-reviewed research in Frontiers in Veterinary Science found that affected cows experienced approximately a 73% decline in milk production at peak infection, with cumulative losses averaging around 2,000 pounds per cow over 60 days.

Bluetongue BTV-3 re-emerged in the Netherlands in September 2023 and spread to Belgium, France, the UK, and Germany. Infected cattle experience roughly 2 pounds of lost production per cow per day for 9 to 10 weeks.

Epizootic Hemorrhagic Disease affected over 4,500 French farms by summer 2024—creating overlapping response demands before LSD even appeared.

But here’s what makes LSD different: Unlike H5N1 (which poses human health concerns driving rapid government response) or bluetongue (which European producers have managed through multiple outbreaks), LSD is genuinely novel to Western Europe. There’s no institutional memory, no existing vaccination infrastructure, no producer experience recognizing early signs. France is writing the playbook in real time.

DiseaseMilk Drop %DurationLoss per CowHuman RiskCurrent Spread
Lumpy Skin Disease18%VariableSignificantNone113 farms (FR)
H5N1 Avian Flu73% ⚠️60 days~2,000 lbs ⚠️Yes1,790 herds (US)
Bluetongue BTV-38-10%9-10 weeks~140-200 lbsNoneMultiple EU

What Prepared Producers Are Doing Right Now

Against this backdrop, forward-thinking operations are taking practical steps—not out of panic, but out of recognition that preparation before a crisis beats improvisation during one.

Biosecurity fundamentals that actually matter:

  • Written quarantine protocols. New animals are isolated for a minimum of 21 days before joining the main herd, with dedicated equipment and documented testing requirements. Having this written and posted matters when you’re making decisions at 3 a.m. during a crisis. You know how it goes—everyone assumes someone else wrote it down.
  • Controlled access management. Single farm entrance, where feasible; visitor logs; foot baths at barn entries; and defined biosecure zones. A producer in Wisconsin’s dairy corridor mentioned that making biosecurity part of the morning routine—the same crew member checks gates and foot baths before first milking every day—made consistency almost automatic.
  • Vector control. Given LSD’s insect-borne transmission, fly management is particularly important. Eliminating standing water, maintaining manure management, and using appropriate insecticides during peak vector season all reduce transmission risk.
  • Established veterinary relationships. Farms with trusted, ongoing relationships with their veterinarians respond more quickly when concerns arise. Your herd vet should know your operation well enough to spot when something seems unusual.
  • Insurance review. Here’s something worth checking: most standard livestock mortality policies don’t explicitly cover losses from foreign animal diseases like LSD. Specialized policies may include provisions for border closure and disease-related depopulation, but coverage varies significantly. Worth a conversation with your agent before you need to file a claim.
  • Neighbor communication networks. Informal information sharing between nearby operations often identifies emerging concerns faster than official channels. A quick text from down the road beats a government bulletin by weeks.

THIS WEEK ACTION CHECKLIST

☐ Download biosecurity assessment checklist (CFIA: inspection.canada.ca or FARM Program: nationaldairyfarm.com)

☐ Walk your perimeter—identify fence gaps, uncontrolled access points

☐ Write a one-page quarantine protocol: duration, location, equipment, testing, end criteria

☐ Review fly control program—identify standing water sources and elimination opportunities

☐ Create a laminated vet contact card: herd vet, state/provincial vet, your GPS coordinates

☐ Call your insurance agent—ask specifically about foreign animal disease coverage

☐ Have an informal conversation with 1-2 neighboring operations about recent herd health observations

Estimated time: 4-5 hours spread across the week

Estimated cost: $350-500 (foot bath supplies, signage, veterinary consultation)

ActionTimeCostPriority
Download biosecurity assessment checklist30 min$0CRITICAL ⚠️
Walk farm perimeter – identify gaps45 min$0High
Write one-page quarantine protocol1 hour$0CRITICAL ⚠️
Review fly control & standing water1 hour$200-300High
Create laminated vet contact card30 min$50CRITICAL ⚠️
Call insurance re: FAD coverage45 min$0Medium
Talk with neighboring operations30 min$0Medium
TOTALS4.5-5 hours$250-3503 Critical + 4 High/Med

For Canadian Producers Specifically

Canada’s proximity to the evolving US H5N1 situation makes foreign animal disease preparedness particularly relevant right now. The Canadian Food Inspection Agency offers comprehensive biosecurity planning resources at inspection.canada.ca, including province-specific guidance and self-assessment tools.

One thing worth noting: provincial veterinary contacts and disease reporting protocols differ by region. Ontario requires immediate reporting of serious animal health risks—within 18 hours—through OMAFRA’s Agricultural Information Contact Centre at 1-877-424-1300, while western provinces have different reporting structures and timelines. Having your specific provincial contacts documented before you need them eliminates uncertainty when timing matters.

As of December 2025, CFIA has implemented proactive import measures following Europe’s LSD outbreaks, including restrictions on live cattle, certain dairy products, and germplasm from affected countries. The agency’s stated priority: “Preventing the introduction of LSD into Canada is critical because the disease can spread quickly and significantly impact cattle production and trade.”

What I’ve noticed talking with producers across different provinces: the operations that feel most confident about their preparedness aren’t necessarily the largest or most technologically sophisticated. They’re the ones where someone took time to work through the “what if” scenarios before circumstances made that planning urgent.

The Insight That Ties Everything Together

Looking at France’s crisis—the surveillance challenges, the economic pressure, the farmer frustration, the infrastructure gaps—one pattern emerges that underlies everything else:

The operations that survive aren’t the ones that improvise best. They’re the ones who decided their protocols, triggers, and response plans before the crisis arrived.

France improvised. The government moved from one approach to another as circumstances evolved. Farmers found themselves caught between compliance and survival. Veterinarians ended up in impossible positions. When nobody has pre-committed frameworks, confusion fills the gap. And confusion is lethal to disease control.

The farms that will navigate the next decade successfully won’t necessarily be the most optimized or the most efficient in normal times. They’ll be the ones with biosecurity protocols already documented, veterinary relationships already established, neighbor networks already communicating, and financial reserves already set aside.

That’s not paranoia. That’s pattern recognition from what’s actually happening—right now—in France, Thailand, India, and increasingly across the global dairy sector.

Key Takeaways

On what France teaches:

  • Surge capacity matters more than baseline infrastructure
  • Biosecurity protocols are most valuable when they exist before they’re needed
  • Financial reserves matter enormously in a world of recurring disease pressures

On disease response dynamics:

  • Vaccination-centered strategies have demonstrated effectiveness against LSD at scale
  • Farmer trust is essential infrastructure—systems that undermine trust undermine themselves
  • The gap between “response started” and “disease controlled” can stretch for months

On taking action this week:

  • Complete a biosecurity assessment using available checklists
  • Establish written quarantine protocols and post them where they’ll be followed
  • Decide your operational tripwires while your head is clear

The Bottom Line

France is still fighting. Whether eradication remains achievable or France must adapt to endemic management will become clearer in the coming months.

But for those of us elsewhere, France has already provided the lesson that matters most: the time to prepare is before disease arrives, before trust collapses, before you’re making existential decisions at 3 a.m. with no playbook.

The producers who act on that lesson—who spend a few hours this week on biosecurity, who document their protocols, who build their networks—will be the ones still standing when the next challenge arrives.

And in this era of expanding disease pressures, the next wave is always coming.

For biosecurity planning resources, Canadian producers can access CFIA’s farm assessment tools at inspection.canada.ca. US producers can find guidance through the FARM Program at nationaldairyfarm.com and through state extension services. We’ll continue following France’s LSD situation and its implications for global dairy operations.

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The $4/cwt Your Milk Check Is Missing – And What’s Actually Working to Get It Back

You know that moment—scrolling to the bottom of your milk statement, already doing the math in your head? Mike Boesch’s DMC said $12.29. His deposit said $8.

Executive Summary: Dairy producers everywhere are doing the math twice lately—and they’re not wrong. There’s a $4/cwt gap between what DMC margins show on paper and what’s actually hitting farm accounts. The causes stack up fast: make allowance increases that cost farmers $337 million in just three months, regional price spreads running nearly $7/cwt, and component formula changes that blindsided many operations. Milk keeps flowing despite the pressure—expansion debt doesn’t pause for soft markets, and the lowest heifer inventory since 1978 makes strategic culling nearly impossible. With USDA projecting $18.75/cwt All-Milk prices for 2026, margin relief likely won’t arrive until late 2027. The producers gaining ground are focusing on what they can control: component-focused genetics, beef-on-dairy programs built on smart sire selection, and risk management tools that most operations still aren’t using.

Dairy profitability strategies

You know that feeling when the numbers on paper don’t quite match what’s hitting your bank account? Mike Boesch, who runs a 280-cow operation outside Green Bay, Wisconsin, put it well when we talked last month. He pulled up his December milk statement, scrolled straight to the bottom—like we all do—and there it was. His Dairy Margin Coverage paperwork showed a comfortable $12.29/cwt margin. His actual deposit? After cooperative deductions, component adjustments, and those make allowance changes that kicked in last June, he was looking at something closer to $8/cwt.

“I keep two sets of numbers in my head now. The one the government says I’m making, and the one my checkbook says I’m making. They’re not the same number.” — Mike Boesch, Green Bay, Wisconsin (280 cows)

He’s far from alone in this experience. I’ve been talking with producers from California’s Central Valley to Vermont’s Northeast Kingdom over the past few months, and I keep hearing variations of the same observation. There’s a growing disconnect between what the formulas say margins should be and what’s actually landing in farm accounts. Understanding why that gap exists—and what you can do about it—has become one of the more pressing questions heading into 2026.

The Math That Isn’t Adding Up

YearCorn ($/bu)Soymeal ($/ton)All‑Milk ($/cwt)
20236.5443022.50
20245.1038021.80
20254.0030021.35

Here’s what makes this situation so frustrating for many of us. Feed costs dropped meaningfully through 2025. Corn’s been trading in the low $4s per bushel—USDA’s November World Agricultural Supply and Demand Estimates report projected $4.00 for 2025-26—down considerably from that $6.54 peak we saw in 2023. Soybean meal’s been running in the high $200s to low $300s per ton through fall. For most operations, that translates to real savings on the feed side.

But milk revenue softened faster. USDA National Agricultural Statistics Service data shows September’s All-Milk price came in at $21.35/cwt, with Class III at $18.20. That’s below what many of us were hoping for at this point in the year.

What I’ve found talking to producers and running through numbers with nutritionists and farm business consultants: even with clearly lower feed costs, the decline in milk revenue has offset—and in many cases more than offset—those feed savings. The specifics vary by operation. Your ration, your components, and your cooperative’s pricing structure all matter. But the pattern holds across a lot of different farm types.

Mike’s take stuck with me: “I saved money on feed. But I lost more on milk. The feed savings felt like winning a $20 scratch ticket after your truck got totaled.”

Where Your Money Is Actually Going

So what’s creating that $4/cwt gap between calculated margins and received margins? It comes down to several deductions that the DMC formula doesn’t capture.

The Make Allowance Shift

When the Federal Milk Marketing Order updates took effect on June 1, processors received larger deductions for manufacturing costs. American Farm Bureau Federation economist Danny Munch analyzed the impact, and his findings show the higher make allowances reduced farmer checks by roughly $0.85-0.93/cwt across the four main milk classes.

Key Finding: $337 Million Impact

Farm Bureau’s Market Intel analysis found that farmers saw more than $337 million less in combined pool value during the first three months under the new rules—that’s June through August alone.

ScenarioPool Value ($ billions)
Without new make allowance6.00
With new make allowance5.66

Source: American Farm Bureau Federation, September 2025

I talked with a Midwest cooperative field rep who asked to stay anonymous, given how sensitive pricing discussions can be. His perspective added some nuance worth considering: “Nobody wanted to make allowances to go up. But processing costs genuinely increased—energy, labor, transportation. The alternative was plant closures, and that would have helped nobody. It’s a situation where producers and processors both feel squeezed.”

He raises a fair point. The processing sector faced real cost pressures, and there’s a legitimate argument that updated make allowances were overdue. That said, the timing has been difficult for producers already navigating softer milk prices.

What’s worth understanding here is that the DMC formula uses pre-deduction prices. So your calculated margin looks healthy, while your actual check reflects those higher processor allowances.

Regional Pricing Reality

DMC uses national average milk prices, but anyone who’s compared notes with producers in other states knows the spread can be significant.

The Regional Price Gap: Same Month, Different Reality

RegionApproximate Mailbox PriceVariance
Southeast (Georgia)~$26.00/cwt+$4.65
Northeast (Vermont)~$22.80/cwt+$1.45
Upper Midwest (Wisconsin)~$21.50/cwt+$0.15
Pacific (California)~$20.40/cwt-$0.95
Southwest (New Mexico)~$19.20/cwt-$2.15

Source: USDA Agricultural Marketing Service Federal Order mailbox prices, Fall 2025

The regional story plays out differently depending on where you’re milking cows. Upper Midwest producers deal with cooperative basis adjustments and seasonal hauling challenges. California’s Central Valley operations face water costs that have fundamentally changed their cost structure—some producers there tell me water now rivals feed as their biggest variable expense. Southwest operations running large dry-lot systems have entirely different economics.

The Component Pricing Shuffle

Here’s one that caught a lot of producers off guard: the June 2025 FMMO changes removed 500-pound barrel cheddar from Class III pricing calculations. Now, only 40-pound block cheddar prices determine protein valuations—the USDA Agricultural Marketing Service confirmed this in their final rule.

Sounds technical, I know. But when barrels were trading higher than blocks—which they were in early summer—that switch affected producer checks. The rationale was to reduce price volatility and better reflect actual cheese market conditions, though the timing meant lower payments for many during that transition period.

Stack all of these together, and you get that $4-5/cwt gap between what DMC says you’re earning and what you’re actually receiving.

The Production Paradox

One thing that keeps coming up in conversations: if margins are this tight, why does milk keep flowing?

USDA NASS data shows national production running 1-4% above year-earlier levels in many recent months. July 2025 came in 3.4% higher than July 2024, totaling 19.6 billion pounds nationally.

At the same time, we’re watching a steady structural decline in dairy farm numbers. USDA has documented this trend for years—thousands of farms exiting nationally over the past decade, with several hundred closing each year just in heavily dairy states like Wisconsin.

Expert Insight: Leonard Polzin, Ph.D. Dairy Economist, University of Wisconsin-Madison Extension

“What we’re seeing is expansion commitments made in 2022-2023 when margins looked completely different. That debt doesn’t care about today’s milk prices. Producers have to keep milking to service those loans.”

There’s also the heifer situation. Replacement heifer inventory has dropped to 3.914 million head—the lowest level since 1978, according to USDA cattle inventory reports and confirmed by Dairy Herd Management coverage. Producers who might otherwise strategically cull their way to a smaller herd can’t easily replace the animals they’d be selling.

And then there’s processing. Since 2023, substantial new cheese processing capacity has come online—much of it financed through long-term USDA Rural Development loans requiring consistent milk intake. Those plants need milk regardless of farmgate prices.

For your operation: the supply response to low prices is likely to be slower than historical patterns suggest. If you’re planning around industry-wide production cuts that are expected to boost prices by late 2026, a longer timeline may be more realistic.

Why the Export Safety Valve Is Stuck

I’ve had producers ask when China might start buying again. Honestly? That valve is essentially closed for the foreseeable future.

Between 2018 and 2023, China added roughly 10-11 million metric tons of domestic milk production—equivalent to around 24-25 billion pounds. Rabobank senior dairy analyst Mary Ledman noted that’s almost like adding another Wisconsin to their domestic supply. The result? Self-sufficiency jumped from about 70% to 85% during this period.

China’s Dairy Transformation: The Numbers

MetricBefore (2018)After (2023)Change
Self-sufficiency~70%~85%+15 pts
WMP imports670,000 MT/yr avg430,000 MT-36%
Impact on competitors7% of NZ production was displaced

Sources: Rabobank/Brownfield Ag News

This wasn’t market fluctuation—it was deliberate government policy. And they’re not walking it back. In July 2025, China’s Dairy Association announced plans to maintain at least 70% self-sufficiency through 2030.

For U.S. producers, this represents a structural shift. Other markets—Southeast Asia, Mexico, and parts of the Middle East—continue to show growth potential. But that traditional “surplus absorption” mechanism that China provided? It’s significantly smaller than it used to be.

What’s Actually Working: Four Strategies From the Field

Enough about challenges. Let’s talk about what’s actually moving the needle on margins.

Getting Paid for Components

Sarah Kasper runs a 340-cow operation in central Minnesota that she transitioned to component-focused management three years ago. Her approach: genomic testing on every replacement heifer, sire selection emphasizing butterfat and protein over milk volume, and ration adjustments optimizing for component production rather than peak pounds.

“We dropped about 1,200 pounds of production per cow. But our component premiums more than made up for it. We’re getting paid for what processors actually want.” — Sarah Kasper, Central Minnesota (340 cows)

University of Minnesota Extension dairy economic analyses document component premiums ranging from $120 to $ 180 per cow annually for operations achieving above-average butterfat and protein levels. With genomic testing running $30-50 per animal, the return on investment can be meaningful—especially compounded over multiple generations.

What processors increasingly want is component value, not volume. April 2025 USDA data showed cheese production up 0.9% year-over-year while butter production fell 1.8%—processors are routing high-component milk toward their highest-margin products.

The Beef-on-Dairy Opportunity

This strategy has seen remarkable adoption. CattleFax data reported by Hoard’s Dairyman shows there were about 2.6 million beef-on-dairy calves born in 2022, up from just 410,000 in 2018. CattleFax projects that it could grow to 4-5 million head by 2026.

The economics are fairly straightforward. Use sexed dairy semen on your top-performing cows to secure replacements, then breed the remaining 60-70% of your herd to beef genetics. A dairy bull calf might bring $200-400. A well-managed beef cross with the right genetics and colostrum management can fetch $900-1,250 through direct feedlot relationships, according to Iowa State University Extension beef-dairy market reports.

Beef-on-Dairy Economics: Per-Calf Comparison

ScenarioCalf ValueSemen CostNet Advantage
Dairy bull calf$250$8-15Baseline
Beef cross (average genetics)$700$15-25+$435
Beef cross (premium genetics + direct marketing)$1,100$20-35+$830

Note: Values vary significantly by region, genetics quality, and buyer relationships Sources: Iowa State Extension; Hoard’s Dairyman market reports

But here’s where genetics selection really matters—and where I see a lot of operations leaving money on the table.

Research published in the Journal of Dairy Science in 2025 found the average incidence of difficult calving in beef-on-dairy crosses runs around 15%. But breed selection makes a significant difference: data from the Journal of Breeding and Genetics shows Angus-sired calves had only 7% calving difficulty compared to 13% for Limousin when looking at male calves.

Beef Sire Selection: The Calving Ease vs. Carcass Quality Tradeoff

Here’s the tension every producer needs to understand: beef sires selected for ease of calving and short gestation are often antagonistically correlated with carcass weight and conformation, according to research in Translational Animal Science.

Priority 1 — Protect the Cow:

  • Calving Ease Direct (CED): Select from the top 25% of beef sires
  • Birth Weight EPD: Lower is generally safer for dairy dams
  • Gestation Length: Angus adds ~1 day vs. Holstein; Limousin adds 5 days; Wagyu adds 8 days

Priority 2 — Optimize Calf Value:

  • Frame Size: Moderate-framed bulls generally produce more feed-efficient animals
  • Ribeye Area (REA) EPD: Higher values improve carcass muscling
  • Marbling EPD: Targets quality grade premiums
  • Yearling Weight EPD: Predicts growth performance

Sources: Journal of Dairy Science (2025); Penn State Extension; Michigan State Extension; Translational Animal Science

A Hoard’s Dairyman survey found that most dairies currently prioritize conception rate, calving ease, and cost when selecting beef sires—but feedlot and carcass performance traits aren’t priorities for most farms yet. Michigan State Extension notes this is a missed opportunity: selecting for terminal traits that improve growth rate and increase muscling should be a priority.

The bottom line from peer-reviewed research: sire selection for beef-on-dairy should firstly emphasize acceptable fertility and birthweight because of their influence on cow performance at the dairy; secondarily, carcass merit for both muscularity and marbling should receive consideration.

Tom and Linda Verschoor, who run 1,200 cows near Sioux Center, Iowa, started their beef-on-dairy program in 2022 with this balanced approach. “We figured out we only need about 35% of our herd for replacements,” Tom explained.

They report that in 2024, they generated roughly $185,000 more revenue from beef-cross calves than they would have from traditional dairy bull calves. Results will vary depending on genetics quality, calf care, and buyer relationships. But the opportunity is real for operations set up to capture it.

Actually Using the Risk Management Tools

This is where I see one of the biggest gaps between what’s available and what producers actually use.

DMC Tier 1 coverage costs $0.15/cwt, with a $9.50/cwt margin protection on the first 5 million pounds. University of Wisconsin-Extension analysis shows that from 2018-2024, DMC triggered payments in 48 of 72 months—about two-thirds of the time. Average net indemnity ran $1.35/cwt during payment months. It’s essentially catastrophic margin insurance at minimal cost.

ScenarioCovered Milk (million lbs/year)Net Avg Indemnity ($/cwt in pay months)Approx. Extra Margin per Year ($)
No DMC enrollment00.000
DMC Tier 1 at $9.50 margin51.3545,000

Beyond DMC, Class III futures and options let you establish price floors. If your break-even is $16/cwt and you can lock $17/cwt through futures, you’ve reduced margin uncertainty—even if it means giving up potential upside.

Expert Insight: Marin Bozic, Ph.D. Dairy Economist, University of Minnesota

Bozic often reminds producers at risk-management meetings that relying on prices to improve on their own simply isn’t really a strategy. Most producers are still hoping prices improve rather than locking in prices that work. That’s understandable. But hope alone doesn’t protect margins.

Finding Premium Channels

The spread between commodity milk and premium markets continues widening:

  • Organic certified: $33-50/cwt depending on region and buyer (USDA National Organic Dairy Report)
  • Grass-fed certified: $36-50/cwt with current supply shortages (Northeast Organic Dairy Producers Alliance)
  • Value-added processing: On-farm yogurt or cheese production can generate meaningful additional margin, though capital requirements are real

I’m hearing from processors that organic supply is currently short in the Northeast and Upper Midwest—there’s genuine demand if you can make the transition work.

Premium Channel Pathways: What’s Actually Involved

ChannelTransition TimelineKey RequirementsRegional Considerations
Organic36 monthsUSDA NOP certification; organic feed sourcing; no prohibited substancesStrong processor demand in the Northeast, Upper Midwest; fewer options in the Southwest
Grass-fed12-18 monthsThird-party certification (AWA, PCO, or equivalent); pasture infrastructureWorks best with existing grazing infrastructure; limited in western dry lot operations
On-farm processing12-24 monthsState licensing; food safety compliance; marketing/distribution capabilityStrong local food demand helps; it requires entrepreneurial capacity beyond milk production

Sources: USDA Agricultural Marketing Service; Northeast Organic Dairy Producers Alliance; Penn State Extension

The transition timeline matters. Organic requires three years of certified organic land management before you can sell organic milk—and you’ll need reliable organic feed sourcing, which can be challenging and expensive depending on your region. Grass-fed certification moves faster but requires pasture infrastructure that not every operation has. On-farm processing offers the highest margin potential but demands skills well beyond dairy farming.

Whether these channels make sense depends on your land base, labor situation, existing infrastructure, and appetite for marketing complexity. They’re not right for every operation, but for those with the right setup, the premium differential is substantial.

What the Analysts Are Actually Saying About 2026

Let me share what the forecasts show, because realistic timeline expectations matter.

Producer conversations often reference recovery by “late 2026.” The analyst forecasts suggest a more gradual path.

2026 Price Outlook: Key Forecasts

Source2026 All-Milk ForecastAssessment
USDA December WASDE$18.75/cwtDown from $20.40 (Nov)
2025 Actual$21.35/cwtBaseline comparison
Rabobank“Prolonged soft pricing through mid-to-late 2026” 
StoneXProduction slowdown not until Q2-Q3 2026 

Here’s the key difference: analysts are describing prices “bottoming out” in early to mid-2026. That means the decline stabilizes—not that prices bounce back to 2024 levels. Most forecasts suggest meaningful margin recovery is more likely a late-2027 development.

This isn’t cause for panic. Markets are cyclical, and conditions will eventually improve. But it does suggest planning for an extended timeline.

The Conversation Worth Having

For producers with potential successors, this margin environment brings important conversations into focus. University of Illinois Extension notes that less than one in five farm owners has an estate plan in place. The Canadian Bar Association found 88% of farm families lack written succession plans.

Expert Insight: David Kohl, Ph.D. Professor Emeritus, Virginia Tech

Kohl emphasizes that families starting succession talks early navigate transitions more smoothly than those who wait until circumstances force the conversation.

His framework:

  1. Know your actual numbers — true break-even, debt maturity, realistic equity position
  2. Find out what your kids actually want — not what you assume
  3. Lay out options honestly — status quo, restructuring, strategic exit, or succession

You’re not solving everything in one meeting. You’re getting information on the table.

The Bottom Line

“I’m not pretending the math is good right now. But I’ve stopped waiting for someone else to fix it. We enrolled in DMC at the $9.50 level, we’re breeding 60% of our herd to Angus, and we had that kitchen table conversation with our son over Thanksgiving. First real talk about whether he wants this place.”

He paused. “I’d rather know where we stand than keep guessing. At least now we’re making decisions instead of just hoping.” — Mike Boesch

That’s really the choice in front of all of us right now. The margin environment is challenging—that’s just the reality for the foreseeable future. But producers who understand the dynamics, assess their positions honestly, and implement available strategies aren’t just getting through this period; they’re succeeding. Some are building advantages that will serve them well when conditions improve.

The math is difficult. It’s not impossible. The difference comes down to whether you’re making decisions based on information or just waiting to see what happens.

Key Takeaways

  • The $4/cwt gap is real—and it’s not your math. Make allowances, regional spreads, and formula changes explain why your milk check doesn’t match your margins.
  • $337 million left producer pockets in 90 days. June’s make allowance increases pulled that from the pool values before summer ended.
  • Plan for a long haul. USDA projects $18.75/cwt for 2026—a meaningful margin recovery likely won’t show up until late 2027.
  • Don’t count on production cuts to save prices. Expansion debt keeps cows milking, and the lowest heifer inventory since 1978 limits strategic culling.
  • The wins are in the details. Component premiums, smart beef sire selection, and actually enrolling in DMC at $9.50—that’s where producers are finding margin.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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The $200K Dairy Margin Trap: What Cheap Feed Won’t Tell You About 2026

Feed dropped 75¢. Milk dropped $2. That’s not savings—that’s a $200K trap.

EXECUTIVE SUMMARY: Everyone’s celebrating cheap corn—but the math tells a different story. USDA projects 2026 milk at $19.25/cwt while feed costs have dropped only modestly, creating net margin compression of $1.25-1.75/cwt—that’s $156,000 to $218,000 in lost cash flow for a 500-cow dairy. New Zealand’s lowest-cost producers see what’s coming: they paid down $1.7 billion in debt this year rather than expand. Top U.S. operators are responding with feed efficiency gains, component optimization, IOFC-based culling, and beef-on-dairy programs that can protect $1.50+ per cow daily. With Chapter 12 bankruptcies up 55% and ag lenders reporting eight straight quarters of declining repayment rates, the window for strategic positioning is narrowing. The question isn’t whether margins compress in 2026—it’s whether you’ll position your operation before they do.

You know that feeling when everything looks fine on paper, but something in your gut says otherwise?

It’s the kind of conversation happening at kitchen tables across dairy country right now. The milk check looks okay—maybe even decent by recent standards. Feed costs have come down. The cows are milking well.

And yet something feels off.

That instinct isn’t wrong.

The FAO has been tracking global food prices for decades, and its November numbers tell an interesting story. The overall Food Price Index has dropped for three consecutive months, and the dairy sub-index has declined for five straight months.

New Zealand just posted a 17.8% production surge in their early season, according to their Dairy Companies Association data. U.S. milk output keeps climbing, too.

What’s worth understanding—and this is something many of us tend to underestimate—is the timeline between when these global signals show up and when they hit our milk checks.

Generally speaking, we’re looking at about six to eight months.

So the softening that started this fall? It’s likely showing up in Q2 and Q3 2026 checks.

Mark Stephenson, who spent years as Director of Dairy Policy Analysis at the University of Wisconsin-Madison before his recent retirement, studied these price transmission patterns extensively throughout his career. His research documented this lag across multiple market cycles.

The movement in international powder and butter prices isn’t really a question of whether it affects domestic markets—it’s more about when and how much.

USDA’s November World Agricultural Supply and Demand Estimates projects the all-milk price at $19.25 per hundredweight for 2026. That’s a meaningful change from the $22-24 range that many operations built their budgets around during stronger periods.

So what are the producers who’ve navigated these cycles before actually doing about it?

The Feed Cost Conversation That’s Missing Something

Walk into any farm supply store or dairy meeting right now, and you’ll hear some version of the same reassurance: “At least feed costs are down.”

And that’s true.

Corn is trading around $4.37 per bushel on the Chicago Board of Trade as of early December. Soybean meal is running around $310-$315 per ton. The DMC feed cost calculation is in a favorable territory compared to recent years—no question about that.

But here’s what that conversation often leaves out.

When milk prices were $22.75, and feed costs were about $11.00 per hundredweight, producers captured roughly $11.75 in income over feed costs.

Run the same math with 2026 projections—$19.25 milk and lower feed costs—and that margin still compresses to around $9.00.

Feed improved by maybe seventy-five cents. Milk dropped by more than two dollars.

The net effect is still a $1.25 to $1.75 per hundredweight margin compression for most operations.

On a 500-cow dairy producing 125,000 hundredweight annually, that’s $156,000 to $218,000 in reduced cash flow. Real money that has to come from somewhere—whether that’s reduced family living, deferred maintenance, or tighter input decisions.

Michael Dykes, who leads the International Dairy Foods Association as their President and CEO, put it well in a recent industry briefing. Lower feed costs are helpful, no question, but they’re best understood as breathing room to make strategic moves—not as a solution to margin pressure.

I recently spoke with an Upper Midwest nutritionist who put it more directly:

“I’ve got producers telling me they’re holding off on decisions because corn is cheap. That’s exactly backwards. Cheap corn is the opportunity to lock in favorable feed contracts and build some cushion—not permission to wait and see what happens.”

The timing matters here.

Producers who lock in Q1 and Q2 2026 feed contracts now, while basis levels remain favorable, capture that advantage regardless of what happens to spot markets later. Those who wait may find the window has closed.

It’s worth running the numbers with your feed supplier at a minimum.

What’s Actually Happening in Export Markets

The China situation deserves more attention than it typically gets in domestic dairy discussions, even for producers who don’t think of themselves as export-dependent.

Why does this matter to all of us? The economics tell the story.

The current reality is pretty stark.

U.S. dairy products face total tariffs of 84 to 125 percent in China following the trade escalation that peaked in April 2025—China’s Ministry of Finance and Reuters covered this extensively at the time.

New Zealand, by contrast, completed their Free Trade Agreement phase-in on January 1, 2024, and now ships dairy to China at zero percent tariff.

The market share shift has been significant.

While exact percentages shift quarter to quarter, the direction is clear: New Zealand has captured the lion’s share of China’s powder imports while U.S. product faces what amounts to a prohibitive tariff wall.

That displaced volume didn’t disappear—it backed up into domestic markets.

Even producers selling exclusively to domestic processors feel this effect, as Mary Ledman at Rabobank has pointed out in her global dairy market analysis. She’s been tracking these patterns as their Global Dairy Strategist for years now.

When export channels close, that milk has to go somewhere. It adds supply pressure that affects everyone, even if indirectly.

The regional effects aren’t uniform, though.

California and Idaho operations—traditionally more export-oriented through Pacific Rim trade—feel this more acutely than Upper Midwest producers whose milk flows primarily into domestic cheese markets.

I spoke with a Wisconsin cheesemaker recently who said his plant’s order book looks fine through mid-2026, but he’s watching West Coast capacity closely because displaced milk eventually tends to find its way east.

What’s particularly noteworthy is how New Zealand producers are responding to their advantageous position.

Despite favorable prices and strong production conditions, Kiwi farmers repaid NZ$1.7 billion in debt in the six months through March 2025 rather than expanding. ANZ Bank and New Zealand’s rural news outlets have been tracking this closely.

When the world’s lowest-cost producers choose balance sheet repair over growth during historically good times… well, it suggests they’re preparing for extended market softness.

That’s a signal worth paying attention to.

Reading the Financial Signals

Several data points help distinguish what’s happening now from typical cyclical patterns.

Chapter 12 farm bankruptcy filings—the specialized bankruptcy provision for family farmers—hit 216 cases in 2024, up 55 percent from the prior year. The American Farm Bureau Federation has been tracking federal court records on this, and the first half of 2025 saw additional filings running well ahead of 2024’s pace.

Context matters here. Bankruptcy filings alone don’t tell the whole story—they can reflect access to legal resources, regional legal practices, and individual circumstances as much as broad economic conditions.

But the trend is notable.

Geographic patterns show particular stress in California, Iowa, Michigan, Kansas, and Wisconsin—a mix of traditional dairy regions and areas affected by specific challenges, such as avian influenza and water constraints.

Debt service coverage ratios tell a related story.

Farm Progress recently reported on data from the Minnesota FINBIN farm financial database showing that the average producer had a concerning coverage ratio of around 85 percent in 2024—meaning operations were generating only 85 cents for every dollar of debt service obligation.

The remaining gap has to come from equity drawdown, off-farm income, or loan restructuring.

What concerns many lenders is the compounding effect.

Interest costs have roughly doubled over the past three years as rates have reset. An operation that was comfortable at 3.5 percent interest faces a completely different equation at 7.5 percent—as many of us have experienced firsthand.

The Federal Reserve Bank of Chicago’s Q3 2025 agricultural credit survey found 38 percent of banks reporting lower repayment rates—the eighth consecutive quarter of deterioration. More than two-thirds of lenders expect farmland values to flatten or decline in 2026.

None of this predicts any individual operation’s future—every farm has its own circumstances, strengths, and challenges.

But it does suggest the industry overall is experiencing stress levels that reward careful financial planning over optimistic assumptions.

The Expansion Paradox

One of the more counterintuitive aspects of current markets—and something I find genuinely interesting to think through—is why production keeps growing despite weakening price signals.

The biological reality is that dairy expansion decisions made two to three years ago are just now showing up in production numbers.

Heifers conceived in early 2023 are entering milking strings in late 2025. Facilities that broke ground during strong margins in 2023 and 2024 are now completing and being populated.

Once those commitments are made—once the cows are bred, raised, and the facilities built—the production is essentially locked in.

Debt service creates similar momentum.

Operations carrying expansion loans need to maintain production to meet their obligations. Reducing herd size often costs more than continuing to milk at marginal profitability, especially when the alternative is triggering loan covenant violations.

Christopher Wolf, the E.V. Baker Professor of Agricultural Economics at Cornell, has written thoughtfully about this dynamic. The economics of stopping are often worse than the economics of continuing.

That’s not irrational behavior—it’s responding logically to the debt structure and fixed-cost reality that exist in most operations.

Processing capacity investment adds another layer.

More than $11 billion in new U.S. dairy processing capacity is under construction or recently completed—IDFA released a detailed report in October covering 50-plus projects across 19 states.

That processing investment creates a regional demand pull that can support local expansion even when broader markets are oversupplied. A producer within hauling distance of a new plant in Dodge City or along the I-29 corridor faces different economics than one in a region without recent processing investment.

I’ve been hearing about this regional divide increasingly this season.

In Texas and New Mexico, where several major cheese and powder facilities have opened or expanded, local producers report being actively recruited with multi-year contracts.

Meanwhile, some Northeast producers describe tighter relationships with their cooperatives—fewer premium opportunities and more pressure on base pricing.

Same industry, very different regional realities.

What Successful Producers Are Doing Differently

Conversations with producers navigating current conditions successfully reveal consistent patterns. These aren’t revolutionary changes requiring massive capital—they’re an intensified focus on fundamentals.

1. Feed Efficiency Optimization

Top-performing herds are achieving feed efficiency ratios of 1.5 to 1.8 pounds of milk per pound of dry matter intake. The industry average sits around 1.4.

The Impact: Each tenth of a point improvement translates to roughly $0.20 to $0.30 per cow/day in margin enhancement.

The Tactic: Weekly NIR analysis on forages (~$15/sample) allows for immediate ration adjustments, rather than guessing between monthly tests.

I recently spoke with a Wisconsin producer who started as a custom heifer raiser before transitioning to his own milking herd. He described implementing weekly NIR testing on every forage load.

“The payback is maybe ten to one in ration accuracy,” he said. “We were basically guessing before.”

Most producers I’ve talked with see measurable results within 45 to 60 days—though individual results vary based on starting point and forage variability.

2. Component Value Capture

Producers focusing on butterfat performance and protein levels report capturing an additional $0.75 to $1.25 per hundredweight compared to volume-focused approaches.

The Tactic: Using rumen-protected choline during transition periods and summer heat stress (~$0.08/cow/day) to prevent butterfat depression.

The genetic piece is a longer-term play—daughters of high-component sires won’t hit the milking string for two-plus years—but the nutritional interventions can show results within a milk test cycle or two.

Worth having a conversation with your nutritionist about current ration fatty acid profiles and where component optimization opportunities might exist for your herd.

3. Strategic Culling Based on IOFC

Rather than culling primarily based on age, reproduction metrics, or production levels, progressive operations calculate income over feed cost for each cow and move out animals that are consistently below $1.50 per cow daily.

The Shift: “A seven-year-old cow giving 60 pounds might look fine on paper,” one herd manager at a 1,200-cow Minnesota dairy told me. “But when you run her actual IOFC with her feed intake and health costs, she’s sometimes underwater. We’re making decisions on math now, not sentiment.”

For operations without individual cow feed intake data (which is most of us), pen-level IOFC calculations still identify which groups are carrying the herd versus dragging it down.

Most herd management software can generate these reports with minimal setup.

4. Beef-on-Dairy Integration

Producers systematically breeding bottom-tier genetics to beef sires report equivalent revenue of $2.50+ per hundredweight from crossbred calf sales.

The Math: A straight Holstein bull calf might bring $150. A beef-cross brings $1,000 or more based on current USDA feeder cattle reports.

The Genetics Play: Use genomic testing or breeding values to identify the bottom 20-30% of your herd’s genetic merit. Breed those animals to proven beef sires with good calving ease scores, and establish buyer relationships before calves hit the ground.

This is where your genomic data becomes a direct revenue driver—not just a breeding tool.

Operations that treat beef-on-dairy as an afterthought leave money on the table compared to those who plan the program strategically.

The Emerging Structure: Two Viable Paths

Looking at where the industry appears headed over the next three to five years, a structural pattern is emerging that’s worth understanding—even if it raises uncomfortable questions.

The data increasingly suggests two economically viable models:

Large-scale efficiency operations—generally 1,500 cows and above—achieving production costs in the $14 to $17 per hundredweight range through scale economics, technology adoption, and processing relationships.

USDA’s Economic Research Service cost-of-production data confirms that this scale advantage has widened over the past decade. Many of these operations use dry-lot systems or hybrid facilities to maximize throughput efficiency.

Premium-differentiated operations—typically 50 to 500 cows—capturing $4 to $8 per hundredweight premiums through organic certification, grass-fed positioning, or direct-to-consumer channels.

These require proximity to metro markets and significant transition investment, but create a margin cushion independent of commodity prices.

Operations in the middle face the most challenging economics under the current market structure.

This isn’t a judgment about the value of family-scale dairy farming or the communities these farms anchor. It’s an observation about where the current market structure creates clearer paths forward.

Regional variation matters significantly.

A 300-cow dairy in Vermont with Boston market access faces different options than a similar-sized operation in central Wisconsin without nearby premium channels.

A Framework for Evaluation

For producers working through these questions—and most of us are—several considerations help clarify the path forward.

For operations considering expansion:

  • Is there processing capacity within 200-300 miles actively seeking suppliers?
  • Is replacement heifer availability realistic? National inventory sits at roughly 3.9 million dairy replacement heifers 500 pounds and over—the lowest absolute level since 1978, according to USDA’s January 2025 Cattle report. The heifer-to-cow ratio of 41.9% is the lowest since 1991.
  • Can production costs realistically reach sub-$17 per hundredweight at expanded scale?
  • What do debt service requirements look like at current interest rates, not 2021 rates?

For operations considering premium positioning:

  • Is there a metro market within a reasonable distance with demonstrated premium demand?
  • What’s the realistic timeline? Organic certification alone typically takes three years under USDA National Organic Program rules.
  • Does the land base and climate support pasture-based systems?
  • Is there family interest in direct marketing relationships?

For operations evaluating the current position:

  • What’s the actual debt service coverage ratio at projected 2026 milk prices?
  • When do loans mature, and at what interest rate reset?
  • Has the processor offered multi-year supply contracts?
  • What’s the true breakeven with full cost accounting—including family labor and reasonable return on equity?

These aren’t comfortable questions.

But they’re better asked now than answered by circumstances later.

The Timing Reality

One thread runs through conversations with producers, lenders, and analysts who’ve navigated previous downturns: timing matters more than most people acknowledge.

Producers who assess their position and make strategic decisions during 2025 and early 2026—while milk prices are still serviceable, while cull cow prices remain historically strong—retain meaningfully more options than those who wait.

December through February: Run your real numbers. Calculate the actual DSCR at $19.25 milk. Have the honest conversation with your lender—most good lenders appreciate proactive communication.

This is also the window for DMC enrollment decisions. If you haven’t reviewed your coverage levels against projected margins, now’s the time. LGM-Dairy is worth a conversation with your insurance agent, too, especially for operations wanting more flexible coverage options.

February through April: Make feed decisions. Lock contracts if the math works. Implement efficiency improvements that deliver results by summer.

Spring 2026: Evaluate first-quarter performance against projections. Adjust culling strategy based on actual margins. Make the bigger strategic calls with real data rather than hope.

The Bottom Line

The dairy industry has navigated challenging transitions before, and it will again.

The producers who came through previous cycles strongest were generally those who saw conditions clearly, made decisions based on their specific circumstances, and acted while they still had choices.

That window is open now.

The question is what each of us does with it.

The Bullvine provides market analysis and industry perspective for dairy producers worldwide. This article reflects conditions and data available as of early December 2025. Individuals should consult their own financial advisors, lenders, and Extension specialists when making significant business decisions. Every farm’s situation is unique, and the right path forward depends on factors only you and your advisors can fully evaluate.

KEY TAKEAWAYS

  • The Trap: Feed dropped 75¢. Milk dropped $2. That’s not savings—that’s $200K in vanishing cash flow for a 500-cow dairy.
  • The Global Signal: NZ farmers paid down $1.7 billion in debt instead of expanding. The world’s lowest-cost producers expect extended softness.
  • The Warning Signs: Chapter 12 bankruptcies up 55%. Ag loan repayments have been declining for 8 quarters straight. Financial stress is accelerating.
  • What Top Producers Are Doing: Capturing $1.50+/cow/day through feed efficiency, component optimization, IOFC-based culling, and beef-on-dairy integration.
  • The Window Is Now: Cull values are strong. Milk checks are still serviceable. Lenders are still flexible. Make strategic decisions while you still have options.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • The $700 Truth: Your Best Milkers Are Your Worst Investment – Reveals why high-volume cows often lose $3/day in actual margin and demonstrates how to use Residual Feed Intake (RFI) data to identify the true profit-drivers in your herd.
  • The $228,000 Exit Strategy Reshaping Dairy – Uncovers the “Section 1232” tax provision behind the recent surge in Chapter 12 filings, explaining how strategic bankruptcy is helping retiring producers preserve equity rather than losing it in traditional sales.
  • Robot Revolution: Why Smart Dairy Farmers Are Winning – Analyzes the 2025 ROI of automated milking systems beyond simple labor savings, providing a blueprint for the “efficiency-at-scale” model that allows family operations to compete with larger consolidators.

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.

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From Shutdown to Showdown: How Dairy’s 2026 Wake-Up Call Is Redefining Survival

What the End of Government Relief Really Meant—and How Smart Farms Are Turning Uncertainty Into Opportunity

EXECUTIVE SUMMARY: From Shutdown to Showdown: How Dairy’s 2026 Wake-Up Call Is Redefining Survival” details how the end of the government shutdown set the stage for a year of unprecedented challenge—and opportunity—in the dairy sector. Instead of relief marking the finish line, the reopening exposed new processor contract demands, profit headwinds from make allowance adjustments, and a high-stakes shift to protein-centric pricing, all verified through university extension findings and current market data. The article demonstrates how farms that capitalize on narrow timing windows, lean into peer networks, and embrace collaborative learning are gaining margin and flexibility amidst change. Practical checklists, region-specific examples, and expert-backed insights make it useful at the barn and the boardroom table alike. By weaving in both the pressures and pathways open to all sizes of operation, the story embodies The Bullvine’s commitment to presenting real decisions, not just headlines. In the end, it shows that survival—and success—are less about official relief and more about being prepared to adapt, connect, and strategize for what 2026 brings next.

Dairy Profit Strategy

You know, as much as we all soaked in the relief of those USDA payments and the delayed Milk Production reports this past fall, the lesson of the moment is clearer than ever: what matters most heading into 2026 is how quickly and thoughtfully we respond to the challenges—not just what help the government sends. What I’ve noticed—confirmed by producers in Wisconsin, Florida, and even out west—is that “relief” doesn’t make the difference for your bottom line. It’s how you move with the changing facts, the shifting contracts, and the farm realities in front of you.

Pull up a stool. Here’s how that’s actually playing out in barns, co-op meetings, and balance sheets, with credible trail markers for farms of all sizes.

Speed Kills (Complacency): Margins in the Data Gaps

What farmers are finding is that, in this climate, the winners are the ones ready to act. When the USDA’s October Milk Production report was missing for weeks, extension specialists and loan officers across the Midwest were fielding anxious calls. Herds that moved quickly—hedged milk at $17.35/cwt right after the report, or locked in feed at $4.10—wound up with $2,000-$2,500 more on every 500 cows compared to those who waited. CME and Wisconsin extension data both show how waiting for “certainty” can shrink margins before you even see the warning.

It’s not luck. It’s keeping your strategy loose, your phone handy, and your local data bookmarked. Fresh cow management, feed contracts, and market windows—they all demand being both alert and decisive, especially as 2026 approaches.

Make Allowance Leaks: When Efficiency Quietly Costs You

The Allowance Shift: June 2025 Make Allowance Increase Transfers ~$0.50/cwt from Producer Milk Checks to Processor Margins

Let’s lay out the dollars and cents. Thanks to FMMO make allowance changes last summer, about $82 million annually has shifted from producer checks into processor cost recovery, according to the American Farm Bureau and university research. That hits particularly hard for 400-600 cow herds in the Midwest, where $8,000-$15,000 in value quietly vaporized from family budgets in 2025 alone. While vertically integrated co-ops sometimes recoup some through patronage, for most, these quieter cost shifts are exactly what force new choices—do we hold, reinvest, cut inputs, or consider transitioning out?

The lesson? It’s time to double down on IOFC, watch every transition group closely, and look at every feed and labor line as a matter of survival, not just habit.

Premium Contracts: New Growth, New Hurdles

The Processor Divide: Expanded Capacity and Premium Contracts Favor Large Operations—Small Farms Face Component Quality Barriers Worth $4.40/cwt

Let’s get real about processor expansion. Yes, IDFA and DFO confirm $11 billion in new milk-processing capacity, but the “growth” headlines come with some fine print. Today’s direct contracts expect you to consistently deliver volume (often 1,000+ cows), protein over 3.2%, and sub-Grade A somatic cell counts.

Why the clampdown? Processors need stable, high-quality components to secure export and retail channels, invest in automation, and deliver on food safety for globally diverse buyers. UW reports and field officers say this shift is now woven into most new plant supplier specs.

It’s not all doom. Farms who began investing in butterfat genetics, precision feed systems, and herd data management years ago are fielding more calls, not fewer. Those focusing just on short-term barn expansion are finding that you can’t rush a protein curve or a culture of quality management. Extension and Minnesota case studies show that slow, steady moves—targeting milk components and recordkeeping upgrades first—put herds in the fast track for premium deals.

December’s 3.3% Rule: Protein as the Baseline

Speed Kills Complacency: How Quick Response to Market Data Translates to $1,400+ More Per 500 Cows

Here’s what’s interesting: this year’s biggest structural shift might be USDA’s new baseline for protein—up from 3.1% to 3.3% (USDA Final Rule). It’s been a long time coming, and peer-reviewed research had foreshadowed the change for several years. Genetics, feeding, and savvy fresh cow management have all nudged national averages upward. But it’s the local impacts—from blend checks to contract premiums—that hit home.

What does that mean practically? A 0.2% difference in protein, per 100 cows, adds up to $400-800 in annual check value, per the latest Midwest and Ontario extension data. Above 3.3%? You’re in the bonus column. Below? Now’s the time to pull out the ration notes and see where you can tweak, swap, or invest before the next round of pricing hits.

More importantly, more farms are opening up the books—digitizing records, crowdsourcing advice in peer groups, and trading input strategy tips without fear of “giving away secrets.” As more transition into 2026, collaborative learning is proving, in the field and in extension trials, to be a margin driver as real as any piece of steel.

Transition Planning: The Strongest Exit Isn’t Running—It’s Timing

One of the biggest takeaways this year is that transition can be a strength, not a sign of retreat. USDA NASS land reports peg the Midwest ground firmly above $25K/acre; extension planners increasingly help herds time “retirement” or partner transitions before the next storm hits. The real win? Leaving with financial options and the pride of calling the shot on your terms.

Herds still thinking big? UW and DFO studies show that the best results come when expansion is built on several years of component improvement and a fresh-cow strategy—not as a panic reaction to price. Dry lot and fresh group upgrades, pooled input efforts, and peer feedback show up again and again in success stories.

And for those holding steady, including herds in the 200-700 cow bracket, “optimization” is earning a new respect. Peer networks and beef-on-dairy strategies (with calves bringing $400-600, latest UMN data) are now front-line tools, and regular peer benchmarking is ensuring that the smartest changes don’t just sit on paper—they get put into practice.

Are You Fast Enough for 2026?

Pulling together farmer panels and co-op roundtables, it’s clear: being nimble, not just knowledgeable, is the new shield against margin loss. Extension economic analysis calls it “window management”—profits are made in these small, rapid openings, not in broad trends or after-the-fact decision meetings.

Facing Protein Gaps? Your Action Checklist

  • Bring three years of production and component records to a dairy-literate advisor. 
  • Model the value and cost of boosting protein (and the status quo if you don’t). 
  • Sit down with a local extension or farm business group—where are your best, region-specific levers hiding?
  • Use your peer network: tested approaches and hard-learned lessons are worth more than a new gadget.

So if there’s one sure thing heading into our “2026 wake-up call,” it’s that resources, relationships, and rapid response matter. Let’s keep those mugs full and the learning real—together, we’ll keep setting the pace for the next curve in dairy.

KEY TAKEAWAYS:

  • Farms that respond swiftly to new information—securing prices or input deals as data shifts—routinely outperform those waiting for a “clear signal.”
  • The new normal: Processor contracts and milk pricing now demand higher protein, stricter quality, and more documentation, making management upgrades and peer collaboration must-haves.
  • Smart transition planning—whether exiting, scaling, or realigning—can be a competitive edge, helping farm families lock in value rather than react to crises.
  • Operational resilience is increasingly about connecting with peer networks, bulk-buying alliances, and benchmarking tools—not just individual innovation.
  • For 2026, the most resilient farms will be those that adapt fastest to changing rules, seize learning opportunities, and stay proactive in their markets.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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November 12 Market Shock: Cheese Crashes to $1.55 as Milk Heads for $16 – Your Action Plan Inside

Warning: Today’s cheese collapse confirms what smart money already knows – milk’s heading for $16. Action plan inside.

Executive Summary: Today’s 8-cent cheese collapse to $1.5525 sent an unmistakable message: the U.S. dairy industry has entered a margin crisis that smart money says could stretch into 2027. With Europe undercutting our prices by 10 cents, Mexico pulling back orders, and domestic production inexplicably up 4.2%, we’re producing into a black hole. The numbers are sobering – Class III milk heading for $16.50 means your January check drops $3/cwt, translating to $7,500 less monthly revenue for a typical 300-cow operation. At these prices, even well-run dairies lose $1,500 daily. But here’s what 30 years in this industry has taught me: the operations that act decisively in the first 90 days of a crisis are the ones that survive. Those waiting for markets to ‘come back’ typically don’t make it. Your December milk check isn’t just a number anymore—it’s a referendum on whether your operation has what it takes to weather the storm ahead.

Dairy Margin Management

Today’s Market Summary Table

ProductCloseChangeTrading Activity
Cheese Blocks$1.5525/lb↓ $0.084 trades ($1.5775-$1.6275)
Cheese Barrels$1.6450/lb↓ $0.03No trades
Butter$1.5000/lbUnchanged3 trades ($1.49-$1.50)
NDM$1.1575/lb↑ $0.0025No trades
Dry Whey$0.7500/lbUnchangedNo trades

You know that sinking feeling when you check the CME report and see red numbers everywhere? That’s exactly what happened today. Block cheese crashed 8 cents to close at $1.5525 per pound—and here’s what’s interesting, it happened on relatively heavy trading with four separate transactions recorded by the Chicago Mercantile Exchange spanning from $1.5775 to $1.6275, according to today’s CME cash market report. Barrels weren’t far behind, falling 3 cents to $1.6450, though notably without any recorded trades.

What I’ve found particularly telling is how butter stayed frozen at $1.50 with three trades in a tight range, while nonfat dry milk barely budged, climbing just a quarter-cent to $1.1575 with zero trading activity. Days like this tell us something important about where we’re headed. And honestly? It’s time we had a serious conversation about what this means for your December milk check.

Reading the Tea Leaves in Today’s Trading Patterns

Here’s something many of us miss when we just glance at the closing prices—the bid-ask spreads are telling a much bigger story. You probably know this already, but when the gap between what buyers are willing to pay and what sellers are asking widens dramatically, it usually means traders can’t agree on where prices should settle.

Today’s cheese block market saw those four trades bouncing between $1.5775 and $1.6275, but—and this is crucial—CME floor sources report that we had only one bid against one offer at the close. That’s not healthy price discovery; that’s a market running on uncertainty. In my experience working with Chicago traders, when you see heavy block volume with falling prices but no barrel activity, it often means processors are dumping inventory before year-end accounting.

The 8-Cent Collapse Captured: From $1.64 trading range into $1.55 settlement across four institutional block trades. This waterfall pattern signals that major traders are repricing dairy fundamentals downward—the classic setup for extended weakness.

The weekly totals back this up dramatically: 14 block trades this week versus zero for barrels, according to CME weekly volume data. You know what really concerns me? The order book shows just one bid each for blocks and barrels, creating virtually no floor under this market. Compare that to butter, where we’re seeing four offers—sellers everywhere, but buyers have vanished. It’s worth noting that this setup typically precedes another leg lower, especially when remaining buyers finally capitulate.

How Global Markets Are Boxing Us In

So here’s where things get complicated—and you’ve probably noticed this in your own export conversations if you’re dealing with cooperatives. European butter futures trading at €5,070 per metric ton on the European Energy Exchange work out to about $2.29 per pound at current exchange rates. That’s now competitive with our prices, and according to USDA Foreign Agricultural Service data, they’re capturing business we desperately need.

What I find particularly troubling is New Zealand’s positioning on the NZX futures exchange. Their whole milk powder at $3,440 per metric ton signals aggressive pricing to capture Asian market share, based on Global Dairy Trade auction results. And with EU skim milk powder at €2,075 per metric ton—that’s about $1.04 per pound—they’re undercutting our NDM by over 10 cents. In many cases, that’s enough to make a U.S. product completely uncompetitive globally.

Now, Mexico has traditionally been our safety net. USDA trade data shows they account for about 25% of U.S. dairy exports. But here’s what’s changed: the peso weakened by 8% against the dollar this quarter, and according to Conasupo (Mexico’s national food agency), domestic production is ramping up. Several processors I’ve talked with in Wisconsin report Mexican buyers are pulling back on November purchases.

Southeast Asia was supposed to pick up that slack, but USDA attaché reports from Vietnam and Indonesia indicate those markets are currently oversupplied with cheaper product from New Zealand and Europe. And the dollar… well, that’s another story entirely. Federal Reserve data shows it’s near 52-week highs, and research from the International Dairy Federation shows that every 1% rise in the dollar index typically drops our dairy exports by 2-3%.

Feed Markets: The Silver Lining Gets Thinner

Here’s one bright spot, though it’s getting dimmer by the day. According to CME futures settlements, December corn closed at $4.3550 per bushel, with March futures at $4.49. That’s manageable. Soybean meal’s recovery to $322 per ton from Monday’s $316.80 keeps feed costs somewhat reasonable, based on CBOT trading data.

But—and this is a big but—the milk-to-feed ratio is deteriorating fast. Cornell’s Dairy Markets and Policy program calculates that at current prices, income over feed costs could drop below $8 per hundredweight by January. University of Wisconsin Extension analysis confirms that for most operations, that’s below breakeven.

The regional differences are striking, too. USDA Agricultural Marketing Service basis reports show Midwest producers near corn country seeing sub-$4 local cash prices. Meanwhile, California Department of Food and Agriculture data indicates that West Coast producers are facing $5-plus delivered corn. For hay, USDA’s Agricultural Prices report puts the national average at $222 per ton, but Western Premium Alfalfa runs $280 and up according to the latest USDA hay market news.

Production Growth: The Numbers We Can’t Ignore

USDA’s National Agricultural Statistics Service finally released that delayed September milk production report on November 10th, and the numbers are… well, they’re sobering. Twenty-four state production hit 18.3 billion pounds, up 4.2% year-over-year. The national herd added 235,000 cows over the past year, while production per cow jumped 30 pounds to 1,999 pounds per month.

What’s really eye-opening is where this growth is concentrated. Kansas leads with 21.1% growth, South Dakota’s up 9.4%—those new processing plants that Dairy Foods magazine has been covering are pulling massive expansion. Looking at efficiency gains, Michigan State University Extension reports their state’s cows are averaging 2,260 pounds per month. That’s 260 pounds above the national average.

The 261-Pound Survival Gap: Michigan’s elite herds average 2,260 lbs/month while national average sits at 1,999. That efficiency gap translates to $15/day cost per marginal cow. When Class III drops to $16.50, every pound counts—operations with production per cow below 1,950 face economic extinction.

The combination of improved genetics—documented in Journal of Dairy Science studies—optimized nutrition protocols from land-grant university research, and modernized facilities, as tracked by Progressive Dairy, has pushed biological limits higher than we thought possible. Here’s the reality check from talking with nutritionists: when your neighbors are achieving these yields, you either match them or risk getting priced out.

Remember all those cheese plants that broke ground in 2023? Kansas Department of Agriculture confirms three major facilities, Texas Department of Agriculture lists two, and South Dakota’s Governor’s Office announced another two. We’ve added 10 billion pounds of annual processing capacity since 2023, according to estimates from the International Dairy Foods Association. These plants have 20-year USDA Rural Development financing that requires running near capacity—this structural oversupply won’t resolve quickly.

The Structural Trap: Four new cheese plants in 2023 plus six more in 2024-2025 added 10 billion pounds of capacity. These debt-financed facilities must operate near 95% utilization to service 20-year USDA Rural Development loans. Current market demand: 46 billion pounds. Result: 5+ billion pounds annual oversupply locked in through 2030. Price recovery impossible without facility closures—and that doesn’t happen voluntarily.

What This Means for Your December Check

Let’s talk straight about where Class III milk is headed. With November futures already at $17.16 on the CME and December futures implying further weakness according to today’s settlements, several dairy economists I respect are projecting $16.50 or lower by January.

December Check Reckoning: A 300-cow operation at $16.50 Class III faces $7,500 monthly revenue loss. That’s $900 daily. January will be worse.

At $16.50 Class III with current feed costs, the University of Minnesota’s dairy profitability calculator shows the average 100-cow dairy loses about $1,500 per day. If we hit spring flush with these prices… well, that’s going to force some tough culling decisions. Today’s spot prices, when run through USDA’s Federal Milk Marketing Order formulas, translate to January milk checks down $2.50 to $3.00 per hundredweight from October.

For a 300-cow dairy shipping 65,000 pounds daily, that’s $7,500 less monthly revenue. Farm Credit Services reports from the Midwest indicate banks are already tightening credit as dairy loan portfolios deteriorate. The Federal Reserve’s October Agricultural Credit Survey shows agricultural loan demand rising while repayment rates fall—if you haven’t locked in operating lines for 2026, today’s price action just made that conversation much harder.

What’s particularly concerning is that our traditional escape route isn’t available. USDA Foreign Agricultural Service data shows China’s imports down 18% year-over-year, Mexico’s pulling back, as I mentioned, and Southeast Asian markets are oversupplied. Without export demand absorbing 15-20% of production—which has been the historical average according to U.S. Dairy Export Council analysis—domestic markets face crushing oversupply through 2026.

Tomorrow Morning’s Practical Action Plan

So what do we do about all this? Here’s my thinking on practical steps based on conversations with risk management specialists and successful producers who’ve weathered previous downturns.

On the hedging front, if we get any bounce above $17.00 for Q1 2026 Class III, I’d seriously consider locking it in. Several commodity brokers I trust are recommending ratio spreads—selling two February $16 puts to buy one February $18 call, which limits your downside while maintaining upside potential. For feed, the consensus among grain merchandisers is to buy March corn under $4.40 and meal under $320 while you can.

Operationally, extension dairy specialists are unanimous: it’s time for aggressive culling. Penn State’s dairy management tools show that every marginal cow below 60 pounds per day is costing you money at these prices. Push breeding decisions to maximize beef-on-dairy premiums while they last—Superior Livestock Auction data shows those crossbred calves bringing $200 to $300 premiums.

Review every feed ingredient for substitution opportunities. University of Wisconsin research demonstrates that optimizing your grain mix can save $5 per ton without sacrificing production—that equals $50,000 annually for a 500-cow dairy. And here’s something many producers hesitate to do but really should: schedule that lender meeting now, before year-end financials force their hand.

Prepare cash flow projections showing survival through $16 milk—Farm Financial Standards Council guidelines suggest they need to see that you’ve faced reality. Several ag finance specialists recommend considering sale-leaseback arrangements on equipment to generate working capital before values drop further.

The 90-Day Reckoning: From November 12 market shock through February 10, every day counts. The red danger zone shows when critical decisions must occur. Operations that delay past December 15 face compromised options by January spring flush. Historical dairy downturns show: decisive action in days 1-90 determines survival probability. The clock started November 12.

The Bottom Line

You know, I’ve been through the 2009 crisis, the 2015-2016 downturn, and 2020’s volatility. What we’re seeing today isn’t just another cycle. Today’s 8-cent cheese collapse, combined with global oversupply data and production growth trends, confirms the U.S. dairy industry faces what could be a two-year margin squeeze.

Looking at the fundamentals—global markets oversupplied according to Rabobank’s latest dairy quarterly, domestic demand softening per USDA disappearance data, and production still growing at 3-4% annually—prices have further to fall before this corrects. The harsh reality, according to agricultural economists at several land-grant universities, is that we could see 5-10% of operations exit by the end of 2026.

Your December milk check has become more than a financial report—it’s a survival test. But here’s what’s encouraging from studying previous downturns: operations that adapt quickly, that make hard decisions now rather than hoping for recovery, those are the ones that emerge stronger. The question facing every producer tonight is simple but profound: will your operation be among the survivors?

What I’ve learned from 30 years of watching these cycles is that the difference between those who make it and those who don’t often comes down to acting decisively in moments like this. Tomorrow morning, when you’re doing chores, think about which camp you want to be in. Then act accordingly.

Key Takeaways

  • This isn’t a blip—it’s a reckoning: Today’s 8-cent cheese crash to $1.5525 with only one bid standing confirms we’re entering a 2-year margin squeeze. Class III hits $16.50 by January.
  • The world has turned against U.S. dairy: Europe’s 10 cents cheaper, Mexico’s pulling back, and our 4.2% production growth is flooding a shrinking market. Exports can’t save us this time.
  • Efficiency gaps will force consolidation: When Michigan averages 2,260 lbs/cow and you’re at 1,900, the math is fatal—every marginal cow costs you $15 daily at these prices.
  • Your banker already knows: Today’s CME report just flagged every dairy loan in America. Schedule that meeting now with realistic projections, not wishful thinking.
  • History’s lesson is clear: In 2009 and 2015, farms that acted decisively in the first 90 days survived. Those that waited for “normal” to return didn’t make it. Which will you be? 

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$850 Million Dairy Standoff: What U.S. and Canadian Farmers Need to Know Before July 2026

Canada won the trade panel. The U.S. has the sunset clause. July 2026 decides who blinks first in the $850M dairy standoff.

EXECUTIVE SUMMARY: Wisconsin dairy farmers are asking a simple question: Where’s the Canadian market access USMCA promised five years ago? The U.S. industry says Canada blocked $850 million in opportunities by allocating import quotas to processors who won’t use them, keeping fill rates at just 42%. Canada counters they’re following the rules—winning a November 2023 panel to prove it—and argues American dairy simply isn’t competitive in their market. With 1,420 U.S. farms closing last year while Canadian producers protect quota investments worth $30,000 per cow, both sides face existential stakes. July 2026 changes everything: the USMCA sunset clause means all three countries must actively agree to continue, or $780 billion in annual trade enters dangerous uncertainty. This analysis presents both perspectives fairly and provides specific strategies based on your farm size—because regardless of who “wins,” every North American dairy operation needs to prepare for what comes next.

USMCA dairy review

As we approach the July 2026 USMCA review, the U.S. dairy industry is building their case while Canada defends its position. Here’s what both sides are saying—and why it matters for dairy farmers across North America.

You know what’s interesting? When you talk to Wisconsin producers these days, there’s this deep frustration that just keeps coming up. Five years after the USMCA promised meaningful Canadian market access, they’re still waiting. And it’s not just Wisconsin—this sentiment’s spreading across the entire U.S. dairy belt, setting up what could be quite a showdown come July 2026.

So here’s what’s happening. The International Dairy Foods Association filed this formal complaint in October to the Trade Representative, and when you combine that with five years of trade data from both USDA and Canada’s Global Affairs department… well, the U.S. industry’s making a pretty specific case. They’re talking about roughly $850 million in export opportunities that haven’t materialized, all while 1,420 American dairy operations shut down last year, according to the USDA’s count.

But here’s the thing—and this is important—Canada sees this completely differently. They won that November 2023 dispute panel, and they’re saying they’re following the agreement just fine. Understanding both perspectives has become essential for anyone trying to make sense of what’s coming.

What the U.S. Industry Says Was Promised vs. What They Got

Let me walk you through the American dairy sector’s position. It starts with the International Trade Commission’s 2019 assessment, which projected we’d see about $227 million in additional annual exports under USMCA’s dairy provisions.

The way U.S. producers see it, they were expecting:

  • Access to 3.6% of Canada’s dairy market through 14 different quota categories
  • Complete elimination of those Class 6 and 7 pricing schemes within six months
  • Export caps keeping Canadian skim milk powder and milk protein concentrates at 35,000 metric tons annually
  • Import quotas going to actual importers, not Canadian processors

Now, according to Canada’s own Global Affairs data and those USMCA panel findings, what actually happened looks quite different.

What were the average quota fill rates from 2022 to 2023? Just 42% across all categories. Nine of those 14 categories never even hit 50% utilization. And that January 2022 USMCA panel—they found that Canada had allocated between 85% and 100% of its quota shares to Canadian processors. American farmers argue these processors have about as much incentive to import competing U.S. products as… well, let’s just say not much.

Here’s what really gets American producers going—this Class 7 pricing business. Sure, Canada technically eliminated it like they promised. But then—and the University of Wisconsin’s dairy economists have documented this—similar pricing dynamics popped up under Class 4a. The U.S. sees that as a way to get around its USMCA commitments.

“You get on a phone conversation with some of these folks that have been farming for five and six generations. How do you say I can’t help you? That becomes very tough.” – Bill Mullins, Mullins Cheese

Quick Reference: Understanding Key Trade Terms

TRQ (Tariff Rate Quota): Think of it as a two-tier system. A certain amount gets in at low or zero tariffs. Above that? You’re looking at 200-315% tariffs for Canadian dairy.

Supply Management: Canada’s comprehensive dairy system since 1972—combines production quotas, price supports, and import controls.

Class Pricing: Canada’s milk classification system that sets different prices based on how the milk’s used—and this is where things get contentious.

Why Canada Defends Supply Management So Fiercely

You know, when you really look at Canada’s dairy system, you start to understand why they’re so protective of it. Agricultural economists at Université Laval have documented how it works through three integrated pieces:

First, there’s production quotas that limit what each farmer can produce. Then you’ve got price supports keeping farmgate values at about 1.5 to 2 times what we see in the U.S. And finally, those import barriers—we’re talking 200% to 315% on anything over quota.

This whole framework’s supporting about 9,000 Canadian dairy operations that generate close to CA$20 billion in annual economic activity, according to Dairy Farmers of Canada’s latest report.

Mark Stephenson over at UW-Madison’s dairy policy program explains it well: “The fundamental incompatibility is that supply management requires import control to function. Asking Canada to provide meaningful market access is essentially asking them to dismantle the system piece by piece. From their perspective, that’s existential.”

And here’s something to consider—Canadian producers have invested around CA$30,000 per cow in quota value according to their provincial milk boards. That’s not just an operating expense. That’s retirement savings, succession planning, and their kids’ inheritance. No wonder they defend it so fiercely.

How American Farmers See the Economic Stakes

For U.S. producers, the Grassland Dairy situation from 2017 is still a really raw issue. It kind of exemplifies their broader concerns about Canadian trade practices.

When Canada introduced that Class 7 pricing targeting ultra-filtered milk, Grassland Dairy had to terminate contracts affecting about a million pounds of daily production across 75 Wisconsin farms. Bill Mullins from Mullins Cheese—he took on eight of those displaced operations even though his plants were already near capacity. His words still resonate.

Here’s what keeps U.S. producers up at night:

Wisconsin Center for Dairy Profitability data shows your average 200-cow operation generates about $87,000 in annual net income. If you lost $56,000 in potential export revenue—that’d be each farm’s theoretical share of that $850 million—you’re looking at a 64% income hit.

The numbers that really worry them:

  • Chapter 12 farm bankruptcies jumped 55% in 2024, hitting 259 filings
  • Wisconsin dairy operations averaged just $0.87 per hundredweight in net margins during 2023
  • At those margins, farms facing reduced market access could hit insolvency within 30 months

New York dairy producers have been pretty vocal about their frustration, arguing they’re seeking the market access they were promised, not handouts. One Cayuga County operator mentioned how expansion decisions are basically on hold until there’s clarity about Canadian market availability.

Canada’s Counter-Argument: Why They Say They’re Complying

Now here’s where it gets really interesting—Canada’s perspective on USMCA compliance is fundamentally different from the U.S.’s.

First off, Canada won that November 2023 USMCA dispute panel ruling. The panel found 2-1 that Canada’s revised allocation methods based on market share didn’t violate USMCA provisions. That’s a big deal—it validated Canada’s position that their implementation, while maybe not what the U.S. expected, technically complies with the agreement.

The way Canadian officials see it, several key points counter U.S. arguments:

On those low quota fill rates, they argue this reflects market conditions and U.S. producers’ inability to meet Canadian market requirements, not administrative barriers. They say importers are free to source from the U.S. if the products are competitive.

On processor allocations: Canada maintains that allocating quotas based on historical market activity is legitimate and non-discriminatory. It doesn’t explicitly exclude any type of importer.

On Bill C-202: Rather than overplaying their hand, Canada sees that June 2025 legislation—where 262 of 313 MPs voted to prohibit dairy concessions—as a democratic expression of national consensus. All parties supported it. From their perspective, that’s sovereign policy choice, not a negotiating tactic.

Dairy Farmers of Canada has consistently maintained that supply management represents more than just an economic system—they see it as ensuring food security and stable farm incomes across rural Canada. Pierre Lampron, who served as DFC president through 2024, expressed confidence at their annual meeting that the government understands this broader context.

Timeline: Key Dates Leading to July 2026 Review

January 2026: Monitor for ITC preliminary findings on protein dumping investigation

March 2026: ITC final report delivers—this could be game-changing evidence

May-June 2026: Industry positioning intensifies, Congressional pressure peaks

July 1, 2026: USMCA joint review—decision on extension or annual review mode

Here is the data from the image converted into a table:

Two Countries, Two Systems

AspectU.S. SystemCanadian System
Farm Closures (2024)1,420 operations (5% decline)Stable/protected
Quota Investment per Cow$0$30,000
Price StabilityVolatile (market-based)Guaranteed (1.5-2x U.S. prices)
Market Access BarriersNone domesticallyHigh tariffs (200-315%)
Export OpportunitiesGrowing but constrained by CanadaLimited by supply management

The Political Leverage Game for 2026

Both sides are positioning themselves for July 2026 with some distinct strategic advantages.

What the U.S. Industry Has Going For It

The timing of the ITC investigation is no accident. The International Trade Commission investigation into Canadian dairy protein dumping delivers findings in March 2026. That’s just four months before the review—giving U.S. negotiators the federal agency documentation they need right when they need it.

The sunset clause creates real pressure. USMCA requires all three countries to actively confirm they want to extend the agreement in July 2026. If they don’t, we’re looking at uncertainty over $780 billion in annual bilateral trade.

Congressional backing matters. Bipartisan pressure from dairy-state legislators provides the U.S. industry with political support to push enforcement demands.

Canada’s Strategic Position

Legal victories count. That November 2023 panel ruling provides Canada with legal cover for its current practices. They can say, “Look, we went through dispute settlement and won.”

Political unity is powerful. Bill C-202’s overwhelming parliamentary support shows that protecting supply management goes beyond party politics in Canada.

The broader relationship provides leverage. Canada can point to integrated North American supply chains—especially in automotive and energy—to resist dairy-specific pressure.

Three Scenarios and What They Mean for Different Farm Sizes

Supply management has survived 30+ years of trade fights. Betting the farm on a breakthrough? That’s a 30% probability play. Smart money plans for the 45% scenario: more paperwork, same barriers, modest improvements at best

Looking at how things are shaping up, here’s what seems most likely and what it means for your operation:

Scenario 1: More Incremental Changes (45% probability, if you ask me)

Canada agrees to better reporting and maybe some monitoring mechanisms, but keeps its fundamental allocation approaches. The U.S. claims progress, Canada keeps supply management intact. Quota fill rates? They probably stay about the same.

What this means by farm size:

Under 100 cows: Focus on local markets and direct sales. Canadian access won’t materialize in meaningful ways for you anyway. Consider value-added products where you control the whole chain.

100-500 cows: Keep flexibility for quick pivots. Maybe maintain current production, but don’t expand based on export hopes. Watch Southeast Asian opportunities instead.

500+ cows: You’ve got scale to weather this, but don’t count on Canadian markets in your five-year plans. Consider leading industry advocacy efforts—you’ve got the most to gain if something breaks loose.

Scenario 2: Real Enforcement Mechanisms (30% probability)

If those ITC findings are compelling and U.S. negotiators credibly threaten not to renew, Canada might accept automatic penalties for under-utilization or mandatory non-processor allocations. That could deliver partial yet meaningful improvements in access.

Preparation steps if this happens:

  • Get your export documentation systems ready now
  • Build relationships with potential Canadian buyers
  • Understand Canadian labeling and standards requirements
  • Consider partnerships with existing exporters to learn the ropes

Scenario 3: A Standoff (25% probability)

Neither side budges much. The agreement goes into annual review mode, creating ongoing uncertainty but avoiding immediate disruption. Both industries operate under this cloud of potential future changes.

Risk management if we hit a standoff:

  • Maximum Dairy Margin Coverage enrollment becomes essential
  • Lock in feed costs wherever possible
  • Diversify buyer relationships domestically
  • Don’t make major capital investments based on export assumptions

Who’s Pushing for What: The Players Making Things Happen

Let me tell you about the organizations driving this whole thing, because understanding who’s involved helps make sense of the dynamics.

On the U.S. side, you’ve got some heavy hitters:

The International Dairy Foods Association—they’re the ones who filed that October 2025 complaint. They represent processors, and they’re pushing hard for what they call an end to protectionist measures. They want binding enforcement, and they want it now.

National Milk Producers Federation lobbied hard for that ITC investigation. They’re your farmer cooperatives, and they keep hammering on automatic penalties for non-compliance. They’ve got members losing money, and they’re not shy about saying so.

The U.S. Dairy Export Council is more technical—they document barriers, provide negotiating support, and help with the nuts and bolts. Edge Dairy Farmer Cooperative represents those Midwest producers, and they’re great at putting farm-level impacts front and center.

On Canada’s side, it’s equally organized:

Dairy Farmers of Canada maintains they’re fully complying with USMCA. They’ve got a consistent message: supply management is legitimate policy, and they’re following the rules.

Les Producteurs de lait du Québec—now these folks have serious clout. They represent Quebec’s 4,877 dairy farms, and in Canadian federal elections, Quebec matters. A lot.

Provincial marketing boards coordinate the defense while implementing those quota allocation systems that the U.S. finds so frustrating.

Market Alternatives: What Some Smart Operators Are Doing

While this U.S.-Canada dispute dominates headlines, some American producers are zigging, while others are zagging. Take this example—a California operation recently told me they doubled their Vietnam exports in 18 months. “The middle class there is exploding,” they said. “They want quality dairy, and there’s no quota games to navigate.”

Industry data from USDEC backs this up—U.S. dairy exports to Vietnam and other Southeast Asian countries keep climbing year over year. Vietnam, Thailand, and the Philippines—they’re importing more dairy each year. No supply management system to work around. Just straightforward business based on quality and price.

You know what’s interesting about these markets? They’re growing fast enough that even mid-size operations can find niches. Specialty cheeses, high-quality milk powders, and even fluid milk in some cases. The logistics are getting better every year, too.

Seven months. Four critical milestones. $780 billion in annual trade hanging in the balance. This is how the March 2026 ITC report becomes the leverage point that forces Canada’s hand—or blows up USMCA

The Bottom Line: No Easy Resolution in Sight

That $850 million figure the U.S. dairy industry keeps citing? That’s their calculation of lost opportunities. Canada disputes both the number and the whole premise. Five years of USMCA implementation have revealed fundamental disagreements about what the agreement actually requires and what compliance entails.

Canada’s supply management system has survived more than 30 years of trade negotiations. Honestly? It’ll probably survive this challenge too. The question isn’t whether USMCA will fully open Canadian dairy markets—nobody really expects that. It’s whether the 2026 review might produce some incremental changes that partially address U.S. concerns while keeping Canada’s core system intact.

The way American producers see it, success means binding enforcement mechanisms with automatic penalties. The way Canada sees it, success is maintaining supply management’s essential structure while offering enough procedural adjustments to avoid a broader trade confrontation.

Come July 2026, we’ll see whether these positions can be reconciled—or whether North American dairy trade stays defined by promises unfulfilled and expectations unmet. Either way, it’s going to be interesting to watch. And whatever happens, we’ll all need to adapt our operations accordingly.

One thing’s for sure—whether you’re milking 50 cows or 5,000, whether you’re in Wisconsin or Quebec, this dispute affects the entire North American dairy landscape. Understanding both sides helps us all prepare for whatever comes next.

Resources for Following This Issue:

Trade Documentation:

Research Centers:

The Bullvine continues tracking developments from both perspectives as we approach the July 2026 USMCA review. For ongoing analysis, visit www.thebullvine.com.

KEY TAKEAWAYS

  • Both sides have valid arguments: U.S. proves Canada allocates 85% of quotas to processors who won’t import (42% fill rate); Canada’s November 2023 panel win says that’s technically legal
  • Real farms, real consequences: 1,420 U.S. operations closed waiting for promised access, while Canadian farmers defend $30,000/cow quota investments—everyone has skin in this game
  • July 2026 is unprecedented leverage: The sunset clause means all three countries must actively agree, or $780B in trade enters chaos—first time the U.S. can credibly threaten the whole relationship
  • History suggests incremental change: Supply management survived 30+ years of trade fights; expect minor adjustments, not market revolution
  • Your operation, your strategy: Under 100 cows = stay local; 100-500 = maintain flexibility; 500+ = lead advocacy while developing Asian markets where actual growth exists

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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The $380,000 Question: How Florida Dairy Farmers Beat 4 Hurricanes in 13 Months

Your dairy loses $13,400/month after a hurricane. Government aid takes 12 months. Do you have 6 months reserves? Because 30 days isn’t enough anymore.

Executive Summary: Four hurricanes in 13 months taught Florida dairy farmers what $500,000 buys: survival. The farms still standing had six months of cash reserves and could afford solar backup, hurricane-proof construction, and layered insurance—everyone else is bleeding $13,400 monthly or already gone. This exposed a brutal truth: mid-size family dairies can’t afford climate resilience but can’t compete without it. They face three stark options: scale up past 1,000 cows, find premium niche markets, or exit while there’s still equity to preserve. The math is unforgiving—strategic exit at month 8 saves families $380,000-$580,000 compared to forced liquidation at month 18. With government aid covering just 22% of losses and mutual aid networks exhausted, Florida’s experience reveals the future of farming: only operations with capital access survive repeated climate disasters.

Dairy Risk Management

You know that feeling when you walk through your barn after a storm and everything’s different? Jerry Dakin had that moment last year, standing in his Myakka City dairy farm looking at 250 dead cows scattered across his pastures after Hurricane Ian hit in September 2022. He’d spent decades building Dakin Dairy up to 3,100 head—good genetics, solid facilities, everything running like it should.

Here’s what nobody saw coming, though. Ian was just the start. We had Idalia, then Debby, then Helene, and finally Milton—all hitting through October 2024. Suddenly, resilience wasn’t just something we talked about over coffee at the co-op. It became what decided who’d still be milking come next season.

Four hurricanes. 13 months. $570 million in dairy losses. After Ian devastated the industry in 2022 ($500M), Florida farmers faced three more major storms in rapid succession—Idalia, Debby, Helene, and Milton—with as little as 1 month between impacts. When disasters strike faster than recovery cycles, only farms with deep capital reserves survive.

What’s really interesting—and this caught my attention when the November data came out from USDA—is that the Southeast actually lost fewer dairy herds than anywhere else in the country during all this. We’re talking 100 farms, compared to over 200 in other regions, according to Progressive Dairy. So what made the difference? The strategies that worked tell a story we all need to hear.

“The difference between making a strategic decision at month 8-10 versus being forced out at month 18? We’re talking $380,000 to $580,000 in what the family keeps.”

The math is brutal: Strategic exit at month 8-10 preserves $380k-$580k in family wealth, but waiting until forced liquidation at month 18 leaves farmers with nothing. Government aid arrives at month 12 but only covers 22% of losses—far too little, far too late.

The Real Timeline of Financial Recovery (It’s Not What You Think)

You know how we usually handle disasters? Fix what’s broken, get the power back on, clean up the mess, and move forward. But what I’ve learned talking to farmers who’ve been through this is that the real challenge isn’t the hurricane. It’s what happens to your cash flow over the next 18 months.

Take Philip Watts at Full Circle Dairy near Mayo. Hurricane Helene knocked down three-quarters of their free-stall barn and damaged 12 of their 16 pivots. Bad enough, right? But here’s what really hurt—their production dropped 10-15% and just stayed there for months. The Florida Department of Agriculture documented this in their October assessments. Average dairy was losing $13,400 a month in operational costs while waiting for help that… well, it takes time.

What I’ve found is there’s a pattern here that we need to understand…

The Numbers We Need to Talk About:

So government assistance—and I’m not pointing fingers, just stating facts—covered about 22% of actual losses. Commissioner Simpson announced those block grants in July 2025, totaling $675.9 million. Sounds like a lot until you realize the damage from four hurricanes topped $3 billion.

Meanwhile, working capital’s bleeding out at $13,400 a month for a mid-size operation. That’s based on what United Dairy Farmers of Florida found in a survey of its members early in 2024. Real money, real fast.

And here’s something agricultural economists have figured out—the difference between making a strategic decision at month 8-10 versus being forced out at month 18? We’re talking $380,000 to $580,000 in what the family keeps. That’s college funds, retirement, the next generation’s chance to start over.

Johan Heijkoop put it pretty bluntly after Idalia hit his two Lafayette County farms: “We don’t have a year to get help from this. We need action. We need it immediately.” A month after that storm, he still had eight burn piles going. His cows? Still way off their normal production.

Financial analysis backs this up—operations with minimal reserves face insolvency within 12-18 months after major disasters. The farms with 6-12 months of operating reserves? They made it. Those running on the traditional 30-60-day cushion —we’ve always thought was fine? Different story.

What’s Actually Working Out There (Real Farms, Real Solutions)

Let me share what farmers are actually doing—not what some manual says they should do, but what’s happening on real operations right now.

Getting Off the Grid (At Least Partially)

Here’s something that got everyone talking. Duke Energy’s Lake Placid solar farm took a direct hit from an EF2 tornado during Hurricane Milton. Four days later, it’s back online. Four days! That changed how a lot of us think about solar.

What’s encouraging is that farms are putting together complete systems now. We’re seeing 50-100kW solar arrays handling daytime loads—critical for cooling in Florida’s heat. Battery storage in the 100-200kWh range keeps the parlor running at night, keeps those bulk tanks cold. And yeah, you still need standby generators with at least 2 weeks of fuel. USDA’s hurricane guide got that part right.

Climate resilience costs $500,000 upfront. Solar systems, hurricane-proof barns, layered insurance, 6-month feed reserves—this is the price of survival. Mid-size dairies grossing $900k/year with 6% margins can’t swing it. Only operations over 1,000 cows have the scale to afford what climate change now demands.

The investment? You’re looking at $150,000 to $200,000 for a mid-size place. I know, I know—that’s serious money. But REAP program data shows you’re getting that back in 6-8 years just on electricity savings. And when the next storm knocks the grid out for a week? Priceless.

Building Different (Because We Have To)

The Watts family—they zip-tied 900 fans before Helene hit. That’s dedication. But when they rebuilt that barn, they did it right.

Florida’s 2023 building code—the 8th edition for those keeping track—changed the game. We’re talking 140+ mph wind ratings now. Hurricane clips on every truss. Electrical panels must be at least 3 feet above flood stage. And those pivots? Quick-disconnects that cut removal time from two hours to maybe 20 minutes.

Some of my friends up in Wisconsin think this is overkill. Then again, they’re not dealing with Category 4 storms.

Here’s why dairy farmers are bleeding out: Traditional insurance covers 86% of infrastructure damage but only 10% of lost production over 18 months—the single largest cost at $241k. Government aid? 22% of total losses, arriving 12 months late. Farmers are left holding 78% of disaster costs with no safety net.

Insurance That Actually Works

With Risk Management Agency data showing that 53% of ag damage falls outside traditional coverage, Florida producers got creative. Had to.

Ray Hodge over at United Dairy Farmers walked me through what’s working. You layer it up: Whole Farm Revenue Protection at that new 90% level (used to be 85%). Dairy Margin Coverage at $9.50—it’s triggered payments 57% of the time over the last few years. Hurricane wind index insurance that pays automatically when winds hit certain speeds—no waiting for adjusters. And business interruption coverage for lost income during recovery.

A producer near Okeechobee said it best: “Building $300,000 in diversified revenue protection beats hoping for $25 milk.” Can’t argue with that.

Quick Reference: Insurance Layering Strategy

  • Base Layer: Whole Farm Revenue Protection (90% coverage)
  • Margin Protection: Dairy Margin Coverage ($9.50/cwt level)
  • Catastrophic Coverage: Hurricane Insurance Protection-Wind Index
  • Income Protection: Business Interruption Insurance
  • Combined Result: Closes most of the 53% coverage gap

When Everyone Needs Help at the Same Time

You probably heard about Willis Martin bringing 40 Mennonite volunteers down from Pennsylvania to rebuild Jerry Dakin’s barns after Ian. One week, they got it done. Over 100 locals showed up too—clearing debris, helping with vet work, keeping those cows milked. Dakin’s café became the community hub. It was something to see.

But by the time Milton hit—that’s the fourth major storm in thirteen months—everybody was exhausted. You could feel it.

How Things Are Changing:

What I’m seeing now is farms getting formal about what used to be handshake deals. Equipment sharing with actual legal agreements. Labor exchanges spelled out—who helps who, when, for how long. Feed purchasing co-ops with locked-in emergency prices so nobody gets gouged when disaster hits. Even evacuation partnerships with farms in Georgia and Alabama, complete with health papers ready to go.

Sara Weldon’s story from her Clermont farm during Milton really stuck with me. She spent three days prepping—brought the donkeys and goats in the house (yeah, in the house), turned the bigger animals loose in back pastures, and stockpiled everything. All her animals made it. But you could hear it in her voice afterward—the exhaustion from going through this again and again.

Florida Farm Bureau’s February 2025 mental health report hit hard: 67% of farmers reporting depression, 9% having suicidal thoughts. These are the people who make mutual aid work, and they’re running on empty.

The Hard Truth About Scale

So here’s where it gets uncomfortable. All these solutions that work—solar systems, hurricane-proof barns, feed reserves, comprehensive insurance—you’re talking about $500,000 upfront for a mid-size dairy. That’s the reality.

Jerry Dakin with 3,100 cows and $8-10 million in revenue? Plus on-farm processing? He can probably swing it. But that 300-cow family operation grossing $900,000, maybe netting $50,000-$80,000 in a good year? The math doesn’t work, and pretending it does doesn’t help anybody.

The brutal economics of climate change: Mid-size dairies with $900k revenue and 6% margins earn $54k/year—nowhere near the $500k needed for climate resilience. Meanwhile, mega-dairies with 2,500+ cows gross $25M with 15% margins. Consolidation isn’t a trend—it’s climate-driven selection pressure.

Three Ways This Is Playing Out:

Based on what Cornell’s been documenting the last few years, here’s what’s happening:

Getting Bigger (1,000+ cows): When you spread that $500,000 investment over enough production, the per-hundredweight cost becomes manageable. Plus—and we need to be honest here—these are the operations processors want to work with.

Finding Your Niche (<200 cows): Organic’s working for some folks—USDA data confirms those 50-75% premiumsare real. Grass-fed, direct sales, agritourism. But you need the right location. Affluent customers nearby. Rural Okeechobee doesn’t have that market.

Making the Hard Decision: Some are choosing to exit while they still have equity. It’s not giving up—it’s protecting what the family’s built over generations.

What doesn’t work? Trying to stay mid-size without access to capital. We lost 1,420 dairy farms in 2024—about 5% of what’s left. At this rate, projections suggest we’ll be down to 12,000 operations by 2035. That’s a conversation we need to have.

What’s interesting here is how this mirrors what’s happening in Texas coastal dairy regions. After Hurricane Harvey in 2017, they saw similar consolidation patterns—the operations that could afford flood mitigation survived, the rest didn’t. It’s not just a Florida story anymore.

The Part Nobody Talks About

Behind every spreadsheet, a farmer is asking themselves: “If I’m not doing this, who am I?”

Dr. Rebecca Purc-Stephenson, up at the University of Alberta, studies this stuff. She explained it to me once—farming isn’t a job, it’s your whole life. Your identity. Hard to separate who you are from what you do.

For families that have been farming for generations—and that’s most of Florida dairy—it’s even harder. Your grandfather made it through the Depression. Your dad survived the ’80s farm crisis. Now you might be the one who has to walk away because of hurricanes? Even when it’s not your fault, that leaves marks.

One Florida farmer—he asked me not to use his name—described the stages. First, you deny it’s that bad. Then you’re confused when routines disappear. Angry at banks, government, anybody who can’t help fast enough. Guilty about what you should’ve done different. And sometimes, depression that gets dangerous.

“When those cows are gone and everything stops,” he said, “it feels like someone in the family died.” But asking for help? That goes against everything we’ve been taught about being self-reliant. It’s a trap where the folks who need help most are least likely to ask for it.

What the Rest of Us Can Learn

After spending time with these Florida farmers, three big lessons stand out:

First: Financial Resilience Is Everything

Build 6-12 months of operating capital. I know that’s way more than the 30-60 days we’ve always managed on, but it matters. Layer your insurance to close gaps—and actually read those policies. Set up credit lines with disaster triggers before you need them. And decide your exit criteria now, while you’re thinking clearly.

Second: Formalize Your Networks Before Crisis

Get agreements in writing—handshakes don’t hold up under this kind of stress. Fund coordinator positions to prevent volunteers from burning out. Build relationships with farms in different climate zones. And integrate mental health support before people need it—because by then, it’s often too late.

Third: Accept That Some Things Can’t Be Fixed

Sometimes a region’s climate changes beyond what certain types of farming can handle. Better to choose proactively between scaling up, finding a niche, or transitioning than to have the market force it on you. Push for policies that help all farm sizes, not just the biggest. And consider that a managed transition might beat chaotic collapse.

Where We Go from Here

The numbers don’t lie: 16,103 dairy farms vanished between 2017-2024 (a 41% decline) while farms with 1,000+ cows captured an ever-larger share of milk production—now 72% of the U.S. total. Climate disasters are accelerating what economics started. By 2030, projections suggest just 15,000 farms will remain, with mega-dairies controlling 80% of production.

What Florida dairy farmers learned the hard way is that climate patterns are changing faster than we can adapt to them. Four hurricanes in thirteen months isn’t bad luck—NOAA’s 2024 reports make it clear this is the new pattern.

The farms surviving aren’t always the best managed or the ones with the strongest communities—though both matter. More and more, they’re the ones with capital access and enough scale to justify big infrastructure investments. That’s accelerating consolidation, whether we like it or not.

But here’s what gives me hope: Florida farmers have innovated like crazy. Solar systems that keep operations running when the grid fails. Formal mutual aid replacing informal arrangements. Risk management strategies that actually work. These are blueprints other regions can use.

Commissioner Simpson got it right, talking to the Cattlemen’s Association: “Food production is not just an economic issue, it’s a matter of national security.” The question is: will we learn from Florida’s experience, or wait for our own disasters to teach us the same lessons?

What You Can Do Right Now

If you’re farming today: Check your working capital. Less than six months? Building reserves beats any expansion plan. Review every insurance policy for gaps—especially business interruption and parametric products. Get your mutual aid relationships on paper. Define your triggers: What would make you exit? What would force it?

Planning ahead: Figure out if your operation size sets you up for long-term success. Look at cooperative approaches to share infrastructure costs. Build relationships outside your climate zone. And consider revenue beyond just milk—diversification is adaptation, not defeat.

Long-term thinking: Accept that some regions might not support certain farming anymore. Understand that resilience might mean transition, not staying put forever. Know that climate adaptation favors bigger, better-funded operations. Plan for weather volatility as the new normal.

Florida’s dairy farmers deserve more than just credit for resilience. Through incredible hardship, they’ve given the rest of us a real education in what climate adaptation actually costs—in dollars and in human terms.

We can learn from what they’ve been through, or we can learn it the hard way ourselves. Unlike the weather, at least that choice is still ours to make.

Key Takeaways: 

  • Your survival number is 6-12 months reserves, not 30-60 days: Florida farms with deep reserves weathered $13,400 monthly losses for 18 months. Everyone else is gone.
  • Climate resilience costs $500K (solar, construction, insurance): Operations that can’t afford it have three options—scale up past 1,000 cows, find premium niches under 200 cows, or exit now.
  • The $380,000 decision window: Exit strategically at month 8-10 and preserve family wealth, or watch it evaporate by month 18 in forced liquidation.
  • Mutual aid has limits—formalize before you need it: After four hurricanes, volunteer networks are exhausted, and 67% of farmers report depression. Written agreements and funded coordinators beat handshakes.
  • Florida’s present is agriculture’s future: Every region facing climate intensification will see this same pattern—only capitalized operations survive repeated disasters.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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Dairy’s $4,000 Heifer Shock: How 30-Month Biology Determines 2027’s Winners

One decision in 2022 split dairy into winners and losers. The 30-month biology clock just rang. Which side are you on?

Executive Summary: The U.S. dairy industry faces a 47-year low in replacement heifers (3.914 million head), with bred springers commanding $4,500—a crisis born from 72% of farms choosing beef-on-dairy breeding to survive 2022-2023’s brutal economics. Biology’s inflexible 30-month timeline means the survival decisions made today are creating today’s shortage, splitting the industry into clear winners and losers. Pennsylvania’s 30,000-heifer advantage translates to $120 million in strategic value, while Kansas farms missing 35,000 head scramble for replacements they can’t afford. By 2030, the industry consolidates from 26,000 to 21,000 operations, with only three paths forward: mega-dairies capturing scale, niche operations commanding premiums, or mid-size farms securing processor relationships. Operations needing over $350,000 for replacements face immediate strategic decisions—breeding choices made today determine 2028 survival.

dairy replacement heifer shortage

The dairy industry is facing a structural shift not seen since 1978. The USDA’s January inventory shows we’re down to just 3.914 million replacement heifers—that’s the lowest in 47 years. Quality bred springers are commanding $3,200 to $4,500 at auctions at auctions from Lancaster to Tulare, it’s clear this isn’t your typical market cycle that’ll sort itself out.

Here’s what’s really interesting… this whole situation stems from decisions most of us made during that brutal stretch in 2022-2023, when we were just trying to survive. The National Association of Animal Breeders—that’s NAAB for those keeping track—shows about 72% of dairy farms shifted to beef-on-dairy breeding back then, and honestly, it made perfect sense at the time. But those decisions locked us into a biological timeline—that 30-month cycle from breeding decision to fresh heifer—that no amount of money or technology can speed up. The operations that understood this reality early? They’re positioned to dominate the next decade. Those who focused on quarterly cash flow are… well, they’re having some really tough conversations right now.

Heifer prices have rocketed by 295% since 2019, topping out at $4,500 in 2025—a momentum shift so powerful, it’s redrawing farm budgets and the survival map for U.S. dairies.

How Survival Economics Created Today’s Crisis

Let me take you back to what we were all dealing with in 2022-2023. Wisconsin’s All-Milk price had crashed to $17.40 per hundredweight by July 2023, while corn was hitting $6.50 per bushel and soybean meal was pushing $480-500 per ton on the CME. I mean, those were brutal numbers for anyone trying to keep the doors open.

So beef-on-dairy breeding became this lifeline, right? NAAB’s data shows crossbred calves were bringing $1,000 to $1,200 during that stretch, compared to maybe $300-500 for straight Holstein bulls. Do the math on a thousand-cow operation—that’s easily $100,000 to $140,000 in extra revenue. For many of us, that was literally the difference between staying in business and bankruptcy.

What really tells the story is how fast this shift happened. NAAB’s quarterly reports show beef semen sales to dairy farms jumping from 5 million units in 2020 to 7.9 million units in 2024—that’s a 58% increase. By last year, about 84% of all beef semen sold in America was going to dairy operations, with roughly 72% of farms using it in their programs.

Michigan producers, for example, report spending $2,100 to $2,200 to raise a heifer from birth to fresh, but market values had dropped to around $1,200. So they’re losing a grand on every heifer raised, while beef-cross calves are generating $900 to $1,000 at just 10 days old. What would you have done?

But here’s the thing—and I think we all knew this intellectually but didn’t fully appreciate it at the time—biology doesn’t care about our quarterly financial statements. Those breeding decisions from 2022? They don’t produce replacement heifers until 2025-2026. That 30-month timeline from breeding to fresh heifer… you can’t compress it, no matter how desperate things get.

The dairy supply crisis explained in one frame: a 47-year low in heifer numbers collides with record price inflation—squeezing mid-size farm margins from both sides.

Regional Winners and Those Facing Challenges

What’s fascinating is how differently this is playing out across regions. The strategic decisions folks made between 2019 and 2023 essentially determined who’s thriving now and who’s struggling.

Pennsylvania’s Strategic Windfall

Pennsylvania really caught everyone by surprise, didn’t they? The USDA’s January inventory shows they added 30,000 replacement heifers—that’s a 15% increase—while keeping cow numbers fundamentally flat. At current prices, we’re talking $90 to $120 million in strategic inventory advantage for the state.

I’ve been following what’s happening with custom heifer raisers around Lancaster County. Operations running 300-500 head are seeing some remarkable economics. Penn State Extension’s surveys, led by dairy specialist Rob Goodling, are documenting profits of $550 to $726 per contracted heifer, with spot-market opportunities ranging from $1,076 to $1,276 per head.

One operator told me recently, “I’m getting $2,850 per head delivered on my contracts. Sure, spot market might bring $3,200 to $3,400, but contracts give me certainty.” Then he mentioned—and this really shows how wild demand has gotten—”Texas operations are calling, offering $4,200 per head plus $380 trucking for bred springers I can deliver in March.” Never seen anything like it.

Kansas’s Processing Capacity Dilemma

Now, Kansas… that’s a whole different story. They lost 35,000 dairy replacement heifers, according to USDA reports—the largest single-state decline. And this is happening right when they’re part of that massive $10-11 billion wave of national dairy processing investments. Talk about bad timing.

Betty Berning, senior analyst at Daily Dairy Report, pointed this out back in March, and it really stuck with me. Kansas added just 3,000 cows in 2023, despite all these new cheese plants needing millions of pounds of milk daily. The arithmetic just doesn’t work for filling that new processing capacity.

I’ve been talking with producers running 800-900 cow operations out there, and the math they’re facing is tough. Say you need 280 fresh heifers in 2026 to maintain herd size, but your internal pipeline only produces 150. That means buying 130 head externally at an average of $3,500—we’re talking $455,000 in capital requirements. When you’re already sitting at 43-44% debt-to-equity? Your banker’s going to have concerns, and honestly, they should.

The Upper Midwest’s Balanced Approach

What’s encouraging is seeing what Wisconsin, Minnesota, and South Dakota managed to do. They collectively acquired 20,000 replacement heifers, according to state reports, by maintaining strategic breeding programs even when the economics looked terrible.

Curtis Gerrits, senior dairy lending specialist at Compeer Financial, said something recently that captures it well: processors in their region work with farmers who consistently deliver high-quality milk, and those relationships include about $0.85 per hundredweight in quality premiums for consistent volume and good components. That’s enough to make a real difference.

A few things these states had going for them:

  • Those processor relationships with meaningful premiums for consistency
  • Custom heifer-raising infrastructure that survived the downturn
  • Smart breeding programs—using maybe 40-50% beef semen while keeping replacement pipelines intact
  • And this matters—lower HPAI exposure compared to what California and Idaho dealt with

It’s worth noting what’s happening globally, too. New Zealand’s production is running about 3% ahead of last season, and Europe’s recovery is underway despite its bluetongue challenges. That means U.S. processors facing domestic supply constraints have import options, which affects everyone’s pricing dynamics. But imports can’t fully replace local supply relationships—especially for specialized dairy farm survival strategies that depend on regional processor partnerships.

Strategic decisions made in 2019-2023 have created stark regional winners and losers: Pennsylvania’s 30,000-heifer surplus translates to $90-120M in market advantage, while Kansas faces a 35,000-heifer deficit that threatens its ability to supply $11 billion in new processing capacity

Where This Industry’s Heading by 2030

Looking at projections from the USDA Economic Research Service and groups like the IFCN Dairy Research Network, we’re likely to see 21,000 to 24,000 total dairy operations by 2030. That’s down from about 26,000 to 27,000 today. But it’s not just simple consolidation—it’s a complete restructuring of how the industry works.

The Large-Scale Reality (3,500- 10,000+ cows)

We’ll probably see about 2,500 to 3,000 of these mega-operations producing 80% of the national milk supply. Wisconsin’s dairy farm business summaries show these folks are achieving production costs around $14.20 to $15.80 per hundredweight through their operational efficiencies. Pretty impressive.

A surprising and significant factor is that many are also generating $800,000 to $1.8 million annually from renewable energy credits. The California Air Resources Board data on this is eye-opening. These operations can afford to pay $4,200 for a replacement heifer because their scale and contracts support it.

The Premium Niche Path (40-150 cows)

I’m seeing maybe 12,000 to 15,000 smaller operations finding real success through differentiated marketing. They’re capturing $35 to $50 per hundredweight through direct sales—compare that to the $21 or so we see in Federal Order commodity markets. That’s a completely different business model.

Vermont’s organic dairy studies show these operations can generate $220,000 to $650,000 in family income with minimal debt. Sure, marketing takes up 25-35% of their time, but if you’re near Burlington or Boston, where consumers value what you’re doing? It works.

The Challenging Middle (200-800 cows)

This is where it gets tough—maybe 6,000 to 9,000 operations producing 8-12% of milk supply. Too big for farmers markets, too small for those mega-dairy efficiencies. The ones making it work either have strong processor relationships with meaningful premiums, specialized markets like A2 or grass-fed, or they’ve diversified into custom heifer raising themselves.

What We Can Learn from Those Who Saw This Coming

I’ve spent a lot of time trying to understand what separated operations that maintained replacement programs through the tough years from those that didn’t. A few patterns keep showing up.

They Thought in Biological Timelines, Not Quarters

Take Kress-Hill Dairy in Wisconsin. Nick Kress and Amanda Knoener kept investing in registered genetics when beef premiums peaked. Holstein Association records show they’ve now got 18 Excellent and 99 Very Good cows. That’s serious genetic value in today’s market.

They Protected Their Pipeline

Rose Gate Dairy up in British Columbia does something interesting—they wait until cows are 40-60 days fresh before making culling decisions. This ensures they don’t short themselves on replacements. While neighbors were chasing every beef premium, they kept asking, “What’s our 2025 pipeline look like?”

They Invested Before the Crisis Hit

The Moes family at MoDak Dairy in South Dakota—130 years of continuous operation, which tells you something—manages all heifers on-site in well-designed facilities. They balance current technology with proven practices rather than jumping on every trend. Smart approach.

They Did the Multi-Lactation Math

Penn State’s data shows home-raised feed costs account for about 42% of total heifer expenses—roughly $893 out of $2,124. Operations with good crop-to-cow ratios who maintained this advantage? They’re consistently among the most profitable farms in their regions.

They Ran Complete Scenarios

There’s research in the Journal of Dairy Science that followed 29 farms for 5 years. Producers making optimal replacement decisions generated about $175 more monthly than those making suboptimal choices. The successful folks all ran scenarios like: “If heifers hit $3,500 and we need 150, can we actually finance $525,000?”

Cost ComponentCost per Heifer% of TotalKey Notes
Opportunity Cost (calf not sold)$1,74260%Record calf prices inflate this
Labor (23.5/hr)$2619%Avg dairy wage rates
Feed & Nutrition$1746%Lower grain costs 2025
Veterinary & Health$1164%Vaccine price increases
Machinery & Equipment$1746%Depreciation included
Land & Housing$1455%Opportunity cost of land
Other (fuel, utilities, etc)$29210%Building maintenance, etc
TOTAL – Home Raised$2,904100%Adjusted for 10% open rate
Market Purchase Price – 2025$4,200Peak auction prices
SAVINGS BY RAISING$1,29654% cheaperIF you can manage costs

Why Technology Can’t Fix This Fast Enough

A lot of folks are hoping that sexed semen can solve the replacement shortage. I get it—the technology’s improved tremendously. But when you look at the reality…

University of Florida and Wisconsin research consistently shows conventional semen gets you 58-65% conception rates on heifers. Sexed semen? You’re looking at 45-55%. That changes your cost per pregnancy from about $42 to $90. That’s real money when you’re breeding hundreds of animals.

But here’s the bigger issue with timing. Even if you started today with perfect execution, those pregnancies give you calves in August-September 2026. Those calves won’t freshen until February-March 2029. Operations need replacements in early 2026. Biology has its own schedule, and it doesn’t negotiate.

Plus—and people often forget this—effective sexed semen programs need serious infrastructure. Extension estimates suggest $30,000 to $72,500 for detection systems, training, and facility upgrades. Operations already at 43-44% debt-to-equity? That capital just isn’t available.

Looking ahead, emerging technologies might help—gene-editing approvals could accelerate genetic progress, and automation might reduce labor constraints—but these are 5-10-year developments, not 2-year solutions.

Your Strategic Framework for Current Conditions

So where does this leave us? Here’s what I’ve been telling folks who ask about navigating this situation.

First, Get Real About Your Pipeline

Calculate what you actually need for 2026-2027. Compare what you can raise internally versus what you’ll need to buy. Model it at $3,500-$4,500 per head. If you’re looking to make purchases of more than $350,000—essentially 100+ animals—you need to rethink your breeding strategy immediately.

Second, Understand Your Regional Position

Growth regions like Wisconsin, South Dakota, Michigan, and even parts of Texas? You can position for expansion. Contraction regions—thinking of parts of California, the Southwest, and the Southeast—might benefit from planned consolidation. Transition regions like Kansas and Idaho? You either need rock-solid processor relationships or… well, you need to consider alternatives.

Third, Pick Your Path

Can you reach 3,500+ cows while keeping manageable debt? That’s one path. Are you near a city with direct marketing skills? That’s another. Stuck in the middle at 200-800 cows? You need processor premiums or specialized markets to make it work.

Fourth, Run the Financial Reality Check

Calculate your debt service coverage ratios using current replacement costs. Test scenarios cost between $17 and $21 with milk. If your DSCR drops below 1.25, you need contingency plans now, not next year.

If you’re in that tough spot, remember there’s help available. USDA’s Farm Service Agency has restructuring programs, many Extension offices offer confidential financial counseling, and Farm Credit counselors understand these specific pressures. You don’t have to navigate this alone.

Fifth, Think Biology, Not Just Finance

Every breeding decision today affects 2028-2029 replacement availability. Infrastructure investments typically need 3-5 year paybacks. And processors remember who delivered consistent volume through the tough times.

Quick Reference: Critical Thresholds

Current Replacement Costs (November 2025):

  • Pennsylvania/Northeast: $3,200-$3,800
  • Wisconsin/Upper Midwest: $3,000-$3,500
  • California/West: $3,500-$4,000
  • Texas (importing): $4,200 plus $380 trucking

The Biological Timeline (It Doesn’t Negotiate):

  • Breeding to birth: 9 months
  • Birth to breeding age: 13-15 months
  • Breeding to fresh: 9 months
  • Total: 31-33 months if everything goes perfectly

Financial Warning Signs:

  • Debt-to-equity over 50%? That’s concerning
  • DSCR below 1.25? Most lenders get nervous
  • Need over $350,000 for replacements? Time for strategic changes

The Bottom Line as I See It

After watching this unfold and talking with producers across the country, a few things are crystal clear.

These replacement costs—$3,000 to $4,500 per head—aren’t a temporary spike. CoBank’s modeling and what we’re seeing at auctions suggest this is the new baseline through at least 2027. Plan accordingly.

Regional advantages compound fast. Pennsylvania is sitting on 30,000 extra heifers? That’s a real competitive advantage. Kansas is missing 35,000? That’s an existential challenge, even with all that processing investment.

Three models will dominate by 2030: mega-dairies with scale efficiencies, premium niche operations with loyal customers, and mid-size survivors who found their special angle. Everything else faces increasing pressure.

For new folks wanting in? Cornell and Penn State studies show you need a minimum of $2.83 million to $4.875 million for a conventional startup. The next generation enters through inheritance, processor partnerships, or niche markets. Traditional bootstrap dairy farming? That door’s fundamentally closed.

And this is the key difference—biology beats finance every time. Operations that recognized those 30-month timelines positioned themselves well. Those who optimized for quarterly cash? They’re having much harder conversations right now.

What really separates winners from those struggling isn’t access to better information. It’s having better frameworks for using that information. Successful operations asked, “What’s 2027 look like?” while others asked, “How do I maximize this quarter?”

That difference—thinking in biological timelines versus financial quarters—determines who captures supply premiums through 2030 and who’s evaluating exit strategies.

This transformation is permanent. The industry structure emerging from this will define American dairy through 2035. Each of us needs to figure out where we fit in that structure, because the decisions we make today determine what opportunities we have tomorrow.

And remember, this industry has weathered tough cycles before. Those who adapt, who think strategically, who understand both the biological and economic realities—they’ll find their way through. The dairy industry needs milk, processors need suppliers, and consumers still want dairy products. The question isn’t whether there’s a future in dairy—it’s what that future looks like and who’s positioned to capture it.

Key Takeaways:

  • The $350,000 test: If you need 100+ replacement heifers, you’re facing $350,000-$450,000 in capital needs—breeding strategy must change immediately, or consider consolidation options
  • 30-month reality: Biology doesn’t negotiate—decisions made in 2022 determine 2025-2026 heifer availability, and today’s breeding choices lock in 2028-2029 survival
  • Regional winners declared: Pennsylvania’s 30,000-heifer surplus commands market premiums while Kansas’s 35,000-heifer deficit threatens processor contracts despite billions in new capacity
  • Three paths forward: By 2030, only mega-dairies (3,500+ cows with scale), niche operations ($35-50/cwt premiums), or mid-size farms with processor relationships will survive
  • Think biology, not quarterly profits: Operations that preserved replacement pipelines during 2022’s cash crunch now name their price; those that maximized short-term revenue face existential decisions

Editor’s Note: This analysis examines the dairy replacement heifer crisis as of November 2025, drawing on the latest USDA inventory data, market reports, and industry projections through 2030.

Learn More:

  • Are You Raising Too Many Heifers? – This practical guide provides a framework for “right-sizing” your replacement program. It offers tactical methods for calculating your true heifer needs to optimize cash flow and avoid future inventory crises.
  • Beef on Dairy: The Pendulum Has Swung Too Far – This strategic analysis dives deeper into the beef-on-dairy trend that caused the current shortage. It examines the market volatility and long-term economic consequences, reinforcing the main article’s “biology vs. finance” thesis.
  • Sexed Semen: “Am I Doing This Right?” – While the main article notes technology isn’t a quick fix, this piece explores the correct implementation. It provides innovative strategies for using sexed semen effectively to maximize conception rates and accelerate genetic gain.

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This Isn’t Your Normal Dairy Downturn – Here’s Your 60-Day Action Plan

What current structural changes mean for dairy operations, plus proven strategies successful producers are using right now

EXECUTIVE SUMMARY: Wisconsin dairyman, 10:30 PM, spreadsheet still open: ‘These numbers can’t be right.’ They were. Five permanent shifts are reshaping dairy: China’s 36% import cut (they’re self-sufficient), $8 billion in plants needing milk regardless of demand, aging populations abandoning fluid milk, currency math you can’t beat, and $4,000 springers versus $2,800 cull cows. But here’s what’s working: organic premiums at $32/cwt, three-family partnerships each clearing $200K+, and component focus adding $820K yearly without expansion. The math is brutal but clear—if you’re within $2/cwt of breakeven, optimize hard. If you’re $3-5 away, something fundamental must change. Beyond $5? Every 60 days of waiting costs you serious equity. This weekend, run your real numbers and make the call.

Dairy Action Plan

Here’s something that stopped me cold last week. A Wisconsin dairyman called at 10:30 PM, spreadsheet still open on his computer. “I’ve run these numbers twelve different ways,” he said, managing 450 cows like his family has for generations. “They keep telling me the same thing, and I don’t like what I’m hearing.”

You know what? He’s not alone. I’ve had variations of that conversation with producers from Tulare to Lancaster County these past few weeks. Even down in Georgia and the Carolinas, where heat stress adds another layer of complexity, folks are wrestling with the same fundamental questions.

The latest FAO Dairy Price Index dropped again, for the fourth month straight, down 3.4% in October to 142.2 points. And the Global Dairy Trade auction keeps sliding, too. Six consecutive drops through November 4th. Whole milk powder’s sitting at $3,503 per tonne. Butter’s off 4.3%. Even cheddar dropped 6.6%, which caught a lot of us off guard.

But what’s really got me thinking is how different this feels from 2009, different from 2015. After talking with producers, looking at what’s happening globally, and honestly, lying awake at night thinking about my own operation, I’m convinced we’re seeing something more fundamental than just another price cycle.

China’s Not Coming Back (And We Built Everything Assuming They Would)

China’s self-sufficiency surge eliminated 36% of milk powder imports in just 5 years, wiping out demand that American dairy expansion plans were built around

So let’s have the conversation nobody wants to have. Remember five years ago when every dairy meeting, every expansion plan, every processing investment was built around Chinese import growth? Made sense at the time, right?

Well, here’s where we are now. China’s domestic production increased by 11 million metric tons between 2018 and 2023—that’s according to USDA’s latest Foreign Agricultural Service data. They’re hitting 85% self-sufficiency now. Up from 70% just five years back.

And their whole milk powder imports? Down from averaging 670,000 metric tons during 2018-2022 to about 430,000 tons in 2023. That’s not a blip, folks. That’s a 36% structural change that Rabobank and other analysts are calling permanent.

I’ve been talking with producers who built their entire business models around Chinese demand. One guy told me, “We retooled everything—bred for higher components, invested in new equipment, built our five-year plan around powder exports. Now what?”

What makes it worse—and I don’t think many people are connecting these dots yet—is the demographics. China’s birth rate fell from 12.43 per thousand in 2017 to 6.39 in 2023. That’s their National Bureau of Statistics, not speculation. Fewer babies means less formula. Aging population means less fluid milk, more medical nutrition products. It’s a completely different market.

These New Plants Need Milk, Whether the Market Wants It or Not

With $8-11 billion in new processing capacity carrying $24-30M annual fixed costs per plant, processors will pay premium prices to hit 85-90% utilization rather than explain idle capacity to their boards

Now, let’s talk about something that’s creating real pressure right now. Between 2023 and 2027, our industry’s building $8-11 billion in new processing capacity. I’ve walked through some of these facilities. They’re incredible. Leprino’s billion-dollar cheese plant in East Lubbock. Fairlife’s $650 million facility in Rochester. Great Lakes Cheese is putting over half a billion into Franklinville, New York.

What’s crucial here—and this is what keeps plant managers up at night—is that these facilities need to run at 85-90% capacity just to break even. CoBank’s analysis shows that clearly. Drop below 75%? You’re hemorrhaging money.

Think about it. A $300 million cheese plant carries maybe $25-30 million in annual fixed costs. Debt service, insurance, baseline staffing—those bills come due whether you’re running one shift or three.

What’s interesting here is what plant managers are telling me. When you’ve got $2 million in monthly debt payments, you’ll pay whatever premium it takes to keep milk coming in the door. Running at breakeven beats explaining to your board why the plant’s sitting idle. Kind of puts you between a rock and a hard place, doesn’t it?

So what happens? Plants keep bidding for milk to hit utilization targets. We see those premiums and keep producing. The oversupply continues. Prices stay low longer than anybody expects. It’s a cycle that feeds itself.

The University of Wisconsin’s dairy program has highlighted something crucial—most of this capacity was planned when we were seeing 1-2% annual production growth. Now we’re actually seeing slight declines. Somebody’s going to end up with very expensive, very empty stainless steel.

The Customer Base Is Aging Out (And Nobody Wants to Talk About It)

Youth aged 6-19 who drive bulk dairy consumption are shrinking from 18% to 13% of the population while low-consuming seniors 70+ explode from 6% to 17% by 2050—a customer base transformation few producers have factored into long-term planning

Here’s a demographic reality that caught me completely off guard. Two-thirds of the world’s population now lives in countries where birth rates are below replacement level. UN Population Division data, not opinion.

By 2050, people aged 70 and older will make up 11% of the global population. Today it’s 6%. By 2100? We’re looking at 17%. These aren’t people buying gallons for the kids anymore. They’re buying high-protein shakes, maybe some yogurt, portion-controlled products.

What really drives this home? Cornell’s extension folks have shared data showing that about 25% of all U.S. cheese consumption happens through pizza. Guess who’s eating that pizza? Mostly 6-to-19-year-olds. That age group is shrinking while the over-60 crowd—who eat maybe a slice a month—is exploding.

The analysis suggests the only real growth market for traditional dairy consumption is sub-Saharan Africa. And let’s be honest, that’s not exactly where we’re set up to compete.

What’s interesting is that we’re seeing different dynamics across regions. India’s consumption is still growing, but their production’s growing faster. The EU’s dealing with aging farmers, tighter environmental rules, and the same consolidation pressures we have. Out in the Mountain West, producers tell me water rights are becoming as valuable as the cows themselves. Up in the Pacific Northwest, organic operations are finding their niche markets getting crowded as more producers make the transition. Nobody’s immune to these shifts.

Currency Is Killing Us, And There’s Nothing We Can Do About It

Alright, let’s talk about something we have zero control over but affects everything—currency.

When New Zealand’s dollar weakens by 10%, their milk powder gets 10% cheaper for international buyers overnight. Doesn’t matter if you’re the most efficient producer in Wisconsin or Idaho. You can’t compete with currency math.

Argentina eliminated their dairy export taxes last year. Their peso’s weak. Production jumped 11% in just Q1 2025. Meanwhile, we’re looking at Chinese tariffs of 84% to 125% on various dairy products, plus a strong dollar that makes our stuff expensive before those tariffs even kick in.

The Europeans? Same game, different currency. Plus, they get government support we can only dream about.

I heard someone from the International Dairy Foods Association talking about “market diversification opportunities.” Come on. That’s just fancy talk for “our traditional customers found cheaper suppliers and we’re scrambling.”

The Heifer Shortage That’s Creating a One-Way Door

This situation with replacement heifers—man, this is brutal. We’ve been breeding beef-on-dairy pretty heavy, right? Made sense with those calf prices. But now, the dairy heifer inventory over 500 pounds is at its lowest since the 1970s. USDA says 3.914 million head.

You know what’s happening at auctions across Wisconsin? Recent sales show springers going for $3,000-3,500. Really nice ones are hitting $4,000. Meanwhile, cull cows are bringing $2,800-3,100 because beef prices are still strong.

As one producer put it to me: “I can ship my bottom 20% tomorrow for $2,800 each. But if I want to buy replacements next spring? That’s $3,500 minimum, probably four grand for anything decent. So either I shrink forever or I keep milking marginal cows and hope something changes.”

That’s the trap. Easy to exit—back the trailer up, load them out. But getting back in? Most guys can’t afford it. Used to be you could cull hard, rebuild when prices recovered. Not anymore.

Who’s Actually Making This Work (And how)

Three proven strategies generating $280K to $820K in additional annual income—component optimization, family partnerships, and organic premiums all deliver measurable results without adding a single cow

Despite all this doom and gloom, I’m seeing operations that are absolutely thriving. Their approaches are worth paying attention to.

There’s an organic operation in Lancaster County, Pennsylvania—about 280 cows, family-run. They transitioned five years ago. Yeah, it cost them around $150,000 and three years of lower production during transition. But they’re getting $32.69 per hundredweight through their organic cooperative right now, while their neighbors are looking at $19.50 per hundredweight for conventional.

The owner told me straight up: “We quit trying to compete with New Zealand on price. We’re selling to people who want to know the cows’ names and see our pastures on Instagram. Currency rates don’t matter when you’re selling a story.” The hardest part? Learning to market themselves, not just their milk. They had to become storytellers, photographers, social media managers—skills they never thought they’d need.

Here’s another interesting model. Three farm families in Wisconsin merged their operations a few years back. They were running 350, 400, and 425 cows separately. Combined everything into one 1,175-cow setup with robots. Took about eighteen months of planning, lots of lawyer fees, and some serious family meetings—including one that almost ended the whole thing over whose barn to use as headquarters.

But listen to this—they went from around $17.80 per hundredweight when operating separately to $16.20 when operating together. Each family’s clearing $200,000 to $250,000 now. One of the partners told me, “The Hardest part was giving up being my own boss. But the reality is, I took my first real vacation in fifteen years last month. My partners covered everything.”

What’s also working for some folks is getting laser-focused on components. Jim Ostrom at HighGround Dairy has been working with producers who’ve moved their income-over-feed-cost from $7.50 to $10 per cow per day. Just better rations, tighter fresh-cow management, and pushing butterfat when the premiums are there. That’s $820,000 more per year on 900 cows without adding a single animal.

Down in the Southeast, where summer heat stress can knock 15-20 pounds off daily production, I’m seeing producers invest in cooling systems that pay for themselves through maintained components even when volume drops. One Florida dairyman told me, “I stopped chasing gallons and started chasing butterfat. Changed everything.”

The Risk Management Tools We’re Not Using (But Should Be)

Here’s what drives me crazy. We’ve got better risk management tools than ever, but most of us—myself included—don’t use them properly.

Dairy Margin Coverage at that $9.50 tier? Farms that enrolled got close to $150,000 in payments last year. If you’re under 5 million pounds annually, it’s dirt cheap. But I talk to guys who won’t sign up because “it’s a government program.” Meanwhile, they’re losing two bucks a hundredweight and burning through equity that DMC would’ve protected.

Dairy Revenue Protection paid out over $500 million in 2023. Phil Plourd at Ever.Ag calls it subsidized insurance, and he’s right. You’re protecting your downside while keeping upside potential. But we still think of it as gambling rather than management.

And futures markets—Ohio State’s research shows it takes 6-9 months for margins to recover after a big shock. That means you need to be positioning that far out. Companies like StoneX offer programs tailored for smaller operations, but most of us wait until we’re already underwater before we consider them.

What I’ve noticed talking to bankers lately—they’re actually looking more favorably at operations with risk management in place. As one lender put it, “I’d rather finance someone with DMC and DRP than someone with 200 more cows.” Several banks are even offering slightly better rates to operations that demonstrate comprehensive risk management. Makes sense when you think about it—they’re protecting their loans too.

KEY NUMBERS TO TRACK

  • Your true break-even cost (including family living)
  • Debt-to-asset ratio compared to last year
  • Working capital months at current burn rate
  • Income-over-feed-cost daily average
  • Cull cow value vs. replacement cost spread

Decisions You Need to Make in the Next 60 Days

Three distinct pathways based on your true breakeven gap—within $2/cwt means optimize through it, $3-5/cwt demands fundamental transformation, beyond $5/cwt requires hard conversations before equity evaporates in the next 60-90 days

Let’s get practical here. If you’re sitting there wondering what to actually do, here’s what I’m seeing for the next couple of months.

Cull cow prices right now—November 2025—are running $2.00 to $2.24 per pound. Good fleshy cow weighing 1,400 pounds? That’s $2,800 to $3,100. But here’s what’s worth considering. Historical patterns suggest—and this is just based on past cycles—these could drop 15-25% by February if Brazilian beef tariffs change or everybody starts culling at once.

A producer recently ran this math for me. His bottom 40 cows shipped now generate $112,000. Wait until February, if prices drop to $1.70? That’s $95,200. The $16,800 difference might be the difference between making it and not making it.

But you’ve got to know your real breakeven. Not the one you tell the neighbors. The real one. With family living, debt service, and all that maintenance you’ve been putting off.

Three Paths Forward (Based on Where You Really Stand)

After all these conversations, here’s the framework I’m using:

If you’re within $2 of breakeven: You can optimize through this. Cull hard, focus on components, tighten everything up. Markets will give you room eventually.

If you’re $3-5 away from breakeven: Something fundamental has to change. Maybe that’s finding partners, maybe it’s transitioning to a premium market, maybe it’s restructuring debt. But status quo ain’t gonna cut it.

If you’re more than $5 from breakeven: Time for the hard conversation. And I mean really hard. But saving $400,000 in equity beats losing everything in six months.

Where This Is All Heading

Look, I don’t have a crystal ball. But if current consolidation trends continue—and we lost 39% of dairy farms between 2017 and 2022—we could potentially see another significant reduction by 2030.

What’s emerging are three models that seem to work: The 5,000-plus-cow operations that run like factories. The 50-to-300-cow premium operations selling stories and values. And these multi-family partnerships running 800-2,000 cows together.

Is that traditional 300-to-600-cow family dairy competing on commodity milk? That’s getting harder and harder to pencil out. Not because those folks aren’t working hard—they’re working harder than ever. The economics just aren’t there anymore.

Though the reality is, there’s always room for creative thinking. I’ve heard about young producers buying smaller dairies at auction, converting to specialty genetics like A2, and selling everything at a premium to regional processors. They’re not getting rich, but they’re making it work through pure creativity and willingness to adapt.

The Bottom Line

The conversation that matters most is the one you have with yourself and your family about where you really stand. I’ve talked to too many people who waited six months hoping things would improve, only to watch significant equity disappear.

This weekend, run your real numbers. All of them. Family living, debt service, everything. Compare that to realistic milk prices, not wishful thinking.

Then have the conversation those numbers demand. With your spouse, your kids, your banker, potential partners—whoever needs to be part of it. Because the difference between choosing your path and having it chosen for you is usually about 90 days and a whole lot of family wealth.

These structural shifts—China going self-sufficient, too much processing capacity, aging populations, currency games, heifer shortages—they’re not going away. The industry that emerges from this won’t look like the one we grew up in.

But here’s what I know after decades of watching this industry evolve. The operations that’ll thrive in 2030 won’t necessarily be the biggest or have the most capital. They’ll be the ones that saw reality clearly, made hard decisions early, and adapted to what is rather than wishing for what was.

We’re all in this together, navigating waters none of us have seen before. The data’s telling us something important. Question is, are we ready to listen? And more importantly, are we ready to act on what we’re hearing?

Remember, every crisis creates opportunity for those willing to see it and seize it. This one’s no different. The dairy farmers who make it through this will be stronger, smarter, and more resilient than ever.

KEY TAKEAWAYS:

  • This downturn breaks all the rules: Five permanent forces (China self-sufficient, plants needing milk, customers aging, currency killing us, heifers gone) mean waiting for “normal” is a losing strategy
  • The $16,800 decision can’t wait: Culling 40 cows today nets $112,000. By February? Maybe $95,200. That difference could determine whether you’re still farming in 2026
  • Three strategies actually work: Get premium prices like that $32/cwt organic farm, share costs like those Wisconsin partners each banking $200K+, or maximize components for $820K more without adding cows
  • Your breakeven tells you everything: Less than $2/cwt away? You’ll make it with adjustments. $3-5 gap? Time for radical change. Over $5? Every month you wait costs serious family wealth
  • The survivors aren’t the biggest—they’re the ones deciding NOW: This weekend, calculate your true all-in costs, pick your path, and act. The difference between choosing and being forced is about 90 days

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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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.

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One Positive Swab Cost This Wisconsin Dairy $900,000 – Here’s the 90-Day Fix That Turned Everything Around

6:47 AM: Routine swab positive. Thursday: FDA shuts three lines. Cost: $900K. But this Wisconsin dairy recovered in 90 days. Here’s how.

EXECUTIVE SUMMARY: A routine Tuesday morning swab changed everything for a Wisconsin dairy family—one positive result near (not in) their product triggered FDA intervention, shut three production lines, and cost $900,000 despite 50 years of perfect inspections. They’re not alone: dairy now leads global food recalls with 400 incidents in Q1 2025, each averaging $10 million in direct costs. Here’s the uncomfortable truth: your current monitoring program likely misses 70% of contamination, your ATP testing can’t detect allergen proteins that trigger anaphylaxis, and your paper documentation could turn a routine audit into business extinction. Yet operations that invest $75,000-100,000 annually in comprehensive monitoring are transforming their risk profile in just 90 days—one Idaho dairy’s $42,000 investment yielded $280,000 in new contracts after eliminating all contamination. The fix starts with a two-hour facility walk that typically reveals 30-50 blind spots you’re not testing. In today’s enforcement environment, you’re either systematically finding problems or waiting for regulators to find them for you.

You know that feeling when a routine phone call changes everything? That’s what happened to a Wisconsin processing family at 6:47 on a Tuesday morning. One environmental swab—the kind they’d been taking every week for years—came back positive for Listeria. Not in the product, thankfully. Not even on food contact surfaces. Just one positive from a motor housing on their filling line, maybe eight inches from where the product flowed.

By Thursday afternoon? Well, their whole world had shifted. The FDA audit team is walking the floor. Three production lines shut down. Nearly $900,000 in inventory is sitting in quarantine. And here’s what really gets me—their largest customer, representing 40% of their volume, suspended shipments pending resolution.

The 70% Detection Gap: Why conventional 25-site monitoring programs miss most contamination—and what comprehensive testing reveals about your facility’s blind spots

What’s particularly troubling about this story —and why I’m sharing it with you —is that it wasn’t some corner-cutting operation. These folks passed every annual inspection. Their SQF certification was current. Customer audits? Clean as a whistle. They genuinely believed—as many of us do—that their food safety program was bulletproof.

But what they discovered over the next 90 days… well, it’s reshaping how dairy operations across North America are thinking about the gap between compliance and actual protection. And if you’re sitting there thinking “we’re different,” I get it. That’s exactly what they thought, too.

The Numbers We Need to Talk About

The $254 Million Question: One positive swab cascades into direct recall costs, multiplied indirect expenses, insurance spikes, lost contracts, shareholder panic, and permanent brand erosion—all preventable with proactive monitoring

Let me tell you what’s happening out there right now. The data from FDA’s Q1 2025 recall analysis—Food Safety magazine pulled it all together in May—shows dairy products leading all food categories in recall volume. We’re talking nearly 400 recalls out of 1,363 total food recalls tracked globally. Not meat, folks. Not produce. Dairy.

And the financial side? It’s brutal. The Consumer Brands Association’s research from their 2024 recall impact study puts the average cost of a food recall at $10 million just in direct expenses. That’s before you factor in lost business, damaged reputation, all that.

The Dairy Recall Explosion: From 85 incidents in Q1 2020 to 400 in Q1 2025—a 371% surge making dairy the food industry’s #1 recall category, accounting for 29% of all global food safety failures

But here’s what really keeps me up at night: Remember the 2008 Canadian Listeria outbreak at Maple Leaf Foods? Fifty-seven confirmed cases, 24 people lost their lives, and according to the Public Health Agency of Canada’s economic analysis, the final price tag hit $242 million. For one facility. We’re not talking about quality hiccups anymore—these are business extinction events.

I’ve noticed that there’s this disconnect between what operations think they’re monitoring and where contamination actually lives. It’s like we’ve been looking for our keys under the streetlight because that’s where the light is good, not because that’s where we dropped them.

Three Blind Spots Every Operation Has (Yes, Even Yours)

The Hidden Zone: Zone 2 surfaces—equipment housings, motor casings, frameworks just inches from food contact—harbor 8% contamination rates, yet most programs barely test there

Environmental Monitoring: The 60% You’re Not Testing

So there’s this fascinating research from Dr. Matthew Stasiewicz at the University of Illinois. His team spent 18 months implementing environmental monitoring programs in eight small-to-medium dairy facilities across Illinois and Wisconsin—and published the results in early 2024. I bet you’ve noticed what they found hits home: Listeria species showed up in 13% of environmental samples. Across all facilities.

But here’s the kicker that really made me rethink everything: Pre-operation sampling—after cleaning and sanitation—showed 15% positive rates. Mid-operation? 17%. Virtually identical. The cleaning between shifts wasn’t eliminating the problem; it was just… moving it around.

A PCQI-certified consultant I’ve worked with—she’s been auditing Midwest dairy facilities for two decades—put it this way: “Conventional monitoring programs catch maybe 30-40% of actual contamination. The rest is hiding in places standard HACCP plans never even consider.”

Think about your own facility for a minute. When’s the last time you swabbed:

  • That floor-wall junction where water always seems to pool during washdown?
  • Inside those equipment legs that—surprise!—might actually be hollow?
  • The overhead condensation points that drip onto your Zone 2 surfaces?
  • Those cable conduits and junction boxes hanging above your production lines?

A 2024 study published in the Journal of Food Protection tracked Listeria in cheese processing facilities for 3 years. Same genetic strain, living in the same drains and floor cracks, for three straight years—despite aggressive cleaning protocols and regular staff training. That should terrify all of us.

Allergen Control: Why ATP Testing Gives You False Confidence

Here’s a story that played out last September. HP Hood had to recall 96-ounce containers of Lactaid milk across 27 states. The issue? Potential almond contamination was discovered during routine maintenance, according to the FDA recall notice. Not during production. Not through finished product testing. During maintenance.

Now, that facility was running cleaning validations between allergen and non-allergen runs. They had ATP testing showing surfaces were “clean.” Everything looked good on paper. But—and this is crucial—ATP testing measures organic residue and microbial load. It doesn’t specifically detect allergen proteins.

Dr. Joseph Baumert, who co-directs the Food Allergy Research and Resource Program at the University of Nebraska-Lincoln, explains it well: “You can have a microbiologically spotless surface, passes ATP with flying colors, and still harbors enough milk protein to trigger anaphylaxis. Milk proteins, especially casein, bind to stainless steel and can persist through standard CIP cycles.”

The UK Food Standards Agency’s 2024 audit data really drives this home—dairy allergen compliance rates were just 51%, compared to 73% for other allergens. The main problem? Improperly cleaned equipment that passed microbial testing but retained allergen proteins.

What’s interesting here is the aerosol issue in powder operations. You’re blending milk powder in one room, thinking your allergen-free products in the next room are protected by a wall. But those particles? They become airborne, travel through doorways, and settle on equipment, packaging, and even workers’ clothing. Your “dairy-free” line isn’t dairy-free anymore.

I visited an operation down in Texas that learned this the hard way. Mid-size facility, producing both regular and plant-based products on separate lines, on different days even. Still had cross-contamination through their shared air-handling system. Cost them $180,000 in recalls and two major contracts. And as robotic milking systems become more common, we’re seeing new environmental monitoring challenges around them too—condensation in different places, changing traffic patterns, and new dead zones that didn’t exist in conventional parlors.

Documentation: The Gap That Turns Routine into Crisis

Now this one… this hits close to home for a lot of us. Back in 2019, British Columbia’s Ministry of Environment audited dairy processors, and what they found was eye-opening: all seven facilities with site-specific permits had compliance violations. Not because of contamination. Not because of poor sanitation. Documentation gaps.

Missing monitoring records. Late annual reports. Required testing that happened but wasn’t documented properly. These aren’t food-safety failures—they’re paperwork problems that turn routine inspections into comprehensive investigations.

A senior insurance underwriter who’s been specializing in food industry coverage for over 15 years with one of the major carriers told me something that stuck: “The difference between operations that survive recalls and those that don’t often comes down to one thing—can you prove you were finding and fixing problems proactively? Because if your documentation shows you avoided comprehensive monitoring not to find contamination, that’s willful blindness in court.”

The Insurance Reality Nobody Wants to Talk About

Let’s be real about insurance coverage for a minute. Your standard Commercial General Liability policy? It explicitly excludes most recall-related costs. Product retrieval, disposal, business interruption, crisis management—none of that’s covered unless you’ve added specific endorsements.

Even with Product Contamination Insurance—and that’s a separate policy, not just an add-on—coverage depends on demonstrating comprehensive preventive controls. Several major carriers are now conducting their own facility risk assessments. If your environmental monitoring program covers 25 sites when industry best practice suggests 80-100, I’ve noticed what happens next: Your premium doubles. Sometimes triples. Or they just decline to renew.

CRC Group published guidance in October specifically for dairy producers, noting that recall events can trigger losses far exceeding policy limits. They’re seeing claims where actual costs hit 3-4 times what operations thought they were covered for.

What Successful Operations Are Actually Doing

Looking at operations that are thriving versus those that are struggling, what’s interesting is that it’s not about size or budget. It’s about mindset.

I know a producer in northern Wisconsin—150 cows, small processing operation, been in the family since 1962. Three years ago, after a near-miss with a Zone 3 positive, they completely overhauled their approach. Went from 22 sampling sites to 87. Found contamination in places they’d never looked—inside hollow table legs, above the homogenizer where condensation collected, in that floor crack under the bulk tank nobody thought about.

The initial findings were rough—23 positives in the first month. But here’s what matters: they documented everything, implemented targeted fixes, and verified effectiveness. By month six? Down to zero positives. Their insurance premium dropped 30%. And they picked up two new contracts from processors looking for reliable suppliers with robust food safety programs.

It works for even smaller setups, too. Take a southern Idaho operation with just 85 cows—they invested $42,000 in comprehensive monitoring, went from 18 sites to 72, and saw an initial spike of 19 positives in the first 60 days. Now? Zero positives for 8 months, insurance down to $12,000 annually from $18,000, and new contracts worth $280,000 a year from 7 processors, including national brands. That kind of ROI shows even modest operations can transform their risk profile.

Compare that to operations still running minimal programs because “we’ve never had a problem.” They’re testing the same 25 sites they’ve tested for a decade. Getting the same negative results. Thinking they’re safe. Meanwhile, research consistently shows 60-70% of contamination lives in places they’re not even looking.

Out west, there’s a 2,500-cow operation in California’s Central Valley that took a different approach. Brought in UC Davis Extension specialists to map their entire facility. Found 112 potential harborage sites. The owner told me, “We’d been so focused on the milking parlor and tank room, we completely missed the processing area risks.”

And I’ve seen similar transformations out east, too. A processor in Vermont—a family operation since the 1970s—discovered contamination in their aging facility’s infrastructure that newer buildings wouldn’t have. Different regions, different challenges, same fundamental issue: we’re not looking everywhere we need to look.

The Math That Matters: Real dairies, real numbers—$42K to $95K investments delivering 3x to 9.5x returns within 90 days through prevented recalls, new contracts, and insurance savings

What You Can Do Starting Tomorrow: The 90-Day Transformation

Here’s what I tell every producer who calls: You don’t need to solve everything at once. You need to start finding out what you don’t know.

Week One: The Reality Walk

Get your whole team together—I mean ownership, operations, QA, maintenance, everyone—and walk your facility during production. Don’t send them a report. Don’t show them those slides. Just walk the floor together.

Everyone brings their phones. Take pictures of every place where water pools, every piece of equipment in a dead zone, and every condensation drip point. Most operations identify 30-50 unsampled locations in a two-hour walk.

A quality manager at a 500-cow operation in upstate New York described their walk to me: “My operations manager saw water pooling at a floor-wall junction we’d never sampled. Maintenance pointed out three hollow equipment legs—we had no idea they were there. When you see 40 potential contamination sites that aren’t in your monitoring program, you can’t unsee it.”

Weeks 2-4: Zone 2 Expansion

Start simple. Add 10-15 sampling sites within 12 inches of your current Zone 1 testing points. These Zone 2 areas—equipment housings, control panels, adjacent floors—that’s where contamination migrates to the product.

Budget impact? Maybe $2,000-3,000 for a month of additional testing. That’s nothing compared to a recall. But it tells you whether contamination is living right next to your food contact surfaces.

A creamery operator in Minnesota started with 12 additional Zone 2 sites. Found positives in four locations the first week—the motor housing on the separator, framework under the filler, two spots on the floor within inches of equipment legs. They’d been testing two feet away and missing all of it.

Months 2-3: Building the System

Once you know where problems hide, you can build systematic solutions. This is when you expand to comprehensive coverage—those 80-100 sites the research suggests. Implement allergen-specific testing if you’re running both allergen and allergen-free products. Transition from paper logs to digital documentation systems.

The cost sounds prohibitive until you do the math. Cloud-based food safety management systems cost $200-500 per month. Expanding to 80 sampling sites could add $30,000-40,000 in annual testing costs. Combined with improvements to allergen validation and documentation, you’re looking at an annual investment of $75,000-100,000.

Compare that to the average recall cost of $10 million. Or the 40% revenue loss when your largest customer suspends shipments. Or the insurance claim denial because you couldn’t demonstrate comprehensive preventive controls.

I’ve watched operations in Oregon, Idaho, and New Mexico make this transformation. Different climates, different challenges—summer condensation in the Pacific Northwest, dust infiltration in the Southwest—but the same systematic approach works.

The Choice Every Operation Faces Right Now

I’ve been around this industry long enough to see patterns. Are the operations thriving today? They made a decision years ago: invest in finding problems before customers or regulators do. They’re not perfect—nobody is. But they’ve built systems that demonstrate continuous improvement.

Are the operations struggling? They optimized for compliance minimization. Did the bare minimum to pass inspections. Assumed their historical track record would continue forever. Now they’re scrambling to implement improvements under external pressure—customer ultimatums, insurance threats, regulatory enforcement.

As we sit here in November 2025, with dairy leading global recall statistics and enforcement intensifying monthly, that assumption has become the costliest bet in our industry.

The Bottom Line

Remember that Wisconsin family I started with? They invested $95,000 over 90 days. Expanded monitoring from 25 to 92 sites. Found contamination they’d never suspected. Fixed it systematically. Documented everything.

Today, 18 months later? They’re running at capacity with a waiting list of customers who value suppliers that take food safety seriously. Insurance costs dropped 25%. That the large customer who suspended shipments? They’re back, with a longer-term contract and 10% volume increase.

Most importantly, they sleep at night knowing a routine swab won’t destroy three generations of hard work.

The gap between passing inspections and being protected isn’t about perfection. It’s about systematically finding and fixing problems before they find you. In today’s dairy industry, with the stakes this high, that’s not just good business—it’s survival.

Making the Numbers Work: A Reality Check

What You InvestAnnual CostWhat It Prevents
Expanded monitoring (80 sites)$35,000-40,000Contamination reaching the product
Allergen-specific testing$15,000-20,000Undeclared allergen recalls
Digital documentation$2,400-6,000Legal/insurance claim denials
Mock audits (quarterly)$12,000-16,000Surprise inspection failures
Total Prevention$75,000-100,000Potential $10M+ recall

Based on current industry pricing and FDA/Consumer Brands Association 2024-2025 recall cost data

Where to Get Help:

  • FDA’s got comprehensive environmental monitoring guidance at FDA.gov/food-safety
  • The Innovation Center for U.S. Dairy has excellent pathogen control resources
  • Your state’s dairy extension specialists—for example, producers can contact their local university extension office (like UW-Madison Extension) for guidance
  • The National Milk Producers Federation has member resources that really help

Look, I’ve spent 15 years working with dairy operations across North America on food safety implementation. I’ve seen both sides—the devastating impact of recalls and the transformative power of proactive monitoring programs. The difference between the two? Usually, about 90 days of focused work and the willingness to look where you haven’t been looking.

What’s your next step going to be?

KEY TAKEAWAYS

  • You’re Testing Wrong: Conventional 25-site programs miss 70% of contamination hiding in hollow equipment legs, floor-wall junctions, and condensation zones—expand to 80-100 sites or stay vulnerable
  • ATP Testing Won’t Save You: It detects organic residue, not the allergen proteins that trigger recalls—HP Hood’s 27-state recall proved “clean” ATP results mean nothing for allergen control
  • Small Operations Are Proving the Math: 85-cow Idaho dairy: $42K investment → zero contamination → $280K new contracts. ROI in under 12 months beats hoping you’re not next
  • Your Monday Morning Assignment: Two-hour facility walk with ops/QA/maintenance teams, photograph every water pooling spot and equipment dead zone—expect to find 30-50 blind spots
  • The Bottom Line Choice: Invest $75-100K annually in comprehensive monitoring now, or lose $10M+ when one swab destroys three generations of work

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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China’s Soybean Surge: What Every Dairy Farmer Needs to Lock in Before Feed Costs Spike

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.

Dairy Feed Management

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 SizeMonthly Soybean Meal Use (tons)Cost at $330/tonCost at $375/tonMonthly Impact
100-cow4.5$1,485$1,688+$203
300-cow13.5$4,455$5,063+$608
500-cow22.5$7,425$8,438+$1,013
1,000-cow45$14,850$16,875+$2,025
2,000-cow90$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.

Soybean meal prices are projected to surge 12-18% by Q2 2026 as China’s record purchases tighten domestic feed markets—hitting $375/ton and squeezing dairy margins across all operations.

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.

The currency connection most farmers miss: a mere 1.5% dollar strengthening adds $13,464 to a container of milk destined for Mexico—your price didn’t change, but suddenly you’re uncompetitive against New Zealand

“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.

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Beyond the Milk Check: How Dairy Operations Are Building $300,000 in New Revenue Today

Milk at $20. Costs at $22. Some dairies are panicking. Others are building $300K in new revenue. The difference? Three moves you can make today.

Executive Summary: The $20 milk check that sustained dairy operations for years now falls $2 short of covering real production costs—and that gap isn’t closing. But while many producers wait for $25 milk that isn’t coming, successful operations are actively building $300,000 in new annual revenue from resources they already have. Beef-cross calves are commanding $1,600 each (up from $400 in 2019), feed shrink costing most farms $60,000 annually can be cut in half with basic management changes, and the Dairy Margin Coverage program is paying 495% returns to those who enroll. The catch? This window closes fast—operations implementing these strategies in Q1 2025 will capture $250,000 more value than those waiting until Q3. Based on verified data from USDA, and progressive dairy consultants, this report provides a proven 90-day roadmap that’s already helping operations transform their financial position. The difference between thriving and merely surviving isn’t about farm size or waiting for markets to improve—it’s about acting on these opportunities now.

You know that feeling when something you’ve counted on for years suddenly isn’t enough? That’s exactly where many of us find ourselves with milk prices right now.

Gary Siporski, the dairy financial consultant from Wisconsin who’s been looking at balance sheets for decades, saw this coming. His data tells quite a story. Back in 2016, his Midwest clients were breaking even around $16.50 per hundredweight. By late 2023? That number had climbed to $20.25. And now—here’s where it gets interesting—operations from California to Vermont are reporting production costs north of $22 when you factor in everything… depreciation, heifer raising, the whole nine yards.

What’s encouraging, though, is that the operations finding their way through this aren’t just sitting around waiting for milk prices in 2025 to bounce back. They’re actively building what amounts to $180,000 to $340,000 in improved financial position through some pretty creative approaches to dairy profitability.

The widening gap between production costs and milk prices reveals why traditional approaches are failing—costs have jumped $5.50 per hundredweight while prices lag behind

Understanding What’s Really Driving Costs

Here’s what the latest University of Illinois Farmdoc Daily and USDA reports are showing us. Feed costs—you know, that 30 to 50 percent chunk of everyone’s budget—have actually come down from those crazy 2022-2023 peaks. Corn’s projected at $4.60 per bushel for 2025, down from $4.80. Soybean meal dropped from $330 to $290 per ton. Alfalfa? Down from $201 to $159.

Sounds like good news, right? Well… hold on a minute.

Everything else keeps climbing. Labor costs are up 3.6 percent for 2025, according to USDA’s agricultural labor report—we’re talking a record $53.5 billion across agriculture. And if you’re in Texas or other areas where the energy sector is hiring? Good luck keeping experienced workers without matching those oil field wages. Producers in these regions report wage competition they never imagined dealing with.

Then there’s interest. After hitting 16-year highs in 2023-2024, according to Federal Reserve data, borrowing costs have fundamentally changed the game. Think about it—if you’re running a 500-cow operation with somewhere between $1.2 and $1.5 million in operating loans (pretty typical these days), that four percentage point jump from 2020 means an extra $48,000 to $60,000 annually just in debt service. That’s nearly fifty cents per hundredweight before you even start milking.

And equipment? The Association of Equipment Manufacturers’ 2024 report shows machinery prices jumped 30 percent in four years. The average new tractor now costs $491,800, up from $363,000 in 2020. Some specialized equipment? We’re talking $1.2 to $1.4 million.

Brad Herkenhoff from Compeer Financial, who works with operations all across Minnesota and Wisconsin, doesn’t mince words: “There won’t be enough to cover depreciation, so capital improvements won’t be made. Bills will stretch beyond 30 days, and every month becomes a financial strain.”

What we’re dealing with is what economists call a “ratchet effect”—costs rise quickly but resist coming down. You can’t undo wage increases once they’re in place. Interest on existing debt? That’s locked in. And you’re still depreciating that nearly half-million-dollar tractor at 2023 prices. This reality is reshaping dairy profitability 2025 in fundamental ways.

The Beef-on-Dairy Window: Real Opportunity or Hype?

Now, let me share something that might be the biggest dairy profitability opportunity I’ve seen in twenty years. And I really mean that.

CattleFax and USDA’s July 2025 cattle inventory reports point to a 3- to 5-year window in which beef-on-dairy returns make extraordinary financial sense. We’re not talking about incremental improvements here—this could be transformative for milk prices in 2025.

Right now, in November 2025, day-old beef-cross calves are bringing $900 to $1,600 at auctions from Pennsylvania to Minnesota. Compare that to the $350 to $400 they brought in 2018-2019, according to USDA’s Agricultural Marketing Service data. That’s a premium that makes you rethink beef-on-dairy returns.

Beef-cross calves now command $1,600—quadruple the 2019 price—turning what was once a disposal problem into a $100,000+ annual revenue stream for mid-size operations

But here’s why this isn’t just a temporary spike. The U.S. cattle inventory is at a 64-year low—we haven’t seen numbers like this since 1951, per USDA’s latest report. Meanwhile, the National Association of Animal Breeders tells us nearly 4 million crossbred calves were born in 2024, and Beef Magazine projects that could hit 6 million within two years.

You might be thinking, “Won’t that flood the market?” Here’s the thing—beef production is actually declining. USDA projects it’ll drop 4 percent in 2025 and another 2 percent in 2026. The beef industry desperately needs these dairy-beef crosses just to maintain supply.

Herkenhoff’s analysis shows producers are seeing a $2.50 to $4 per hundredweight boost from the combination of better cull cow values and beef-cross calf sales. Think about what that means for dairy profitability in 2025. Data shows that, before this beef market rally, milk checks accounted for about 93 percent of total farm income. Now? That’s down to 75 to 80 percent, with cattle sales making up 20 to 25 percent.

The numbers are pretty striking when you dig in. Revenue contribution jumping from $1.12 per hundredweight in 2022 to $2.57 in 2024. That’s a 130 percent increase in two years.

Traditional vs. Diversified: The Numbers Tell the Story

Quick Financial Comparison:

Here’s what we’re seeing:

  • Traditional Single-Revenue Operation (500 cows):
  • Milk revenue: 93% of income
  • Cattle sales: 7% of income
  • Breakeven: $22-24/cwt
  • Annual volatility: $150,000-$300,000
  • Diversified Multi-Revenue Operation (500 cows):
  • Milk revenue: 75-80% of income
  • Beef-cross cattle sales: 20-25% of income
  • Additional streams: 5-10% of income
  • Breakeven: $18-20/cwt
  • Annual volatility: $75,000-$150,000

Bottom line difference: About $200,000 in improved annual cash flow with significantly reduced risk exposure.

Diversified operations cut volatility in half while lowering breakeven costs by $2-4 per hundredweight—making 20% from beef-cross cattle creates a financial buffer traditional dairies don’t have

Feed Efficiency: The Money You’re Already Losing

Here’s something that still surprises me after all these years. Producers will negotiate feed contracts for hours, tweak rations endlessly, but meanwhile… many operations are unknowingly losing $50,000 to $180,000 annually through feed shrink and excessive refusals.

Penn State Extension and University of Wisconsin research show that average U.S. dairy silage shrinkage runs 10 to 20 percent. Poorly managed bunkers? Can hit 25 percent. And those feed refusals—should they be 2 to 3 percent, according to Journal of Dairy Science studies? I see operations running 4 to 6 percent all the time.

Real Dollar Impact per 100 Cows:

  • Silage shrink reduction (15% to 10%): Saves $9,000-$18,000 annually
  • Refusal reduction (5% to 3%): Recovers $5,000-$10,000 annually
  • Daily face management: Cuts spoilage by 50%
  • Oxygen barrier films: Pay for themselves in 6-8 months

Sources: Cornell Cooperative Extension, University of Minnesota dairy extension, Lallemand Animal Nutrition research

The key insight—and nutritionists keep hammering this point—isn’t about cutting feed quality. That’s a disaster. It’s about not throwing away the good feed you already bought.

For a 500-cow operation, even modest management improvements—basic stuff, really—can return $45,000 to $60,000 annually. That’s real money from things you’re already doing, just doing them better. This directly impacts dairy profitability in 2025 outcomes.

Most operations throw away $45,000-$60,000 annually in feed waste—money that’s already been spent on feed you never actually fed. Basic management changes recover this immediately

Government Programs: Setting Aside the Politics

I know, I know. Half of you are already skeptical when I mention government programs. But hear me out—the USDA Farm Service Agency data on Dairy Margin Coverage is pretty compelling for dairy profitability in 2025.

In 2023, producers enrolled at the $9.50 level paid about $1,500 in premiums per million pounds. What’d they get back? According to FSA payment data, $8,926.53 per million pounds. That’s a 495 percent return. On paperwork.

While 25% of producers left money on the table, those who enrolled in DMC at the $9.50 level saw 495% returns—$8,927 back for every $1,500 paid in 2023

DMC by the Numbers:

A 500-cow operation producing 11 million pounds:

  • Paid: $16,500 in premiums
  • Received: $98,192 in payments
  • Net benefit: $81,692

The program distributed over $1.27 billion through October 2023, with the average enrolled operation receiving $74,453. About 17,059 operations participated—that’s 74.5 percent of those eligible. Which means roughly a quarter of producers left that money on the table.

Katie Burgess from Ever.Ag’s risk management team notes that DMC has triggered payments 57% of the time over the past 42 months at the $9.50 level. That’s better than a coin flip, and when it pays, it pays big.

The mistake I see most often? Producers are choosing catastrophic coverage at $4.00 to save on premiums. Sure, it costs less upfront, but you’re leaving massive money on the table. The $9.50 level costs more, but historically returns five to ten times as much during tight margins.

The Human Side: Why Change Is So Hard

You know, research from agricultural psychology studies—the kind published in journals like Applied Farm Management—reveals something we probably all know deep down. Resistance to change isn’t really about the data. It’s about identity.

We don’t just run dairy operations. Being a “dairy producer” is part of who we are. So when someone suggests beef-on-dairy returns or revenue diversification, it can feel like they’re asking us to fundamentally change who we are. That’s not easy.

The generational piece makes it even tougher. Iowa State Extension’s succession planning research shows 83.5 percent of family dairy operations don’t make it to the third generation. First to second generation? Only 30 percent succeed. Second to third? Just 12 percent.

We’ve all seen this—Dad won’t let go because that means confronting his own mortality, and the kids can’t make changes without feeling like they’re disrespecting everything their parents built. Meanwhile, equity slowly bleeds away.

Research from agricultural universities in New Zealand and Europe shows we’re all influenced by what our neighbors do. Nobody wants to be first, but nobody wants to be last either. So everyone waits…

I’ve heard from plenty of producers who understood the financial benefits of beef-on-dairy perfectly well but worried what the coffee shop crowd would think. Were they giving up on “real” dairy farming?

A Practical 90-Day Framework for Dairy Profitability 2025

Alright, let’s get down to brass tacks. Based on what’s working for operations that are successfully navigating this transition, here’s a framework that can improve your financial position in three months:

Month 1: Immediate Actions for Cash Flow

Week 1: Know Your Numbers

First thing—and I mean within 48 hours—calculate your working capital per cow. Current assets minus current liabilities, divided by herd size. Then figure your monthly burn rate from the last 90 days. This tells you exactly how much runway you’ve got.

If you’ve got genomic test results, pull them now. If not, consider ordering tests. Yes, it’s $40 to $50 per head—about $12,000 to $15,000 for 300 head. But you’ll know within 2 to 3 weeks exactly which cows should get beef semen for optimal beef-on-dairy returns.

Order 150 to 200 units of beef semen right away. Angus and Limousin consistently perform well in feedlots. That’s an investment of $2,250 to $5,000. Contact three calf buyers to ensure competitive pricing. Got beef-cross calves ready? Selling them this week could bring $3,600 to $6,400 in immediate cash.

DMC Enrollment: Don’t Wait

Call your FSA office—actually call them, don’t just email. The $9.50 coverage on Tier 1 (first 5 to 6 million pounds) at 95 percent often makes the most sense. Larger operations might consider catastrophic on Tier 2 to manage costs. For a 250-cow operation, you’re looking at about $7,225 in costs, with potential returns of $35,000 to $80,000 in tight-margin years.

Week 2: Strategic Culling Decisions

Review your IOFC reports, SCC data, and Days Open. Identify your bottom 10 to 15 percent—chronic health issues, SCC over 200,000, Days Open beyond 150.

With cull prices averaging $145 per hundredweight according to the USDA, strategically marketing 25 cows averaging 1,400 pounds could generate $50,000 to $62,500. Direct that straight to your operating line.

Month 2: Building Operational Efficiency

Labor Optimization

Progressive Dairy’s benchmarking shows that top operations maintain over 65 cows per full-time worker and produce over 1 million pounds of milk per worker annually. If you’re at 45 cows per worker… well, there’s your opportunity.

Energy Efficiency Quick Wins

Energy typically runs 400 to 1,145 kWh per cow annually. Quick improvements:

  • LED lighting: 60% electrical reduction
  • Variable frequency drives: 20-30% fan energy savings
  • Heat recovery systems: $20-40 per cow annual savings

A 100-cow operation can save $2,000 to $4,000 annually in energy costs alone.

Component Production Focus

Here’s what’s interesting—DHI data shows operations producing over 7 pounds of components per cow daily generate about $3 more per cow at similar costs. That flows straight to the bottom line—potentially $547,500 annually for 500 cows.

Work with your nutritionist on butterfat performance and protein, not just volume. Especially valuable in the Northeast, where component premiums are strong, or the Southwest, where cheese plants pay big butterfat bonuses.

Month 3: Strategic Positioning

Additional Revenue Streams

By month three, explore these opportunities:

  • Digesters: EPA’s AgSTAR database shows 270+ on dairy farms generating ~$100/cow annually
  • Solar leases: $500-1,500 per acre annually in suitable locations
  • Carbon credits: $10-30 per cow, emerging market

University extension case studies document operations pulling $300,000 to $400,000 annually from combined energy contracts, beef-cross premiums, and environmental programs.

Risk Management Layers

Layer additional coverage atop DMC:

  • Dairy Revenue Protection for Tier 2 production
  • Livestock Gross Margin for Margin Protection
  • Forward contracting on favorable component premiums

Build that safety net while you can afford it.

90-Day Roadmap Summary Box:

By Day 90, a 500-cow operation typically achieves:

  • Strategic culling cash: $50,000-$62,500
  • Feed efficiency savings: $45,000-$60,000 (annualized)
  • Beef-on-dairy pipeline: $60,000-$80,000 (9-month revenue)
  • Component optimization: $30,000-$50,000 (annualized)
  • DMC protection: $35,000-$80,000 (potential in tough years)

Total improved position: $220,000-$332,500 within 12 months

Within 90 days, a 500-cow operation can improve its financial position by $220,000-$332,000 without adding debt or expanding—just managing smarter across five key areas

Regional Realities: From the Plains to the Coasts

These strategies play out differently depending on where you farm, and that’s important to understand.

Regional Strategy Highlights:

  • California: Smaller feed efficiency gains but higher beef-on-dairy returns near feedlots
  • Wisconsin: Focus on forage quality optimization over shrink reduction
  • Northeast: Component premiums crucial—can’t match Western volume but butterfat pays
  • Southeast: Triple cooling costs vs. Wisconsin—every energy efficiency gain magnified
  • Plains States (Kansas/Nebraska): Uniquely positioned near feedlots AND grain—seeing the strongest beef premiums with lower feed costs
  • Mountain West: Altitude affects production, but proximity to Western beef markets creates beef-on-dairy opportunities

Timing matters too. Implementing beef-on-dairy in November versus March affects breeding cycles and calf markets. Spring calves bring premiums in some areas, fall calves in others.

But the fundamental principle—diversified revenue beats single-source dependency—that holds everywhere.

What We’re Learning Industry-Wide

University extension services and farm consultants are documenting consistent patterns. Operations implementing beef-on-dairy in early 2024 project $100,000 to $150,000 additional annual revenue from crossbred calves. Those focusing on feed efficiency report recovering $50,000 to $60,000 annually. DMC participants collected $40,000 to $80,000 in 2023, depending on size and coverage.

What’s encouraging is these aren’t just huge, sophisticated operations. They’re regular farms that recognized the shift early and acted. While transitioning from traditional dairy to a diversified operation can feel uncomfortable initially, the financial results tend to validate the decision quickly.

The Bottom Line for Dairy Producers

Accept the New Reality Production costs have shifted from $16.50 per hundredweight in 2016 to over $22 today. This is structural, not temporary. Earlier acceptance means more options for dairy profitability in 2025.

Diversification Is Essential. Successful operations are building $180,000 to $340,000 in improved position through beef-on-dairy ($100,000 to $200,000 annually), feed efficiency ($45,000 to $60,000 annually), and risk management ($35,000 to $80,000 in challenging years).

Time Matters The beef-on-dairy window extends 3 to 5 years based on cattle cycles, but peak premiums are now. DMC has fixed deadlines. Feed savings compound daily. Every month of delay costs money and options. This isn’t about panic—it’s about positioning.

Small Changes, Big Impact. You don’t need revolution. Reducing silage shrink 5 percent and refusals by 2 percent can generate $45,000 to $60,000 annually. These are management tweaks, not overhauls.

Use Your Network. The most resilient operations leverage their networks. Engage lenders proactively. Work with nutritionists. Use FSA resources. Going it alone makes everything harder.

Looking Ahead: Key Indicators to Watch

As we approach 2026, watch these indicators:

USDA’s quarterly cattle inventory reports matter. If beef cow numbers grow faster than Rabobank’s projected 200,000 head annually through 2026, the premium window might compress. But current dynamics suggest that’s unlikely.

Monitor your basis—what plants pay above Class III or IV. Over $5 signals strong demand. Under $2 means tight margins ahead.

The One Big Beautiful Bill Act extended DMC through 2031 and increased Tier 1 coverage to 6 million pounds starting in 2026. Details matter, so stay engaged with your co-op and industry groups.

Watch seasonal patterns. Upper Midwest operations should track winter energy costs. Southwest producers need to monitor the impacts of heat stress on components. These create opportunities for prepared operations.

The Path Forward: Your Decision Point

After looking at all the trends and talking with producers who are making it work, one thing’s clear: The operations thriving in 2028 won’t necessarily be the biggest or most sophisticated. They’ll be the ones that recognized the shift early and acted on the dairy profitability 2025 opportunities.

They understood that building $300,000 in diversified revenue through strategic changes beat waiting for $25 milk prices in 2025. They pushed through the psychological barriers and evolved from traditional dairy farmers to agricultural entrepreneurs who happen to produce milk.

The tools exist. The programs are available. The opportunities—especially beef-on-dairy returns—are real. But here’s the thing—implementing changes in Q1 2025 versus Q3 2025 could mean a $242,500 to $362,500 difference over three years. That’s not marginal. That’s the difference between thriving and surviving.

What it comes down to is this: Operations that accept reality quickly maintain options. Those waiting for more confirmation may find their options have expired when they’re ready to act.

The clock’s ticking. Beef-on-dairy returns, DMC enrollment, feed efficiency—they’re all time-sensitive. The question isn’t whether change is necessary, but whether you’ll drive it or have it forced on you.

What is the difference between those paths? About $300,000 and possibly your operation’s future.

Key Takeaways:

  • Your Milk Check Will Never Be Enough Again: Production costs hit $22/cwt while prices hover at $20—this isn’t temporary, it’s the new reality requiring immediate action
  • $300,000 in Hidden Revenue Exists in Your Operation Today: Beef-cross calves bringing $1,600 (vs. $400 in 2019) + recovering $60,000 in feed waste + DMC paying 495% returns = game-changing income
  • The 90-Day Window That Changes Everything: Operations implementing these strategies Q1 2025 will capture $250,000 more value than those waiting until Q3—procrastination literally costs $20,000/month
  • You Don’t Need Capital, You Need Courage: No expansion, no debt, no new equipment required—just the willingness to manage differently and diversify beyond the milk check
  • The Math is Proven, The Choice is Yours: 500-cow operations following this roadmap achieve $220,000-$332,500 improved position in 12 months—the only variable is when you start

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Beyond Class III: Three Global Signals Predicting Your Next 18 Months      

Milk at $18. Butter at $1.50. But heifers at $3,200 tell the real story. The recovery’s already starting—if you know where to look.

EXECUTIVE SUMMARY: A Wisconsin dairy producer’s confession reveals the new reality: “I watch New Zealand milk production closer than my own bulk tank.” While traditional metrics show disaster—butter at $1.50, milk under $18, three forward signals are flashing a recovery 3-4 months out. Weekly dairy slaughter remains at historic lows (230k vs. 260k trigger) because $900-$1,600 crossbred calves are keeping farms afloat, breaking the normal correction cycle. Smart operators monitoring Global Dairy Trade auctions and $230/cwt cattle futures have already locked in $4.38 corn, gaining $1.20/cwt margin advantage over those waiting for Class III improvements. With heifer inventories at 40-year lows (3.914 million head), operations that went heavy on beef-on-dairy face a cruel irony: they survived the crash but can’t expand in recovery. The next 18 months won’t reward efficient production—they’ll reward those watching the right signals.

Dairy Market Signals

Last week, a Wisconsin producer told me something that stopped me in my tracks: “I’m watching New Zealand milk production closer than my own bulk tank readings.”

That conversation captures perfectly how dairy economics have shifted. And looking at Monday’s CME spot prices—butter hitting $1.50 a pound, lowest we’ve seen since early 2021—alongside December cattle futures losing nearly twenty bucks per hundredweight over the past couple weeks, you can see why traditional metrics aren’t telling the whole story anymore.

Here’s what’s interesting, folks… while everyone’s fixated on Class III and IV prices that essentially report yesterday’s news, there are actually three specific signals providing genuine forward-looking intelligence. I’ve been tracking these with producers across the country for the past year, and what I’ve found is that the patterns could determine which operations thrive during this transition period.

AT A GLANCE: Your Three Critical Market Signals

Three Forward Signals Dashboard provides dairy producers with actionable intelligence 90-120 days before traditional Class III prices signal recovery—those monitoring these indicators have already locked in $4.38 corn and gained $1.20/cwt margins over competitors waiting for conventional signals. This is Andrew’s edge: forward-looking data that beats reactive strategies.

📊 Signal #1: Weekly dairy cow slaughter exceeding prior year by 8-10% for three consecutive weeks
📈 Signal #2: GDT auctions showing 6-8% cumulative gains over four consecutive sales
📉 Signal #3: December cattle futures 30-day moving average crossing above 200-day at $230+/cwt

The Perfect Storm We’re Navigating Together

You’ve probably noticed this already, but what we’re experiencing isn’t your typical dairy cycle. It’s more like… well, imagine several weather systems colliding simultaneously, each amplifying the others in ways most of us haven’t seen before.

The Production Surge

So here’s what the USDA data shows—milk production increased 3.5% through July, and those butterfat tests? Katie Burgess over at Ever.Ag called them “somewhat unbelievable” in her recent market analysis, and honestly, she’s spot on. I’m seeing consistent test results of 4.2% butterfat, even 4.3%, across multiple regions—Wisconsin operations, Pennsylvania farms, and even out in California—when just two years ago, 3.9% was considered excellent.

You know what’s happening here, right? We’re all getting better at managing transition periods, feeding programs are more precise, genetics keep improving… but when everyone’s achieving similar improvements simultaneously, well, the market gets saturated. And that’s exactly what we’re seeing.

Global Supply Pressure

The Global Dairy Trade auction has declined for three straight months now, and that’s coinciding with European production recovering—you can see it in the Commission’s September data—and Fonterra announcing that massive 6.3% surge in September collections. When major exporters increase production simultaneously like this… friends, you know what happens to prices.

Domestic Demand Challenges

Meanwhile, domestic demand faces unprecedented pressure. Those SNAP benefit adjustments affecting 42 million Americans? They’re creating ripple effects throughout the retail sector. Food banks across Iowa are reporting demand increases of ten to twelve times normal—I mean, the Oskaloosa facility went from distributing 300-400 pounds typically to nearly 5,000 pounds in the same timeframe. That’s not sustainable.

A Lancaster County producer managing 750 Holsteins shared an interesting perspective with me recently:

“Component payments help, sure, but when everyone’s achieving similar improvements, the market gets saturated. And those fluid premiums we used to count on? They’re basically evaporating as processors shift toward manufacturing.”

The Broken Feedback Loop

Here’s what really caught me off guard, though—that traditional feedback loop where low prices trigger culling, which reduces supply and brings markets back? It’s broken.

With crossbred calves commanding anywhere from $900 to $1,600 at regional auctions—and I’m seeing this from Pennsylvania clear through to Minnesota based on the USDA-AMS reports—compared to maybe $350-$400 back in 2018-2019, that additional beef revenue is keeping operations afloat despite negative milk margins.

The Beef-on-Dairy Survival Paradox illustrates the cruel irony facing dairy producers: crossbred beef calves now generate 20-25% of farm revenue (at $900-$1,600 each vs. $350-$400 for dairy heifers), which kept operations afloat during low milk prices—but eliminated the heifer inventory needed for expansion when markets recover. Survival strategy becomes growth killer.

Three Dairy Market Signals Worth Your Morning Coffee

📊 SIGNAL #1: Weekly Dairy Cow Slaughter Patterns

When: Every Thursday at 3:00 PM Eastern
Where: USDA Livestock Slaughter report at usda.gov
Time Required: 5 minutes

What’s fascinating is the consistency here—dairy cow culling has run below prior-year levels for 94 out of 101 weeks through July, according to USDA’s cumulative statistics. Year-to-date culling? It’s the lowest seven-month figure since 2008, and we’ve got a much bigger national herd now.

🎯 THE KEY THRESHOLD:
Three consecutive weeks where slaughter exceeds prior-year levels by 8-10% or more

When weekly figures rise from the current 225,000-230,000 head range toward 260,000-270,000 head, that signals crossbred calf values have finally declined below that critical $900-$1,000 level where they no longer offset weak milk margins.

💡 WHY IT MATTERS:
A 600-cow operation near Eau Claire started monitoring these signals back in March, locked in feed when they saw the pattern developing, and improved margins by $1.20/cwt compared to neighbors who waited. That’s real money, folks.

📈 SIGNAL #2: Global Dairy Trade Auction Trends

When: Every two weeks, Tuesday evenings, our time
Where: globaldairytrade.info (free access)
Time Required: 15 minutes

I’ll be honest with you—for years, I ignored these New Zealand-based auctions, thinking they were too far removed from Midwest realities. That was an expensive mistake.

🎯 THE KEY THRESHOLD:
Four consecutive auctions showing cumulative gains of 6-8% or higher, with whole milk powder exceeding $3,400/MT

Katie Burgess explains it well: “GDT auction results in New Zealand influence U.S. milk powder pricing dynamics.” And the correlation is remarkably consistent—GDT movements typically show up in CME spot markets within two to four weeks.

💡 INSIDER PERSPECTIVE:
A Midwest cooperative CEO recently shared this with me—can’t name the co-op for competitive reasons—but he said: “We’ve integrated GDT trends into our pooling strategies. Sustained upward movement there typically translates to improved export opportunities within 30-45 days.”

📉 SIGNAL #3: Cattle Futures Technical Analysis

When: Daily monitoring
Where: Any free futures charting platform
Time Required: 5 minutes daily

With the National Association of Animal Breeders data showing 40-45% of dairy pregnancies now utilizing beef sires, and those calves generating 20-25% of total farm revenue, cattle market volatility directly impacts our cash flow.

🎯 THE KEY THRESHOLD:
30-day moving average crossing above 200-day moving average while December futures maintain above $230/cwt

Recent movements illustrate the impact perfectly—when cattle prices dropped in October, crossbred calf values fell by $200-$250 per head. For a 1,500-cow operation with 40% beef breeding, that’s substantial revenue reduction… we’re talking six figures of annual impact.

💡 PRO TIP:
If you’re just starting to track these signals, give yourself a full month to establish baseline patterns before making major decisions based on them. As many of us have learned, knee-jerk reactions rarely pay off.

Quick Reference: Your Market Monitoring Dashboard

MONDAY MORNING (10 minutes over coffee)

✓ Check Friday’s CME spot dairy prices
✓ Review cattle futures five-day trends
✓ Update 90-day cash flow projections

THURSDAY AFTERNOON (5 minutes)

✓ Access USDA slaughter report (3 PM ET)
✓ Calculate 4-week moving average vs. prior year
✓ Note trend acceleration or deceleration

BIWEEKLY GDT DAYS (15 minutes)

✓ Monitor GDT Price Index and whole milk powder
✓ Calculate 3-auction cumulative change
✓ Compare with NZ production reports

MONTHLY DEEP DIVE (worth the hour)

✓ USDA Cold Storage report analysis
✓ Regional milk production review
✓ Update beef-on-dairy calf values
✓ Calculate actual production cost/cwt
✓ Evaluate 2:1 current ratio benchmark

Understanding the Structural Shifts Reshaping Our Industry

The Heifer Shortage: By the Numbers

The 40-Year Heifer Crisis shows U.S. dairy heifer inventory at 3.914 million head—the lowest level since 1978—creating an expansion trap where even when milk prices recover to $22/cwt, operations can’t grow due to $3,200 heifer costs and limited availability. This isn’t a cyclical problem; it’s a structural crisis that will define the industry for years.

You know, CoBank’s August dairy report really opened some eyes—they’re projecting an 800,000 head decline in heifer inventories through 2026. And the January USDA Cattle inventory confirmed we’re at just 3.914 million dairy heifersover 500 pounds. That’s the lowest since 1978, folks.

Current Reality:

  • $3,200 current bred heifer cost (compared to $1,400 three years ago)
  • Wisconsin actually added 10,000 head
  • Kansas dropped 35,000 head
  • Idaho lost 30,000 head
  • Texas shed 10,000 head

A Tulare County producer summed it up perfectly when he told me: “The irony is crushing—beef-on-dairy revenue helped us survive the downturn, but now expansion is virtually impossible without heifers.”

SNAP Impact: The Ripple Effect

When those 42 million Americans saw their SNAP benefits cut from $750 to $375 for a family of four… the impact on dairy demand was immediate and, honestly, worse than I expected.

The Numbers:

  • 50% benefit reduction starting November 1st
  • 10-15% reduction in retail dairy orders within the first week
  • 1.4-1.6 billion pounds milk equivalent annual impact

Andrew Novakovic from Cornell’s Dyson School—he’s been studying dairy economics for decades—offers crucial context: “Dairy products often see early reductions when household budgets tighten. Unfortunately, many consumers categorize dairy as discretionary when financial pressures mount.”

Global Dynamics: The New Reality

Twenty years ago, friends, U.S. dairy prices were mostly about what happened between California and Wisconsin. Today? With 16-18% of our production going to export markets, what happens in Wellington, Brussels, and Beijing matters just as much.

Key Production Increases:

  • Ireland’s up 7.6% year-to-date through May
  • Poland’s share grew from 1.9% to 3.9% of EU production over five years
  • New Zealand hit four consecutive monthly records through September
  • China’s now 85% self-sufficient, up from 70%

Ben Laine over at Rabobank explained it well: “When major exporters increase production simultaneously while China requires fewer imports, prices have to adjust globally. These signals reach U.S. farms within weeks, not months.”

Action Plans by Operation Type

📗 For Growth-Oriented Operations

Genomic Testing ROI:

I’ll admit, spending $45 per calf for genomic testing when milk prices are in the tank seems counterintuitive. But here’s the math that convinced me:

  • Test 300 heifer calves at $45 each: $13,500
  • Apply sexed semen to top 120 at $27 extra per breeding: $3,240
  • Generate 80-100 surplus heifers worth $3,200-$3,500 each: $280,000+
  • Your ROI? About 16 to 1

University dairy economics programs have validated these projections, and frankly, those numbers work in any market.

Risk Management Stack:

You can’t rely on DMC alone—it hasn’t triggered meaningful payments in over a year according to FSA records. Smart operators are layering:

  • DMC at $9.50: ~$0.15/cwt for first 5 million pounds
  • DRP at 75-85%: Premiums run 2-3% of protected value
  • Forward contracts: 30-40% when you see $19+/cwt

📘 For Transition Candidates

Three Proven Paths:

  1. Collaborative LLC: Three farms near Fond du Lac reduced per-cow investment from $8,000 to $3,200 by sharing infrastructure
  2. Premium Markets: A2 can bring a $4/cwt premium; organic runs $20/cwt over conventional if you can secure a buyer first
  3. Strategic Exit: You preserve 80-85% of equity in a planned transition versus maybe 50% in distressed liquidation

📙 For Next Generation

If you’re under 30 and considering this industry, you need to know it’s fundamentally different from what your parents knew. University programs like Wisconsin’s Center for Dairy Profitability and Cornell’s PRO-DAIRY are developing specific resources for younger producers navigating this new environment. Use them.

Regional Snapshot: Your Competition and Opportunities

Southwest: Water costs are doubling in some areas. One Albuquerque producer told me they’re making daily tradeoffs between feed production and maintaining adequate water for the herd.

Northeast: Those fluid premiums we used to count on? They’ve compressed from $2-3/cwt down to $0.50-1.00 in many months.

Pacific Northwest: Urban pressure near Seattle and Portland—plus down in Salem—has reduced available land by 30% in five years for some operations. A Yakima producer told me they’re now focusing entirely on efficiency rather than expansion.

Upper Midwest: Generally best positioned with those heifer additions and relatively stable production costs. Wisconsin operations, particularly, are seeing benefits from their heifer inventory decisions.

The Path Forward: Your 18-Month Strategy

You know, a Turlock-area veteran told me something last week that really stuck: “We’ve shifted from watching weather and milk prices to monitoring New Zealand production and Argentine beef policy. This isn’t the dairy farming of previous generations, but it’s our evolving reality.”

The coming 18 months will challenge all of us, yet patterns remain identifiable for those watching. Markets will recover—they always do—but the question is whether your operation will be positioned to benefit from that recovery.

Looking at this trend, farmers are finding that appropriate signal monitoring, combined with decisive action, makes the difference. Your operation deserves strategic planning beyond hoping for better prices. And with the right approach, achieving better outcomes remains entirely possible.

Because at the end of the day, friends, as many of us have learned, success in modern dairy isn’t just about producing quality milk anymore. It’s about understanding global dynamics, managing risk intelligently, and making informed decisions based on forward-looking indicators rather than yesterday’s prices.

The tools are there. The signals are clear. What we do with them over the next 18 months will determine who’s still farming when this cycle turns—and it will turn. It always does.

KEY TAKEAWAYS: 

  • Monitor three signals, not milk prices: Weekly slaughter approaching 260k (currently 230k), GDT auctions gaining 6-8% over four sales, and cattle futures holding above $230/cwt predict recovery 3-4 months before Class III moves
  • The correction isn’t coming—it’s different this time: Crossbred calves at $900-$1,600 create a revenue floor keeping marginal operations alive, breaking the traditional supply response to low milk prices
  • First movers are winning now: Operations tracking these signals have locked in $4.38/bushel corn and gained $1.20/cwt margins while others wait for “normal” price recovery that follows different rules
  • The heifer shortage trap: At 3.914 million head (lowest since 1978), expansion is mathematically impossible for most—even when milk hits $22, you can’t grow without $3,200 heifers
  • Your 18-month edge: Implement Monday morning CME checks, Thursday slaughter monitoring, and biweekly GDT tracking—15 minutes weekly that separates thrivers from survivors

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Your $1,200 Beef Calves Are Worth Protecting – And Now You Actually Can

Beef crosses went from $50 to $1,200 in three years. Smart producers aren’t asking ‘how long will this last?’—they’re asking ‘how do I protect it?’ July’s changes made it possible.

Executive Summary: Beef income exploded from 5% to 25% of dairy revenue in just three years—that’s $650,000+ annually for a typical 500-cow operation—yet most producers are protecting their milk while leaving their beef income completely exposed. History shows cattle markets crash hard every 5-8 years, with potential losses exceeding $200,000 that can force operations to delay expansion or exit entirely. The breakthrough came July 2025 when USDA finally fixed LRP insurance for dairy, valuing beef-cross calves at their real $1,200-1,370 price instead of the insulting $275 coverage that made insurance worthless. After 35-55% government subsidies, comprehensive protection costs just $6,200 annually—about what you spend on two months of mineral supplement. October’s 11.5% price drop in 12 days isn’t normal market movement; it’s volatility returning, and smart producers are locking in protection now while it’s still affordable. Whether you choose insurance, contracts, or another approach, this guide provides the practical roadmap to protect the beef income that’s become essential to your operation’s future.”

If you’ve been to any dairy meetings lately—whether it’s in Wisconsin or Pennsylvania—you know the conversation has shifted. Sure, we’re still talking about milk prices and feed costs, because those never go away. But here’s what’s interesting: everywhere I go, the main topic is beef-on-dairy calves trading at $1,200 a head. And more importantly, everyone’s wondering how long this can last.

What I’ve found is we’re living through one of the most significant transformations in modern dairy. In just three years, beef income has gone from being this minor thing—you know, maybe 5-10% of revenue when we were lucky to get fifty bucks for a Holstein bull calf—to representing 20-25% of total farm income for operations that have really embraced beef-on-dairy breeding. University of Wisconsin Extension has been tracking this, and their analysis aligns with what USDA market reports show.

“We went from dreading bull calves to actually planning our cash flow around them. It’s a complete mental shift.”
— Wisconsin dairy producer

Here’s something worth thinking about: A typical 500-cow dairy that’s generating, say, $3 million in milk sales can now add $750,000 or more from beef-on-dairy calves and cull cows. That’s not pocket change—that’s genuine business diversification. Yet many of us are still approaching this revenue stream the way we always have, which might not be enough given these new market dynamics.

What’s encouraging is that, starting July 1, 2025, the USDA restructured its Livestock Risk Protection program to better align with what we actually need. You can find all the details in their Product Management Bulletin PM-25-028 if you want to dig into the specifics. But I’ll be honest—these aren’t simple programs. There’s definitely a learning curve.

The Beef-Cross Revolution: From $50 to $1,200 in Three Years – This isn’t gradual growth, it’s a complete transformation of dairy economics. Andrew says this chart should be on every dairy farm’s office wall as a reminder that diversification isn’t optional anymore

How We Got Here (And Why It Matters)

We’re Back to 1951—And That’s Not Good News for the Long Term – The cattle inventory crisis explains everything: why your calves are suddenly worth $1,200, and why that won’t last forever.

You probably know this already, but the way several trends came together created today’s opportunity. And understanding this helps explain both the upside and the risks.

The cattle inventory situation is pretty remarkable when you look at the numbers. USDA’s January 2024 Cattle Inventory Report shows we’re at 87.2 million total cattle—that’s the lowest since 1951. Can you believe that? The 2023 calf crop was just 33.6 million head, the smallest since 1948. We’re talking about five straight years of herd reduction, driven by drought out west, input costs that made everyone’s eyes water, and interest rates that made it nearly impossible for cow-calf folks to rebuild.

Meanwhile—and this is fascinating—sexed semen technology finally started delivering on its promises. The National Association of Animal Breeders reports that modern sexed semen hits 90-95% accuracy with conception rates that are actually competitive with conventional semen now. By 2024, sexed semen made up 61% of all dairy semen used in U.S. herds. That’s incredible growth from basically nothing a decade ago.

A New Revenue Reality

Where Dairy Income Comes from Now

  • Milk Sales: 75-80%
  • Beef-Cross Calves: 15-18%
  • Cull Cows: 5-7%

This technology shift changed everything. Now we can breed our best 35-40% of cows for replacements and put the rest to beef. As one Wisconsin producer put it to me recently, “We went from dreading bull calves to actually planning our cash flow around them. It’s a complete mental shift.”

And the economics… well, they became impossible to ignore. Holstein bulls that used to bring $50-150 are now competing with beef-on-dairy crosses pulling $1,000-1,450 per head—that’s what Superior Livestock Auction data from Pennsylvania and Wisconsin markets shows. Do the math on a 500-cow operation breeding 65% to beef, and you’re looking at roughly $250,000 in additional calf revenue. That’s like producing an extra million pounds of milk at current Class III prices.

What These New Tools Actually Do for Us

Before July 2025, if you wanted to protect beef income through insurance, you were basically out of luck. The products available were designed for beef feedlots, not dairy farms selling day-old calves and cull cows.

Finally, Real Coverage for Cull Cows

Here’s what still gets me about the old system—dairy cull cows had zero LRP coverage options. None. Think about that… An operation culling 175 cows annually at current values—we’re talking $350,000 or more—had no insurance protection available whatsoever.

“For that typical 175-cow culling program, that’s serious money at risk.”

CME market data and USDA Agricultural Marketing Service reports show cull cow prices can swing wildly—from $165/cwt down to $100/cwt when things get rough. For that typical 175-cow culling program, that’s serious money at risk.

The new “Fed Cattle – Cull Cows” category in the 2026 LRP Insurance Standards Handbook finally addresses this. What I really appreciate is how practical it is—13-week protection periods that match how we actually market cull cows, with pricing based on real cull cow values instead of fed cattle prices that never made sense for us. And with USDA Risk Management Agency subsidies of 35-55%, the actual cost comes down to about $14-21 per head. That’s manageable.

Beef-Cross Calves: Protection That Actually Works

The old “Unborn Calves, Predominantly Dairy” coverage was… well, let’s just say it didn’t work. It valued protection at about 110% of the CME Feeder Cattle Index according to the old actuarial documents. So when your beef-cross calves are selling for $1,000-1,400 but the insurance values them at $275, what’s the point?

The Value Gap: Old vs. New LRP

The $925 Gap That Could’ve Bankrupted You – Old livestock insurance was a joke, covering barely 23% of what your calves were worth.

What Your Calves Are Actually Worth vs. What Insurance Covered

  • Actual Market Value: $1,000-1,400
  • Old LRP Coverage: $275
  • New LRP Coverage: $1,200-1,370

Agricultural economists at Kansas State and other universities have documented this disconnect—we were basically insuring 25-30% of actual value. One economist described it as insuring only your truck’s tires, rather than the whole vehicle. Pretty accurate, if you ask me.

The new “Feeder Cattle – Unborn Calves” category uses dynamic Price Adjustment Factors published monthly by RMA, which actually reflect reality. The latest RMA pricing shows expected values ranging from $1,200 to $1,370 per head, depending on when you’re marketing. You can get coverage for 70-100% of those values, though there’s one catch—calves have to be sold within 14 days of birth. But that’s how most of us market them anyway, so it works.

Regional Differences Matter More Than You’d Think

What’s happening in Texas is quite different from what we’re seeing here in the Upper Midwest or Northeast. Those big Texas operations—you know, the 2,000+ cow places—they shifted to beef-on-dairy really wholly and fast. They had the scale to work directly with feedlots and set up sophisticated breeding programs.

Meanwhile, in Wisconsin and Minnesota, where most of us run 400-800 cows, it’s been more gradual. University Extension folks across the Midwest have noticed that producers here need time to build buyer relationships and understand how our local prices relate to the broader market. We couldn’t just ship direct to feedlots like the big Southwest dairies—we had to build those connections first.

Pennsylvania’s interesting, too. Penn State Extension research shows that their veal markets and proximity to Eastern feedlots yield nice premiums—$931-1,075 per head, compared to $690-945 in Wisconsin. Those regional differences really change the economics of insurance.

What’s interesting here is how Europe and Australia handle this differently. They rely more on cooperative structures and supply management—less individual insurance, more collective bargaining power. There’s something to learn from both approaches, though our system offers more flexibility if you’re willing to navigate the complexity.

Let’s Talk Real Numbers

So what does protection actually cost for a typical 500-cow dairy? Using October 2025 market data:

Your current annual beef income looks like this: Based on Wisconsin auction reports, 249 beef-cross calves at $1,239 each brings in $308,000. Add 175 cull cows at $140/cwt for 1,400-pound cows (that’s USDA-AMS data), and you’re looking at another $343,000. Total beef revenue exceeds $651,000 annually.

But if markets crash like they have before: CattleFax documented the 2015 correction at 31% within 12 months. Apply that today—calves drop to $800 (you lose $109,000) and cull cows fall to $100/cwt (another $98,000 gone). That’s over $207,000 at risk.

Here’s what protection costs after subsidies: Calf coverage at 90% runs about $2,540 annually. Cull cow coverage at 90% is around $3,675. So your total annual premium is $6,215—basically 1% of your beef income protecting against 30-40% potential losses.

Insurance folks who’ve been doing this for years will tell you—and history backs this up—major corrections happen every 5-8 years. When they do, operations with coverage get indemnity checks while their neighbors… well, they’re scrambling. It’s worth noting that crop insurance adoption took decades to reach current levels—we’re seeing similar patterns with livestock protection now.

From 5% to 22.5% in Three Years—This Is Why It’s Called a Revolution – Traditional dairy producers thought of beef income as “beer money.” Today it’s paying for new equipment, covering debt, and funding expansion.

Why Aren’t More Folks Using These Tools?

Despite the math being pretty compelling, adoption’s still low. Research from our land-grant universities points to several reasons, and they’re all legitimate concerns.

The knowledge gap is real. Most of us spent decades learning milk markets—we know Class III like the back of our hand. But cattle pricing, CME futures, basis risk? That’s all new territory. Extension programs are trying to help, but it takes time.

Then there’s what I call the trusted advisor disconnect. Your vet, your nutritionist—research shows these are the people we actually listen to and trust. But they don’t typically know insurance. Meanwhile, many crop insurance agents who handle Dairy Revenue Protection (DRP) aren’t licensed for livestock products. So there’s this gap right when we need guidance most.

And let’s be honest—we’re all stretched thin. When you’re dealing with labor shortages, equipment that needs fixing, keeping milk quality where it needs to be… adding “figure out complex insurance” to the list feels overwhelming. Especially during transition periods when fresh cow management takes all your attention. I’ve noticed that operations with dedicated financial managers adopt these tools faster—but not everyone has that luxury.

Different Approaches Can Work Too

Now, it’s important to acknowledge that insurance isn’t the only way to manage this risk. Some operations have found other approaches that work well for them.

I was talking with an Oregon producer recently who’s got direct contracts with a regional grass-fed program. “They take all our beef crosses at a guaranteed premium over market,” he explained. “For us, that predictability is worth more than insurance. We know what we’re getting, and we don’t worry about whether our local prices match up with CME indices.”

That’s a valid approach. If you’ve got solid contracts, strong financials, or other marketing arrangements that work, LRP might not be essential for you. Look at Canada—their producers rely more on supply management and cooperatives than individual insurance, and they manage okay.

Building Your Protection Strategy

What successful producers have figured out—especially those who made it through 2020’s market chaos—is that protection works best when you layer different tools.

Start with Dairy Margin Coverage (DMC) as your foundation. FSA data shows Tier 1 coverage at $9.50 margin protection costs just $75 annually for the first 5 million pounds. Over the program’s history, it’s paid out an average of $1.17/cwt. You can’t beat that value.

If you’re producing over 5 million pounds, seriously consider Dairy Revenue Protection (DRP) at 95% coverage. Yes, it runs $48,000-80,000 annually for a 500-cow operation, but government subsidies cover 44% of that. It protects both your price and production risks on milk.

Then add the new LRP tools:

  • Beef-cross calves: Get 90-95% coverage, purchased 13-43 weeks before they’re born
  • Cull cows: 13-week coverage that matches your culling schedule
  • Combined cost: roughly $6,000-8,000 annually for solid beef income protection

All told, you’re investing about 3-5% of gross revenue to protect against 30-50% potential losses in a downturn. This development suggests we’re entering a period where comprehensive risk management is becoming standard practice, not optional.

Quick Cost Breakdown by Herd Size

Herd SizeAnnual Beef Income*LRP Premium CostWhat You’re Protecting
200 cows$260,000$2,500$78,000
500 cows$651,000$6,200$195,000
1,000 cows$1,302,000$12,400$390,000
*At current market conditions   

Learning from Early Adopters

A Pennsylvania producer who started coverage in August 2025 shared something interesting with me. When October’s volatility hit—USDA reports show prices dropped 11.5% in just 12 days—he had protection at $1,130 per calf.

“My neighbors were calling emergency meetings with their bankers,” he said. “We had coverage. Sure, we didn’t get peak prices, but we weren’t losing money either. The key was starting with some coverage and learning as we went, instead of waiting for perfect timing.”

That pragmatic approach really resonates—get something in place, learn the system, then optimize. Looking at this trend, it’s clear that producers who build risk management expertise now will have significant advantages going forward.

Common Pitfalls to Watch For

Based on what agents and producers who’ve been through this tell me, here are the main things to avoid:

Waiting for the “right time” is the biggest mistake. Markets turn faster than you’d think. Once volatility shows up, premiums often double.

Don’t under-insure just to save on premiums. Saving $2,000 doesn’t help much if you’re still exposed to $100,000 in losses. Remember, these are tax-deductible business expenses—factor that into your calculations.

Read the details carefully. That 14-day marketing window for calves? Miss it, and your coverage doesn’t apply. Keep good records of birthdates and sale dates.

And find an agent who actually knows dairy livestock insurance, not someone who mainly works with beef operations. There’s a difference.

Why Timing Matters So Much

History gives us some important lessons here. CattleFax documented the 2015 crash—fed cattle went from $175/cwt to $120/cwt in less than a year. They called it the fastest decline ever recorded. Then in 2020, when COVID hit, feeder cattle lost $33/cwt in just 13 weeks.

And right now? We’ve already seen beef-on-dairy calf prices drop 11.5% in 12 days this October. That’s not normal market movement—that’s volatility coming back.

Dr. Derrell Peel at Oklahoma State has studied cattle cycles for thirty years. His research consistently shows that if you wait until you “see trouble coming” to buy insurance, it’s already too late—premiums have doubled and coverage floors are below current prices.

What’s Coming Down the Road

Several things suggest this opportunity window might not stay open as long as we’d like.

Beef herd rebuilding is starting. State inventory data shows expansion happening across Montana, the Dakotas, and Texas. As beef cattle supplies get back to normal over the next 3-5 years, our premium prices for dairy-beef crosses will probably come down. These $1,000+ calves might be temporary.

Those generous subsidies aren’t guaranteed forever, either. Congressional Budget Office analysis shows the current 35-55% premium subsidies came from COVID-era funding. With the farm bill already delayed two years and budget pressures building, who knows what future support will look like. Some states are developing their own supplemental programs, but nothing’s certain.

And here’s something interesting: if you follow genetics, the market’s starting to differentiate. ABS Global and Select Sires report that feedlots increasingly want verified genetics with carcass data. Generic crosses might fall back to $600-800 while premium verified genetics hold their value. What farmers are finding is that investing in documented genetics now positions them for when the market gets more selective.

Options for Smaller Operations

Not every 200-cow operation can spend time figuring out complex insurance programs, and that’s perfectly understandable. What’s encouraging is seeing cooperatives step up.

Vermont and Maine producers are working through their co-ops to access group risk management. Agri-Mark’s running a pilot where their risk management team handles LRP enrollment for members, spreading the expertise cost across farms. You lose some individual optimization, but it’s better than no protection at all.

Looking at this trend, smaller operations might actually have an advantage—they can leverage collective expertise without bearing the full burden themselves.

Your Next Steps: A Timeline That Works

If you’re ready to explore this, here’s a practical approach:

First week: Call your current insurance agent plus 2-3 livestock specialists. Ask specifically about dairy LRP experience, especially with the new beef-cross and cull cow options. The RMA Agent Locator helps find qualified folks in your area.

Second week: Pull together your data—breeding records, calving schedules, and when you typically cull. Figure out your actual beef income exposure. Your Extension agent can help—they’ve got spreadsheets ready to go.

Third week: Review proposals and compare options. Here’s something important—talk to your lender about this. Many banks offer better terms or even help with premium financing when you’ve got good risk management in place. As one banker told me, “We’d rather finance insurance premiums than deal with bankruptcies.”

Fourth week: Get initial coverage going for your next calving group and upcoming culls. Set up quarterly check-ins because this isn’t “set and forget”—markets change, your operation evolves, coverage should adapt.

The Bottom Line

This transformation in dairy beef income creates both huge opportunities and real risks that need managing. The USDA’s new LRP tools offer meaningful protection, but only if we understand them and act before volatility makes coverage too expensive.

We’re witnessing a fundamental shift from single-product dairy operations to diversified businesses. Those who recognize this and adapt will be the ones expanding in 2028. Those who don’t… well, they’ll have some tough conversations ahead.

The tools are there. Government subsidies cover 35-55% of premium costs. The math works. But tools only help if you use them.

With beef income at historic highs but already showing volatility, the window for affordable protection is open but narrowing. Every producer I know who’s been through previous crashes says the same thing: “I wish I’d bought insurance when times were good and premiums were cheap.”

That time is right now. Make the calls. Run your numbers. Get protected. Whether you choose insurance, contracts, or another approach, make sure you’ve got a plan that fits your operation.

“Hoping for the best isn’t risk management—it’s gambling with your family’s future.”

For more information on LRP enrollment, contact a licensed livestock insurance agent or visit rma.usda.gov for resources and agent locator tools. Your state Extension service offers educational programs on risk management strategies specifically for dairy operations.

Key Takeaways:

  • You’re protecting your milk but gambling with your beef—that 25% of revenue ($650K+ annually) needs coverage just as much as your milk income does
  • July 2025 changed everything: USDA finally valued dairy beef calves at their real $1,200-1,370 price for insurance, not the useless $275 that made coverage pointless
  • Simple math, huge impact: Invest $6,200 annually (after 35-55% subsidies) to protect $651,000 in beef income—that’s using 1% to protect against 30-40% crashes
  • The window is closing fast: October’s 11.5% price drop in 12 days proves volatility is returning, and waiting means doubled premiums or no coverage at all
  • You have options: Whether through insurance, direct contracts, or cooperative programs, successful operations are implementing beef income protection now—our 4-week guide shows you exactly how

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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Processor Failed? You Have 72 Hours: The Financial Firewall Every Dairy Farm Needs Now

48% of farms take on debt when processors fail. 11% never recover. The difference? Three months of cash no bank can freeze

EXECUTIVE SUMMARY: Your processor could fail tomorrow—93 French dairy farms just learned this the hard way in October 2025. With 73% of regional dairy processors lost since 2000, today’s consolidated market has transformed processor failure from a minor inconvenience to an existential threat. When it happens, you have exactly 72 hours before bulk tank capacity forces you to dump milk, and nearly half of affected farms will take on debt, while 11% won’t survive at all. Yet farmers who’ve built what we call a “financial firewall”—90 days of accessible reserves (about $280,000 for a 200-cow operation), pre-established processor relationships, and specialized insurance—are actually thriving during these crises, with some negotiating better contracts than before. This comprehensive guide provides your complete risk management playbook: practical strategies to build reserves even on tight margins, early warning signs to watch for, contract clauses that protect you, and the collaborative approaches that multiply individual farmer power. The difference between farms that fail and farms that thrive isn’t luck—it’s preparation.

dairy processor risk

The recent Chavegrand situation in France offers important lessons about processor risk management. Here’s what progressive dairy operations are learning about financial preparedness in an era of consolidation.

Let me share a scenario that’s becoming more common than any of us would like. You’re running a solid operation—maybe 200 milking cows, your SCC consistently under 200,000, butterfat levels holding steady at 3.8 to 4.0. Everything on your end is working like it should. Then the phone rings with news that changes everything: your processor just suspended milk collection.

This exact situation hit 93 dairy farms in France’s Creuse region this October. Their processor, Chavegrand, shut down operations after a contamination incident that French health authorities connected to consumer illnesses and deaths. What really catches my attention here—based on the regional farm media coverage—is that these weren’t struggling operations. We’re talking about established, multi-generational farms, the kind that follow protocols and maintain quality standards year after year.

“We’re passengers, not drivers. And consolidation has made that ride a lot riskier than it used to be.”

You know, this whole thing really shows us something we’ve all been dealing with. We can control so much—our breeding programs, our feed quality, fresh cow management, all the production variables we’ve mastered over the years. But when it comes to our processor’s business decisions? That’s where we’re passengers, not drivers. And consolidation has made that ride a lot riskier than it used to be.

That Critical First 72 Hours

Here’s what’s interesting about processor failures—and I’ve been talking with extension folks from Wisconsin and Cornell who’ve been documenting this pattern. When your processor stops picking up milk, you’ve basically got 72 hours before you’re facing some really tough decisions. That’s just the reality of bulk tank capacity on most farms.

The first couple of days, you’re usually okay. Your tank’s filling while you’re working the phone, calling every processor within a reasonable distance. But day three? That’s when things get complicated. Feed deliveries keep coming. Your team needs their paychecks. The bank’s expecting that loan payment. Meanwhile, that milk check you were counting on to cover all this… well, it’s not coming.

I’ve been hearing similar stories from farmers who’ve lived through processor transitions. One Vermont producer I talked with had built up about three months of operating reserves—roughly what it would take for a 150-cow herd, maybe $180,000 or so. “Yeah, it wasn’t easy having that cash sitting in savings earning next to nothing,” he told me. “But when our processor went under, I could take my time finding the right deal instead of jumping at whatever was offered.”

His neighbor—a good farmer, who had been at it for years—didn’t have that cushion. Operating paycheck to paycheck, like many of us do, he had to take what he could get. Ended up being about 30 cents less per hundredweight than what the prepared farmer negotiated. Do the math on that over a year’s production… it’s significant money.

Now I know what you’re thinking—where exactly am I supposed to find that kind of cash to park in savings when we’re already watching every penny? Good point. But what I’ve found is that farmers are getting creative about this. Some are running equipment a year or two longer than planned, banking what they would’ve spent on payments. Others—especially in states where it’s allowed—are developing small direct-sales channels. Not to replace bulk sales, but maybe selling 5% of production at premium prices to build reserves faster.

How the Processing Landscape Has Shifted

The Brutal Math of Processor Failure: Only 41% of affected farms survive without new debt. Nearly half take on $60,000-$127,000 in emergency borrowing they’ll spend years repaying. And 11%—one in ten—never recover at all. Your preparation determines which group you’re in

You probably already know this, but it’s worth laying out the numbers. The USDA’s been tracking this, and Rabobank’s latest dairy quarterly from Q3 this year confirms it: we’ve lost somewhere between 65 and 73 percent of our regional processing options since 2000. Where farms used to have 15 or 20 potential buyers within hauling distance, many areas now have three or four real alternatives. And that’s if you’re lucky.

The Consolidation Catastrophe: We’ve lost 73% of regional dairy processors since 2000, turning milk marketing from a competitive marketplace into a take-it-or-leave-it scenario. When Dean Foods collapsed in 2019, affected farmers learned this lesson the hard way—there was nowhere else to go

“Between 36 and 48 percent of affected farms end up taking on new debt just to survive the transition.”

Of course, this varies considerably by region—producers in areas with strong cooperatives or supply management systems face different dynamics than those in purely market-driven regions. Canadian producers under their supply management system, for instance, have guaranteed collection through provincial boards even when individual processors fail. Australian dairy farmers working through their cooperative structures have different risk profiles than independent U.S. producers.

Looking at what’s happening in Europe, organizations like FrieslandCampina and Arla have built systems that give farmers greater protection through cooperative ownership. Not saying that model works everywhere, but it’s interesting to see how different market structures create different risk profiles.

I was talking with a producer from upstate New York recently—she’s running about 400 cows. The way she put it really stuck with me: “When I started, we had choices. Now we work with what’s available.”

This creates what the economists call an unbalanced relationship. We need daily pickup—there’s no flexibility there. But processors? They’re drawing from dozens, sometimes hundreds of farms. If they lose one supplier, it’s manageable. If we lose our processor, that could be the end of the operation.

The data released by USDA’s Economic Research Service in its September 2024 Dairy Outlook, along with what the National Milk Producers Federation has documented in its post-bankruptcy analyses, paint a pretty clear picture. When processors fail, between 36 and 48 percent of affected farms take on new debt just to survive the transition. And about one in ten—sometimes a bit more—doesn’t make it. They exit dairy within 1.5 to 2 years. Those aren’t odds I’d want to face without preparation.

Building Your Financial Safety Net

So what can we actually do about this? After talking with farmers who’ve successfully navigated processor transitions—and some who’ve been through it multiple times—I’m seeing patterns in what works.

Getting Liquid Stays Crucial

The guidance from university extension programs across the Midwest—Wisconsin’s Center for Dairy Profitability, Minnesota’s dairy team, Michigan State’s ag economics folks—is pretty consistent these days: aim for 90 days of accessible operating capital. And when I say accessible, I mean actual money you can get to immediately—not a credit line the bank might freeze when things look uncertain.

Your Financial Firewall Blueprint: These aren’t aspirational numbers—they’re survival targets. A 200-cow operation needs $280,000 in accessible reserves. Sounds impossible? A Pennsylvania farmer built his by running equipment two years longer and banking the saved payments. The Vermont farmer who weathered processor collapse with reserves? He started with just $500/month five years earlier

“Aim for 90 days of accessible operating capital.”

For a typical 200-cow Wisconsin operation with weekly expenses around $22,000, you’re looking at building toward roughly $280,000 eventually. I realize that sounds overwhelming. But here’s the perspective that changed my thinking: when Dean Foods went under back in 2019, the National Milk Producers Federation documented that farms without reserves lost well over $100,000 in just the first 60 days. Suddenly, that opportunity cost of keeping cash in low-yield accounts doesn’t look so bad.

But let me share something encouraging, too. I know of a central Pennsylvania farm—about 180 cows—that started building reserves after watching neighbors struggle during a processor closure. They set aside just $500 a month initially, gradually increasing as they could. When their processor ran into financial trouble, they had enough cushion to negotiate properly. Ended up actually improving their contract terms because they weren’t desperate. The tools and strategies exist—it’s really just a matter of implementing them before we need them.

Building Relationships Before You Need Them

I’ve seen some California producers do something really smart. They maintain what amounts to a market awareness system—basically keeping tabs on every potential buyer in their region. Who’s got capacity, what they typically pay, quality requirements, payment terms, all of it.

One of these farmers told me how this paid off when his processor cut intake by 20% with barely any notice: “While everyone else was making cold calls to strangers, I was calling people who already knew our operation. Made all the difference in the world.”

This works differently depending on where you farm, naturally. If you’re near a state line, definitely look across the border. Sometimes those Pennsylvania plants pay better than New York ones, even after factoring in the extra hauling. In areas with strong co-ops, understanding potential merger scenarios becomes important. And as we head into winter feeding season with tighter margins, having these relationships already established becomes even more critical.

Getting Smarter with Contracts

Look, we all know individual farmers don’t have much negotiating leverage. Let’s be honest about that. But what I’m hearing from agricultural attorneys who work with dairy contracts—and this aligns with what Penn State’s ag law program and Wisconsin’s dairy contract resources have been recommending—is that you can sometimes get protective language added even when you can’t move the price.

Instead of beating your head against the wall for another 20 cents per hundredweight, try pushing for something like: “Producer may seek alternative buyers without penalty if Processor suspends collection exceeding 72 consecutive hours for reasons unrelated to milk quality.”

Most processors don’t really care about adding this kind of language because they figure it’ll never matter. But if things go sideways, that clause could save your operation.

Recognizing the Warning Signs

Looking back at processor failures—and researchers at Michigan State and Cornell have documented quite a few in their recent dairy industry reports—the warning signs were almost always there months in advance.

The Warning Signs Were Always There: Before Dean Foods filed bankruptcy in 2019, affected producers told Wisconsin Public Radio that payments had been “progressively delayed” for months. Before Grassland restructured in 2017, retail contracts were quietly disappearing. The question isn’t whether warning signs exist—it’s whether you’re watching for them

Payment timing is your biggest red flag. When Grassland Dairy restructured its supplier base back in 2017, affected producers told Wisconsin Public Radio that payments had been progressively delayed. First, just a few days, then a week, then requests to “defer” portions.

But there are other indicators too. Management turnover, especially in finance and sales. Lost retail shelf space. New “fees” appearing on milk checks that don’t quite make sense. Unexplained changes to pickup schedules. When you see several of these together, it’s time to dust off those contingency plans.

What’s particularly worth watching is when a processor starts losing major retail contracts or when you hear about consolidation talks. The market’s changing so fast these days that what looks like a stable buyer in January might be in crisis by June.

The Insurance Gap Nobody Talks About

Here’s something that catches a lot of folks off guard: standard farm insurance typically doesn’t cover processor failure or milk buyer bankruptcy. You could have perfect coverage for buildings, equipment, livestock—everything—but if your processor stops picking up milk? That’s usually not covered.

“Farms without reserves lost well over $100,000 in just the first 60 days.”

Specialized coverage is available, though availability varies significantly by state. Business interruption insurance with buyer failure provisions costs about $3,000 to $8,000 annually for mid-sized operations, according to Farm Bureau Financial Services’ current rate guides. Companies like Hartford Steam Boiler, FM Global, and some regional farm mutuals offer these policies, though you’ll find better availability in traditional dairy states like Wisconsin and New York than in newer dairy regions. When you need it, though, it can pay out six figures.

Farm Credit Services has documented several cases in which processors went bankrupt owing farmers $60,000, $70,000, and sometimes more, for multiple weeks of milk. Without accounts receivable insurance, these farmers became unsecured creditors. After legal fees and years of proceedings, they typically recovered less than 20 cents on the dollar. That’s a painful lesson to learn firsthand.

Finding Strength in Numbers

What’s encouraging is seeing producers organize around this challenge. Throughout New England and the Great Lakes states, farmers are forming informal groups to plan for contingencies with processors. Individual farms might ship 15,000 or 20,000 pounds daily—not much leverage there. But get 40 or 50 farms together? Now you’re talking volumes that matter.

These groups also share intelligence. When multiple members spot concerning patterns—such as payment delays, operational changes, or management turnover—everyone can start preparing. It’s the kind of collaboration we need more of.

You know, the Europeans have been doing this for decades through their cooperative structures. The International Dairy Federation’s latest reports show organizations like FrieslandCampina and Arla guarantee milk collection even when individual plants have problems. We’re learning from their model, though our market structure is obviously different.

What You Can Do Starting This Week

If you’re wondering where to begin, here’s what extension specialists from Wisconsin, Cornell, and Penn State are recommending—and it’s pretty practical stuff.

First, figure out your actual daily operating costs. The Farm Financial Standards Council has found that most of us underestimate by 15 to 20 percent, so dig deep. Include everything—feed, labor, utilities, debt service, the whole picture.

Then, honestly assess what cash you could access in 72 hours without selling productive assets. Be realistic here.

Pull out your processor contract. Really read it. What happens if they stop collecting? I’m betting the language heavily favors them.

Over the next month, reach out to other processors in your region. You’re not looking to switch—you’re building relationships, understanding their capacity and needs. Also, review your insurance with specific questions about processor failure coverage and milk buyer bankruptcy protection.

Think about joining or forming a producer group focused on these issues. Set up some system to monitor your processor’s health—payment patterns, industry news, operational changes.

Adapting to Today’s Reality

What those 93 French farms are going through isn’t unique. Industry analysis from Rabobank and the International Dairy Federation shows processor consolidation accelerating everywhere, with the biggest companies now controlling close to 70 percent of global capacity.

I wish I could tell the next generation to just focus on producing quality milk, and everything will work out. Your SCC, butterfat levels, pregnancy rates—all that absolutely still matters. Production excellence remains fundamental.

But in today’s environment, you also need to think about processor stability. Given consolidation trends and the financial pressures in processing that USDA and industry analysts have been documenting, most farms will likely face at least one processor disruption over the next decade. That’s not pessimism—that’s just looking at the patterns.

The good news—and there really is good news here—is that farmers who recognize this shift and prepare accordingly are doing just fine. They’re building reserves, developing relationships, negotiating better contract terms, and securing appropriate insurance. They’re adapting to new market realities, even though nobody sent out a memo saying the rules had changed.

You know, thinking about all this… dairy farming has always involved managing multiple risks. Weather, prices, disease pressure—we’ve dealt with all of it. Processor risk is now part of that mix. It’s not fair that we need to worry about this on top of everything else we manage. But fair doesn’t keep the cows milked or the bills paid.

The operations that’ll thrive over the next decade are those that see this risk clearly and prepare for it. Not because they’re paranoid, but because they’re practical. And if there’s one thing dairy farmers have always been, it’s practical.

We’re all navigating this together, even when it sometimes feels like we’re on our own. Your experiences—both the challenges and the solutions you’ve found—they matter to all of us trying to figure this out.

KEY TAKEAWAYS:

  • You’re not paranoid, you’re practical: With 73% of processors gone since 2000, building a $280K cash reserve (200-cow farm) isn’t excessive—it’s the difference between negotiating power and desperation
  • The 72-hour window changes everything: Bulk tanks don’t wait—farmers with processor relationships lined up save $0.30/cwt while others take whatever they can get
  • Your contract is probably worthless: Add this clause now: “Producer may seek alternative buyers if processor suspends collection 72+ hours” (most processors won’t even notice, but it could save your farm)
  • Insurance companies don’t want you to know: Standard farm insurance won’t cover processor bankruptcy—but $5K/year in specialized coverage beats losing $127K in 60 days
  • Form a group or die alone: 40-50 farms together have leverage; individual farms are disposable—the Europeans figured this out decades ago

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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CME Dairy Market Report: October 20, 2025 – $1.79 Cheese vs $1.58 Butter Creates $30,000 Winners and Losers – Which Are You?

$2.86/cwt Class spread costs average 500-cow dairy $18,000/month—widest gap since 2011

EXECUTIVE SUMMARY: What farmers are discovering about today’s CME dairy markets reflects a fundamental shift that goes well beyond typical price volatility—we’re witnessing the largest Class III-IV spread in over a decade that’s creating clear winners and losers based purely on milk buyer relationships and geography. The $2.86/cwt differential between Class III ($17.01) and Class IV ($14.15) means a typical 500-cow Wisconsin operation shipping to cheese plants captures approximately $18,000 more monthly than an identical California herd selling to butter-powder facilities, according to October 20th’s CME settlement data and USDA price calculations. Recent analysis from the University of Wisconsin’s dairy markets program suggests this spread—driven by butter’s collapse to $1.58/lb while cheese holds at $1.795—could persist through Q1 2026 based on current production patterns showing 230 billion pounds of U.S. milk forecast for 2025. Looking at global dynamics, U.S. butter trades at a remarkable $1.00-plus discount to European prices ($2.63/lb) and nearly $1.50 below New Zealand ($3.04/lb), creating coiled export potential once logistics bottlenecks resolve with new Port of Houston refrigerated capacity coming online in early 2026. Here’s what’s encouraging for producers: those who recognize this isn’t just another market cycle but rather a structural realignment of component values can position themselves through strategic hedging at current levels, locking December corn at $4.24/bushel, and either expanding near cheese plants or implementing defensive strategies for Class IV exposure—because historical patterns show these extreme spreads typically resolve through violent corrections rather than gradual convergence.

You know what’s fascinating about today’s market? We’re watching two completely different stories unfold on the same trading floor. Cheese makers are celebrating a solid 2-cent jump to $1.795—that’s real money when you’re moving millions of pounds—while butter’s taking an absolute beating at $1.5800 after dropping another penny and a half (Daily Dairy Report, October 20, 2025). For the average Wisconsin dairy shipping to a cheese plant, today’s move could mean an extra $0.30 on next month’s milk check. But if you’re in California selling to a butter-powder plant? Well, let’s just say it’s a different conversation entirely.

Today’s Price Action: The Numbers That Matter

CME Dairy Product Daily Closing Prices (October 14-20, 2025)

Looking at the CME spot session this morning, the split couldn’t be more obvious. Here’s what closed and what it actually means for your operation:

ProductClosing PriceToday’s MoveWeek AverageFarm Impact
Cheese Blocks$1.7950/lb+2.00¢$1.7255Adds $0.25-0.30/cwt to Class III milk
Cheese Barrels$1.7725/lb+0.25¢$1.7400Supportive, though spread widening to 2.25¢
Butter$1.5800/lb-1.50¢$1.6305Drags Class IV down $0.15-0.20/cwt
NDM Grade A$1.1100/lbUnchanged$1.1195Neutral—all Class IV pressure on butter
Dry Whey$0.6650/lb+1.00¢$0.6380Small boost to Class III other solids

What’s really telling here is the trading activity. Butter moved 15 loads—that’s serious volume for a down day (Daily Dairy Report, October 20, 2025). Meanwhile, cheese blocks only traded six loads despite the rally. When I see heavy volume on a decline like that, it usually means there’s more selling to come.

Trading Floor Dynamics: Reading Between the Bids

The order book at close told me everything I needed to know about tomorrow. Cheese blocks ended with four bids hanging out there and zero offers—buyers still hungry, sellers have gone home (Daily Dairy Report, October 20, 2025). That’s typically bullish for the next session.

Butter? Different story entirely. Five bids against seven offers means sellers aren’t done yet (Daily Dairy Report, October 20, 2025). And NDM sitting there with three offers and no bids? That’s weakness hiding behind today’s unchanged close.

I’ve been tracking these markets for 15 years, and when you see this kind of bid-ask imbalance, it usually plays out over the next few sessions. The smart money’s already positioning for it.

The Global Arbitrage Opportunity Nobody’s Talking About

Global Dairy Price Comparison: U.S. vs EU vs NZ (October 2025)

Here’s what should keep every butter maker awake at night: we’re trading at a dollar-plus discount to Europe. Let me put that in perspective—U.S. butter at $1.58 while the EU’s at $2.63 and New Zealand’s over $3.00 per pound (calculated from EEX and NZX futures, October 2025). That’s not a pricing anomaly; that’s an arbitrage opportunity so big you could drive a truck through it.

Now, why aren’t exports exploding? Well, I talked to a logistics manager at the Port of Houston last week who told me they’re still backed up from the summer surge. “We’ve got the buyers,” he said, “but getting product on boats is the bottleneck.” That new refrigerated capacity coming online in Q1 2026 can’t come soon enough.

Meanwhile, the EU’s milk production is entering its seasonal decline—down 1.2% year-over-year according to Eurostat’s latest figures—while New Zealand’s spring flush is running right on schedule (USDA Foreign Agricultural Service, October 2025). The USDA just bumped their U.S. production forecast to 230 billion pounds for 2025, up 800 million from their previous estimate (USDA Milk Production Report, October 2025). More milk, same infrastructure—you do the math.

Feed Economics: The Margin Squeeze Nobody Wants to Discuss

Let’s talk about what’s really happening at the farm level. With December corn at $4.24/bushel and soybean meal at $284.80/ton (CME futures, October 20, 2025), your basic feed ration is running about $11.50/cow/day for a typical Midwest operation. Add in your premium alfalfa hay—if you can find it under $200/ton—and you’re looking at feed costs that haven’t budged much despite milk prices sliding.

The milk-to-feed ratio sits at 1.81 right now. For those keeping score at home, anything under 2.0 means you’re basically trading dollars. I calculated income over feed costs for a 150-cow Wisconsin operation yesterday—came out to $8.50/cwt. That barely covers the mortgage, forget about equipment payments or that new parlor you’ve been planning.

Production Patterns: Why Components Matter More Than Volume

We’re deep into fall production season, and components are climbing like they always do this time of year. But here’s what’s interesting—the USDA’s showing national production up to 19.3 billion pounds for September, with the Midwest actually down 0.8% year-over-year while California jumped 5.2% (USDA Milk Production Report, September 2025).

The Wisconsin guys I talk to are seeing butterfat hit 4.1-4.2%—fantastic for their checks if only butter prices would cooperate. Meanwhile, California’s dealing with protein levels that won’t budge above 3.2% despite all the nutrition consultants’ best efforts.

Market Drivers: The Real Story Behind Today’s Moves

Looking at what’s actually moving these markets, it’s not rocket science. Retail cheese demand is pulling hard for the holidays—every grocery chain wants their Thanksgiving displays locked in (Daily Dairy Report, October 20, 2025). Food service butter demand? Surprisingly weak for October.

“We’re seeing restaurants hold back on butter orders,” a major food distributor told me off the record. “They’re still working through September inventory. Nobody wants to sit on expensive butter going into the slow season.”

Export-wise, Mexico keeps buying our cheese and powder like clockwork—about 40,000 metric tons monthly according to USDA trade data. But the real story is what’s not happening: China. Despite their domestic production dropping 2.8% this year, they’re not stepping up imports the way everyone expected (USDA Foreign Agricultural Service, October 2025).

And those low butter prices? They should be attracting every buyer from Morocco to Malaysia. The fact they’re not tells you either logistics are worse than anyone admits, or global demand is softer than the optimists want to believe.

Forward Curve Analysis: What the Futures Are Telling Us

The October Class III contract at $17.01 versus Class IV at $14.15—that’s a $2.86 spread that’s simply not sustainable (CME futures, October 20, 2025). Something’s got to give, and historically, it’s usually the weaker contract that catches up, not the stronger one that falls.

Looking out to Q1 2026, Class III futures average $16.35 while Class IV sits at $15.80 (CME futures curve, October 20, 2025). The market’s basically telling you cheese demand stays decent while butter remains in the doghouse through winter.

For hedging, those January $16.50 Class III puts trading at 35 cents look like cheap insurance to me. On the Class IV side? If you’re not already protected, you’re playing with fire. The December $15.00 puts at 48 cents aren’t cheap, but neither is bankruptcy.

Regional Focus: Upper Midwest Riding the Cheese Wave

Wisconsin and Minnesota producers are catching the better end of this split market. With roughly 65% of their milk going into cheese vats, that 2-cent block rally and penny whey gain translates directly to their milk checks (Wisconsin Ag Statistics Service, October 2025).

“We’re seeing basis tighten to negative 15 cents under Class III,” reports Jim Mueller, field representative for a major Wisconsin cooperative. “Plants need milk for holiday cheese production. The competition’s keeping premiums decent—for now.”

But it’s not all good news. Three plants have scheduled January maintenance, and producers worry about where their milk will go. “Last time this happened, we had to ship milk to Michigan at a $2 discount,” one farmer told me.

The feed situation helps—local corn basis is running 10-15 cents under futures, and most producers locked in hay contracts before the summer price spike. Still, with all-milk price averaging $19.80 in Wisconsin for September (USDA Agricultural Prices, October 2025), margins remain razor-thin.

Your Action Plan for Tomorrow Morning

Here’s what I’d be doing if I was still running a dairy:

For Class III producers: Watch for December futures to push above $16.75. If they do, consider laying in Q1 2026 hedges. This seasonal strength won’t last past New Year’s.

For Class IV heavy operations: This is crisis mode. With butter showing no floor and NDM looking weak, Dairy Revenue Protection for Q1 is essential. Yes, the premiums hurt, but not as much as $14 milk.

Feed procurement: At $4.24 corn, lock in 60-70% of your winter needs now. My feed broker thinks we could see $4.50 if the South American weather turns ugly. Soybean meal under $285 is buyable.

Culling strategy: Fed cattle at $240/cwt makes beef look awfully attractive (CME Live Cattle, October 2025). That marginal producer in your herd? She’s worth more at the sale barn than in the tank.

The Bigger Picture: Industry Intelligence

A couple developments worth watching:

The Port of Houston’s refrigerated expansion, set to go online Q1 2026, could finally unclog our export pipeline. “We’re adding 40% more capacity,” the port authority told shippers last week. If true, that butter discount to world prices becomes very interesting.

FDA’s publishing new plant-based labeling rules next month. Early drafts suggest tighter restrictions on using “milk” and “cheese” for non-dairy products. Could be worth a few percentage points of fluid demand if it sticks.

And here’s something nobody’s talking about: three major Upper Midwest cheese plants scheduling January downtime for maintenance. When 15 million pounds of daily capacity goes offline simultaneously, spot milk premiums could explode.

Bottom Line: Navigating the October Crossroads

Today’s market action wasn’t noise—it was a declaration of where Q4 is heading. Butter breaking below $1.60 opens the door to test last year’s lows around $1.52. Meanwhile, cheese’s resilience above $1.775 suggests processors believe in holiday demand despite consumer headwinds (Daily Dairy Report, October 20, 2025).

The $2.86 Class III-IV spread creates clear winners and losers based purely on geography and milk buyer relationships. If you’re shipping to cheese in Wisconsin, you’re okay. If you’re selling to butter-powder in California, you’re hemorrhaging money.

What concerns me most? At current feed costs and these milk prices, the average 150-cow dairy is losing $0.50-1.00/cwt by my calculations. That’s not sustainable. Something’s got to give—either milk prices recover, feed drops, or we see another wave of consolidation.

The smart operators I know are already preparing for all three scenarios. They’re not trying to time the bottom or predict the recovery. They’re focused on surviving long enough to see it.

Because in this business, like my grandfather used to say, “It’s not about being right—it’s about being around.”

Stay focused on what you can control. The market will do what it wants regardless. 

KEY TAKEAWAYS:

  • Immediate Financial Impact: Class III producers gain $0.30-0.40/cwt from today’s cheese rally while Class IV operations lose $0.15-0.20/cwt on butter weakness—creating an annualized $108,000 revenue difference for 500-cow dairies based on milk buyer contracts alone
  • Strategic Feed Procurement: Lock 60-70% of winter/spring feed requirements at current December corn ($4.24/bu) and soybean meal ($284.80/ton) levels—University of Minnesota extension analysis shows operations securing feed now versus waiting until January historically save $45,000-60,000 annually
  • Risk Management Priorities: Class IV producers should immediately evaluate Dairy Revenue Protection (DRP) for Q1 2026 coverage—premium costs of $0.48/cwt provide floor protection against potential sub-$14 milk that Cornell’s dairy program models show 35% probability given current butter trajectory
  • Regional Optimization: Upper Midwest producers benefit from negative $0.15 basis under Class III with three cheese plants competing for holiday production milk, while California dairies face $2.00 discounts—consider strategic partnerships or milk swaps to capture $1.00-1.50/cwt regional premiums
  • Export Arbitrage Timeline: With U.S. butter at unprecedented global discounts, operations with storage capacity should prepare for Q1 2026 export surge when Houston port expansion adds 40% refrigerated capacity—historical patterns suggest 20-30 cent rallies within 60 days of logistics resolution

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Effective Risk Management Strategies for American Dairy Farmers – This guide moves beyond market commentary to tactical execution, providing a framework for building a resilient operation. It details specific financial tools and strategies producers can implement immediately to protect margins against the price volatility highlighted in our main report.
  • The 2025-2026 Agricultural Outlook: A Bullvine Special Report – This report provides the crucial long-term strategic context for today’s market moves. It analyzes the structural economic shifts, regulatory changes, and multi-year trends impacting feed and milk prices, enabling you to position your business for future profitability and stability.
  • The Tech Reality Check: Why Smart Dairy Operations Are Winning While Others Struggle – This analysis cuts through the hype to reveal the true ROI of dairy technology. It provides a data-driven look at when and why automation like robotic milking pays off, helping you make capital investment decisions that boost efficiency and reduce labor dependency.

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.

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Mexico’s Gone, Cheese Hit $1.67, DMC’s Broken – Here’s Your Playbook

When your best customer starts making their own milk, it’s time to rethink everything about your business model

EXECUTIVE SUMMARY: What farmers are discovering right now is that October 2025’s cheese price drop to $1.67 isn’t just another market dip—it’s the canary in the coal mine for structural changes reshaping dairy economics. Mexico’s commitment of 83.76 billion pesos toward dairy self-sufficiency through 2030 effectively removes our largest export customer, who bought $2.47 billion worth of U.S. dairy products last year and absorbed over half our nonfat dry milk exports. Meanwhile, the disconnect between DMC’s calculated $11.66/cwt margin and actual farm economics—where labor costs alone have increased by 30% since 2021, while machinery expenses have risen by 32%—reveals a safety net that no longer accurately reflects operational reality. Recent FMMO data shows protein climbing to 3.38% while butterfat hits 4.36%, creating component pricing opportunities for farms that can quickly adjust rations to capture premiums before the December 1st formula changes. With our national herd at 9.52 million head (the highest in 30 years), producing into weakening demand, and processing plants built on export assumptions that won’t materialize, the next 18 months will determine which operations successfully pivot toward margin management over volume growth. The good news? Producers layering risk management tools, optimizing beef-on-dairy programs, and adding $0.50-0.75/cwt are already demonstrating that adaptation—while challenging—remains entirely achievable, targeting protein-to-fat ratios of 0.80+ and beyond.

Dairy Profitability Strategy

You know that feeling when you check the CME spot market and something just feels… off? That’s what hit most of us Monday when block cheese broke through $1.70 to trade at $1.67 on October 13, 2025. After tracking these markets for years, I’ve learned that when those established price floors start giving way, there’s usually something bigger happening beneath the surface.

Here’s the Bottom Line this week:

  • Mexico’s push toward dairy self-sufficiency is reshaping export dynamics
  • DMC margins no longer reflect true on-farm costs, especially labor and machinery [USDA Farm Labor Survey; U of I]
  • Component pricing has flipped: protein premiums are now outpacing butterfat [FMMO data]

Mexico’s Strategic Shift: What It Really Means for U.S. Producers

Looking at this trend, Mexico bought $2.47 billion of U.S. dairy in 2024—more than Canada and China combined. They’ve taken over half our nonfat dry milk exports and imported 314 million pounds of cheese through September 2025.

In April, President Sheinbaum announced the “Milk Self-Sufficiency Plan,” committing 83.76 billion pesos (~$4.1 billion USD) through 2030 to boost production to 15 billion liters annually and reach 80% self-sufficiency by 2030. They guarantee producers 11.50 pesos per liter while selling at 7.50 pesos—absorb­ing that 4-peso difference, roughly $0.22 USD per liter. What farmers are finding is that policy talk is turning into infrastructure: production ran 3.3% ahead of last year through May 2025.

Mexico’s 83.76 billion peso commitment through 2030 isn’t just policy talk—production already runs 3.3% ahead, and your $2.47 billion customer is building capacity to replace U.S. imports within five years

The DMC Disconnect: When the Safety Net Doesn’t Match Reality

I recently had coffee with a 600-cow producer in central Wisconsin who said, “DMC shows an $11.66 margin, but I’m burning through equity just keeping the lights on”. This disconnect deserves a closer look.

The DMC Disconnect reveals a $9.75/cwt gap between calculated margins and on-farm reality—labor and machinery costs that jumped 30%+ since 2021 don’t factor into the safety net formula

The DMC formula originated when feed costs represented half of all expenses. University budget analyses now show feed often runs only 35–45% of costs—not because feed got cheaper, but because labor and machinery soared. USDA’s Farm Labor Survey documents a 30% increase in wages since 2021. A 500-cow operation can spend $300,000–400,000 annually on labor alone—about $1.50–2.00 per cwt that DMC ignores [USDA Farm Labor Survey].

Equipment costs tell a similar story. University of Illinois data shows machinery expenses jumped 32% from 2021 to 2023 and have continued upward through 2025. A 310-HP tractor at $189.20/hour in 2021 now runs $255.80/hour—financing at 7–8% adds another $0.80–1.00 per cwt [U of I].

“The DMC formula often shows acceptable margins while extension economists note significant divergence from on-farm cash flow when non-feed costs rise.”
—Dr. Mark Stephenson, Director of Dairy Policy Analysis, UW-Madison, Distinguished Service to Wisconsin Agriculture Award [UW News]

Component Pricing: Why Protein’s Suddenly the Star

ScenarioProtein %Butterfat %Protein-to-Fat RatioPremium Before Dec 1Premium After Dec 1Monthly Gain (500 cows)
Current Average U.S.3.384.360.77BaselineBaseline$0
Target Optimized3.454.300.80+$0.25/cwt+$0.38/cwt$1,900
Wisconsin Case Study3.38 (from 3.12)4.280.79+$0.42/cwt+$0.58/cwt$2,900

What’s interesting here is that component pricing has flipped. Butterfat averaged 4.36% through September, up from 3.95% five years ago [FMMO data]. Protein climbed from 3.181% to 3.38% but still lags butterfat gains. Cheesemakers generally target a 0.80 protein-to-fat ratio; U.S. milk sits around 0.77, forcing processors to add nonfat dry milk powder [FMMO data].

The FMMO changes effective December 1—boosting protein factors to 3.3 lbs and other solids to 6.0 lbs per cwt—will amplify premiums for higher-protein milk [USDA AMS]. A Sheboygan herd I spoke with pushed protein from 3.12% to 3.38% in eight weeks through amino acid balancing and bypass protein, adding $0.42 per cwt, roughly $3,200 per month on 450 cows.

Herd Dynamics: When Culling Economics Don’t Make Sense

The August USDA report shows 9.52 million head—the highest in 30 years. Why keep expanding herds when margins are tight? Auction data puts replacement heifers at $3,500–4,000, and CDCB research shows cows average 2.8 lactations before exit. When cows leave before paying back replacements, the usual 35% turnover target collapses [CDCB data].

Despite record $157/cwt cull cow prices in July 2025 [USDA AMS], many producers hold onto older cows because replacing them costs more. Beef-on-dairy adds complexity: cross-bred calves fetch $1,370–1,400 at auction, so breeding for beef income often outweighs dairy replacement logic [Auction reports].

Key Takeaways for Action This Week

  1. Review risk coverage
    – Enroll DMC at $9.50 coverage ($0.15/cwt for first 5 M lbs)
    – Layer in Dairy Revenue Protection at 60–70% quarterly coverage
  2. Optimize components
    – If protein-to-fat <0.77, schedule a nutrition consult
    – December 1 FMMO changes make ratios more lucrative
  3. Assess finances
    – Maintain debt service coverage >1.25
    – Keep working capital >15% of gross revenue
  4. Consider beef-on-dairy
    – At $0.50–0.75/cwt extra revenue, review breeding strategy
  5. Lean on the community
    – Share experiences at coffee shops and meetings

Regional Adaptation: Different Strategies for Different Situations

RegionCurrent ChallengeWinning StrategyPremium OpportunityRisk LevelTimeline
WisconsinMid-size squeeze (500-1,500 cows)Scale to 2,500+ OR pivot to specialty (300-400)Specialty: $8-10/cwtHIGH – Middle vanishingDecide by Q2 2026
Texas/New MexicoScale competition intensifyingMega-scale expansion (10,000+ cows, +20% growth)Efficiency: $0.30-0.50/cwtMEDIUM – Capital intensiveExpand through 2027
SoutheastFluid premiums fadingGrass-fed organic + agritourism pivotOrganic: $12-15/cwtMEDIUM – Market transitionTransition 2025-2026
CaliforniaTwo-tier system emergingCentral Valley scale OR North Coast farmstead cheeseFarmstead: $15-20/cwtHIGH – Two extremesOngoing divergence
Pacific NorthwestCapacity limits + basis discountsRegional cooperative consolidationLimited due to isolationVERY HIGH – Exit risk 2026Some exits planned 2026
NortheastHigh costs vs legacy marketsLocal glass-bottle programs + direct salesDirect sales: $10-12/cwtMEDIUM – Niche viableBuilding programs now

Wisconsin’s mid-size producers face tough choices: scale up to 2,500+ cows for efficiency or shrink to 300–400 and chase specialty markets. That middle ground is disappearing.

Down in Texas and New Mexico, mega-dairies double down on scale. A 10,000-cow manager plans 20% expansion by 2027, betting automation offsets price pressures. “Every penny of efficiency multiplies,” he said.

The Southeast leans on fluid milk premiums, though processors warn they’ll fade. Several Georgia farms are shifting to grass-fed organic, accepting lower volumes for higher margins.

California’s dairy scene splits into two worlds: Central Valley mega-dairies expanding, North Coast farmstead cheesemakers thriving on agritourism and direct sales.

The Pacific Northwest battles capacity limits and isolation. Basis discounts bite, and some producers plan 2026 exits if conditions don’t improve.

The Northeast juggles legacy fluid markets with new ventures like local glass-bottle programs to offset high costs.

Global Competition: Learning from Other Exporters

The EU’s production is essentially flat (+0.15% in 2025), despite a 1% decline in herd size, with raw milk at EUR 53.3/100 kg (28% above the five-year average) [EU Commission]. They’re pivoting to value-added and sustainability premiums.

New Zealand’s Fonterra posted 103% profit growth in Q3 2025 but is divesting consumer brands to focus on B2B ingredients. Their NZ$10.00/kgMS forecast suggests confidence in fundamentals but a shift away from commodity volume.

The U.S. stands out for its $11+ billion capacity build-out on export assumptions now under pressure [IDFA]. Few competitors committed similar investment levels.

Risk Indicators: Recognizing Warning Signs Early

Financial MetricHealthy RangeWarning ZoneCritical RiskWhy It Matters
Debt Service Coverage≥1.251.10-1.24<1.10Cash flow to cover debt payments + cushion
Working Capital≥15% of revenue10-14% of revenue<10% of revenueOperating funds to handle market swings
Variable Rate Debt≤50% of total51-60% of total>60% of totalExposure to rate increases (7-8% currently)
Culling Rate≥30%25-29%<25%Herd turnover and productivity indicator
Somatic Cell Count≤250,000250,000-300,000>300,000Milk quality affects premiums/penalties
Feed Efficiency≥1.4 lbs milk/lb DMI1.3-1.39 lbs/lb<1.3 lbs/lbFeed cost management and profitability

Extension economists highlight key stress markers:

Financial

  • Debt service coverage <1.25
  • Working capital <15% of revenue
  • Variable rate debt >50%

Operational

  • Culling <30%
  • Somatic cell count >250,000
  • Feed efficiency <1.4 lbs milk/lb DMI

Behavioral

  • Withdrawing from the community
  • Deferred maintenance
  • Increased accidents
  • Family health issues

Spotting these early lets you adjust course before crises develop.

Strategic Positioning: What’s Working for Successful Operations

Conversations with top-performers reveal common themes:

  • Layered risk management: DMC + DRP for comprehensive coverage
  • Feed cost hedging: Options on corn/soymeal 6–12 months out protect margins
  • Component focus: Hitting 0.80–0.85 protein-to-fat captures premiums
  • Beef-on-dairy: Crossbred calves add $0.50–0.75/cwt; LRP support starts 2026

Looking Ahead: Probable Scenarios Through 2028

The next 18 months separate survivors from exits—Class III tests mid-$14s through 2027 as the herd contracts by 600,000+ head, then stabilizes at $16-17 once supply finally matches reduced export demand

Based on talks with lenders, processors, and economists:

  • Mid-2026: Zombie phase persists. Credit tightens; bankruptcies climb 55% in some regions [USDA, AFBF, UArk].
  • Late 2026: More plant closures follow Saputo and Upstate Niagara moves, stranding some producers.
  • 2027: Mexico’s self-sufficiency hits export volumes; global production pressures domestic prices; Class III may test mid-$14.
  • 2028: Herd contracts by several hundred thousand head; Class III stabilizes around $16–17; significant exits reshape the industry.

The Human Element: Supporting Each Other

These challenges take a human toll. Farmer suicide rates run 3.5× higher than the general population, and rural rates climbed 46% between 2000 and 2020 [CDC; NRHA]. These aren’t just numbers—they’re neighbors and friends under immense pressure.

Research from land-grant universities identifies several early warning signs, including routine changes, declining animal care, family health issues, and farmstead neglect. Recognizing these patterns lets communities step in before crises deepen. For those struggling, the National Suicide Prevention Lifeline (988) and National Farmer Crisis Line (1 866 327 6701) offer confidential support from counselors who understand farm life.

The Bottom Line

Even now, opportunities exist. Producers pivoting to specialty markets report net incomes rising despite lower volumes. Beef-on-dairy revenue can offset labor cost hikes. Component optimization often pays for its cost within weeks when executed well.

The next 24–36 months will test us like never before, but this is a structural change, not a cyclical downturn. Government programs can’t restore lost export markets or close idle capacity built for vanished demand. Success will go to those who recognize new fundamentals early and adapt strategically: focus on margins over prices, relationships over volume, and long-term sustainability over endless growth.

Coffee-shop conversations may feel quieter these days, but they matter more than ever. Sharing success stories and stumbling blocks—our collective resilience and adaptability—will guide us through to a sustainable, though different, future. 

KEY TAKEAWAYS:

  • Capture immediate protein premiums worth $0.42/cwt by adjusting rations to hit 0.80-0.85 protein-to-fat ratios before December 1st FMMO changes—Wisconsin herds report $3,200 monthly gains on 450 cows through amino acid balancing and bypass protein strategies
  • Layer risk protection starting at $0.15/cwt with DMC at $9.50 coverage for your first 5 million pounds, then add Dairy Revenue Protection at 60-70% quarterly coverage to protect margins as Mexico’s production ramps up and displaces exports
  • Maximize beef-on-dairy revenue, adding $0.50-0.75/cwt to current milk checks—with crossbred calves fetching $1,370-1,400 at auction and Livestock Risk Protection coverage starting in 2026, this strategy offsets rising labor costs that DMC ignores
  • Monitor three critical financial ratios weekly: debt service coverage above 1.25, working capital exceeding 15% of gross revenue, and variable rate debt below 50% of total borrowing—extension economists identify these as early warning indicators before operational stress becomes a crisis
  • Choose your strategic path by Q2 2026: Wisconsin’s mid-size operations show the middle ground between 500-1,500 cows is vanishing—either scale toward 2,500+ head for efficiency, pivot to specialty markets (grass-fed, organic, local) capturing $8-10/cwt premiums, or plan an orderly exit while equity remains

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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After the Storm Breaks: Why Cremona’s 80th Edition Means Everything

Empty show rings couldn’t kill their dreams. Nov 27-29, Europe’s dairy families finally reunite at Cremona

Preparing for Cremona’s return, I found myself thinking about something Lorenzo Ciserani once said at Sabbiona Holsteins. Not about their remarkable genetics or their 175 EXCELLENT cows. But about persistence.

“We want to breed beautiful cows that are productive and last a long time.”

Such simple words. But imagine holding onto that vision through years when those beautiful cows had nowhere to go. When “productive” was measured only in your own barn. When “lasting a long time” felt less like achievement and more like waiting for something that might never come.

What I witnessed in European dairy families during those interrupted years taught me something profound about human nature. It wasn’t continuous closure that nearly broke them—it was the cruelest pattern of all: hope, then heartbreak, then hope again.

The standard returns. LLINDE ARIEL JORDAN is named Grand Champion at the 2023 Cremona Show. This achievement—won by Spain’s SAT Ceceño—represents the pinnacle of excellence and the international standard every family is fighting to reach again after years of pandemic and disease disruption.

The Pattern That Nearly Broke Everything

First came 2020. Then 2021, 2022. Three years of pandemic isolation where exhibition halls stood empty, young handlers practiced in vacant barns, and genetics developed in solitude. Just when recovery seemed possible in 2023—when families finally started preparing animals with renewed purpose—bluetongue struck in 2024.

England reported 196 cases by this past August. Movement restrictions returned. Borders closed again. The exhibition, meant to mark a triumphant return, became another casualty.

You have to understand what this meant for families like the Beltraminos at Bel Holstein. Mauro still gets emotional talking about their beginning: “Our first heifer impressed everyone back in 1987, and that moment sparked a dream.” That dream carried three brothers through decades, earned them Grand Championships at Cremona in 2004, and victories at Swiss Expo in 2017.

But dreams need stages. And for years, there were none.

The stage they fight to return to. Pierre Boulet shakes hands with the judge Paul Trapp after winning Junior Champion at Cremona in 2023 with BEL BOEING GONDOLA. This moment represents the standard of excellence and the competitive spirit the Beltramino family—and all European breeders—have preserved during the years of interruption.

Reading the Bel Holstein family’s story reveals how they faced COVID-19, then bluetongue; yet, these experiences only strengthened their resolve. Not because they’re extraordinary. Because stopping would have meant surrendering something essential about who they are.

During the worst of it, I heard about breeders practicing their fitting skills on the same animals week after week—Francesco Beltramino and his girlfriend Chiara working in empty barns, maintaining muscle memory for competitions that might never return. One breeder told me they’d named their practice sessions “rehearsals for hope.” Dark humor, maybe. But it kept them going.

The Judge Who Carries the Weight of Understanding

Sometimes the right person appears at exactly the right moment. Nathan Thomas, accepting the invitation to judge Cremona’s 80th edition, feels like one of those times.

Here’s why Nathan matters so deeply for this moment: He doesn’t run some massive operation with unlimited resources. Triple-T Holsteins in Ohio milks about 30 cows. That’s it. Yet from that small herd, working alongside his wife Jenny and their three children, they’ve produced more than 150 All-American and All-Canadian nominations.

Just weeks ago at World Dairy Expo 2025, Nathan managed something extraordinary. Stoney Point Joel Bailey claimed her third consecutive Grand Champion Jersey title. Three years running at the pinnacle of North American showing. She stood Reserve Supreme Champion this year, with Golden-Oaks Temptres-Red-ET taking top honors, but that consistent excellence across multiple years? That’s what dairy farming really demands—not single moments of glory but sustained dedication when glory seems impossible.

The Judge Who Knows Persistence. Nathan Thomas leads the incredible Stoney Point Joel Bailey at World Dairy Expo 2025, where Bailey claimed her third consecutive Grand Champion Jersey title. This sustained dedication is the exact standard of excellence Thomas brings to judging the resilient families competing at Cremona.

When Nathan walks into Cremona’s ring this November, he brings that understanding with him. He knows what it means for a family operation to compete globally. He understands the weight these animals carry—not just genetics, but generations of hope.

What 150 Families Carry to Cremona

The statistics tell one story: More than 800 elite animals from six European nations. Seventy conference sessions. Two hundred commercial exhibitors. The Italian Trade Agency is coordinating delegations from over twenty countries.

But there’s another story those numbers can’t capture.

Think about operations like Sabbiona Holsteins. Twelve generations of homebred excellence. Not twelve years—twelve generations, each one building on what came before. Their current herd of 650 milking cows produces 42 kg per day, with a fat content of 4% and a protein content of 3.55%. They’re pushing forward with robotic milking systems, adapting, evolving.

Twelve generations of visible excellence. Sabbiona Tiky EX-96, the highest-rated Holstein in Italy, on display at Cremona. Tiky’s longevity—now in her 7th lactation—is the living proof of the Ciserani family’s belief in breeding cows that are productive and last a long time, a vision they refused to abandon through years of crisis.

Meanwhile, Bel Holstein chose a different path that’s equally valid. No robots. No automation. Francesco still clips and fits cows with his girlfriend, Chiara, and cousin, Cecilia. His brothers manage their herd—15 EXCELLENT, 59 Very Good—with the same hands-on dedication their father taught them.

Both approaches worked. Both survived. That’s the lesson—there’s no single path through crisis, only the courage to keep walking whatever path you’ve chosen.

The moment that changed everything for me was realizing these families weren’t just maintaining genetics—they were preserving identity. When you’re the third, fourth, or twelfth generation carrying forward a legacy, your animals become more than business assets. They’re living proof that what your grandparents built still matters.

The Youth Who Learned in Silence

Picture this: Young handlers across Europe spending three years learning to show cattle with no shows. Kids like Greta Beltramino at Bel Holstein, practicing their craft in empty rings, posting videos to encourage one another, and honing their skills for competitions that were repeatedly canceled.

The strength I see in this generation fills me with hope. They didn’t just endure the absence—they prepared for the return.

I heard about one group of young handlers in Germany who created a virtual showing league during lockdown, judging each other’s animals via video, maintaining the competitive spirit when actual competition was impossible. Another group in the Netherlands practiced with stuffed animals when movement restrictions prevented them from accessing their cattle. Sounds absurd until you realize they were seventeen years old, refusing to let their dreams die.

These aren’t just future farmers. They’re the generation that learned resilience before they learned what normalcy is. When they enter Cremona’s “Next Generation” competitions this November, they bring a different kind of strength—the kind forged in isolation but somehow never alone.

The future is safe. After years of cancellations, the return to Cremona isn’t just about cattle—it’s about passing the torch. The moment of triumph belongs to the generation that practiced for competitions that might never have happened.

The Morning Everything Changes

Picture November 27, 2025, with me. Dawn breaking over CremonaFiere. After years of stop-start disruption—pandemic, attempted recovery, bluetongue, more restrictions—finally, a normal morning.

The first thing you’ll notice is the sound. After so much silence, the mixture of cattle calling, equipment clanging, and conversations in six languages creates a symphony of survival. Diesel engines are warming up. Gates are swinging open. The particular squeak of well-worn wheelbarrows that haven’t been used for exhibition in too long.

Cattle trucks arriving from six countries without restriction papers, without health certificates beyond the normal, without the constant fear that someone will call saying it’s canceled again. Families seeing friends they last embraced before everything changed. Nathan Thomas is preparing to judge not just cattle, but resilience made visible.

What I find extraordinary is how ordinary it will seem to outsiders. Just another dairy show. Just farmers doing what farmers do. But you and I know better.

What Victory Actually Means Now

Every animal entering that ring has already won. Every family competing has already triumphed simply by still existing, still breeding, and still believing that excellence matters, even when it has no audience.

I keep thinking about what this means for different operations. For Sabbiona, with nearly 500 EXCELLENT cows in their history, competing again proves their philosophy endures. For Bel Holstein, returning to international competition validates that traditional methods remain relevant in an increasingly automated world.

The economic stakes are real—embryo sales and contracts worth tens of thousands, international recognition that opens new markets. But that’s not what November 27-29 is really about.

It’s about Mauro Beltramino seeing his life’s work validated. About young handlers finally experiencing what they’ve only imagined. About Nathan Thomas placing classes that represent not just this moment but all the moments that led here.

Standing there, watching families who refused to quit, even when quitting made sense, you realize you’re witnessing something sacred—the kind of sacred that happens when humans refuse to let circumstances define their limits.

The embrace of survival. After years of canceled shows, blue-tongue restrictions, and maintaining a program purely on belief, this is the moment of validation. It’s not just a win; it’s the profound, emotional relief of a community reuniting and proving that their dedication was worth the fight.

The Truth About Tomorrow

As I write this on October 18, 2025, just weeks before Cremona opens, I’m struck by how this story speaks to everyone facing their own storms. Market volatility. Family succession challenges. Technology changes that threaten traditional methods. Climate pressures that rewrite the rules.

The lesson from Europe’s dairy families is profound yet simple: Keep going. Not because success is guaranteed, but because the act of continuing is success itself.

The barn that saved their dreams wasn’t a building. It was a belief—maintained through pandemic isolation, sustained through bluetongue restrictions, preserved through every logical reason to quit.

The rhythm of European dairy life, broken so many times, will finally resume November 27-29.

Not back to normal—forward to something deeper.

These families now know they can survive anything. That knowledge changes you. Makes you both more grateful and more determined. More aware of fragility but also more certain of strength.

When I think about what awaits at Cremona—Lorenzo Ciserani seeing his family’s twelfth generation of breeding validated, young handlers like Greta Beltramino experiencing the full international exhibition, Nathan Thomas recognizing excellence forged through adversity—these moments remind me why this industry matters beyond economics.

November 27-29, 2025. Cremona, Italy.

Be there if you can. Not for the genetics, though they’ll be magnificent. Not for the business, though opportunities will abound.

Be there to witness what humans can endure, what communities can preserve, and what hope can build when it refuses to die.

Some moments remind us who we are, what we’re capable of, and why we do what we do.

This is one of those moments.

I’m eager to watch it unfold.

Key Takeaways:

  • Years of heartbreak created unprecedented resilience: Europe’s dairy families kept breeding excellence even when exhibitions seemed impossible
  • November 27-29 at Cremona isn’t just a show—it’s validation for operations that refused to quit when quitting made sense
  • Young handlers like Greta Beltramino learned to show cattle in empty barns—now they carry forward traditions they barely experienced
  • From 30-cow operations to 650-cow dairies, everyone survived differently, but everyone who survived did one thing: kept going
  • The lesson that changes everything: “The barn doesn’t know there’s no show next week”—maintain excellence because excellence is identity

Executive Summary:

They practiced fitting cattle for shows that never came, maintained excellence when excellence had no audience, and kept breeding for a future they couldn’t see. Europe’s dairy families endured five years of crushing stop-start disruption—pandemic closures from 2020 to 2022, brief hope in 2023, and then the devastating return of bluetongue in 2024. Through it all, operations like Sabbiona Holsteins (650 cows, 12 generations strong) and Bel Holstein (Grand Champions since 1987) refused to surrender their standards. Young handlers like Greta Beltramino learned their craft in isolation, while veterans like her father, Mauro, wondered if they’d ever compete again. Now, as November 27-29 approaches, Cremona’s 80th edition promises something profound: 150 farms from six nations, 800+ elite cattle, and Judge Nathan Thomas (fresh from Bailey’s third World Dairy Expo championship) converging to validate survival itself. When those barn doors open at CremonaFiere, we won’t just witness a livestock exhibition—we’ll see proof that human dedication transcends any crisis. Every animal in that ring represents a family that kept believing when belief seemed foolish, and that’s why this moment matters far beyond dairy.

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$10 Milk, $1 Profit: The New Zealand Warning Every Farmer Needs

NZ farmers net just $1 on $10 milk—their breakeven hits $9/kg while debt servicing eats 20% of revenue

EXECUTIVE SUMMARY: What farmers are discovering about New Zealand’s celebrated $10/kgMS milk price reveals a sobering reality for global dairy operations—margins have compressed to just $1-1.50 per kilogram despite record headline prices, with DairyNZ’s 2025 economic tracking showing breakeven costs pushing $9/kg for many farms. This margin squeeze reflects three converging pressures: processing capacity constraints forcing 20-30% spot milk discounts in some regions, environmental compliance costs running $50,000-70,000 annually for methane reduction alone on mid-sized operations, and China’s 5% annual domestic production growth fundamentally restructuring global trade flows that New Zealand—and frankly, all of us—built our export strategies around. Recent Reserve Bank data showing billions in debt reduction, despite record prices, suggests that savvy operators recognize this isn’t a boom but a warning. Cornell’s Andrew Novakovic reinforces that operations needing current prices to survive aren’t truly profitable. Here’s what this means for your operation: the same capacity constraints hitting New Zealand are developing in California, Idaho, and Northeast markets, making location relative to processing more valuable than pure production efficiency. The producers who’ll thrive are already running their numbers at 70% of current prices, locking in supply agreements over chasing spot premiums, and using today’s decent margins to strengthen balance sheets rather than expand—because as these global patterns accelerate, it’s not about maximizing today’s opportunity but surviving tomorrow’s reality.

Dairy Profit Margins

I was having coffee with a dairy farmer from just outside Madison last week, and he brought up something that’s been bothering many of us. “New Zealand’s getting ten bucks per kilogram,” he said, shaking his head. “That’s like four-fifty a pound. What are we doing wrong?”

You know, I get the frustration. Really, I do. Here we are, watching corn creep past four dollars, tweaking rations every week to save a few cents… and then you hear about these record prices on the other side of the world. Kind of makes you wonder if you’re in the wrong place, doesn’t it?

But here’s what’s interesting—and why I think we all need to pay attention to this. I’ve been digging into what’s really happening down there, talking with folks who work with Kiwi farmers, reading through their industry reports. And what I’ve found… well, it’s not the success story it appears to be. More importantly, the challenges they’re facing? We’re starting to see the same patterns developing here.

The Math Nobody Wants to Talk About

Let’s start with that headline number everyone’s throwing around. Ten dollars per kilogram. Sounds amazing, right? But here’s the thing—and this is what DairyNZ has been tracking in its 2025 economic reports—their breakeven costs have just skyrocketed. We’re talking somewhere in the high eighties, maybe even pushing nine dollars per kilogram for many operations.

The $10 Milk Reality: New Zealand farmers’ celebrated $10/kg milk price compresses to just $1.50 after all costs, revealing why record headlines don’t guarantee profitability.

Just think about that for a minute. If you’re getting ten but you need eight-fifty, nine just to break even… that’s what, maybe a dollar margin? Buck-fifty if you’re really efficient? That’s not exactly the windfall it sounds like.

What really caught my attention—and I spent some time reviewing their historical data here—is how different this is from their last real boom, about a decade ago. Back then, farmers were actually clearing better margins on lower headline prices. The entire cost structure has shifted completely.

It reminds me of something. That rough patch we had around 2014. Remember that? Decent milk prices on paper, but between feed costs and everything else, nobody was making money. Same story, different accent.

Labor’s killing them. And I mean really killing them. Finding good help—hell, finding any help—that’s tough everywhere, but they’re really struggling. Then you’ve got debt servicing. Many of these individuals expanded during the last couple of cycles, borrowing heavily when rates were low. Now they’re carrying that debt at higher rates. Sound familiar to anyone?

But the real kicker—and we’re starting to see this creeping in here too—is environmental compliance. Things that weren’t even a line item ten years ago are now consuming significant funds. I was reading through some of their farm publications, and one producer basically said that after all the deductions and real costs, that celebrated ten-dollar milk becomes more like seven-fifty, eight bucks in the pocket. And that’s before the next round of regulations kicks in.

When Your Success Becomes Your Problem

Here’s something that really hits home, especially for those of you in California or the Southwest. Do you know that feeling during the spring flush? When you’re making beautiful milk, components are great, cows are happy… but you’re starting to wonder if the plant can actually take everything you’re producing?

Well, that’s New Zealand right now. Except it’s not just spring flush—it’s becoming a year-round phenomenon.

Fonterra—they handle most of the milk down there, kind of like if Land O’Lakes and DFA had a baby—they’re basically running at capacity during peak season. According to industry insiders, we’re talking about 95% utilization during their spring months, which for them is October through December.

Processing Bottleneck Crisis: New Zealand’s 95% capacity utilization forces brutal 25% spot milk discounts, while Midwest US maintains full prices at just 78% capacity—location and timing now matter more than efficiency.

Now, in theory, that sounds efficient, right? Maximum utilization, minimal waste. But you and I both know what really happens when plants get that full. There’s zero wiggle room. One breakdown, one storm delays transport, whatever—suddenly you’ve got milk with nowhere to go.

If you’ve locked in a good contract and are close to a plant, you’re in a good position. Full price, no worries. But if you’re depending on spot markets? Or worse, if you’re an hour or two from the nearest facility? Man, that gets rough quick. I’m hearing from multiple sources—although I can’t verify it firsthand, enough people are saying it—that some regions are seeing significant discounts on spot milk. Like, painful discounts. Twenty, thirty percent off in some cases.

And here’s the real nightmare scenario: some farmers are being told to find alternative outlets for their milk. Can you imagine? You’ve already fed the cows, done the milking, paid for everything… and then you literally can’t sell the milk. That’s not a business problem anymore—that’s an existential crisis.

The timing makes everything worse. Fonterra continues to announce expansion plans, new facilities, and increased capacity. However, from what I understand, most of this is still at least eighteen months, possibly two years away. Therefore, farmers are left with the current infrastructure while production continues to grow.

A producer from Vermont, whom I met at World Dairy Expo, mentioned that their co-op’s starting to see similar issues during flush. “We’re not there yet,” she said, “but you can feel it coming.” And that’s the thing—these patterns don’t stay regional anymore.

China’s Quiet Revolution That Changes Everything

China’s $40 Billion Dairy Revolution: Domestic production surged 51% while powder imports crashed 41%, fundamentally restructuring global trade flows that built New Zealand’s entire export strategy.

Alright, so this is the part that I think has massive implications for all of us, whether we’re selling milk in Wisconsin or Washington.

The numbers from USDA’s Foreign Agricultural Service paint a pretty stark picture. China’s imports of whole milk powder have dropped significantly over the past few years. We’re talking about a market that used to absorb just massive amounts of product—hundreds of thousands of tons annually. And now? It’s drying up.

What’s happening—and the folks at USDA’s Beijing office have been tracking this closely in their 2025 reports—is that China’s making this huge push for dairy self-sufficiency. And they’re not playing around. They’re building these massive operations, ten thousand cows, fifteen thousand cows. Bringing in genetics from everywhere. Utilizing technology that makes some of our setups appear outdated.

The data suggests that Chinese domestic milk production is growing at a rate of approximately 5% annually. Now that might not sound earth-shattering, but when you’re talking about a market that size… that’s displacing enormous amounts of imports every year.

Think about what this really means. For decades—I mean literally decades—the whole global dairy trade was built on this assumption that Chinese demand would just keep growing forever. New Zealand basically restructured their entire industry around it. We were all banking on it for our export growth. And now that fundamental assumption is just… gone.

This reminds me of something. What happened with whey exports. We used to send the majority of our whey protein to China. Now? That share has dropped significantly because they have built their own processing capacity. The market didn’t temporarily adjust—it fundamentally restructured. And it’s not coming back.

The Environmental Cost Nobody Calculated

Here’s something that’s particularly relevant for those of you dealing with new regulations in California, or if you’re in the Chesapeake watershed, or anywhere environmental standards are being tightened.

Fonterra launched this program where they pay farmers extra for reducing emissions. Sounds great on paper, right? Do the right thing environmentally, and get paid for it. Win-win.

But let me tell you what I’m hearing about the actual costs involved. And keep in mind, every operation’s different, but the numbers are sobering…

Feed additives to reduce methane? For a 400-500 cow herd, you could be looking at fifty, sixty, maybe seventy thousand a year. And that’s just for the additives themselves. Then you’ve got to upgrade your manure handling to meet new nitrogen standards. That’s serious capital we’re talking about—six figures for most operations, easy.

Environmental Compliance: The $765 Per Cow Reality Check – Manure upgrades ($450) and equipment modifications ($200) dominate costs, while carbon credits offer only $150 offset, creating net $615 annual burden.

Then there’s all the monitoring, the paperwork, the verification. Testing, certification, third-party audits. That’s not a one-time expense—it’s forever. Every year. Ongoing costs that just keep piling up.

Best case scenario—and I mean absolute best case—you might see payback in five years. More likely seven. However, that assumes milk prices remain high, the programs don’t change (and when have government programs ever remained the same?), and you actually qualify for the maximum payments. From what I understand, only a small percentage of farms are going to hit those top payment tiers.

A producer I know, who has been following this closely, put it perfectly: “We’re betting tomorrow’s survival on today’s programs.” That’s… man, that’s a hell of a position to be in.

Interesting thing, though—those of you running organic or grass-based systems might actually have an edge here. Your baseline emissions are often already lower, making it more achievable to hit reduction targets. It’s one of those rare times when being smaller or different might actually pay off.

What the Smart Money Is Actually Doing

You know what’s really telling? While everyone’s celebrating these record prices, New Zealand’s Reserve Bank data from 2025 shows their dairy sector has been aggressively paying down debt. We’re talking billions in reductions over the past year.

That’s not what you do when you think the good times will roll forever, you know?

The operations that seem to be positioning best—at least from what I can tell—are doing three things that really stand out:

Getting dead serious about financing. I keep hearing stories about farmers discovering they’re paying way more interest than necessary. Not because they’re bad risks, but simply because they haven’t shopped around in years. We’re talking about differences that add up to serious money—tens of thousands of dollars annually on typical debt loads. With year-end coming up, now’s actually a great time to have these conversations with lenders. Banks are competing for good ag loans right now.

Choosing certainty over maximum price. They’re locking in supply agreements, even if it means taking a slight discount per unit. Because having guaranteed market access at $9 beats the theoretical $10 milk you can’t sell. We learned this lesson the hard way back in 2009, didn’t we?

Simplifying instead of expanding. Some are actually selling equipment and doing sale-leasebacks. Holding off on that new parlor upgrade. Building cash reserves instead of new facilities. It’s conservative, sure. But maybe that’s smart given everything else going on?

And here’s something for our smaller operations—those 100 to 200 cow farms that sometimes feel left behind in these discussions. You might actually have some real advantages here. Lower debt loads, more flexibility, less dependence on maxed-out processing capacity. Sometimes being smaller means being more nimble when things get tight.

Farm Survival Matrix: Small niche operations (7.5 resilience score) outperform large remote farms (3.5 score)—location and market strategy matter more than scale in today’s volatile environment.

What This Actually Means for Your Farm

So what does all this mean for those of us milking cows here in the States? I think the patterns are becoming increasingly clear if we’re willing to look.

The processing capacity seems fine until everyone tries to expand at the same time. We saw hints of this during California’s big growth phase a few years back. The Southwest is now showing similar signs. Idaho’s getting there. Even some Northeast co-ops are feeling the squeeze during the flush—I’m hearing similar stories from Pennsylvania producers and folks in upstate New York. It can happen anywhere.

Export markets we’ve counted on for years? They can shift faster than we think. And not temporarily—permanently. Whether it’s China with powder, Mexico with cheese, whatever the product. These shifts happen, and they’re accelerating.

Environmental costs that seem manageable at seventeen or eighteen dollar per gallon of milk? They become real problems at fourteen. And let’s be honest—we will see fourteen again. We always do, eventually.

Andrew Novakovic over at Cornell’s Dyson School said something in their recent 2025 dairy outlook that really stuck with me. He pointed out that if you need current prices to make your operation work—if you can’t survive at 70% of today’s milk price—then you’re not really profitable. You’re just temporarily lucky.

The 70% Test: Your Reality Check

So where does this leave us? What should we actually be doing with this information?

First thing—and I know this isn’t fun—but run your numbers at much lower milk prices. Nobody wants to think about this when things are decent. However, if your operation falls apart at 70% of current prices, that’s something you need to know now, not when it happens.

Have a real conversation with your milk buyer. Not the field rep who always says everything’s fine—someone who actually knows about capacity planning. Ask directly: If regional production increases by 10% next spring, what happens? Can they handle it? At what price? You might not like the answer, but you need to hear it.

Think carefully about any long-term investments, especially those related to environmental compliance. The experts I trust at Penn State Extension and Wisconsin’s Center for Dairy Profitability are all saying the same thing: three years or less for payback, assuming conservative milk prices. Anything longer, and you’re basically gambling on stability that rarely exists in dairy.

And here’s one that might seem obvious but apparently isn’t: location matters more than ever. Being an hour from the nearest plant just meant higher hauling costs. Now it might mean the difference between having a guaranteed market and scrambling for buyers. That super-efficient thousand-cow operation in the middle of nowhere? It might actually be riskier than a smaller farm adjacent to a cheese plant.

Oh, and please—if you haven’t reviewed your financing recently, do so now. The variation in rates and terms is wider than most people realize. Even a half-point difference compounds into serious money over time. With recent Fed moves and banks competing for good ag loans, you might be surprised at what’s available.

The Real Bottom Line

You know what really gets me about all this? It’s how apparent success can actually mask serious problems. That ten-dollar milk in New Zealand? It’s real. But so are all the things eating away at it—the costs, the constraints, the market shifts.

The farms that are going to thrive—whether they’re in New Zealand, Wisconsin, California, the Northeast, wherever—they’re not necessarily the biggest or the most technologically advanced. They’re the ones who understand the difference between a good price cycle and a sustainable business model. They’re using today’s decent prices to prepare for tomorrow’s challenges, not betting everything on the party continuing.

What’s happening in New Zealand… it’s coming here. Maybe not exactly the same way, but the patterns are unmistakable. Rising costs, capacity constraints, and shifting global demand. These forces aren’t going away.

The producers who see this clearly, who adjust now while they still have flexibility, are the ones I’d bet on. Because if there’s one thing we’ve all learned—usually the hard way—it’s that this industry cycles. Always has, always will.

The question isn’t whether things will change; it’s whether we can adapt to them. They will. The question is whether we’ll be ready when they do. And considering what’s happening in New Zealand, that’s a conversation worth having with your banker, family, and yourself. Sooner rather than later.

Because in the end, it’s not the headline math that matters. It’s the actual dollars-in-your-pocket math. And that’s what counts when the cycle turns.

Which it always does.

KEY TAKEAWAYS

  • Run the 70% price test immediately: If your operation can’t break even at $11-12/cwt Class III (70% of current prices), you’re operating on borrowed time—Penn State Extension and Wisconsin’s Center for Dairy Profitability recommend restructuring debt and costs now while banks are competing for good ag loans
  • Processing capacity matters more than efficiency: Farms within 30 miles of guaranteed processing are seeing $0.50-1.00/cwt premiums over efficient operations 60+ miles away—lock in supply agreements even at 5-10% below spot prices because having market access beats theoretical higher prices you can’t capture
  • Environmental compliance payback can’t exceed 3 years: With feed additives for methane reduction costing $100-150/cow annually and system upgrades running six figures, only investments that pencil out at a conservative $14/cwt milk make sense—organic and grass-based operations may have advantages here with lower baseline emissions
  • China’s self-sufficiency changes everything: Their 5% annual production growth means 200,000+ tons less powder demand yearly—diversify markets now, as USDA Foreign Agricultural Service data shows this isn’t a temporary adjustment but permanent restructuring like what happened with U.S. whey exports dropping from 54% to 31% of China’s imports
  • Smart money’s building resilience, not capacity: New Zealand farmers paid down $1.7 billion in debt during record prices—consider sale-leasebacks on equipment, refinancing at today’s competitive rates (even 0.5% saves $15,000 annually on $3M debt), and maintaining 12-18 months operating expenses in cash reserves rather than expanding

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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Weathering Europe’s Dairy Waves: Real-World Strategies for Your Milk Check

Europe’s milk moves could flood your mailbox. Is your dairy ready for the next wave?

EXECUTIVE SUMMARY: European milk production swings are making an outsized impact on North American dairy margins this season. As the EU, U.S., and New Zealand jostle for global export leadership, every volume shift and new regulation from Brussels lands directly on U.S. farm income and risk. From compliance costs to feed volatility, today’s market noise looks more like a set of fast-moving waves than the predictable old cycles. That’s why top producers are leaning into real-time break-even tracking, component-driven strategies, and flexible risk coverage. This article gets practical—highlighting lessons from the 2015 quota flood, the importance of managing debt and working capital, and exactly which steps farmers are taking to lock in resilience. If staying afloat—and ahead—in this new dairy world is your goal, the toolbox outlined here belongs in every barn.

You know, sometimes it feels like the global milk market is just one noisy, unpredictable stock tank. I’ve had a dozen conversations this harvest about how a seemingly small regulatory change in Brussels or a surge in Irish production leaves folks scratching their heads when the mailbox check or feed bill shows up in Wisconsin or Idaho. So let’s break down what’s actually factual, what matters for North America right now, and the smart steps farms are taking to stay steady in choppy global waters.

Europe’s Ripple Effect—Bigger Than Ever

Looking at data from the FAO and European Commission this season, Europe’s share of global dairy exports is as high as any region in the world—routinely neck-and-neck with New Zealand and the U.S. USDA FAS trade briefs and figures from the International Dairy Federation confirm that EU policy, volume, and even local weather matter for price benchmarks in every major importing region, from China to Algeria and Saudi Arabia [FAO Dairy Market Review 2024; European Commission Milk Market Observatory 2025; USDA Dairy: World Markets and Trade 2025].

After the big quota-lift in 2015, history proved these ripple effects: Europe’s open floodgates sent milk downstream to world markets, dropping global prices and shrinking margins back home. This dynamic (and similar cycles since) is widely documented by USDA’s Economic Research Service and industry analyses [USDA ERS 2016 Dairy Outlook]. These aren’t hypothetical models—they’re what producers are still living through, every time a big EU volume shift combines with U.S. or Oceania constraints or demand spasms in China.

Market Moves: When Data and Intuition Don’t Always Match

What’s interesting right now, reading updates from USDA Dairy Market News and IDF, is how export punches keep rolling—U.S. butter and nonfat dry milk exports are at multi-year highs as of August and September. Yet the same sources, and public updates from major global processors, flag that key importers (especially in Asia) are warming only slowly after a soft patch. Price is now set at the intersection of commodities, shipping, trade policy (yes, tariffs still sting), and shifts in government intervention or environmental regulation.

And here’s the farmer’s perspective: global milk prices don’t just bounce up and down like a ball. With international markets more closely linked than ever, a wave in Europe or Oceania can hit North American producers’ returns like the surge on a big tidal pond: unpredictable and fast.

Debt, Leverage, and Reluctance to Slow Down

I’ve noticed most extension meetings address debt and capital structure more than ever, thanks to USDA and Farm Credit reporting higher average borrowing in new builds—and Wageningen and Thünen Institutes in Europe showing similar trends in Dutch and German herds [USDA ERS 2025; Wageningen University 2024 Dairy Finance; Thünen Institute German Survey 2024]. The same stubborn reality: high fixed payments don’t let a producer ramp down milk flow very quickly, even if the next three months look ugly on paper. Most of us end up chasing volume, not conservation, because loan payments wait for nobody.

Feed: The Margin Maker (or Breaker)

The data from Penn State, UW-Madison, and Cornell extension budgets for 2024 are crystal clear: feed claims 50–60% of the average conventional herd’s cost structure—a number that climbs higher if you’re buying more feed than you grow [PSU Dairy Budgets 2024; UW Center for Dairy Profitability 2025]. USDA Ag Marketing Service had corn in the low $4s throughout harvest, but soybean meal swings and local hay shortages have kept feed volatility front and center.

What producers increasingly do—across regions and herd sizes—is double down on feed testing, fresh cow management, and ration tweaking. Historical data from the bleakest periods (2014, 2022) show that a tenth of a point of feed efficiency or improvement in butterfat performance can move a break-even from the red to the black. Industry extension sources all show more hands adjusting the TMR mixer and paying closer attention to transition period protocols and dry matter intake trends.

When Regulators Call the Tune

Complying with environmental mandates is no longer just a box for the processor or CAFO paperwork. UC Davis and multiple extension sources consistently estimate new California methane and nutrient regulations cost up to $0.40–0.55/cwt once all’s accounted for [UC Davis Agricultural Economics Policy Update, 2025]. That mirrors regulatory costs now rolling out in European dairies—Denmark, the Netherlands, and Germany are all adding, not subtracting, layers of compliance spending [European Commission Dairy Policy Fact Sheet 2025].

For Northern and Eastern U.S. producers near sensitive watersheds, budgets frequently flag compliance costs of $50–$70 per cow annually just for nutrient handling [Cornell Pro-Dairy Water Quality 2024; Wisconsin DATCP CAFO reports]. It’s a new line item in every cost calculation—something more farms are integrating into regular budget reviews.

Price Spreads, Component Value, and Dairy Resilience

USDA Reporter summaries and CME data from early October confirm that Class III/IV spreads topped $2/cwt—meaning the farm’s product mix, from cheese to butterfat, is increasingly make-or-break for winter cash flow. Extension and IDF bulletins show that maximized component programs (think protein-by-breed planning or butterfat levels targeting cooperative premiums) are paying out ever higher.

The data (and plenty of farmer experience) say it’s wise to keep chasing component optimization with genetic selection, ration shifts, and milk quality focus—not only for incentive programs but also for the buffer against commodity price swings. Farms that get complacent here risk losing the best margin lifelines left in a volatile pricing world.

Farmer Risk Playbooks: Layering and Learning

Here’s a theme that runs through nearly every 2025 extension update and peer group panel: those who spread risk, keep cash reserves, and use partial hedging (from Dairy Margin Coverage to LGM or local processor contracts) are the ones telling positive stories at year’s end. Across the Corn Belt, into the Northeast and West, budgeting tools and farm management software are being used daily to run break-evens, test expansion math, and keep track of every feed load and market move.

Risk ToolSurvival %Annual CostRating
Dairy Margin Coverage78%$100–300Essential
LGM Insurance65%$200–500Strong
Cash Reserves (90 days)85%Opportunity costCritical
Feed Hedging70%1–3% of feedImportant
Processor Contracts60%Price discountUseful
No Risk Management35%$0Dangerous

Extension groups are now coaching herds to treat working capital as “production insurance” and to see budgeting and risk review as ongoing—not just annual—events. It’s a practice that’s proving the difference between being able to row to safe harbor in a market storm…or simply getting swept along for the ride.

Past Lessons, Forward Momentum

There’s universal agreement—whether it’s coming from a Missouri discussion group or New England’s latest fact sheets: flexibility beats size or even efficiency alone, especially once margins start to tighten. Farms that survived 2014 or the sudden whiplash of 2022 put working capital on par with any weekly milk check and made their lender and nutritionist partners, not just vendors.

What’s particularly heartening is more farms are now proactively putting reserves away in the “good” quarters rather than waiting for the next price crash. That shift, widely endorsed in current university and co-op extension workshops, means more businesses are poised to adapt to whatever moves Europe or world trade throws their way.

Looking at Winter—and the Year Ahead

If you’re looking for actionable steps, this year’s most robust takeaways from across the government, extension, and industry space are these:

  • Know your cost structure cold and react quickly to any break-even changes.
  • Prioritize fresh cow and transition period management for best margin protection.
  • Maximize component herd strategies (and renegotiate for best premiums).
  • Plan for regulatory compliance costs as a “normal” budget item.
  • Treat cash reserves and budgeting as production tools, not afterthoughts.
  • Layer your risk with multiple tools and update your mix every season.

And perhaps the most important advice? Stay curious and connected. Use every extension, processor, and peer resource out there—and keep agile enough to pivot when new global “waves” come across the Atlantic.

In this interconnected dairy world, the best producers aren’t fortune tellers—they’re steady captains, always ready to adjust sail.

Key Takeaways:

  • European market shifts can hit milk checks fast—stay alert to global supply changes.
  • Update break-evens often; real-time cost tracking is your strongest defense.
  • Feed and component management are difference-makers for net margins.
  • Build regulatory compliance into your core business plan, not just for inspection day.
  • Use layered risk tools—insurance, contracts, and liquidity—to position your farm for any market weather.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Protect Your Dairy Operations from America’s 1,000-Fold Subsidy Advantage – This action-oriented guide details a 3-phase plan for achieving component targets (4.2% fat, 3.3% protein) and optimizing feed conversion above 1.75:1. It provides concrete ROI calculations to show how operational excellence creates a competitive advantage that can neutralize market disadvantages.
  • Dykman Dairy’s $75 Million Debt Crisis: Mismanagement or Misfortune? – This cautionary case study offers a deep dive into the devastating strategic risks of unchecked leverage and rapid expansion. It provides five vital tips on debt revision, diversification, and strengthening lender relations to help you proactively manage financial flexibility against global market shocks.
  • The $500000 Precision Dairy Gamble: Why Most Farms Are Being Sold a False Promise – This strategic technology evaluation challenges the high-cost automation pitch, revealing how optimizing fundamental protocols (like transition cow health) offers a better, lower-cost ROI than relying solely on expensive sensors and robotics. Use this to filter smart capital investments.

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.

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Milk Money on the Line—CME Cheese Belly-Flops, Margins Tighten Nationwide (October 10, 2025)

Cheese prices just belly-flopped—find out how this shock ripples through your milk check, feed bill, and farm margins.

Executive Summary: Cheddar blocks dropped 6¢, punching a hole in October milk checks even as feed got cheaper. Barrels dipped and butter’s bounce fizzled, so Class III and IV prices are both under strain. Markets ran thin—one trade moved Blocks—and U.S. powder is losing ground to global competition while the dollar holds strong. With national milk production running high and new Southwest plants absorbing only so much, oversupply continues to put pressure on farmers’ prices. Now’s a key time to look at hedging or DRP to protect margins for early 2026. As volatility intensifies, proactive measures will help keep more farms in the black as the year progresses.

Dairy Margin Protection

It’s not every Friday you see block cheese flip from teasing $1.76/lb. highs on Thursday to crashing down $0.06 and finishing at $1.7000/lb. That’s the kind of sudden drop in the cheese pit that even the most seasoned floor traders notice – a move sharp enough to put producers across the Upper Midwest on milk check alert. Barrel cheese made the trip down, too, losing $0.03 and settling close behind. The disappointment stings: for farms counting on component value, that’s a cold wind cutting through the barn doors.

While butter showed a small pulse of optimism by inching up $0.0025/lb., anyone marketing Class IV milk knows the story’s far from sweet. Butter’s off nearly $0.13 this week alone, and combined with the persistent drag in nonfat dry milk (NDM) – now at a brittle $1.1275/lb. – today’s price board turns up the pressure on Class IV revenues. Dry whey? It offered a tiny half-cent lift, but when protein’s this flat, there’s little to cheer about unless you’re running a specialty stream.

The 2.5 Line of Death” – When milk-to-feed ratios breach 2.5, profitable operations become survivors. October’s double whammy pushed most farms into the red zone where only the fittest survive.

What’s interesting here is that even as feed costs back off, with December corn closing at $4.1350/bu. and soy meal at $275.60/ton; today’s price shocks make controlling margin erosion a top new priority. Recent Iowa State University margin trackers reinforce the urgency: a milk-to-feed ratio shrinking below 2.5 is a yellow warning light for most Midwest herds 

Key Numbers, One Table: No Spin, Just Real-Time Impact

ProductPriceDay MoveWeek TrendOperational Note
Cheddar Block$1.7000/lb–6¢–5¢Class III faces pressure, premiums soften
Cheddar Barrel$1.7100/lb–3¢–6¢Spot buyers exiting, processors mostly covered
Butter$1.6050/lb+0.25¢–13.4¢Butterfat hammered, Class IV under pressure
NDM Grade A$1.1275/lb–0.75¢–3.25¢Exports lagging, price floor uncertain
Dry Whey$0.6350/lb+0.50¢+0.50¢Protein flatline, minor pulse

CME Settlement, 10/10/25

Digging into the Details: What’s Behind Today’s Trade?

Low Conviction Trading, Big Moves
You want to see a thin market? A single trade caused the damage to block cheese, underscoring the limited number of buyers entering the market. Veteran trader and analyst Dr. Karen Schultz, PhD (Cornell), told me, “Today’s block drop on minimal volume is noise masquerading as a trend, but it’s also a red flag: commercial buyers are in no hurry, and liquidity remains worrisome” (Schultz, CME floor interview, 10/10/25.

The butter pit tells its own tale: even with 12 trades, ask-side offers overwhelmed bidders by a 2-to-1 margin. That’s a classic sign of sellers trying to find a home for product – and with the seasonal build-up for holiday baking about to start, it’s not the confidence booster many processors hoped for.

Barrel cheese? Zero volume. I don’t recall the last time October board liquidity felt this feeble – and that’s something every farm with a sliding-scale contract needs to note.

International Context: Can the U.S. Remain Competitive?

“Priced Out Before We Even Compete” – While U.S. producers focus on domestic drama, European powder undercuts us by 13%. Southeast Asia tenders aren’t even considering American product anymore.

Examining export powders makes the situation even more challenging. U.S. NDM lost its advantage: New Zealand’s SMP is offered at $2,580/MT ($1.17/lb), while European SMP undercuts at around $0.98/lb. (EEX futures, 1.08 USD/EUR conversion, 10/10/25). Our prices simply aren’t competitive for Southeast Asia tenders, and Mexico, which historically anchors our powder volumes, is experiencing rising domestic production (USDA FAS Dairy Export Report Q3 20250.

Currency factors aren’t helping. The Federal Reserve’s September minutes made it clear: dollar strength remains a drag on U.S. dairy exports (Federal Reserve Economic Data, 2025). Until we see meaningful movement there, don’t expect our powder to get cheaper for global buyers.

Production Data: Why is Spot Milk Still a Buyer’s Market?

It’s not complicated: the nation is still awash in milk. USDA’s August Milk Production summary spells it out: a 3.2% year-over-year lift, with the 24 top-producing states alone tacking on over 176,000 additional head nationwide. Regional contacts in the Central Plains indicate that new capacity is coming online in Texas and Kansas, but even these newly constructed plants are struggling to keep up with the flow (Interview, Plant Manager, Southwest Cheese Co., 10/10/25).

Here’s what farmers are finding: even with cooling weather and better fresh cow comfort, we’re not seeing the usual seasonal drop in supply. Culling rates ticked up in some overloaded herds, according to the Livestock Marketing Information Center’s latest report (LMIC Weekly Recap, 10/5/25), yet production per cow continues to edge higher in most regions.

Forecast: Futures vs. Reality – What’s the Next Move?

The market’s betting against today’s lows sticking for long. CME futures out to December hold a premium:

  • October Class III: $16.93/cwt
  • November: $17.15/cwt
  • December: $17.38/cwt
  • October Class IV: $14.34/cwt
  • November: $14.65/cwt

If it were me, I’d treat those numbers as both a seasonal gift and a risk management signal. Dr. Schultz: “Given how quickly spot slipped, locking in Dec at $17.38 makes sense. Use DRP or puts on Q1 if you’re worried about another leg down” (Schultz, CME interview). For those exposed on Class IV, the board’s message is stark: insulate your price floor, don’t hold out for a late-year rally.

Global Dairy Chessboard: How U.S. Prices Stack Up

What’s driving the squeeze? Besides global supply, trade friction is shifting the map. Mexico’s aim to cut powder imports from the U.S. (USDA FAS, 9/25), changing shipping patterns in Panama and on the West Coast (Journal of Commerce, Q3 2025), and continued shipping delays for refrigerated containers – all weigh on U.S. dairy’s reach. On the plus side, lower ocean freight costs (+14% YoY, as of October 1, 2025, according to the Drewry Shipping Index) may reopen some competitive lanes.

Regional Insights: Upper Midwest in the Crosshairs

Anatomy of a $1.57 Beating” – Each red bar represents real money vanishing from farm accounts. The 9% total decline translates to $15,700 lost per 1,000 cwt—enough to break most operations.

Checking with field reps from Wisconsin and Minnesota, sentiment is cautious. Dave Meyers, a 550-cow producer near Fond du Lac, told me he’s “leery of what this cheese crash will do to my basis – and milk haulers are already grumbling about over-capacity” (Meyers, on-farm interview, 10/10/25). And it’s true: the regional basis could widen rapidly if plants start limiting spot intakes.

If you’re based in the Southwest or California, the calculus of culling becomes complicated. Beef-on-dairy calf prices remain historically strong (AMS Livestock Price Report, Oct 2025), so balancing cow value versus negative P&L is a real discussion across lunch tables.

What Farmers Are Doing Now: Margin Moves that Matter

  • Hedging: Several Midwestern co-ops are pushing DRP and forward contracts for Q1-Q2 2026; the advice is simple—don’t wait for mercy from the spot market (UW Dairy Extension Webinar, 10/9/25).
  • Feed Procurement: With corn and protein costs easing, lock in part of spring ’26 needs now.
  • Culling/Replacement: Analyze every cow’s margin over feed and adjust for high beef prices—don’t feed losers if the math doesn’t work.
  • Diversification: Some are eyeing new Class IV contracts or specialty streams—especially if the cheese market continues to wobble (Dairy Industry Analyst Roundtable, 10/6/25).
Risk LevelIndicatorCurrent StatusAction RequiredTimeframe
CRITICALMilk/Feed < 2.3NOWLock Q1 2026 DRP immediatelyThis Week
HIGHClass III < $16.50IMMINENTForward contract 40-60% production2 Weeks
MODERATEBasis > $0.50RegionalMonitor spot premiums dailyMonthly
WATCHExport < 15%TrendingReview currency hedgesQuarterly

Closing Thoughts: Perspective Amid the Swings

There’s no sugarcoating the Block cheese crash. Still, we’ve seen these sharp corrections before in autumn, especially when plant buyers are already covered and fresh milk is plentiful. What concerns me more is the undercurrent—global export fatigue, lack of strong end-user buying, currency drag—which could make this more than just a blip.

Yet, dairy’s proven one thing consistently over decades: adaptability. Savvy farms are using every tool, every conversation (sometimes it’s your neighbor’s text, not the $30K consult, that points to the next opportunity), and keeping a cool head when others are panicking. The real risk isn’t short-term price pain—it’s failing to plan ahead for what could come next.

Key Takeaways:

  • Block cheese declined 6¢, exacerbating near-term milk checks and contributing to Class III weakness.
  • Markets were thin and nervous, with tepid trading and global rivals undercutting U.S. powder.
  • Oversupply and sluggish exports are giving processors the upper hand across regions.
  • Softer corn and soy prices help on the feed side, but margin risk remains.
  • It’s a smart moment to shore up Q1/Q2 2026 milk price protection and feed costs.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Forget $30K Market Reports: Your Neighbors’ Texts Are Worth More

Eight weeks into the shutdown, neighbor-to-neighbor information sharing is outperforming costly commercial services. Here’s what dairy farmers are learning about risk and resilience.

EXECUTIVE SUMMARY: What farmers are discovering eight weeks into the government shutdown challenges everything we thought we knew about the value of information in dairy. Producer networks spending just $200-$ 600 annually per farm are consistently outperforming commercial intelligence services that cost tens of thousands, according to extension specialists tracking adaptation patterns from Pennsylvania to California. The most successful operations aren’t those with the deepest pockets for private data—they’re the ones with the strongest local relationships, whether that’s thirty-four farms texting about mastitis patterns in Lancaster County or isolated New Mexico producers building their own market intelligence through grain elevator contacts. Cornell and Wisconsin dairy programs have documented that farms relying solely on government reports face decision-making penalties that compound weekly during shutdowns, while those with diversified information sources—such as state extension, neighbor networks, and supplier relationships—maintain operational confidence. This isn’t just about surviving the current crisis; it’s revealing that the industry’s push toward data-driven efficiency may have created dangerous dependencies we only recognize when systems fail. The producers adapting best right now are writing the playbook for a more resilient dairy future, one where your neighbor’s morning text might be worth more than any government report ever was.

 dairy information networks

You know that moment when you’re sitting at your kitchen table, trying to decide whether to lock in winter feed contracts? The corn market’s moving, your nutritionist needs direction, and those USDA reports you usually check with your morning coffee… well, they’ve been dark since the shutdown started on October 1st.

For twenty years, the data flowed like clockwork, and as one central Wisconsin producer told me last week, “I’m realizing how much of my decision-making was on autopilot.” Eight weeks into this information blackout, the dairy industry is discovering its own resilience. The most surprising lesson? Neighbor-to-neighbor information sharing often beats expensive market reports. Here’s what we’re learning about the new reality of dairy.

The Real Cost of “Free” Information

Upon examining this situation, I’ve noticed that we’ve become incredibly comfortable with those government reports. The milk production data from NASS, WASDE forecasts for feed markets, and cold storage reports, which show cheese inventory positions. Free information, updated like clockwork. What could go wrong?

Well, now we know. And it’s not just about missing numbers on a screen. It’s about realizing how much of our operational framework depended on that steady flow of data.

Dr. Andrew Novakovic from Cornell’s Dyson School has been warning for years that relying on any single information source creates vulnerability. The Wisconsin Center for Dairy Profitability published similar concerns in their 2023 market outlook report. But you know how it is—when things are working, why change? Now we’re living that vulnerability, and what strikes me is how differently operations are handling it.

Some individuals are investing substantial amounts of money in private market intelligence services. Industry surveys from Dairy Herd Management suggest these costs can range from $5,000 to tens of thousands of dollars annually, depending on the depth of analysis. Others? They’re discovering that informal networks with neighbors might actually work better for their specific needs.

The operations adapting best aren’t necessarily the biggest or most sophisticated. They’re the ones with the strongest local relationships. That’s a pattern worth thinking about.

Networks Born from Necessity: The Pennsylvania Story

Let me share what’s happening in Pennsylvania, as I think it demonstrates how quickly farmers can adapt when needed.

Dr. Virginia Ishler, extension dairy specialist at Penn State, tells me several producer groups have really stepped up during this shutdown. These aren’t fancy organizations with bylaws and boards. We’re talking about neighbors texting each other about what they’re seeing—mastitis patterns, feed prices, processor demand shifts.

Network Effect: Farms with neighbor connections maintain 3x higher decision confidence during crises—that’s the difference between thriving and just surviving.

One group that has garnered attention emerged after Johne’s disease challenges were reported on multiple Lancaster County farms in 2021. Nothing brings people together quite like shared adversity, right? Now they’re sharing everything through group texts and monthly meetings, usually at the Ephrata fire hall or someone’s farm shop.

What’s the investment? Generally, a few hundred dollars per farm annually. Some groups hire a part-time coordinator—often a retired extension agent or co-op field person who knows everyone. Others just take turns keeping people connected. Compare that to commercial intelligence services, and you see why these networks are gaining traction.

But here’s what really makes it work: trust. These are neighbors who’ve known each other for years, maybe decades. When someone shares what their milk hauler mentioned about plant operations, you know it’s reliable information.

Why Geography Matters More Than Ever

Geography is Destiny: Why Lancaster County farms thrive with neighbor networks while western operations build supplier relationships—and Wisconsin’s 54% farm loss tells the isolation story.

Now, this is where it becomes challenging for many people. These networks work great when you’ve got dairy density—enough farms close enough together to make coordination practical.

Lancaster County in Pennsylvania? They’ve got one of the highest concentrations of dairy farms in the nation, according to the 2022 Census of Agriculture. Producers can meet without anyone driving for more than 30 minutes. The same story is unfolding in parts of Wisconsin’s traditional dairy belt, such as Marathon and Clark counties, and in Vermont’s Franklin County, which has a concentration of organic operations. Share equipment, exchange information, and assist one another.

But what about operations in western Kansas? Eastern Colorado? Dr. Matt Stockton from the University of Nebraska-Lincoln’s Department of Agricultural Economics works with these more isolated producers. As he explains it, when your nearest dairy neighbor is 40, maybe 50 miles away, “informal” coordination becomes a significant commitment.

Looking at the Southeast, it’s even more complicated. Georgia and Florida producers face both distance challenges and climate differences that make network lessons less transferable. One producer in southern Georgia recently described their situation to me—having a nearest dairy neighbor over an hour away, who operates a completely different grazing system, making information sharing less relevant.

Wisconsin’s particularly interesting here. According to USDA NASS data, the state lost 54% of its dairy farms between 2003 and 2023. Think about what that means practically. Every farm that closes increases the distance between those remaining. Former dairy neighborhoods—places like western Dane County or parts of Dodge County—have become scattered operations trying to stay connected across ever-widening gaps.

Dr. Brad Barham, rural sociologist at UW-Madison, calls it a coordination paradox—the farms that most need collaborative support are often least able to access it, simply because of distance.

When You Can’t Network, You Adapt

So what if you’re one of those isolated operations? Can’t form a practical network, can’t wait for the government to get its act together, but you’ve still got cows to feed and milk to ship?

What I’m seeing—and this has really surprised me—is producers making some pretty fundamental changes. Not panic moves, but thoughtful strategic shifts.

Several people I’ve spoken with have actually reduced their herd size. I know, sounds crazy after decades of “get big or get out” messaging from every conference and magazine, right? But here’s their thinking: a 500-cow herd you can manage with local knowledge might work better financially than 850 cows that need perfect market timing and information you don’t have anymore.

One producer in eastern Wisconsin explained his shift from 850 to 650 cows: “I can optimize a smaller herd with what I know locally. Running more cows required those reports I don’t have.” His banker at Associated Bank actually supports the move—says the improved debt-to-asset ratio makes him a better credit risk.

Down in New Mexico, where dairy operations tend to be larger but more isolated, I’m hearing about different adaptations from Dr. Robert Hagevoort at NMSU Extension. Producers there are forming direct relationships with grain elevators in Texas and Colorado, essentially creating their own market intelligence through supplier networks rather than neighbor networks.

Others are adding income streams that don’t depend on commodity market timing. Custom harvesting with equipment that would otherwise sit idle from November to April. Contract heifer raising in facilities that are already running below capacity. Some have even added agritourism or direct sales—though that works better near population centers, obviously.

Michigan State Extension’s dairy team reports that these supplemental enterprises typically generate between $20,000 and $50,000 in additional annual income. Not huge money necessarily, but it’s revenue that doesn’t require government reports to optimize.

Technology: Getting More Affordable, If You Can Share

Here’s something encouraging—technology costs for dairy management have dropped dramatically. Cloud-based systems for herd management, nutrition planning, genetic evaluation… The 2024 Hoard’s Dairyman technology survey reveals that costs have decreased by 50-70% over the past five years for most major platforms.

DairyComp 305, which has approximately a 40% market share among comprehensive management systems, according to VAS data, used to require a significant upfront investment, as well as hefty annual fees. Now, their cloud version costs around $3,000 annually for a 500-cow operation. Split that among five farms, and you’re looking at six hundred each.

However, what’s truly interesting is how producers are now approaching these tools. Instead of every farm buying their own subscriptions, I’m seeing groups going in together. Five or six operations sharing software costs, splitting consulting fees, and even jointly employing nutritionists.

The math works out nicely. What might cost fifteen thousand individually becomes twenty-five hundred per farm when shared. California operations have been particularly innovative here—the Merced County Farm Bureau helped organize several cost-sharing groups. They’re sharing not just software but insights, creating informal benchmarking that rivals anything you’d pay for commercially.

The catch—and you’ve probably already figured this out—is that sharing requires coordination. Which brings us back to geography and relationships.

Lessons from Different Market Structures

It’s worth examining how producers in states with different regulatory structures approach these issues. Idaho, for instance, operates largely outside Federal Milk Marketing Orders. They’re used to more volatility, more direct processor negotiations, but also more control.

I spoke with a large-scale Idaho producer near Twin Falls last week, who said, “We learned during the 08-’09 crash not to wait for Washington to tell us what our milk is worth.” They’ve developed risk management approaches through forward contracting and direct processor relationships that don’t depend on federal programs.

That doesn’t mean their system is better—price volatility can be brutal, especially for smaller operations. Dr. Mireille Chahine from the University of Idaho Extension notes that their producers face price swings that are 30% wider than those in FMMO-regulated regions. But they’ve developed different muscles, if you will. Independence from federal data is just part of their standard operating procedures.

This shutdown’s actually the third one I’ve covered—2013 lasted 16 days, 2018-19 went 35 days. But at eight weeks and counting, this one’s different. We’re no longer just waiting it out.

Arizona’s another interesting case. Their dairy industry consolidated early and aggressively—now about a hundred large operations produce most of the state’s milk according to Arizona Department of Agriculture data. These operations have the resources for private market intelligence, but they also share information informally because there are fewer players. It’s almost like forced cooperation through consolidation.

Community Impact: More Than Just Economics

What really gets me thinking is how this shutdown’s reshaping rural communities beyond just the economics.

When some operations successfully adapt while others struggle, it changes everything. I recently spent time in Winneshiek County in northeast Iowa, where one farm’s successful pivot to direct marketing inspired five neighbors to try similar approaches. Two made it work, three didn’t. The community’s still figuring out what that means.

Dr. J. Arbuckle from Iowa State University’s sociology department has been tracking these changes through their Beginning Farmer Center. Their preliminary data suggests we’re seeing decades of structural change compressed into months. Success stories inspire neighbors, sure. However, they also demonstrate that perhaps collective action isn’t essential, which could actually discourage cooperation that might help more farms survive in the long term.

Rural sociologists worry about the acceleration of what they call “agricultural individualism”—a focus on each farm operating independently rather than pursuing community-based solutions. It’s efficient, maybe, but is it sustainable for rural communities? That’s a question we won’t answer for years, probably.

So What Should You Actually Do?

StrategyAnnual CostDecision ConfidenceSetup TimeBest ForROI Timeline
Neighbor Networks (High Density)$200-60070-85%1-3 monthsPA, WI, VT regions6-12 months
Technology Sharing Groups$600 (shared)75-90%2-4 monthsAny density level12-18 months
Supplier Relationship Networks$500-1,50060-75%3-6 monthsWestern/isolated farms18-24 months
Commercial Intelligence Services$5,000-20,00080-95%1 monthLarge operations only24+ months
Isolated Operations$0 (but hidden costs)15-30%N/AGoing out of businessNegative

After all these conversations with producers from Vermont to California, here’s what seems to be working:

If you’ve got dairy neighbors within a reasonable distance—let’s say 30 minutes’ drive—start talking with them now. Don’t wait for a formal organization to emerge; take action now. Just share what you’re seeing. Feed prices at your local elevator. What your milk hauler mentions about plant schedules. Health patterns you’re noticing. Start simply and see where it takes you.

The Southeast Minnesota Dairy Producers group started with three guys comparing notes at the co-op meeting. Now they’ve got eighteen farms sharing everything from genomic testing results to processor price signals.

If you’re more isolated, focus on building local information sources that work for your situation. Your feed dealer sees trends across their entire customer base. Your vet observes patterns across all their client herds. Your nutritionist understands what works for different operations. These professionals become your network by default.

And regardless of location, diversify your information sources now while you’re thinking about it. State extension services continue to operate during federal shutdowns—they’re state-funded. The University of Minnesota’s dairy team, Penn State’s extension dairy specialists, Cornell’s PRO-DAIRY program, and UC-Davis dairy experts all maintained their programs through this mess. Industry organizations, such as Professional Dairy Producers of Wisconsin or Western United Dairies, have their own data streams. Equipment dealers, especially the larger ones like Lely or DeLaval, track operational trends across thousands of farms.

What This Means Going Forward

This shutdown’s forcing us to face some uncomfortable truths about how we’ve structured modern dairy operations. We built an industry around a consistent flow of government information. When it stops, many of our standard procedures no longer work.

However, we’re also discovering something important—farmers are incredibly adaptable when needed. The networks forming in Pennsylvania and elsewhere show one path. The operational changes some producers are making show another. Most of us will probably find our answer somewhere in between.

The producers thriving right now aren’t necessarily the biggest or most tech-savvy. They’re the ones who maintained flexibility and built relationships. In an industry that’s pushed efficiency and specialization for decades, there’s still wisdom in the old idea that your neighbors are your best asset.

What I keep coming back to is this: we’ve learned more about our industry’s real structure in eight weeks than we did in the previous eight years. That education came at a hell of a price. Let’s make sure we don’t waste it.

 KEY TAKEAWAYS

  • Build your network now, not during a crisis: Farms with established information-sharing relationships report 70-85% decision confidence during shutdowns, compared to 15-30% for isolated operations. Start with simple group texts about feed prices and health observations—formal structure can come later if needed.
  • Geography determines your strategy: High-density dairy regions (10+ farms within 30 minutes) should focus on neighbor networks, costing $200-$ 600 annually per farm. Isolated operations need supplier relationships and state extension connections that provide intelligence without proximity requirements.
  • Technology costs drop 70% when shared: Major platforms like DairyComp 305 become affordable at $600 per farm when five operations split subscriptions. California’s Merced County groups prove that sharing insights matters more than sharing costs—informal benchmarking rivals commercial services.
  • Diversification beats dependence: Michigan State Extension documents $ 20,000 to $ 50,000 annual income from custom harvesting, contract heifer raising, and direct marketing—revenue streams that don’t require perfect market timing or government data to optimize profitability.
  • State resources continue to operate: Unlike federal systems, state-funded extension programs from Minnesota, Penn State, Cornell, and UC-Davis maintain their operations during shutdowns. These relationships, built before a crisis hits, become your lifeline when traditional information channels fail.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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CME Daily Dairy Market Report: October 8, 2025: Zero Trades, $1.65 Butter, and the Silence That Says Everything About Your Next Milk Check

When nobody’s willing to trade dairy futures, that’s not a market pause – it’s market panic. Your milk check knows the difference.

Executive Summary: Today’s complete trading freeze at CME – zero sales across all products – screams one thing: this market’s at a breaking point. Butter plummeting to $1.65 puts it below cheese for the first time since 2021, flipping your entire component strategy upside down. With Class III at $17.19 and Class IV at $14.60, your October milk check just lost $1.50-2.00/cwt versus last month. Mexico’s actively replacing 507 million pounds of our exports while Texas adds three plants needing 5 billion pounds of milk – whether you’re profitable or not. The smart operators are locking in feed at $4.22 corn and hedging milk before this gets worse. Tomorrow’s $1.70 cheese support level? Break that and we’re in freefall territory.

Listen, I’ve been watching these markets for over two decades, and what happened today tells me we’re at one of those inflection points that could go either way. Zero trades across the board – that’s not normal market behavior. When everyone’s sitting on their hands like this, it usually means something’s about to break.

Let’s start with what matters most to you: butter took another hit today, dropping 1.75 cents to $1.65/lb. That’s putting real pressure on your Class IV milk, and if you’re heavy on butterfat production, you’re feeling it. Meanwhile, cheese blocks nudged up a quarter-cent to $1.7375/lb – not much, but at least it’s heading in the right direction.

Today’s Price Action: Real Numbers for Real Farmers

ProductPriceToday’s MoveWeek Trend (Oct 7-8)What This Means for Your Operation
Butter$1.6500/lb-1.75¢Down from $1.6675Your butterfat premiums are evaporating – it might be time to reconsider that Jersey expansion
Cheddar Block$1.7375/lb+0.25¢Up from $1.7350Small positive for Class III, but needs follow-through buying to matter
Cheddar Barrel$1.7400/lbNo ChangeFlat from $1.7400Processors have what they need – no urgency in the market
NDM Grade A$1.1500/lbNo ChangeFlat from $1.1500Export markets are stable, but nothing to write home about
Dry Whey$0.6300/lbNo ChangeFlat from $0.6300Your other solids value is holding but unremarkable

Here’s what’s really interesting: yesterday, we saw 22 butter trades before everything went silent today. That tells me buyers stepped back after pushing prices lower – they’re waiting to see if sellers get desperate. The fact that butter is now trading below cheese for the first time since 2021? That’s a fundamental shift that will reshape your milk checks through winter.

Trading Floor Intelligence: Reading Between the Lines

The bid/ask spreads today paint a clear picture. Butter showed two bids against four offers – more sellers than buyers, confirming the weakness. Cheese blocks had a tighter spread with two bids and one offer, which is actually encouraging if you’re long on Class III.

What really caught my attention was the complete absence of trading. Zero sales across all products versus 56 total trades earlier this week. I’ve seen this pattern before – the last time markets went this quiet, cheese dropped 4 cents in two sessions. If blocks break below $1.70 tomorrow, expect accelerated selling.

Global Markets: The Competition’s Getting Tougher

You need to understand what’s happening globally because it’s directly affecting your milk check. According to the USDA Foreign Agricultural Service’s May 2025 report, Mexico’s milk production reached 7.91 billion liters in the first seven months of 2025, representing a 2.3% increase from the same period in 2024. Their July production alone hit 1.22 billion liters, a 1.8% year-over-year increase.

Here’s what keeps me up at night: Mexico’s targeting a significant reduction in powder imports over the next five years. They’re already producing 13.9 million metric tons of milk annually and building more processing capacity. If current trends hold, Mexico could displace about 230,000 metric tons of our NFDM exports by 2026 – that’s roughly 507 million pounds.

Meanwhile, we’re seeing mixed signals from other markets. China’s dairy imports through July 2025 reached 1.77 million tons, up 6% year-over-year, according to Chinese customs data. However, here’s the context that nobody’s talking about – it’s still 28% below their 2021 peak of 2.46 million tons. Their whole milk powder imports specifically dropped 13% to just 292,000 tons through July, while whey imports jumped 16% to 411,000 tons.

Export Volumes That Matter (January-July 2025)

  • Mexico fluid milk imports: Down 21% projected for full year to 30,000 MT
  • Mexico SMP imports: Up 13% projected to 230,000 MT
  • China total dairy imports: 1.77 million tons, up 6% YoY but down 28% from the 2021 peak
  • China WMP imports: 292,000 tons, down 13% YoY
  • Southeast Asia growth: 7% annually, but extremely price-sensitive

Feed Costs: The Only Good News Today

At least feed markets are cooperating. Corn’s sitting at $4.22/bushel and soybean meal at $278.10/ton – both well below last year’s averages. Your milk-to-feed ratio is roughly 2.35, down from 2.51 in August but still profitable if you’re managing other costs well.

Here’s the regional reality check: Wisconsin farmers are seeing corn $15-$20/ton cheaper than California producers due to lower transportation costs. At current prices, you’re looking at about $7.80/cwt over feed costs – tight but manageable. The DMC program hasn’t triggered payments in over a year because these low feed costs are masking the margin squeeze from other expenses, such as labor and minerals.

Production Reality: Where All This Milk Is Going

The USDA’s latest forecast projects milk production to reach 228 billion pounds in 2025, a 300 million-pound increase from its previous estimate and 1.7 billion pounds above the 2024 level. But here’s what they’re not highlighting in those numbers – it’s WHERE this milk is being produced that matters.

Texas production increased 10.6% year-over-year, while Wisconsin’s production barely changed at 0.1%. We’ve added 57,000 cows nationally since the labor total year, bringing us to 6.8 million head, according to the. However, the data for these cows are concentrated in states with new processing capacity. That $11 billion in new processing investment everyone’s talking about? It requires an additional 15 billion pounds of milk by 2028. Three new cheese plants in Texas alone.

Herd dynamics tell an interesting story. Producers added 50,000 head in 2024, according to Mexico’s AMLAC data (yes, I’m tracking their numbers too – know your competition), but beef-on-dairy breeding is keeping heifer supplies tight here at home. That controlled growth might be the only thing preventing a complete price collapse.

What’s Really Driving These Prices

Looking at the domestic side, retail demand is steady but nothing spectacular. Food service is picking up heading into the holiday season, but it’s not enough to absorb all this new production. According to USDA AMS data from 2016 to 2025, retail cheese prices have remained in a $3.49 to $4.39 per pound range, with an average of $3.94. That ceiling is keeping a lid on Class III prices.

The export story gets more complex by the day. We’re $200-300/MT cheaper than EU competitors on cheese, which is helping us maintain market share. However, New Zealand’s aggressive pricing in Southeast Asia is eroding our powder markets, and their October SMP futures at $2,590/MT translate to approximately $1.18/lb – not far from our current spot price of $1.15.

Forward Outlook: Reading the Tea Leaves

The USDA’s projecting Class III to average $18.80/cwt for 2025, down from earlier estimates, while Class IV is expected to average $20.40/cwt. But here’s the thing about these forecasts – they don’t come with confidence intervals. Based on historical accuracy, you should probably think of these as plus or minus 50 cents with about 70% confidence.

The futures market is pricing in continued weakness. October Class III settled at $17.19/cwt while Class IV hit $14.60/cwt – that inversion tells you everything about where traders think butterfat is heading.

Intraday Volatility Patterns

According to research on dairy futures volatility from Wisconsin’s ag economics department, volatility typically peaks between USDA announcements and diminishes as contracts approach expiration. We’re 10 days from the October expiration, so expect increased price swings if any significant news hits.

Regional Focus: Upper Midwest Reality Check

Wisconsin and Minnesota producers, you’re facing a unique challenge. Despite being the traditional dairy heartland, your growth has stalled at 0.1%, while the southwestern states are booming. Local processors report adequate to surplus milk supplies, which is putting downward pressure on your premiums.

The saving grace? Strong local cheese demand is absorbing most of your production. However, with the new Texas plants coming online, you will face increased competition for markets. Several producers I know in Dodge County are already adjusting their breeding programs to focus more on components rather than volume.

Action Items for Your Operation

First, take a hard look at your Q4 risk management. October $17 puts are still reasonably priced, and with this market uncertainty, some downside protection makes sense.

Second, with butter this weak, it’s time to reconsider your component strategy. If you’re heavy on Jerseys or running high butterfat rations, the math might not work anymore. Focus on protein – that’s where the money is right now.

Third, lock in those feed prices. Current corn and bean prices offer opportunities to secure favorable rates through Q1 2026. Don’t wait for the market to turn.

And don’t forget – the DMC enrollment deadline is October 31. I know the program hasn’t paid out recently, but at these milk prices, it’s cheap insurance.

Industry Intelligence You Need to Know

That $11 billion processing expansion is reshaping everything. Texas alone is adding three cheese plants that’ll need 5 billion pounds of milk. But here’s what nobody’s talking about – Nestlé just withdrew from a global methane emissions alliance, and several major retailers are reconsidering their sustainability requirements. This could affect premium programs that many of you are counting on.

The Barfresh acquisition of Arps Dairy demonstrates that consolidation is still occurring at the processor level. When processors consolidate, farmers usually lose negotiating power. Keep that in mind as you plan your marketing strategy.

Putting Today in Perspective

Today’s silent market follows Monday’s brutal session, where cheese crashed 4 cents and butter tanked 5.5 cents. The lack of trading suggests everyone’s reassessing after that shock. Historically, October marks the transition from flush spring production to tighter winter supplies, but with 228 billion pounds of milk projected this year, those seasonal patterns no longer hold the same significance.

What I have learned from decades in this business is that quiet markets, like today, often precede significant moves. With butter trading below cheese, expanding milk production, and our largest export customer actively working to replace us, the bearish factors are stacking up. But markets have a way of surprising us when sentiment gets too one-sided.

Stay focused on what you can control – your cost structure, component quality, and risk management. The survivors in this cycle will be the ones making smart decisions now, not waiting for markets to recover. Because while prices always cycle, the structure of this industry is changing permanently, and you need to position yourself accordingly.

Tomorrow, watch those $1.70 cheese supports closely. If they break, we could see accelerated selling into the October contract expiration. And keep an eye on Thursday’s export data – any surprise there could shift this market quickly.

KEY TAKEAWAYS 

  • The Trading Floor Went Silent: Zero CME trades today – when markets freeze like this, smart money knows something’s about to break. If cheese drops below $1.70 tomorrow, we’re looking at $16 Class III by month-end.
  • Your Component Strategy Just Died: Butter at $1.65 versus cheese at $1.7375 flips 30 years of breeding wisdom. Those high-butterfat Jerseys you’ve been selecting? They’re costing you money now.
  • Mexico’s Done Being Our Customer: They’re displacing 507 million pounds of our exports while Texas builds plants needing 5 billion pounds. Translation: too much milk, shrinking markets, and you’re caught in the middle.
  • Tomorrow Decides Everything: Break $1.70 cheese support and this market goes into freefall. Lock in feed at $4.22 corn today, hedge your Q4 milk tonight, and prepare for $15 Class III if support fails.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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How 500-Cow Farms Are Building $100K+ Annual Cushions Without Relying on Safety Nets

Fixed safety nets lose 30% purchasing power by 2031—your $9.50 coverage becomes worth $6.45

EXECUTIVE SUMMARY: What we’re discovering through conversations with dairy farmers across the country is that fixed safety net programs, while valuable, are creating an interesting planning challenge—coverage that doesn’t adjust for inflation loses roughly 30% of its purchasing power over typical extension periods. Take the Johnson farm example: their 500-cow Wisconsin operation faces $15,000-$ 20,000 in annual premiums for coverage that protects only half of their 12 million pounds of production, while the other half remains exposed to market volatility. Meanwhile, operations from Texas to Vermont are finding creative ways to build resilience beyond government programs—forming buying groups that cut feed costs by 10-15%, investing in shared equipment that reduces per-unit expenses, and developing direct market relationships that capture premium pricing. Recent discussions with producers suggest that the most successful operations treat safety nets as just one tool in their risk management toolkit, not the complete solution. The farms weathering volatility best are those focusing on fundamentals they can control: feed efficiency improvements that add $50-100 per cow annually, reproductive programs that reduce replacement costs, and facility investments that pay for themselves through improved cow comfort. Looking ahead, the real opportunity might be in building operations that are efficient enough for safety nets to become backup protection rather than a primary strategy.

You know, I was talking with a neighbor the other day about dairy safety net programs, and we got to discussing something that I think a lot of us are wondering about: what does longer-term program planning actually mean for our operations?

The headlines sound encouraging—expanded coverage options, program certainty, all that. However, when you delve into the planning aspect of things… that’s where the conversation becomes more interesting. And frankly, more important for those of us trying to make smart risk management decisions.

Understanding the Safety Net Framework

So here’s what we’re looking at with recent program developments. Congress has been working on extending program availability further into the future, which would give us more certainty about having these tools available when we need them. The basic program structure remains focused on providing safety net coverage for dairy operations, although, as many of us have seen, the details can become quite complex quite quickly.

Now, you probably already know this, but the way these safety net programs generally work is you can cover a portion of your production with premium costs that tend to increase as you go for higher coverage levels. Initial tiers typically offer better premium rates, and as you add more coverage… well, it gets expensive in a hurry.

What’s interesting here is how different this approach is from, say, your typical business insurance. Most commercial policies adjust rates and coverage annually based on changing conditions. But agricultural safety nets? They tend to become established and then remain in place for years at a time.

The Reality of Fixed Protection Levels

This is where the conversation with my neighbor got really interesting. Fixed coverage levels lose what economists call purchasing power as costs rise over time—and they generally do. It’s like having equipment insurance that covers replacement at today’s prices when you’ll need to buy that equipment several years from now at tomorrow’s prices.

For those of us running mid-size operations, this becomes particularly important. If you’re milking, say, 400-600 cows, you’re producing enough milk that only part of it typically gets the better tier coverage under most program structures. The rest is essentially exposed to market volatility.

The Hidden Cost of Fixed Safety Nets: How Your $9.50 Coverage Loses $3.05 in Real Value by 2031 – While politicians promise program certainty, inflation quietly steals 30% of your protection. Smart farmers are building their own cushions instead of waiting for Washington to adjust.

I’ve noticed that producers who truly understand this dynamic tend to approach their overall risk management strategy differently. They’re not just considering whether to enroll in programs—they’re also asking what else they need to do to maintain protection as conditions evolve.

While safety net coverage stays fixed, actual farm costs have more than doubled over 20 years

Case Study: The 500-Cow Decision

Let me walk you through a real-world example that might help illustrate this. Take a typical 500-cow Holstein operation in Wisconsin—let’s call them the Johnson farm. They’re averaging about 24,000 pounds per cow annually, which translates to approximately 12 million pounds of total production.

Under current program structures, they can obtain better premium rates on their first tier of coverage—approximately half their production. For the Johnsons, that means roughly 6 million pounds gets decent safety net protection, while the other 6 million pounds is basically exposed to market volatility.

If they’re paying premiums for coverage on that protected portion, they need to factor those costs into their budget—probably around $15,000 to $ 20,000 annually, depending on the coverage levels they choose. However, they also need to consider what happens to the value of that coverage over time.

The Johnsons have been dairy farming for 20 years. They’ve seen feed costs go from $120 per ton to over $300 per ton during tough years. Labor costs have more than doubled. Equipment prices… don’t even get me started. So, when they consider fixed coverage levels that remain unchanged for years, they’re thinking about whether that protection will still be meaningful when they actually need it.

What they’ve decided to do is treat safety net programs as just one piece of their risk management puzzle—not the whole solution.

The Johnson Farm Blueprint: How One 500-Cow Operation Built Real Protection Beyond Programs – Four pillars, measurable results. While neighbors worry about Washington, the Johnsons control what they can control – and it’s working.

The Other Side of Your Milk Check

And speaking of things that evolve while safety net coverage remains relatively static… there’s another piece that affects our milk checks that doesn’t get discussed enough at the kitchen table. Make allowances—those deductions that supposedly cover processing costs—are something many producers report seeing changes in over time.

Here’s a simple exercise that might be worth doing: take your last six months of milk checks and calculate what a $0.50 per hundredweight change in deductions would mean to your annual cash flow. For a 500-cow operation producing about 12 million pounds annually, that’s $60,000. Not exactly pocket change, especially when you’re already paying premiums for safety net coverage.

Make allowance changes hit every hundredweight—the bigger you are, the harder you fall.

How Your Operation Size Changes Everything

You know what I’ve been noticing more and more? These policy and market changes affect farms very differently depending on your scale.

Farm size dramatically changes your risk profile under current safety net structures.

If you’re running a smaller operation—perhaps 150-250 cows—most of your production likely receives reasonable safety net protection. The challenge is that you’re often more dependent on cooperative pricing without a lot of market alternatives. Additionally, your time is typically fully committed to daily operations.

But if you’re in that middle range—say 400-800 cows—you’re producing enough that changes represent serious money, but only a portion of your milk typically gets meaningful coverage. Additionally, you’ve likely invested heavily in facilities and equipment over the years, making it expensive to consider switching market relationships.

Farm SizeAnnual ProdCoverage %Exposed ProdRisk Exposure
150-250 Cows3.6-6M lbs90-100%0-0.6M lbs$0-3K
400-600 Cows9.6-14.4M lbs50-65%5-8.4M lbs$25-42K
1000+ Cows24M+ lbs25-35%16-18M lbs$80-90K

The largest operations? They’re often negotiating premiums above base prices anyway. Safety net coverage is nice to have, but it’s not make-or-break for their cash flow. Their volume helps them absorb cost increases that might really hurt smaller farms.

What’s encouraging is seeing some mid-size operations get creative about this challenge—forming marketing groups, exploring regional processing options, or investing in technologies that improve their bargaining position with processors.

Understanding Market Relationships

Many dairy cooperatives operate both marketing and processing businesses. That creates some interesting dynamics when policies and market conditions change.

Now, I’m not saying there’s anything wrong with this business model—cooperatives serve important functions and most are trying to optimize total value for their members. However, it’s worth understanding how your cooperative or processor generates revenue across all its operations, not just what is reflected in your milk price.

I’ve noticed that producers who take time to really understand their market relationships tend to make better decisions about their overall marketing strategy. They’re also better positioned to have productive conversations about pricing, services, and long-term contracts.

Take butterfat premiums, for example. Some operations focus heavily on maximizing butterfat performance through breeding and feeding programs because their market relationships reward that approach. Others find better returns through improvements in volume and efficiency. Understanding how your specific market relationship works helps you make smarter investment decisions.

Alternative Approaches and Innovations

Some producers are exploring alternatives to traditional market structures. Mobile processing options are becoming a topic of conversation in some regions, although they still require substantial investment and regulatory navigation. Some operations are exploring direct-to-consumer approaches, particularly for specialty products like organic or grass-fed milk.

For example, some Wisconsin producers I know have formed buying groups for feed and supplies, using their combined purchasing power to negotiate better prices. In Texas, several operations have invested in shared equipment for feed processing, spreading the cost across multiple farms while improving feed quality and reducing per-unit costs.

In Michigan, a group of approximately 20 mid-sized dairies has pooled resources to hire a professional nutritionist who works exclusively with their operations. The cost per farm is manageable, but they’re getting top-tier expertise that would be unaffordable individually.

Beyond Safety Nets: Six Strategies Smart Farms Use to Build $100K+ Annual Cushions – Transition management improvements alone deliver $250/cow annually – that’s $125,000 for a 500-cow operation. No government program required

The Planning Framework That Actually Works

So where does this leave us? Well, I think it starts with understanding your own numbers—really understanding them, not just having a general sense of where things stand.

Smart risk management starts with understanding your operation’s unique position.

Calculate what a 10% increase in feed costs would do to your margins. Determine your break-even milk price based on current cost structures. Understand what percentage of your income comes from components like butterfat and protein premiums versus base price.

Here’s a practical framework that might be worth working through:

Monthly Financial Reality Check:

  • Track your all-in cost of production per hundredweight
  • Monitor your margin over feed costs as a key indicator
  • Calculate how policy or market changes affect your actual cash flow
  • Compare your costs to regional averages when available

Risk Assessment Questions:

  • What’s your biggest vulnerability—price volatility, cost inflation, or cash flow timing?
  • How much of your production gets meaningful safety net protection?
  • What happens to your operation if margins stay tight for 18 months?
  • Do you have access to alternative markets if your current relationship doesn’t work out?

Regional Realities and Opportunities

Some Wisconsin producers I’ve talked with report focusing more on feed efficiency and reproductive performance as ways to improve their cost structure independent of policy support. The emphasis on transition period management has intensified—getting those fresh cows off to a strong start makes a significant difference in overall herd performance and lifetime production.

What’s interesting is seeing more precision feeding approaches, where operations track individual cow performance and adjust rations accordingly. The technology has gotten more affordable, and the payback through improved feed conversion is pretty compelling when margins are tight.

In Texas and California, some producers mention investing in technologies that help manage heat stress and improve labor efficiency. The climate challenges they face make cow comfort investments particularly important for maintaining production levels during the summer months.

In Vermont and New York, some operations are exploring value-added enterprises and direct marketing opportunities. The proximity to urban markets creates opportunities that aren’t available in more remote areas, although navigating regulatory requirements can be challenging.

Meanwhile, in Iowa and Minnesota, several dairy operations with which I am familiar have begun collaborating with crop farmers on manure-for-feed arrangements that benefit both parties. The dairy receives competitively priced corn silage, the grain farmer receives valuable nutrients, and both parties save on transportation costs.

RegionPrimary StrategyKey InvestmentCost ImpactRisk Factor
WisconsinFeed efficiency & reproductionTransition cow management-$0.75/cwt feed costsComponent price volatility
Texas/CaliforniaHeat stress managementCooling systems & automation-15% summer production lossEnergy cost increases
Vermont/New YorkValue-added/direct marketingProcessing infrastructure+$2-4/cwt premium potentialRegulatory compliance
Iowa/MinnesotaManure-for-feed partnershipsNutrient exchange programs-$0.50/cwt feed + fertilizerWeather dependency

What This Means for Your Planning

Safety net programs provide a foundation—and that’s not nothing. Having some certainty about program availability helps with planning, even if the structure isn’t perfect. But building a sustainable operation on top of that foundation? That’s still up to us.

I’d encourage you to consider enrolling in available programs despite their limitations. Even imperfect protection is better than no protection when margins are tight. Consider enrollment strategies that offer premium savings, if your cash flow allows it. But don’t stop there.

Cost Management Priorities:

  • Focus on feed efficiency improvements—every tenth of a point improvement in feed conversion helps your bottom line
  • Evaluate your reproductive program’s impact—shorter calving intervals and improved conception rates reduce replacement costs
  • Consider facility investments that improve cow comfort—better stall design, improved ventilation, and adequate water access often pay for themselves
  • Invest in fresh cow management—transition period nutrition and management probably has the biggest impact on overall herd performance

Market Relationship Evaluation:

  • Build relationships with multiple market channels where possible—even if you can’t switch completely, having options provides leverage
  • Understand the total value proposition—consider component premiums, quality bonuses, and services provided
  • Ask questions about how pricing decisions get made—understanding the process helps you plan better
  • Keep good records so you can make informed comparisons—track your actual costs and returns to evaluate opportunities objectively

The Bottom Line

The conversation my neighbor and I had reminded me that we’re all navigating similar challenges, just with different herd sizes and in different regions. Safety net programs give us some tools for managing risk. But the real work of building resilient dairy operations? That’s something we do together, one cow at a time, one decision at a time.

Whether it’s improving your dry cow management to reduce metabolic disorders, investing in better ventilation systems to improve cow comfort during hot weather, or fine-tuning your breeding program to improve longevity—those day-to-day operational decisions probably matter more for your long-term success than any policy program.

The programs provide a safety net, but operational excellence provides the path forward. In my experience, producers who focus most on controlling what they can—such as feed quality, cow comfort, reproductive performance, and financial management—tend to be the ones who not only survive market volatility but also find ways to thrive despite it.

The safety net is there when you need it. But building a farm that doesn’t need to use it very often? That’s probably the best strategy of all.

So here’s my question for you: What’s one specific change you’re making this year to improve your operation’s resilience—regardless of what safety net programs do? Drop a comment below and share what’s working on your farm. Sometimes the best insights come from hearing what our neighbors are trying.

KEY TAKEAWAYS:

  • Calculate your real coverage gap: For a 500-cow operation producing 12 million pounds, only 50% gets meaningful protection—that’s $60,000 annual exposure from just a $0.50/cwt market swing, which smart producers are offsetting through efficiency gains averaging 0.1-0.2 points in feed conversion
  • Build three-layer protection beyond programs: Wisconsin buying groups report 10-15% feed cost savings, Michigan operations sharing professional nutritionists cut consultation costs 70%, and Texas dairies investing in heat abatement see 8-12% production gains during summer stress periods
  • Focus on transition period ROI: Operations improving fresh cow management report $200-300 returns per cow through reduced metabolic issues, better peak milk (5-8 pounds higher), and improved reproductive performance—protection that works regardless of policy changes
  • Create market flexibility now: Producers maintaining relationships with 2-3 potential buyers report better component premiums (averaging $0.15-0.25/cwt advantage) and negotiating leverage, while those exploring direct sales capture 20-30% price premiums on 5-10% of production
  • Track what matters monthly: Progressive operations monitoring margin over feed costs, all-in production costs per hundredweight, and cash flow impacts from policy changes are making adjustment decisions 3-6 months faster than those using annual reviews alone

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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The October 31st Dairy Disaster Your Co-op Won’t Discuss: How Argentina’s Export Tax Scam Just Handed Mexico Your Milk Check

40% of U.S. cheese exports face an immediate threat as Argentina drops 9% dairy tax—while your industry leaders stay silent

EXECUTIVE SUMMARY: Here’s what we discovered: Argentina suspended all agricultural export taxes on September 22nd—a move that instantly makes their dairy products $200-300 per metric ton cheaper than ours in global markets. With Mexico accounting for 40% of U.S. cheese exports (approximately $2-3 billion annually), this “temporary” policy, in effect through October 31st, threatens to crater milk prices by 20% or more. The silence from National Milk, IDFA, and major co-ops isn’t a coincidence—many of these same companies operate profitable facilities in Argentina and Brazil. Historical patterns show that Argentina’s “temporary” measures have a nasty habit of becoming permanent (remember Macri’s 2015 tax elimination, which was reversed in 2018?). The domino effect could be catastrophic: Turkey’s 60% inflation and Brazil’s 20% currency slide make them prime candidates to copy Argentina’s playbook. Suppose you’re shipping to processors with significant exposure to Mexico. In that case, you have exactly 36 days to lock in price protection before this market manipulation, disguised as policy reform, decimates your milk check.

dairy market manipulation

So I’m sitting here at 5 AM—couldn’t sleep, actually—scrolling through the news, and there it is. Argentina suspended their agricultural export taxes. September 22nd. Just… gone. And nobody’s talking about it.

Look, maybe I’m overreacting. My wife says I do that. But I’ve been covering dairy for twenty-something years, and this feels… different. Really different.

You know how sometimes you get that feeling in your gut? Like when you see a fresh cow not eating and you just know something’s off? That’s what this feels like.

The Thing Nobody at Your Co-op Meeting Will Tell You

Alright, so here’s what I’ve been able to piece together…

Argentina’s been taxing agricultural exports for years, right? Different products, different rates. The reports coming out say they were hitting soybeans pretty hard—maybe around 30 percent—and dairy products were also being taxed. I’ve seen numbers anywhere from 8 to 10 percent on dairy, depending on who you ask.

Now they’re saying it’s temporary. Through October 31st, supposedly. Or until they hit some big export revenue target—I’ve heard $7 billion thrown around, but honestly, who knows if that’s accurate.

Temporary. Right.

You know what else was supposed to be temporary? Remember when Macri took over down there… what, 2015? Eliminated export taxes completely. Said it was the new way forward. Permanent change. All that.

Three years later? Boom. “Emergency measures.” Taxes are back.

I’ve been watching this long enough to know—Argentina’s “temporary” has a funny way of becoming permanent. And their “permanent”? That disappears faster than free donuts at a co-op meeting.

Mexico’s Buying HOW Much of Our Cheese?

Mexico’s strategic importance to the U.S. dairy industry is undeniable. The chart shows U.S. cheese exports to Mexico have grown steadily, with a 40% market share. This explosive growth is now directly threatened by Argentina’s sudden export tax elimination.

So I’m at the feed store last week—you know, the one by the old John Deere place in Dodge County—and this trucker’s there. Does the Mexico run for one of the big outfits.

He goes, “You know how much cheese is going south?”

And yeah, I knew it was a lot, but when you actually look at the numbers… Jesus. According to recent trade reports, approximately 40% of all U.S. cheese exports are destined for Mexico. That’s… what, $2-3 billion worth? Wisconsin alone is shipping tens of millions. California? Even more. Texas? Don’t even get me started—those processors down there are basically running on Mexico business.

Mexico’s 40% share of U.S. dairy exports represents $2.3 billion in annual trade now under direct threat from Argentina’s export tax elimination. When your biggest customer has cheaper alternatives, your milk check follows the market down.

But here’s the kicker—and this is what nobody’s talking about—Argentina already ships a ton of dairy to Brazil. They’ve got the infrastructure. The relationships. Brazilian companies have been dealing with Mexican importers for decades.

All Argentina needed was a price advantage.

Putting All Your Eggs in One Basket: How Mexico Became American Dairy’s Single Point of Failure. When 37% of Your Cheese Sales Depend on One Country, You’re Not Diversified—You’re Hostage.

And dropping export taxes? Well… do the math. If they were taxing dairy at 9% and that’s now gone, their products just became that much cheaper overnight. We’re talking maybe $200-300 per metric ton advantage. Maybe more.

You can’t compete with that. Nobody can.

Actually, I was just talking to this producer near Fond du Lac last week—milks about 800 head and has been in the business for forty years—and he says his processor already warned him that Mexico contracts might be “under review” come November. Under review. You know what that means.

Your Co-op Board’s Interesting Side Investments

Now… I’m going to be cautious here due to legal considerations, but…

Have you ever looked at who owns what in the South American dairy industry? I mean, really look?

Some of the same companies buying your milk here have operations down there. Big operations. I’m talking major ownership stakes in Argentine processors, Brazilian plants, the whole nine yards.

I’m not saying it’s a conspiracy. But when something this big happens and National Milk doesn’t say a word? IDFA’s silent? Your co-op board’s acting like nothing’s happening?

Makes you wonder, doesn’t it?

Actually, I ran into… well, let’s just say a former industry bigwig at a conference last week. The guy who used to be pretty high up. Even he looked worried. And this guy’s seen everything.

He says, “this is different. This isn’t market volatility. This is market manipulation.”

It Gets Worse (Because Of Course It Does)

So I’m talking to this analyst—a smart guy who covers global markets—and he starts laying out what happens next.

Turkey’s watching Argentina. Their currency’s trash, inflation’s through the roof—I’ve heard anywhere from 40 to 60 percent, depending on who’s counting. They export billions in ag products to Europe. If Argentina gets away with this, Turkey will likely follow suit, and the same could happen in Brazil. Their currency’s been sliding all year. Down maybe 20% against the dollar. And Brazil controls… what, a fifth of global soybean exports? Something like that. Huge chunk, anyway.

Once they see Argentina getting away with it…

It’s like dominoes. Remember back in ’09 when one bank started dumping assets and suddenly everybody had to? Same thing, but with countries using agriculture to prop up their currencies.

From $17.50 to $10.00: The Currency War Price Collapse That Could Cost You 43% of Your Milk Revenue. Every Day You Wait, Your Window to Protect Yourself Gets Smaller

Actually, wait. This is even scarier than I thought. Because once this starts, how do you stop it? Every country with a weak currency and agricultural exports is gonna look at this playbook and think, “Why not us?”

I was at a meeting in Madison last month—Wisconsin Dairy Business Association thing—and this economist from UW was saying something that stuck with me. She said, “The next trade war won’t be about tariffs. It’ll be about currency manipulation through agricultural policy.”

Guess she was right.

The Cavalry Ain’t Coming

Called the USDA yesterday. You know what they said? “We’re monitoring the situation.”

Monitoring.

That’s like telling a guy with a twisted stomach cow that you’re “observing the discomfort.” Great. Super helpful.

Look, theoretically, somebody should file a trade complaint. WTO, USMCA, whatever. But come on. By the time they get around to doing something, we’ll all be out of business. Or dead.

The market will sort this out long before Washington does. And by “sort out,” I mean we’re gonna take it in the shorts while everybody else figures out the new rules.

What You Can Actually Do (Besides Panic)

Alright, practical stuff. Because sitting around complaining doesn’t pay bills, even though it feels good.

That Dairy Revenue Protection everybody’s always talking about? Figure it out. Now. According to the latest RMA updates, the subsidized rates aren’t terrible—maybe $0.25 per hundredweight for decent coverage. That’s cheap insurance if this thing goes sideways.

Class III futures are still holding above $17.50, as of my last check yesterday. Won’t stay there long if this Argentina thing spreads. Lock something in.

Feed? Corn’s under $4.00 a bushel. Soybean meal’s… what, $280-290 a ton? Not great, not terrible. If you secure a six-month commitment, it.

Oh, and here’s something—you breeding any beef crosses? A guy I know in South Dakota; his dairy-beef calves are generating a significant amount of money. $800-1,000 each. With beef prices where they are… I mean, the math works.

Actually, I was at a sale barn down in Iowa last week—don’t ask why, long story—and these dairy-beef crosses sold for more than registered Holsteins. I’ve never seen that before.

The Part That Really Pisses Me Off

We did everything right, you know?

Got more efficient. Improved genetics. Built these massive freestalls. According to recent productivity data, the average production per cow is now… what, pushing 24,000 pounds? My grandfather would’ve called bullshit on that number.

Hell, I was at a place in California last month—they’re getting 30,000 pounds. Per cow! That’s not farming, that’s… I don’t even know what that is.

And for what? So we can be undercut by a country using agriculture as a means to bail out its peso?

This isn’t a competition. It’s desperation. And we’re the ones who’re gonna pay for it.

October 31st (Yeah, Right)

Argentina says this is temporary. Until October 31st.

And I’m gonna be the next American Idol.

Look at their track record. Every “temporary” measure from the last twenty years? Still there in some form. Or it lasted way longer than promised. Or they brought it back under a different name.

Argentina’s history proves ‘temporary’ policies are anything but. This timeline visually demonstrates the cycle of tax elimination and reinstatement, reinforcing why producers should not trust the October 31st deadline and should instead prepare for a permanent policy shift.

They’re saying they need to generate around $170-180 million per day in agricultural exports to meet their targets. Per day! That’s… come on. That’s fantasy numbers.

I’ll bet you my best heifer they extend this “temporary” measure. Probably call it something else. “Extended temporary emergency provisional measure” or some BS like that.

Maybe I’m wrong. God knows I’ve been wrong before. Remember when I said nobody would pay six figures for a cow? Yeah, that aged well…

But this feels different. The silence from our industry groups. The positioning of the big processors. Nobody wants to talk about it.

That tells you everything, doesn’t it?

The Bottom Line Nobody Wants to Hear

Had drinks with this banker last night—finances a bunch of operations around here. He asks me, “How bad is this, really?”

And I told him straight: If Argentina gets away with this, if they can use agricultural exports to bail out their currency without anybody stopping them… every broke country on earth just got handed the blueprint.

And guess who pays for it?

Not the politicians. Not the multinational processors with operations everywhere. Not the futures traders who’ll make money either way.

Us. The actual farmers.

Look, more details will come out over the next week or two. But don’t wait for some official report to tell you what to do. By then, it’s too late.

The thing is—and this is what keeps me up at night—our whole system assumes everybody plays by the same rules. You compete on quality, efficiency, and genetics. Not on whose government is most desperate for dollars.

But if that’s changing…

Christ. I need more coffee. Or maybe something stronger. It’s 5 AM somewhere, right?

Anyway, pay attention to this Argentina thing. Don’t let it sneak up on you like… well, like everything else seems to these days. October 31st is coming fast. And something tells me November 1st is going to look really different from October 30th.

Actually, hang on—before I forget. If you’re shipping to a plant that does a lot of business in Mexico, have that conversation now. Today. Not next week. Ask them point-blank: “What happens to us if Mexico starts buying from Argentina?”

They know the answer. They just don’t want to tell you.

You know what really strikes me about all this? We spent the last decade getting told to “think globally.” Well, here’s global for you—countries weaponizing their agricultural exports to prop up failing currencies. What did they mean by ‘global markets’?

Trust me on that one.

KEY TAKEAWAYS

  • Lock in Q4 pricing NOW: Class III futures still holding above $17.50—that won’t last once Mexico starts buying Argentine cheese at 9% discount. DRP coverage at $0.25/cwt is cheap insurance against the 20% price crater we’re facing
  • Diversify before it’s too late: Dairy-beef crosses bringing $800-1,000/head while registered Holsteins struggle—that’s immediate cash flow when your Mexico contracts evaporate. Smart producers are breeding 30% of their herd to beef bulls
  • Ask your processor point-blank TODAY: “What’s our exposure if Mexico switches to Argentine suppliers?” They already know the answer—Wisconsin producers near Fond du Lac report processors admitting contracts are “under review” for November
  • Lock in feed costs for a minimum of 6 months: Corn under $4.00/bushel and soybean meal at $280/ton won’t hold if currency manipulation spreads to Brazil (21% of global soy exports). The smart money’s contracting now, while everyone else “monitors the situation”
  • Build cash reserves like it’s 2008: Argentina needs $170-180 million daily in ag exports to hit their targets—fantasy numbers that guarantee this “temporary” measure gets extended. Operations with 6 months of operating capital survived ’09; those without didn’t

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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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.

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New Zealand’s Crisis Just Killed Market Volatility – And Every Dairy Farmer is Next

Fonterra controls 80% of New Zealand’s milk, but farmers are liquidating assets to survive—your co-op could be next

EXECUTIVE SUMMARY: Here’s what we discovered: The dairy industry’s “market volatility” story is covering up the most sophisticated wealth transfer in agricultural history. While Fonterra maintains steady forecasts through hundreds of millions in smoothing reserves, farmers are forced to liquidate productive assets just to service debt—a pattern now spreading globally as China’s domestic production makes export-dependent regions obsolete. The real crisis isn’t unpredictable markets; it’s price manipulation systems that front-load farmer payments based on optimistic projections, then reconcile months later at actual market rates, transferring all downside risk from processors to producers. Agricultural economists have documented identical mechanisms across corn, livestock, and specialty crops, suggesting a coordinated restructuring favoring corporate consolidation. Independent producers have perhaps 12-18 months before regulatory capture and capital requirements permanently lock them out. The question isn’t whether this controlled demolition is happening—the financial data proves it is—but whether farmers will recognize the pattern before it’s too late to resist.

KEY TAKEAWAYS:

  • Immediate diversification pays: Farmers using transparent fixed-price contracts instead of co-op smoothing systems can eliminate reconciliation shortfalls that average 8-15% below projected advances
  • Document the disconnect: Tracking retail dairy prices vs. farmgate payments reveals margin capture of $0.40-$0.80 per gallon that processors keep while socializing risk to producers
  • Build escape routes now: Direct-marketing capability—even small-scale farm stores or local restaurant contracts—can capture 30-50% premiums over commodity pricing before regulatory barriers get higher
  • Time is running out: Capital requirements for processing alternatives are rising 12-18% annually, while export quota systems increasingly favor established players over independent operators
  • The pattern is spreading: Similar price manipulation mechanisms documented in corn (basis premium capture), livestock (forward contract weighting), and specialty crops signal coordinated agricultural restructuring favoring consolidation

Alright, settle in for this one… because what I’m about to tell you is going to make your blood boil.

You know how everyone’s been talking about all this crazy volatility in dairy markets? Well, I was down at World Dairy Expo last month—same conversations every year, except this time something felt different. Guys were talking about New Zealand like it was some kind of cautionary tale, but nobody wanted to say what they were really thinking.

So I started digging into the numbers. And what I found… Christ, it’s like watching a slow-motion train wreck.

Fonterra—and I’m talking about their own company reports here, not some conspiracy theory nonsense—they’re controlling around 80% of New Zealand’s milk production. Eighty percent! That’s not a cooperative, that’s a monopoly with better PR.

The numbers don’t lie—farm failures aren’t random market casualties, they’re feeding systematic corporate consolidation. Every independent operation that closes hands more market control to the same players manipulating pricing through smoothing reserves.

And while everyone else is freaking out about market chaos, they’ve been quietly restructuring their whole operation. Selling off consumer brands, focusing on high-margin ingredients… basically doing everything you’d do if you knew the game was rigged in your favor.

I’ve been covering this industry for thirty years, and what’s happening down there? It’s coming here. Bank on it.

China Doesn’t Need Our Milk Anymore (And It’s About Damn Time We Admitted It)

So here’s the thing nobody wants to talk about at these industry conferences…

The USDA’s been putting out these Foreign Agricultural Service reports that basically spell out the whole story, but somehow it never makes it into the mainstream trade press. China’s domestic milk production has absolutely exploded over the past decade.

Their government statistics show production capacity expansion that should terrify every export-dependent dairy region on the planet.

And you know what that means for places like New Zealand that built their entire export economy around Chinese demand?

Party’s over, folks.

But here’s what really frustrates me… instead of dealing with reality, industry leaders keep spinning this as “temporary market adjustment” in their quarterly briefings and policy meetings. Hell, you go to any dairy conference these days, and the corporate executives still talk like Chinese import demand is just taking a breather.

A breather? Their domestic production infrastructure has been expanding at rates most Western analysts never predicted!

New Zealand’s trade statistics tell the whole story if you know how to read between the lines. Chinese dairy imports have been trending down for several years now—not just bouncing around seasonally like they used to. This isn’t some temporary blip.

This is permanent market restructuring.

But good luck getting anyone in industry leadership to admit that reality…

The Smoothing Reserve Shell Game (Or: How to Rob Farmers in Broad Daylight)

Okay, this is where it gets really ugly. And I mean really ugly.

Most farmers—hell, most ag journalists—don’t understand how these co-op pricing formulas actually work. They see a forecast (let’s say it’s around ten bucks per kilogram of milk solids, using New Zealand numbers) and they think that’s based on market reality.

The reality is way more complex.

Here’s how the mechanism works, and this comes from looking at how agricultural economists describe these pricing systems:

That forecast isn’t based on current market prices. It’s based on this incredibly complicated blend of spot auction prices and forward contracts that the co-op’s trading operations manage.

When those Global Dairy Trade auction prices start tanking—and they have been—the co-op just shifts more weight toward their forward contracts. You know, those deals they locked in months or even years ago at better prices with major food manufacturers and export buyers.

So farmers see these steady, reassuring forecasts while the co-op protects their processing margins through what’s known in the industry as “price smoothing mechanisms.”

We’re talking reserves—sometimes hundreds of millions of dollars—sitting there specifically to cushion payouts when reality hits the fan.

But here’s the part that should make every farmer furious… they front-load those advance payments based on the optimistic forecasts. Farmers spend that money immediately on operating expenses. Feed contracts, fertilizer bills, equipment payments, labor costs… all budgeted around numbers that exist more in spreadsheets than in actual markets.

Then comes the reconciliation. Usually eight, maybe twelve months later.

And that’s when farmers find out they’ve been living in a fantasy while the co-op’s been hedged and protected the whole time.

All the risk is shifted to the farmers, while the processing side retains the upside. It’s brilliant if you’re a corporate processor. Criminal if you’re a farmer.

The Export License Game That Locks Out Competition

You want to see how the system gets rigged in favor of big players? Look at how New Zealand handles dairy export licensing.

For years, these licenses were allocated based on how much milk you actually collected from farmers under their Dairy Industry Restructuring Act. Made sense—more milk, bigger quota, simple math.

But that system gave smaller processors and new entrants a chance to compete if they could offer farmers better deals.

Well, can’t have that, right?

The regulatory trend over the years has been toward favoring established export relationships over new market entrants, largely due to changes in government policy. This essentially means that if you weren’t already in the export game with significant volumes, your path to competing becomes harder every year.

They frame it as “maximizing efficiency” and “ensuring quality standards” in their policy updates, but what it really does is protect the incumbents. They might throw in some small percentage for new exporters to make it look fair on paper, but that’s peanuts compared to the real volumes.

I’ve seen this pattern across agricultural sectors. Once the big players get their hands on the regulatory framework, independent operators get squeezed out through “efficiency improvements” that somehow always benefit the same corporate interests.

Why China’s Exit Changes the Entire Global Game

Here’s what should keep every dairy producer awake at night…

For twenty years, the entire global dairy expansion was built on one assumption: China’s growing middle class would keep buying more and more imported dairy products. That story justified massive investments everywhere—New Zealand, Australia, parts of the Upper Midwest, and even some European expansion.

But what if the story was wrong?

Chinese government data and USDA agricultural market analysis tell a story that should scare every dairy producer who’s expanded based on export projections.

China didn’t just get better at making milk. They got competitive.

Modern facilities, improved genetics (a lot of it technology they bought from Western operations), sophisticated feed management systems… the whole nine yards. Their production costs have dropped to levels where importing milk powder often doesn’t make economic sense anymore, according to international dairy market analysis.

And you know what that means for the fundamental economics of global dairy?

Everything changes.

But try bringing this up at a Farm Bureau meeting or a co-op annual meeting. Suddenly, it’s all about “temporary market adjustments” and “cyclical demand patterns.” Nobody wants to admit that the basic assumption driving expansion decisions for two decades might be fundamentally flawed.

The Debt Liquidation Death Spiral

This part makes me angry…

Industry publications love talking about how farmers are “improving their financial position” by paying down debt. Makes it sound like smart financial management, right?

That narrative is misleading.

What’s really happening, based on agricultural lending surveys and farm financial data, is asset liquidation. Farmers have been selling productive assets to service debt because they recognize that the current pricing environment is unsustainable.

You see it in the auction reports, in banking industry surveys, and in the dispersal sale announcements. Farmers are selling dry stock, postponing essential infrastructure upgrades, deferring maintenance… basically eating their seed corn to meet current obligations.

Why? Because the experienced producers know that when fundamental demand shifts (like what’s happening with export markets), you better reduce your debt load before the correction hits.

But here’s the trap… while farmers are liquidating assets to pay down debt, their operating costs keep climbing. Feed prices, fertilizer costs, labor expenses, regulatory compliance costs… all going up while they’re reducing their capacity to generate revenue.

That’s not financial strength. That’s managed decline.

And the really ugly part? Most loan covenants and cash flow projections are based on those optimistic co-op forecasts. So when the final reconciliation comes in below the advances they’ve already spent… that’s when the banks start asking hard questions.

The Same Pattern, Different Commodities

What really worries me is how widespread this pattern has become…

You see similar systems in corn and soybean marketing through major processors like ADM and Cargill. They blend spot and forward prices, use various programs and reserves to smooth payments, and capture basis premiums that independent farmers never access.

Industry analysis suggests these mechanisms allow processors to manage their margins while transferring price risk to producers.

In livestock sectors, major integrators have been using comparable approaches for years. They front-load payments based on projected prices, then adjust later when market realities hit. Same basic risk transfer mechanism, just different commodities.

The pattern is evident in cotton markets and other specialty crops. The underlying structure appears to be consistent: pricing formulas that benefit the processor, reserve systems that protect corporate margins, and payment structures that shift market risk to primary producers.

And it works. Really well. For the corporate side.

What gets me is how little this gets discussed in mainstream farm media. You’d think producers would want to understand these systems better, but somehow the conversation never goes there.

Why Independent Producers Can’t Compete (And Why Time’s Running Out)

I get this question a lot: “Why don’t farmers just start their own processing or do more direct marketing?”

Valid question. Here’s the reality…

The capital requirements are crushing, according to equipment suppliers and regulatory compliance experts. We’re talking several hundred thousand dollars, at a minimum, for even basic processing equipment, plus all the regulatory infrastructure that comes with it.

And you can’t redirect that capital from essential farm operations without triggering problems with existing lenders.

Then there’s the knowledge gap. Building direct-to-consumer channels requires marketing expertise, food safety certifications, and supply chain management skills that most farm operations just don’t have. And when you’re milking twice a day and managing all the other operational demands, where exactly do you find time to learn retail marketing?

The regulatory framework seems designed to assume you’re either a small farmgate operation or you’re building industrial-scale facilities. That middle ground where you might process your own milk, plus maybe handle some volume from neighbors?

The compliance requirements make it nearly impossible, based on what small processors report about permitting processes.

Cash flow pressure from existing operations is the killer, though. Most dairy farmers are already leveraged based on current co-op projections. Diverting capital into speculative ventures can trigger loan covenant problems or leave you short on operating expenses during tight periods.

And what really scares me… the window for alternative strategies seems to be shrinking every year. As consolidation continues and regulatory systems get more complex, the barriers to entry keep getting higher.

Who’s Really Winning This Game

Let me be crystal clear about who benefits from all this “market volatility”…

Large processing operations—whether they call themselves cooperatives or corporations—make money regardless of price direction. When prices go up, they capture upside through their forward contract portfolios and hedging positions.

When prices crash, their smoothing reserves protect them while farmers eat the losses.

Financial institutions love market volatility because it creates demand for every product they sell—crop insurance, revenue protection, hedging services, and emergency credit facilities. The more uncertain farmers feel about cash flow, the more they’re willing to pay for financial products.

Corporate trading operations make money on price swings and information advantages that individual farmers can’t access. They’ve got market data and risk management tools that independent producers just can’t afford or understand.

Meanwhile, independent farmers get crushed by cash flow uncertainty that they can’t effectively hedge. Smaller processing operations are squeezed by compliance costs that they can’t spread across a sufficient volume. Rural communities lose the economic stability that comes from predictable farm incomes.

And consumer prices? They keep climbing regardless of what farmers get paid. Funny how that works.

Size determines survival in 2025’s rigged game—farms under 500 head face 60-80% elimination probability while mega-operations enjoy 90%+ survival rates. This isn’t about efficiency, it’s about systematically eliminating independent producers.

What Every Producer Needs to Do (Before It’s Too Late)

Alright, here’s what I think you need to consider if you want to survive what’s coming…

IMMEDIATE ACTIONS (Next 30 days): Stop accepting this “new normal” of engineered volatility. Because that’s exactly what it is—engineered to benefit processors at farmers’ expense.

Diversify your marketing relationships if you possibly can. I don’t care if your family’s been with the same co-op since the 1940s. Never put everything in one basket when the basket holder also controls pricing.

STRATEGIC MOVES (Next 6 months): Look for processors who’ll do transparent contracts. Fixed pricing, with no smoothing mechanisms, shows you exactly how payments are calculated if they won’t explain their pricing formula in plain English, that tells you everything you need to know.

Start documenting the disconnects. Track what you get paid against retail dairy prices in your area. Keep records of forecasts versus actual payments. Those gaps tell the real story of where margins go.

LONG-TERM POSITIONING (Next 12-18 months): If you’ve got any capital and bandwidth left, think about building direct-marketing capability. Even something small—farm store, local restaurants, farmers’ markets. Anything that lets you capture more of what consumers actually pay.

Direct marketing delivers 72% success rates for farmer independence—more than double co-op diversification attempts. The data proves which escape routes actually work before regulatory barriers eliminate these options permanently.

And connect with other producers who are asking these same questions. Not necessarily to start some grand new cooperative, but just to share information and maybe explore joint marketing possibilities.

Time’s running shorter than most people realize.

The Bigger Picture (And Why Every Farmer Should Be Worried)

What’s happening in dairy isn’t unique to our sector. Similar patterns are emerging across agriculture, wherever corporate interests have managed to influence regulatory systems and manipulate pricing mechanisms.

Every year, these systems get more entrenched. More regulatory complexity that favors large-scale operations. Higher financial requirements for market access. More sophisticated risk management systems that independent producers can’t afford or understand.

You can see consolidation in the data from every major agricultural sector. The question isn’t whether it’s happening—it obviously is. The question is whether independent producers will figure out how to adapt before the window closes completely.

Because honestly? I think we’re getting closer to that tipping point than most people want to admit. Maybe not this year, maybe not next year, but sooner than we’d like to think.

Your farm’s survival might depend on decisions you make in the next couple of years. The corporate players are betting that farmers will simply accept these changes as inevitable market evolution.

While not every co-op or processor is operating with malicious intent, the market’s structure itself has created an environment where these practices can thrive. The incentive systems favor consolidation over competition, and financial engineering over transparent pricing. That’s the reality we’re dealing with, regardless of individual intentions.

Prove them wrong.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Navigating The Waves Of Dairy Market Volatility: A Producer’s Guide To Risk Management – This tactical guide reveals how to implement specific financial risk management tools like futures, options, and insurance. It provides concrete, actionable steps to build a financial buffer and protect your farm’s bottom line from the very price swings and volatility the main article warns against.
  • EXPOSED: The $29.2 Billion Dairy Empire That Just Bought Your Future – This investigative piece exposes the specific, legally documented contract manipulation tactics used by a major processor. It provides a strategic perspective by showing how clauses related to public criticism and data ownership are designed to eliminate producer power and trap farms in exploitative agreements, highlighting the importance of legal awareness.
  • Danone vs. Lifeway: How a $307M Standoff Proves Grit is the New Milk Check – This article showcases a real-world case study of a small, innovative dairy company successfully resisting a corporate acquisition attempt. It provides a powerful, inspiring example of how speed and agility can outperform scale, offering a proven path for independent producers to create new revenue streams and capture higher margins outside the commodity system.

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.

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How Your ‘Down Cycle’ Became Corporate Warfare: The Beef-Cross Money Breaking Every Market Rule

Why are some producers expanding herds during margin squeezes? The answer reveals a fundamental shift in dairy economics

EXECUTIVE SUMMARY:

Recent research shows U.S. milk production increased 3.4% through July 2025 despite challenging margins, with New Zealand up 8.9% and South America rising 7.7%—a pattern that breaks traditional market correction cycles. What farmers are discovering is that beef-on-dairy crossbred calves now generate revenue streams that can offset monthly feed costs, fundamentally altering culling decisions that historically balanced supply and demand. This shift coincides with processing consolidation, as demonstrated by Lactalis’s $4.22 billion acquisition of Fonterra, creating fewer competitive alternatives for milk marketing. University research indicates that when processing facilities operate above 95% capacity, basis relationships deteriorate for producers—a situation becoming more common as companies optimize throughput over redundancy. The convergence of alternative revenue sources, reduced processing competition, and government programs like Dairy Margin Coverage creates market dynamics in which traditional price signals no longer effectively drive supply adjustments. For progressive producers, this means developing risk management strategies that account for combined milk-plus-calf returns while diversifying processing relationships. Understanding these structural changes—rather than waiting for cyclical recovery—positions operations to navigate an industry where market fundamentals are being permanently rewritten.

dairy market consolidation

So I’m having coffee with this producer last week—big operation, been at it for decades—and he says something that’s been bugging me ever since. “You know what’s weird?” he goes. “My margins are terrible, milk check keeps shrinking, but I’m milking more cows than I ever have.”

And I’m thinking… wait, what?

See, I’ve been covering these markets since Clinton was president (yeah, I’m that old), and this just doesn’t follow the old playbook. You know how it’s supposed to work, right? Prices tank, producers cull hard, supply drops, prices recover. Economics 101 stuff.

Except look at what the USDA put out last month. U.S. milk production up 3.4% through July—during what should be a massive correction period. New Zealand’s running 8.9% ahead of last year, according to Global Dairy Trade reports. South America’s up 7.7%. These numbers keep coming in month after month.

I mean, when’s the last time you saw production climbing during a price crash? Never, right? Because it makes no damn sense economically.

And honestly? That should scare every independent producer reading this.

Global milk production defying economic logic – while prices crash, production surges in key regions, breaking the fundamental supply-demand corrections that have balanced dairy markets for decades

The Beef-Cross Money That’s Breaking All the Rules

You guys all know about these beef-on-dairy calves bringing serious money lately. I’m talking… well, let’s just say crossbred calves are covering expenses that used to come straight out of the milk check.

But here’s where it gets nuts—that calf money is completely screwing up everything we thought we knew about supply and demand responses.

Think back to 2014. I remember writing about operations that culled hard when Class III dropped. Supply tightened up real quick. Prices recovered. Basic market mechanisms are working like they should.

Not anymore.

You’ve got cows bleeding money on every hundredweight of milk, but that same cow’s beef-cross calf might cover months of feed costs. So instead of sending her down the road like you would’ve done back then, you keep her around for the calf revenue.

Makes total sense from a cash flow standpoint, I get it. But multiply that decision across every dairy operation dealing with tight margins… and suddenly you’ve got this bizarre situation where terrible milk prices are actually keeping more cows in production.

What are the feedback loops that are used to correct market imbalances automatically? They’re not just broken—they’re working backwards.

When Your Processor Starts Playing Games

You know what really bothers me? How tightly these processing networks run nowadays. I keep hearing about plant shutdowns that create these massive disruptions—milk backing up at farm tanks, basis going to hell, producers scrambling to find alternative processing.

And the basis? Starts at maybe a small discount and just keeps sliding. Gets ugly real fast.

But what really gets me is how it exposes just how deliberately lean these processors run their operations. Mark Stephenson up at Wisconsin Extension—sharp guy, does good work—he’s mentioned how when processing plants approach capacity limits, basis relationships start deteriorating for producers.

Which makes you wonder… why are so many facilities always running right at that edge?

My theory? Because they figured out that tight capacity gives them leverage. When every processor in your region is maxed out, where else are you gonna haul your milk? They can knock your basis down, and you’ll take it because—what choice do you have?

Talk to producers lately. Basis penalties that used to be seasonal exceptions are becoming… well, more frequent occurrences. Because some genius in corporate figured out that running short on capacity works better than building enough to actually serve their suppliers properly.

The Lactalis Deal That Shows How This Game Really Works

You want to see corporate timing that’d make a Wall Street trader jealous? Watch how Lactalis—try saying that name three times fast—played their Fonterra buyout.

So these guys are already the biggest dairy company on the planet, right? Pulling in over €30 billion annually according to their own financial reports. They could’ve struck this deal anytime they wanted.

But did they move when milk prices were strong and farmers actually had some negotiating power? Hell no.

They waited until this year, right when global oversupply was building and operations were getting squeezed on margins. Those Australian Competition and Consumer Commission documents show the negotiations happening right as market pressure was building. Final deal: $4.22 billion for Fonterra’s consumer and foodservice businesses.

Coincidence? I seriously doubt it.

Want proof this is a pattern? Look at what they did in France after they consolidated operations there. Despite making record money—record money—they cut milk collection by 450 million liters last year. That’s nearly 10% of their French volume, according to European dairy reports. French producers were screaming about it, but by then, competitive alternatives were already gone.

Funny how that timing works out, isn’t it?

Why “Cheaper Feed” Is Mostly Marketing Nonsense

Every trade publication—and I read way too many of them—has some consultant talking about how lower grain costs are gonna save our margins. Corn backing off from highs, soybeans down… sounds encouraging in theory.

Until you actually run the numbers on real operations.

So let’s say feed costs drop significantly—and I mean really drop, more than you’d normally see. When you break that down per cow per day versus what most operations are losing on milk revenue… well, it’s like trying to fill a swimming pool with a garden hose while someone’s got the drain wide open.

I keep hearing from producers who’ve done the math. Feed improvements might save you fifty cents, maybe seventy-five cents per cow daily. But if milk revenue’s down two-fifty, three dollars per cow… you see the problem?

MetricDaily Per Cow ImpactMonthly Per CowAnnual Per Herd (500 cows)
Milk Revenue Loss-$2.50-$75.00-$456,250
Feed Cost Savings+$0.60+$18.00+$109,500
NET IMPACT-$1.90-$57.00-$346,750

But these consultants keep pushing feed procurement strategies because—and I suspect this is part of the game plan—it keeps producers focused on optimizing costs while the real money flows toward corporate consolidation. Keep us busy saving pennies while Rome burns.

The Processing “Emergency” Pattern

What bothers me about these plant shutdowns? Every time one goes down, it requires this massive coordination effort—state agencies getting involved, emergency rerouting across multiple states, even companies that don’t normally handle dairy getting pressed into service.

When one facility failure requires government-level intervention, that tells you everything about how this system’s designed to operate. Zero redundancy is built in. Everything is running right at the breaking point.

If any of us ran our dairy operations with that little backup… hell, we’d never sleep at night. But for processors? Apparently, running lean means every breakdown creates regional pricing opportunities they can use to their advantage.

And that’s becoming the pattern. Processing disruptions that create permanent changes to local basis relationships. Never temporary adjustments that recover—always permanent shifts that favor the processor.

Makes you wonder how accidental some of these emergencies really are…

What the Experienced Guys Are Actually Doing

I’ve been talking to producers who’ve figured out this cycle’s different from anything we’ve seen before. The ones positioning to survive aren’t sitting around waiting for some magical market recovery.

They’re getting serious about risk management for Q4 production. Class III put options for fourth quarter production—locking in price floors when things could get uglier. Some operations regularly rotate milk between multiple processors. Soon as one plant starts offering heavy discounts, they shift volume to keep everyone competitive.

DMC enrollment deadline’s coming up fast—September 30th, that’s next Monday. Coverage costs you maybe fifteen cents per hundredweight but pays out when margins collapse below certain thresholds. Joe Outlaw at Texas A&M’s Agricultural and Food Policy Center ran the numbers after that 2023 squeeze—program paid out $1.27 billion to enrolled producers. With margins running where they are now? Enrolled operations could see substantial government checks.

Strategic culling’s getting weird, too. Some producers I know are scoring every cow on total economic return—milk revenue plus calf value minus feed costs. Some of their best milk producers are getting shipped because their calves don’t bring premium money. Makes sense mathematically, but it feels backwards, you know?

Regional feed coordination with neighbors still makes sense if you can coordinate bulk purchases and negotiate decent freight rates. Every dollar saved per ton adds up when you’re feeding this many animals.

The Government Program Making Everything Worse

This probably won’t make me popular with the bureaucrats in Washington, but I gotta say it: Dairy Margin Coverage isn’t protecting family farms. It’s subsidizing the oversupply that’s letting corporate processors buy cheap milk.

Think about the logic here. DMC literally pays producers to keep milking cows that lose money on every hundredweight. Who benefits from a sustained cheap milk supply? Processing companies are buying raw materials at below-market rates.

It’s corporate welfare disguised as farmer relief, and most of us are too desperate to turn it down.

The program uses national averages that completely ignore regional basis manipulation games. Producers dealing with heavy local discounts see DMC calculations based on milk prices they’ve never actually received in their mailbox. It’s like calculating your gas mileage based on highway speeds when you’re stuck in city traffic all day.

Still, with margins this brutal, you probably need the coverage. Just understand what you’re really signing up for—subsidizing a system that’s working against your long-term interests.

The Reality Nobody Wants to Discuss Publicly

Hell, I’ve been doing this since the late 90s, and I’ve never seen market mechanisms get systematically dismantled like this. What are the automatic balancing systems that are used to correct supply-demand imbalances? They’ve been neutralized.

Beef-cross revenue eliminates price-driven culling incentives. Processing consolidation kills competition for our milk. Global production growth creates sustained oversupply conditions. Government programs subsidize below-cost production.

This isn’t your typical cyclical correction. It’s a managed transition toward corporate control of milk pricing, with independent farmers becoming contract suppliers instead of actual market participants.

Back when we had real competition for our milk—and some of you remember those days—you could play processors against each other. Get a better basis here, threaten to move volume there. Now? Good luck with that strategy.

Industry publications keep using words like “partnership” when they talk about these corporate acquisitions. Lactalis is partnering with farmers after they buys up assets. Partnership. Right. Like David partnering with Goliath—how’d that work out?

When one party controls processing capacity and the other has nowhere else to sell their product… that ain’t partnership. That’s dependency, presented in fancy marketing language.

Bottom Line for Producers Who Understand What’s Happening

Smart farmers are repositioning for an industry where volume might matter more than efficiency per cow, where calf checks could drive more herd decisions than milk production metrics, and where basis management becomes more critical than traditional futures hedging.

Reality check time. Feed cost improvements can’t offset milk revenue losses when prices drop faster than input costs. Government programs provide short-term cash flow but perpetuate the structural problems driving margin compression. Beef-cross returns generate immediate revenue while potentially undermining long-term market stability.

Operations implementing serious risk management strategies—protecting production with options, diversifying processor relationships, culling based on total economic returns instead of just milk numbers—those farms will survive this transition period.

The ones waiting for a traditional cyclical recovery? They’re gonna discover that “normal” doesn’t include the competitive market relationships that made independent dairy farming economically viable.

Corporate consolidation is accelerating rapidly across the industry. Producers who recognize this as a permanent structural change rather than a temporary market weakness have limited time to position defensively before competitive alternatives disappear entirely.

Your operation’s survival depends on understanding that current market conditions aren’t just natural economic forces playing out. They reflect corporate strategies designed to concentrate industry control while systematically reducing the number of independent producers.

The question isn’t whether markets will eventually improve—they might. The question’s whether your farm can adapt to survive in the corporate-controlled industry that’s emerging from this transformation.

Makes me sick to write that last part, but it’s the truth as I see it developing.

KEY TAKEAWAYS:

  • Combined revenue optimization: Producers tracking total economic returns per cow (milk revenue plus calf value minus feed costs) are making more profitable culling decisions, with beef-cross calves potentially covering 2-3 months of feed expenses per animal
  • Risk management enhancement: Class III put options for Q4 production and Dairy Margin Coverage enrollment (deadline September 30th) provide essential downside protection, with 2023 DMC payments totaling $1.27 billion to enrolled operations during margin squeezes
  • Processing relationship diversification: Operations rotating milk between multiple processors monthly, maintain competitive basis pricing, and avoid the 15-20¢/cwt penalties that can occur when single-plant dependencies face capacity constraints
  • Strategic feed procurement coordination: Regional cooperatives coordinating bulk grain purchases and freight optimization can achieve meaningful cost reductions, though these savings alone cannot offset significant milk revenue declines
  • Market structure adaptation: Successful operations are positioning for an industry where basis management becomes more critical than traditional futures hedging, requiring a deeper understanding of local processing dynamics and capacity utilization patterns

Production data sourced from the USDA Economic Research Service monthly dairy reports and Global Dairy Trade auction results that track international supply trends. Corporate financial information from publicly available Lactalis Group reports and Australian Competition and Consumer Commission regulatory filings. Academic analysis from the University of Wisconsin Extension dairy economics research and Texas A&M’s Agricultural and Food Policy Center studies on government program impacts.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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CME Dairy Market Report: September 15, 2025 – Butter Just Got Hammered

Butter crashed 4¢ in ONE day – that’s $0.40/cwt straight out of your September milk check while you weren’t looking.

EXECUTIVE SUMMARY: Here’s what happened while most farmers were focused on fall harvest – institutional money just abandoned the dairy markets in a coordinated selloff that signals fundamental supply-demand problems ahead. Butter plummeted 4¢ to $1.82/lb in a single session, instantly cutting $0.40/cwt from your September milk check, while U.S. production runs 1.8% above last year with European and New Zealand suppliers offering 15-20% discounts on global markets. We’ve been tracking cream supply data from Wisconsin and Minnesota, and processing plants are reporting inventory levels 25% above normal for this time of year – that’s not seasonal variation, that’s oversupply. The technical damage in futures markets suggests this isn’t a temporary correction but the beginning of a margin squeeze that could persist through Q4 2025. Smart operators are already implementing collar hedging strategies and adjusting feed procurement to protect cash flow. The data doesn’t lie – farms that adapt their risk management now will survive this cycle while others get squeezed out.

KEY TAKEAWAYS:

  • Lock in Q4 hedging now – October $17.00 puts are trading at $0.25 premium, giving you break-even protection at $16.75/cwt. With Class III futures showing technical breakdown patterns and USDA forecasting continued +1.5% production growth, downside risk outweighs upside potential through year-end.
  • Optimize feed procurement immediately – Regional feed cost spreads are widening (Upper Midwest corn at $4.24/bu vs $5.00 in California), and with milk-to-feed ratios dropping 8% this month, every $0.10/bu saved on corn adds $0.15/cwt to your margin according to Penn State extension calculations.
  • Review Dairy Margin Coverage before September 30 deadline – With butter markets in technical breakdown and institutional selling pressure building, margin protection becomes critical insurance. Current premium structures favor coverage levels that could trigger payments if this weakness continues into Q4.
  • Adjust culling strategy for oversupply conditions – Wisconsin and Minnesota plants report 25% above-normal inventory levels, and processing capacity constraints are pressuring local basis by 15-20¢/cwt. Strategic culling of lower producers can improve per-cow efficiency while reducing volume exposure to weak pricing.
dairy market report, farm profitability, dairy risk management, milk price hedging, feed cost reduction

Well, folks… if you were hoping today would give us some relief on milk pricing, I’ve got some tough news to share. The butter market absolutely got crushed today – we’re talking a 4-cent drop down to $1.82/lb, and that’s the kind of single-day move that makes your Class IV pricing look pretty ugly real quick.

Been watching these markets for over two decades now, and when butter falls that hard in one session, it’s telling you something fundamental has shifted. This wasn’t some technical hiccup or a few guys taking profits – this was serious institutional money stepping aside. Your September milk check just got lighter by about 40 cents per hundredweight, and honestly? The way the technical charts look, we might not be done yet.

Here’s the reality check we all need to face: we’ve got too much milk, too much cream, and not enough buyers willing to pay what we’ve been getting. It’s that simple, and today the market finally acknowledged it.

What Actually Happened to Prices Today

Let me break down what the CME cash market did to us today, because the visual tells the story better than I can explain it: The butter story is what really matters here. I’ve been talking to cream haulers across Wisconsin and Minnesota, and they’re telling me the same thing – supplies are running heavier than anyone expected this time of year. These cooler temps we’ve been having? Great for keeping the girls comfortable, terrible for price discovery.

What strikes me about this selloff is how the cheese complex responded. Blocks managed a tiny gain, but with zero barrel trades… that tells you buyers are stepping aside. When nobody’s trading barrels, that’s usually not good news coming down the pike.

The only bright spot? Dry whey picked up a penny. At least the cheese plants are still running hard, which means there’s still some demand for milk going into cheese-making. But one penny on whey can’t carry the whole market.

Trading Floor Signals – What the Smart Money’s Telling Us

Here’s what caught my attention from the trading floor today, and this stuff matters more than people realize:

The butter bid/ask spreads blew out to 6 cents during the afternoon selloff – nearly double what we typically see. That’s institutional money stepping aside, waiting for clearer entry points. When the big players aren’t willing to step in and catch a falling knife, that usually means more downside ahead.

Heavy butter volume on the down move tells me this wasn’t just profit-taking. This felt institutional and methodical. Block cheese saw decent two-way action despite the small gain, so there’s still some interest around these levels… but not enough to get excited about.

Here’s the technical reality we’re facing – butter’s got historical support near $1.75, but if that breaks, we could see a quick drop to $1.65. And cheese blocks? They need to hold $1.60, because a break there opens the door to $1.55, and that’s where margins get really ugly for Class III. What’s particularly concerning is how this price action fits with the futures curves. We’ve been in a steady downtrend since early August, and today’s cash market move just confirmed what the futures have been telling us.

The Global Picture – We’re Losing Our Competitive Edge

The thing about global dairy markets… they don’t care about our local production costs or what we think milk should be worth. Right now, we’re getting outcompeted on price, and it’s showing up in our domestic markets.

EU milk production is holding steady with strong butterfat content, keeping their butter markets well-supplied. Their futures are trading at significant discounts to our levels, making European exporters increasingly aggressive in markets we used to dominate.

Fonterra’s latest updates show solid milk flows through their peak season. What’s particularly worrying is how their NZX butter futures are trading well below U.S. equivalents, creating real global pricing pressure.

The strong dollar isn’t helping our cause either. When you combine already-premium U.S. pricing with unfavorable exchange rates, we’re pricing ourselves out of key markets. Mexico – our largest butter customer – is becoming increasingly price-conscious and actively shopping European suppliers when pricing becomes attractive.

Production Reality – The Supply Side Story

The latest USDA numbers show our national milk production running about 1.8% above year-ago levels. Now, that might not sound like much, but in a market where demand growth is maybe 1%, that extra half-percent becomes a real problem.

Here’s what’s happening in key regions:

Wisconsin managed a 0.1% production increase back in March despite having 5,000 fewer cows. That tells you everything about how genetics and management improvements are boosting per-cow production. The girls are giving us more milk, but the market isn’t rewarding us for it.

Minnesota trends show positive production patterns, though the specific growth numbers vary by reporting period. What I’m hearing from cooperative managers up there is they’re dealing with higher volumes than expected, and some plants are getting tight on storage capacity.

California’s been running about 1.5% above year-ago despite some late-summer heat stress issues. That’s a lot of extra milk hitting the market when demand isn’t keeping pace.

Idaho’s seeing similar patterns – strong per-cow production but processing capacity struggling to keep up with the volume.

Feed Costs and Your Bottom Line

Current feed situation isn’t giving us much relief on the cost side, and regional differences are becoming more pronounced: The milk-to-feed ratio just took a major hit with today’s pricing weakness. That 4-cent butter drop alone knocked about 40 cents per hundredweight off your immediate milk value – and that’s real money coming straight out of margins.

What’s frustrating is seeing corn hold relatively steady while milk prices crater. The Upper Midwest has decent feed costs at $4.24/bu, but our West Coast operations are dealing with freight premiums that add 75 cents or more per bushel. In the Northeast, imported grain costs are elevated, though local hay crops are providing some relief.

Risk Management – What You Should Actually Do

This isn’t theoretical anymore – today’s price action has immediate implications for your cash flow and risk management. Let me walk through some specific scenarios:

Put Option Strategy: With Class III September futures at $17.56/cwt, October $17.00 puts are currently trading around $0.25 premium. Here’s the math – if you buy protection at $0.25 and Class III drops to $16.50, you break even at $16.75 ($17.00 strike minus $0.25 premium). Anything below that, you’re protected.

Collar Strategy Example: For larger operations, consider this approach for Q4 production:

  • Sell December $18.50 calls at $0.15 premium
  • Buy December $16.50 puts at $0.30 premium
  • Net cost: $0.15 per cwt

This caps your upside at $18.35 ($18.50 strike minus $0.15 net cost) but protects against anything below $16.65 ($16.50 strike plus $0.15 net cost).

Basis Considerations: If you’re in Wisconsin or Minnesota, where basis typically runs strong, lock in favorable basis levels now before they weaken further. Some cooperatives are offering 50-cent premiums to Class III – that might not last if this weakness continues.

Timing Matters: Don’t try to catch a falling knife, but if you haven’t done any price protection yet, these levels might be your wake-up call. Options premiums have increased with today’s volatility, but they’re still reasonable compared to the risk exposure.

Forward Market Intelligence

The USDA’s latest production forecast calls for +1.5% growth through year-end, but today’s market action suggests traders think that’s conservative. Current futures pricing suggests that the market anticipates even stronger supply growth.

Class IV September futures finished at $16.84/cwt, reflecting today’s butter weakness. The options market is pricing in continued high volatility, suggesting more dramatic swings ahead.

What’s interesting is how the forward curve is shaping up. December Class III is still holding above $17.00, but barely. If we see continued weakness in cash markets, those forward months could also come under pressure.

Policy and Programs

Here’s something that might help your cash flow situation – USDA’s expanded dairy margin protection program enrollment runs through September 30. Given today’s margin pressure, it’s worth reviewing your coverage levels immediately.

The Dairy Margin Coverage program could provide crucial cash flow support if this weakness persists. With milk prices dropping and feed costs holding steady, margin coverage becomes more valuable. Don’t wait until the deadline – if you haven’t signed up or need to adjust coverage levels, do it this week.

Regional Market Spotlight – Where the Action Really Is

The Upper Midwest is driving much of today’s supply pressure. Wisconsin and Minnesota producers are reporting excellent cow comfort from cooler temperatures, higher butterfat tests boosting cream supplies, and strong milk production above seasonal norms. Some plants are reaching capacity, creating urgent storage needs that pressure local basis levels.

California operations are dealing with mixed signals – production remains strong despite some heat stress, but processing capacity utilization is running at a high level. The Golden State’s milk is competing more directly with Midwest product in cheese markets, adding to pricing pressure.

Mountain West (Idaho, Utah) continues seeing expansion pressure from relocated operations. Fresh cow numbers remain elevated, and new dairy construction is adding capacity faster than demand growth.

Northeast fluid demand provides some cushion, but commodity market weakness affects everyone’s psychology. When butter and cheese get ugly, buyers become more cautious across the board.

The Bottom Line

Look… today’s dairy market action delivered a message we can’t ignore. We’ve got an oversupply situation that’s finally showing up in pricing, and the butter market’s dramatic decline signals broader challenges ahead for dairy profitability.

This isn’t just a one-day blip. The technical damage in butter, combined with lackluster cheese performance and ongoing export challenges, suggests we’re entering a period where managing risk becomes more important than hoping for higher prices.

Your September milk check just got lighter, and without significant changes in supply-demand fundamentals, the pressure could intensify through year-end. The smart money is focusing on risk management rather than hoping for a price recovery.

Here’s what I’d be doing if I were still milking cows: Focus on what you can control – feed efficiency, herd management, and appropriate hedging strategies. Review your Dairy Margin Coverage enrollment before September 30. Don’t let hope become your primary marketing plan, because this market environment could persist longer than many of us expect.

The fundamentals suggest we’re in for a challenging period, but informed decision-making and appropriate risk management can help navigate these choppy waters. Stay focused on margins, not just milk prices, and remember – markets eventually find their equilibrium. The question is whether your operation can weather the adjustment period.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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CME  Daily Dairy Market Report for September 9, 2025: When Cheese Takes a Dive, but Whey Says “Hold My Beer”

Your co-op says fall flush is normal. We found why 2025 is different – and it’s costing you $0.50/cwt

EXECUTIVE SUMMARY: We’ve been digging into today’s CME chaos, and here’s what’s really happening while everyone else is focused on the obvious cheese drop. The 3¢ whey surge isn’t random – it’s revealing where protein demand is actually flowing in 2025, and most producers are completely missing this shift.Your September milk check just took a $0.30-0.50/cwt hit, but that milk-to-feed ratio sitting at 1.65 is the real killer – anything below 2.0 means you’re in survival mode, not profit mode. Meanwhile, we’re sitting on butter that’s $0.95/lb cheaper than European competition globally, yet most operations aren’t structured to capture export premiums.The fall flush started early this year because processors are too comfortable with their inventory levels. What’s different from previous years? The financial pressure is forcing producers into culling decisions that might actually moderate the typical production surge – and that creates opportunity for operations positioned correctly.Bottom line: this isn’t your typical September softness, it’s a fundamental repositioning that separates the survivors from the thrivers.

KEY TAKEAWAYS

  • Lock your feed costs NOW before soybean meal climbs higher – today’s $3.40/ton jump to $288.60 is a warning shot, and with that 1.65 milk-to-feed ratio, every dollar in feed cost hits your margin directly (call your feed supplier this week for Q4 contracts)
  • Your butter is export gold at $2.00/lb – we’re underselling European competition by nearly a dollar per pound globally, but only operations with port access logistics can capture this premium (talk to your co-op about export programs immediately)
  • Whey’s 5% surge signals protein demand shift – while everyone panics about cheese, whey protein demand is exploding in 2025, making high-component milk more valuable than ever (focus on butterfat and protein optimization in your ration)
  • DRP coverage at $17.50/cwt for Q1 2026 still makes sense – with Class III futures tracking $16.96 and downside risk increasing, protecting above $17.50 covers your cost of production plus margin (don’t wait for premiums to climb higher)
  • Fall flush dynamics started early and aggressive – processors aren’t chasing milk like usual, meaning premium structures will stay weak through October unless you’re positioned with the right co-op contracts (review your marketing agreements now)
CME dairy prices, milk-to-feed ratio, dairy market analysis, dairy risk management, dairy export trends

Here’s what caught my attention today – while most of the dairy complex was getting hammered, dry whey decided to party like it’s 1999, jumping 3¢/lb in a market where everything else was bleeding red ink. The thing about days like this is they tell you exactly where the real demand is hiding.

Your September milk check just took a hit, no sugarcoating it. We’re looking at probably $0.30-0.50/cwt coming off what you were expecting just last week. But here’s what’s interesting – this isn’t some random market noise. This is processors telling us they’re comfortable, maybe too comfortable, with their inventory positions as we head into fall flush territory.

What Actually Happened Today

The story starts early this morning when the blocks opened weakly and never recovered. What strikes me about today’s action is how broad-based the selling was – this wasn’t just one product having a bad day.

ProductPriceToday’s MoveWhat This Means for Your Operation
Cheese Blocks$1.6650/lb-3.00¢Ouch. This is your Class III taking a direct hit. Processors aren’t chasing milk
Cheese Barrels$1.6800/lb-2.00¢Barrels over blocks again – weird market signal right there
Butter$2.0050/lb-2.00¢Just above the psychological $2.00 level. Class IV is feeling the pressure
NDM$1.2000/lb-2.00¢Making us the high-cost powder supplier globally – not good
Dry Whey$0.6000/lb+3.00¢The lone soldier standing. Protein demand is real

The thing about cheese blocks dropping 3¢ in one session… that’s the biggest single-day move we’ve seen since late July. Meanwhile, barrels holding up better create this inverted spread that frankly has traders scratching their heads. When the market can’t decide which product should be worth more, you know uncertainty is creeping in.

Trading Floor Reality Check

Here’s where it gets interesting from a mechanics standpoint. We had zero barrel trades today – none. The price fell 2¢ without a single load changing hands. That tells you buyers just walked away from the market entirely at those levels.

On the flip side, dry whey had five active bids and zero offers at the close. Sellers didn’t want to part with the product, and buyers were begging for more. That’s why it popped 5% in one session while everything else was getting crushed.

The volume story is telling too – 11 butter loads and 12 NDM loads. This wasn’t some quiet drift lower on thin trading. There was real conviction behind the selling, which makes me more concerned about the sustainability of current price levels.

The Global Chess Match (And We’re Not Winning Everywhere)

This is where things get really interesting, and frankly, a bit concerning for some of our export programs.

Butter – We’re the Global Bargain Bin: Our CME butter at $2.0050/lb makes European butter at roughly $2.95/lb look like highway robbery. New Zealand’s sitting at around $3.14/lb. If we can get our butter to the ports – and that’s always the question with logistics these days – it should move internationally. The freight situation out of the West Coast has improved, but we’re still dealing with container availability issues that can turn a great export opportunity into a logistics nightmare.

Powder – Houston, We Have a Problem: Here’s where I get worried. Our NDM at $1.20/lb is pricing us out of the global market. European SMP is trading around $1.06/lb, New Zealand’s at $1.18/lb. That 6-14¢ premium we’re carrying is massive in commodity terms. I’ve been talking to export traders, and they’re basically shut out of new business except for some specialty applications.

What’s particularly troubling is the South American situation that’s not getting enough attention. Argentina and Uruguay have been quietly building their powder capacity, and they’re starting to compete directly with us in key markets like Southeast Asia and North Africa. Their cost structure, especially with favorable exchange rates, is putting additional pressure on global pricing.

The Asian Demand Picture: Speaking of Southeast Asia… the demand patterns we’re seeing out of Vietnam, Thailand, and Indonesia are shifting. These markets are becoming increasingly price-sensitive, opting to shop globally rather than remaining loyal to traditional suppliers. China’s still playing games with import timing – they’ll go months without buying, then suddenly need massive quantities. Makes planning impossible for our exporters.

Feed Costs and the Margin Squeeze

The math on feed costs is getting ugly, and today’s action made it worse. Soybean meal jumped hard – up $3.40/ton to $288.60 for December – while corn eased slightly to $4.1950/bu.

Here’s the calculation that’s keeping me up at night: with Class III futures at $16.96/cwt and current feed values, we’re looking at a milk-to-feed ratio of about 1.65. Anything below 2.0 means you’re in survival mode, not profit mode.

What’s particularly challenging is the regional variation in feed costs. Talking to producers in the Northwest, they’re dealing with drought-related hay costs that are astronomical. Meanwhile, parts of Wisconsin are seeing decent local corn prices, but their basis to futures is still wide due to transportation bottlenecks.

The currency angle isn’t helping either. The strong dollar makes our exports less competitive, but it also makes imported feed ingredients more affordable. It’s a mixed blessing that currently feels more of a curse than a blessing.

Production Patterns and Seasonal Reality

The fall flush is happening right on schedule, maybe even a bit early in some regions. I’m hearing from Wisconsin and Minnesota that milk is flowing freely – heat stress is gone, cows are comfortable, and production is ramping up just as it should this time of year.

But here’s what’s different this year compared to recent falls: the financial pressure on producers is more intense. With these tight margins, some operators are making hard decisions about culling and herd management that might actually moderate the typical fall production surge. It’s early to call this a trend, but it’s worth watching.

California’s telling a slightly different story. Central Valley producers are seeing more normal seasonal patterns, but they’re also dealing with feed cost pressures that are keeping some milk in the fluid market rather than going to manufacturing. The Class 4b premium for fluid milk is looking pretty attractive compared to manufacturing returns right now.

What’s Really Moving These Markets

Domestic Side of Things: Retailers finished their back-to-school cheese promotions and frankly don’t seem eager to reload aggressively. Food service demand always hits a lull in September – it’s as predictable as sunrise. The surprising thing is how comfortable processors seem with their inventory positions. Usually by now we’d see some restocking ahead of Q4 holiday demand, but that’s not happening yet.

Export Markets – The Full Story: Mexico remains our most reliable customer, but even they’re starting to shop around when our premiums get too wide. I’m hearing reports of Mexican buyers testing European suppliers for powder programs, which should be a wake-up call for our pricing.

The Middle East and North Africa markets are evolving rapidly. These regions are growing their import needs, but they’re also becoming more sophisticated buyers. They’ll take advantage of global price differentials in ways they didn’t five years ago.

Currency Impact Deep Dive: The dollar’s strength is a double-edged sword that’s currently cutting us more than helping. Yes, it makes feed imports cheaper, but it’s pricing us out of competitive export situations. A 5% move in the dollar can easily swing export profitability from positive to negative, and that’s exactly what we’re seeing in some markets.

Futures and Forecasting (With Some Healthy Skepticism)

The futures market’s reaction to today’s weakness was muted, which suggests that traders believe this might be overdone. September Class III settled at $16.96/cwt, up slightly, while Class IV dropped to $16.92/cwt.

Now, about those USDA forecasts everyone quotes religiously… their latest work suggests Class III averaging $17.25 for Q4 2025. Here’s the thing, though – their methodology tends to smooth out the kind of volatility we’re seeing right now. They use models that assume rational market behavior, but markets aren’t always rational, especially when seasonal patterns collide with global trade disruptions.

The confidence intervals on these forecasts are wider than USDA typically admits. I’d put real money on Q4 Class III being anywhere from $16.50 to $18.00/cwt, depending on how export demand develops and whether this fall flush is as pronounced as expected.

Hedging Reality Check: With this volatility, Dairy Revenue Protection (DRP) premiums are climbing. What cost you $0.25/cwt to ensure last month might run $0.45/cwt today. But given the downside risk we’re seeing, those premiums might be worth it for Q1 2026 coverage.

Put options on Class III futures are getting expensive, too, but they’re still cheaper than the potential losses if this downtrend continues. I’m particularly interested in the $17.00 puts for December and January contracts.

Regional Market Deep Dive: Upper Midwest Dynamics

Let’s talk about what’s happening in America’s dairyland, because it’s telling a broader story about supply and demand dynamics.

Wisconsin and Minnesota are experiencing what I’d call a “comfortable flush” – production is up, components are good, and there’s no shortage of milk for processors. But here’s the catch: local basis levels are weaker than usual because co-ops and processors don’t feel pressure to bid aggressively for supply.

Feed costs tell a mixed story across the region. Local corn basis is reasonable in areas with good crops, but transportation to deficit areas is keeping overall feed costs elevated. Hay prices are all over the map – some areas with decent alfalfa crops are seeing reasonable prices, while drought-affected regions are paying premium rates for imported feed.

The exciting development is how some producers are adjusting breeding and culling decisions based on margin pressure. Instead of the traditional fall breeding programs, some operations are being more selective, which could moderate the typical spring freshening surge.

Currency and Competitive Positioning

This doesn’t get talked about enough, but exchange rate movements are having a huge impact on global dairy competitiveness. The dollar has been strong against the currencies of most major dairy-producing countries, which makes our exports more expensive and their imports to our markets cheaper.

Here’s a concrete example: when the dollar strengthens 5% against the Euro, European butter becomes roughly 10¢/lb more competitive in Asian markets than it was before the currency move. Multiply that across multiple products and markets, and you’re talking about significant trade flow shifts.

The Brazilian real and Argentine peso have been particularly volatile, creating both opportunities and challenges for South American dairy exporters competing with us in key markets.

What Producers Need to Do Right Now

Look, I’m not going to sugarcoat this – the margin picture is challenging, and today’s price action made it worse. Here’s what needs to happen:

Feed Management (This Week): Get quotes on your next 90 days of feed needs. Today’s soybean meal surge is a warning sign that costs could rise further. Some nutritionists are recommending adjustments to rationing to reduce meal dependency where possible, without compromising production.

Price Risk (This Month): Your September milk check is tracking in the $16.90-17.00 range based on today’s action. If you haven’t locked in some Q4 and Q1 2026 protection, now’s the time to get serious about it. DRP coverage at $17.50/cwt for Q1 2026 still makes sense, even with higher premiums.

Cash Flow Planning (Immediate): With milk-to-feed ratios this tight, cash flow timing becomes critical. Know exactly when your milk checks arrive and plan feed purchases accordingly. Some producers are finding success with split deliveries to smooth out cash flow timing.

Production Decisions (Next 60 Days): This might not be the year for aggressive expansion plans. Focus on maximizing efficiency from your current operation rather than adding capacity in a tight margin environment.

Industry Intel You Need to Know

Processing Capacity News: Saputo’s expansion at their Turlock facility is ahead of schedule, adding whey protein concentrate capacity that should support stronger whey pricing in the long term. This is actually bullish for Class III calculations, since whey is carrying more weight in the formula.

Regulatory Developments: USDA’s Milk Production report drops September 19, and early indications suggest August production was up 1.8% year-over-year nationally. That’s in line with seasonal expectations, but doesn’t help the supply-demand balance in the short term.

Technology Trends: More operations are investing in precision feeding systems to optimize ration costs. With margins this tight, the technology that seemed nice-to-have last year is becoming essential for survival.

Putting Today in Historical Context

Today’s 3¢ drop in cheese blocks was the largest single-day decline we’ve seen in six weeks. But here’s the thing – we’re still trading 8-10¢/lb above the spring lows, so this isn’t exactly crisis territory yet.

What concerns me more is the character of the decline. This wasn’t some external shock or weather event driving prices lower. This was a fundamental repositioning as market participants adjusted to harsh realities and global competitive pressures.

September typically brings seasonal price pressure – that’s nothing new. What’s different this year is how quickly processors seem willing to step back from aggressive milk procurement. Usually, we see more of a gradual transition into fall patterns.

The technical picture on the charts is also becoming concerning. Cheese blocks broke below what had been solid support around $1.70/lb, and the next meaningful support level doesn’t appear until the $1.60-1.65 range.

Bottom Line Reality Check:

This market is telling us that fall flush dynamics are asserting themselves earlier and more aggressively than usual. The global competitive situation for some products is challenging, particularly powder, while others like butter remain attractively priced for export.

Your operation needs to be prepared for a potentially prolonged period of tight margins. This isn’t necessarily a crisis, but it’s definitely not a time for complacency. The producers who manage feed costs aggressively and protect downside price risk are going to be the ones still standing when margins improve.

The good news? Milk demand fundamentals remain solid, and we’re still the most efficient dairy production system in the world. This too shall pass… but it might take a while.

Market conditions as of 4:00 PM CDT, September 9, 2025. As always, consult with your risk management team before making marketing decisions – this market is moving fast enough to make yesterday’s strategy obsolete by tomorrow’s close.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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CME Daily Dairy Report for September 8, 2025: When the Cheese Pit Goes Silent and Your Milk Check Stays Flat

5 loads. That’s all that traded across the entire CME dairy complex Monday. We haven’t seen markets this dead since..

EXECUTIVE SUMMARY: Monday’s CME session was a wake-up call we didn’t see coming. With only five loads trading across the entire dairy complex, we’re witnessing market apathy that should terrify anyone counting on Class III recovery. But here’s what caught our attention… while domestic cheese markets flatline, U.S. butter is trading at a staggering $1.16/lb discount to Europe – creating the biggest export arbitrage opportunity we’ve seen in years.The math is brutal right now: milk-to-feed ratios sitting at 1.85 mean most operations are bleeding money, especially with September Class III stuck below $17.00/cwt. Yet Upper Midwest producers showing 2.8% production growth are doubling down on component optimization, shifting focus from protein to butterfat as global markets signal where the real money is.Private forecasters we track are more pessimistic than USDA projections, suggesting Q4 won’t bring the relief everyone’s expecting. The smart money is already repositioning for a prolonged margin squeeze – and the producers who adapt their component strategies now will be the ones still profitable when this market finally turns.

KEY TAKEAWAYS:

  • Butter export goldmine hiding in plain sight: U.S. butter at $2.02/lb vs Europe’s $3.18/lb creates immediate opportunities for Class IV premiums – work with your co-op now to capture export demand before competitors catch on
  • Component strategy pivot pays off: Upper Midwest producers optimizing for butterfat over protein are seeing $0.50-$0.75/cwt premiums in current market conditions – review your ration with your nutritionist this week to maximize the butter advantage
  • Risk management isn’t optional anymore: With milk-to-feed ratios below 2.0 and December Class III futures only 50¢ higher than September, LGM-Dairy or DRP protection is the difference between surviving and thriving through Q4
  • Feed cost window is closing: December corn at $4.21/bushel offers reasonable entry points, but harvest volatility could push prices lower – lock in winter feed now while you can still pencil out positive margins
  • Production moderation signals coming: Private sector forecasts suggest tighter supplies ahead as 47-year low heifer inventory and margin pressure force culling decisions – position for the recovery that always follows these cycles

You ever have one of those days where you check the CME numbers and think… “Did everyone just decide to take a nap?” That was today, folks. I mean, we’re talking five total loads across the entire dairy complex. Five! I’ve seen more action at a church social.

But here’s the thing that’s keeping me up at night – this isn’t just market noise. The underlying weakness in cheese prices keeps putting a ceiling on our Class III potential, and with September futures stuck below $17.00/cwt, we’re looking at margin pressure that’s making a lot of us seriously uncomfortable.

What’s fascinating, though… and I keep coming back to this… is how ridiculously cheap our butter has gotten compared to the rest of the world. I’m talking almost embarrassingly cheap. That might actually set up some interesting export opportunities for Class IV down the road, but we’ll see.

What These Numbers Actually Mean When You’re Writing That Feed Check

Let me break this down like we’re sitting around the kitchen table after chores:

ProductClosing PriceToday’s MoveMonth TrendWhat This Really Means
Cheese Blocks$1.6950/lb+0.50¢-2.4%That tiny bump? Can’t overcome the monthly slide that’s capping your Class III
Cheese Barrels$1.7000/lbFlat-2.9%Zero trades today… processors just aren’t interested
Butter$2.0250/lb+0.25¢+0.5%Modest strength, but we need bigger moves to really help Class IV
NDM$1.2200/lbFlat-1.3%International buyers see fair value, not a steal
Dry Whey$0.5700/lb+0.50¢+0.3%Welcome news – helps offset some cheese weakness

The story here isn’t about these tiny price moves… it’s about what didn’t happen. Five loads total – three blocks, one NDM, one whey. That’s it. Compare that to a typical busy day when we might see 20-25 loads change hands, and you start to understand why I’m concerned.

What’s particularly telling is that barrels are trading at a half-cent premium to blocks right now. That’s backwards, and anyone who’s been watching these markets knows it. Typically, blocks carry the premium because grocery store demand for natural cheese stays pretty steady. This flip suggests food service demand (which uses more processed cheese made from barrels) might be holding up slightly better. But honestly, with zero barrel trades today… even that signal is pretty weak.

When Nobody Shows Up to the Party

I reached out to a few contacts on the floor today – you know how it is, sometimes you need to hear it straight from the people actually making the trades. The consensus was pretty clear: this market is stuck in neutral, and nobody wants to be the first to make a move.

Zero registered bids in the barrel market against a single offer. That’s not panic selling, folks. That’s apathy. When buyers are sitting on their hands like this, waiting for something – anything – to give them a reason, you know confidence is running pretty thin.

Market technicians are suggesting spot blocks have support around $1.68/lb, with resistance near $1.75/lb. But honestly? Getting to that resistance level feels like wishful thinking given what we’re seeing in terms of buying interest. If we break through that $1.68 support on any real volume… well, let’s just say it could get interesting in a hurry.

The Tale of Two Dairy Markets – And It’s Getting Weird

This is where things get really interesting, and frankly, a bit frustrating if you’re trying to make sense of what’s happening in dairy right now. We’re essentially operating as two completely different exporters.

On the butter side… guys, we’re practically giving it away. Our cash butter at $2.0250/lb compares to about $3.18/lb equivalent in Europe and $3.14/lb in New Zealand. That’s not a small discount – that’s a “buy American or you’re crazy” kind of price gap.

The powder game? That’s a street fight. Our NDM at $1.22/lb ($2,690/MT equivalent) is right in the thick of it with European SMP around $1.15/lb and New Zealand SMP at $1.17/lb. We’re competitive, sure, but we’re not cheap. Every international sale requires aggressive marketing and sharp pencils.

What this means for your milk check is pretty straightforward – the butter discount should provide some decent support for Class IV pricing, but in the powder arena, we’re going to earn every export sale the hard way.

Feed Costs and the Math That Actually Pays Your Bills

Let’s talk about the numbers that really determine whether you’re making money or just keeping busy. Current feed landscape has December corn sitting at $4.2150/bushel and December soybean meal at $285.20/ton. Those aren’t terrible numbers, honestly.

The problem? It’s not feed costs killing us. It’s the milk price.

The milk-to-feed ratio right now is sitting around 1.85. For those keeping score at home, that’s using September Class III at $16.90/cwt against a standard dairy ration cost. Anything below 2.0 means your margins are getting squeezed, and we’re well into that territory.

Here’s what’s really frustrating – feed costs have actually been relatively manageable. But when milk is bringing what it’s bringing… your income over feed costs stays uncomfortably tight. That’s putting a lot of operations in tough spots for cash flow planning, especially heading into fall when you’re thinking about winter feed purchases.

What’s Really Moving These Markets (Or Not Moving Them)

Industry reports suggest the domestic demand story is fairly straightforward. We’re in that post-Labor Day sweet spot where retailers are stocking up for back-to-school lunch programs. That provides a steady baseline for cheese demand, which is good… but it’s not great.

Food service appears to be in one of those transition periods between the summer travel season and the year-end holiday push. You know how it goes – hotels and restaurants are kind of in limbo right now.

What’s become clear from conversations with industry sources is that processors seem pretty comfortable with current inventory levels. Nobody’s scrambling to buy milk or build cheese inventory, which explains the lackluster bidding we’re seeing in spot markets.

On the export side, Mexico continues to be our rock. They’re consistent buyers of U.S. cheese and skim milk powder, though their 2025 milking herd forecast at 6.8 million head means their production growth could displace about 100 million pounds of our NFDM exports – roughly 11% of what we send them. That’s… not ideal.

But here’s where the butter story gets interesting. The Middle East imported 99,000 tons of butter in 2024, with Saudi Arabia taking 53,000 tons. With U.S. butter this competitively priced, market analysts are suggesting we could see some significant sales announcements in the coming weeks. That would be a game-changer for Class IV.

Looking Ahead – And the Forecasts Are All Over the Map

The futures market isn’t painting a rosy picture right now. September Class III at $16.90/cwt pretty much reflects the weakness we’re seeing in spot cheese markets. But here’s what’s interesting – when you compare the CME futures to various forecasts, there’s quite a spread.

The USDA is projecting 2025 milk production at about 228 billion pounds with increased commercial dairy exports. Their Q3 average projection for Class III sits around $17.50/cwt. But private sector analysts like those at StoneX and Rabobank are being more cautious, suggesting Q3 averages closer to $17.20/cwt based on current demand patterns and production trends.

What’s particularly noteworthy is that some private forecasters are suggesting we might see production moderation as margins stay tight – especially in regions dealing with higher feed costs or labor challenges. That could provide some underlying support, but timing is everything in this business.

Class IV futures at $17.03/cwt are holding that slight premium over Class III, and that’s entirely due to butter and NDM strength relative to cheese. The forward curve suggests more stability in Class IV than Class III, which makes sense given our export positioning.

What People Are Actually Saying

Industry sources report that market sentiment remains… well, let’s call it cautious. One longtime trader I know mentioned that “the market feels dead in the water right now. Nobody wants to be a hero buying cheese at these levels, but there aren’t any aggressive sellers either. We’re basically stuck until we get a catalyst.”

A processing plant manager up in Wisconsin told contacts that “inventories are in good shape. We’re filling our regular orders without any issues, but we don’t see any reason to chase milk prices higher or build extra inventory right now. If prices dip, we’ll buy. But we’re not driving this market higher.”

What’s particularly interesting is hearing from dairy economists who are really focusing on this split between Class III and Class IV. As one analyst put it: “The world clearly wants our butter at these price levels, but the domestic cheese market is struggling to find its footing. Producers with flexibility in component management should really be focusing on butterfat optimization right now.”

Regional Reality Check – What’s Happening in the Heartland

For those of us in Wisconsin and Minnesota, today’s cheese market action hits pretty close to home. The Upper Midwest is showing milk production growth of about 2.8% with processing plants running at full capacity. When you consider that the majority of milk in our region flows into cheese vats, that sub-$1.70 block price translates directly into pressure on milk checks.

I’ve been talking to producers across southern Wisconsin, and the story is pretty consistent. Plants are running full schedules – that’s the good news. There’s no shortage of homes for milk. But the value proposition… well, that’s tied directly to a spot cheese market that’s showing zero ambition right now.

What strikes me is how many producers are starting to work with their nutritionists to optimize for butterfat rather than just protein, given the relative strength we’re seeing in butter markets. Others are looking more seriously at forward contracting opportunities, even at these lower levels, just to establish some cash flow certainty going into fall.

The thing about our region is that we’ve got the infrastructure and the cow comfort systems to maintain production even when margins get tight. But that doesn’t make the tight margins any easier to live with.

What You Should Actually Do Right Now (And I Mean This Week)

Look, I’m not going to sugarcoat this – if your cost of production is anywhere near these Class III levels, you need to be thinking seriously about risk management. Like, this week. The December Class III contract is only trading about 50 cents higher than September, which doesn’t give you much cushion for improvement.

Risk management tools worth considering: Dairy Revenue Protection (DRP) can help establish price floors without limiting your upside potential. If you want to lock in a specific margin level, Livestock Gross Margin (LGM-Dairy) might make sense for your operation. And don’t ignore forward contracting opportunities with your co-op or milk buyer – even at these levels, certainty has real value when you’re trying to manage cash flow.

Feed cost management: Today’s corn and meal prices offer reasonable entry points if you still need to cover fall and winter feed needs. With the uncertainty we’re seeing in milk prices, locking in your biggest expense provides some certainty. Several analysts I follow are suggesting corn could test the $4.00 level if harvest proceeds smoothly, but that’s not guaranteed.

Component optimization: This might be the most important near-term strategy. With cheese prices this weak, maximizing butterfat and protein content becomes critical for milk check improvement. Work with your nutritionist to fine-tune those rations – even small improvements in component levels can add meaningful dollars to your monthly check.

Industry Intel That’s Actually Worth Knowing

The cooperative landscape continues to evolve, with major co-ops significantly expanding their sustainability programs this fall. They’re working to secure “green” premiums from food companies for producers who can document environmental stewardship efforts. It’s not huge money yet, but every little bit helps when margins are this tight.

On the regulatory front, those Federal Milk Marketing Order reforms that went into effect June 1 are still working their way through the system. The updated make allowances and composition factors are gradually impacting regional price relationships, though it’s too early to see the full effects.

We’re also dealing with some production challenges that could eventually provide market support. H5N1 avian flu continues impacting California dairy production, and dairy replacement heifer inventory hit a 47-year low at 3.91 million head as of January. These supply-side factors could eventually tighten things up, but timing… well, timing is everything in this business.

Putting Today in Context – And Looking for Light at the End of the Tunnel

Here’s the bottom line – today’s quiet session wasn’t a turning point, it was just another day in what’s become a fundamentally challenging pricing environment. That spot block price of $1.6950/lb is a far cry from the $2.00+ levels we were seeing this time last year.

The market has basically repriced cheese lower due to ample milk supplies meeting good, but not great, demand. Until we see a meaningful shift in that supply/demand balance, this challenging environment will likely persist.

What I’m watching for as potential catalysts: the next USDA Milk Production report, any significant export sale announcements (particularly in butter), weather developments that could affect either feed costs or production, and early holiday season demand patterns.

Markets like this… they don’t turn on a dime. When we do see a shift, it’ll likely be gradual at first. But the thing about dairy markets is they always turn eventually. They have to.

For now, focus on what you can control – production efficiency, component optimization, cost management, and smart risk management strategies. The producers who position themselves well during tough periods are usually the ones who benefit most when conditions improve.

And they will improve. This industry has been through tougher times, and we’ve always come out the other side. The key is making sure you’re still in the game when things turn around.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Rabobank’s 2026 Warning: What Smart Producers Are Already Doing About It

What if I told you the producers making money in 2026 aren’t the ones celebrating the highest today? Rabobank’s warning changes everything.

EXECUTIVE SUMMARY: You know what caught my attention? While everyone’s busy counting their milk checks, Rabobank’s quietly warning about a 2026 market correction that could separate the survivors from the casualties. Here’s the thing—they’re forecasting NZ milk prices at $20.50 per hundredweight (record highs) for 2025, but smart producers aren’t just celebrating. They’re using these margins to invest in tech that’s delivering 18% better reproduction rates and cutting vet costs by $285 per cow. European farms already banking an extra $1,200 per cow annually through carbon programs… and that’s coming our way fast. Cornell’s data shows diversified operations weathered the last market chaos 23% better than commodity-only farms. The window for strategic positioning won’t stay open forever. Time to decide: are you building a bridge over the next downturn, or hoping the water doesn’t rise?

KEY TAKEAWAYS

  • Tech isn’t a luxury anymore—it’s survival gear. AI lameness detection achieves 85% accuracy, and farms investing $ 180,000 in monitoring experience an 18% increase in reproduction. Start with activity monitors if you’re under 200 cows—payback in 3-4 years with current labor costs.
  • Regional feed costs are your hidden profit killer. While corn averages $4.20 nationally, you’re paying $5+ in California versus $4 in Iowa. Lock feed contracts now while financing rates sit at 6.5-8.5%—both won’t last.
  • Carbon programs aren’t feel-good farming anymore—they’re cash flow. European operations pocket $1,200+ per cow annually through emission reductions. California’s LCFS credits are already worth $85-120 per metric ton. Start your footprint assessment before programs fill up.
  • China’s the wildcard that could flip everything. Their imports are up 2% while production drops 2.6%—but weak demand keeps it unpredictable. Diversify your risk, as when China moves, global prices tend to follow.
  • Equipment financing window is closing. Rates at 6.5-8.5% won’t hold with 2026 uncertainty looming. Complete tech installs by year-end to catch 2025 tax advantages while building cash reserves during strong margins.
 dairy farm profitability, dairy technology ROI, dairy market trends, dairy risk management, milk price forecast

You know how it goes in this business—just when you think you’ve got the market figured out, it throws you a curveball. Right now, everyone’s talking about Rabobank’s record-breaking milk price forecasts for 2025, but here’s what’s keeping me up at night: their quiet warning about 2026.

While most folks are busy counting their milk checks, the sharp operators I know are already using these fat margins to build their defenses. The question isn’t whether the storm’s coming—it’s whether you’ll be ready when it hits.

These Price Numbers Have Everyone Talking

Let’s start with what we know for sure. Rabobank’s calling for New Zealand milk prices between $9.50 and $10.15 NZD per kilogram of milk solids for the 2025/26 season—which, at current exchange rates, works out to roughly $20.50 per hundredweight for us. That’s the highest opening forecast they’ve ever made.

Here at home, we’re looking at all-milk prices in the $21-22 range according to the latest USDA reports, and honestly, that matches what I’m seeing on the farms I visit. Over in Europe, producers are seeing solid bumps too, with German operations hitting €45-48 per 100 kilograms.

But here’s the thing—Mary Ledman from Rabobank wasn’t exactly popping champagne when she spoke at World Dairy Expo last year. She pointed to currency volatility and trade tensions as real threats lurking ahead.

What strikes me about this whole situation is how easy it would be to get comfortable with these margins and forget that dairy markets… well, they don’t stay comfortable for long.

The Tech Divide That’s Reshaping Everything

The gap between farms embracing technology and those sticking with traditional methods isn’t just widening—it’s becoming a chasm. The precision dairy market just hit $5.5 billion this year, and that’s not just numbers on paper.

AI systems detecting lameness with 85% accuracy—that means catching problems before they cost you serious money. I’m seeing farms cut vet bills significantly while keeping their cows healthier.

This represents an aggregate analysis of multiple University of Wisconsin Extension case studies: farms investing approximately $180,000 in monitoring tech typically see reproductive performance improvements of around 18% and veterinary cost reductions of $285 per cow annually. Individual farm results vary significantly based on management practices, herd genetics, and local conditions. Producers should conduct farm-specific economic analysis before investment decisions.

The economics break down like this (and this varies quite a bit by region):

Technology Investment by Farm Size:

  • Under 200 Cows: $60,000-120,000 investments with 3-4 year paybacks. In states like Wisconsin, where corn’s running $4.10 delivered, the feed efficiency gains alone can justify the use of activity monitoring systems.
  • 200-500 Cows: $200,000-350,000 for robotic milking and precision feeding. Takes 5-7 years to pay back, but in places like Pennsylvania, where labor’s hitting $16-18/hour, the math works.
  • 500+ Cows: Full automation packages run $500,000 and up, but with 4-6 year paybacks. Out in California, where you’re paying $20+ for milking labor, these systems aren’t luxury—they’re survival.

This divide? It’s only going to matter more when margins tighten in 2026.

China’s Dairy Puzzle—Still Our Biggest Wild Card

China remains our biggest uncertainty. They’re forecast to boost imports by 2% this year after three straight years of decline, while their domestic production’s expected to drop 1.5-2.6%.

Nate Donnay from StoneX put it perfectly:

“Production’s dropping faster than consumption, but weak demand’s still holding back any big surge.”

Chinese pricing has exerted competitive pressure on global markets, with complex regional dynamics that make predictions nearly impossible. If China’s economy rebounds faster than expected right when Rabobank’s predicting our structural issues… that could get messy fast.

The Great Analyst Split—And Why It Matters to Your Bottom Line

The industry’s basically split into two camps right now. StoneX is betting on continued strength—they point to tight heifer supplies (we’re down to 1978 levels) and massive cheese plant expansion creating structural demand worth over $8 billion.

Rabobank’s more cautious. They’re warning about trade policy risks and disease impacts that have already proven severe—look what HPAI did to California, dropping production 9% last November.

Here’s what caught my attention in Cornell data: farms with diversified income streams weathered the 2020-2022 chaos 23% better than commodity-only operations. That’s not theory—that’s documented survival advantage.

European Carbon Economics—This Is Coming Our Way

European producers aren’t just talking sustainability anymore; they’re banking on it. Recent research shows low-carbon operations outperforming high-emission farms by $1,200+ per cow annually.

I’m hearing about operations over there where carbon credit payments represent real money. Precision feeding reduces emissions by 30%, and methane capture generates additional revenue streams.

California’s LCFS credits are already worth $85-120 per metric ton. Northeast carbon markets are expanding into agriculture. Early adopters are positioning themselves for competitive advantages.

Feed Costs—The Variable That Changes Everything

Don’t underestimate what’s happening with feed prices. Sure, corn futures are around $4.20 nationally, but add transportation and regional basis, and suddenly you’re looking at:

Regional Feed Cost Reality (as of Q3 2025):

  • Iowa: $3.95-4.15 delivered
  • Wisconsin: $4.10-4.25 delivered
  • Pennsylvania: $4.60-4.75 delivered
  • California: $5.10+ delivered

Those differences completely change your feeding strategies and technology ROI calculations.

Investment Timing—This Window Won’t Stay Open

Equipment financing is still reasonable at 6.5-8.5% for qualified operations, but lenders are already adjusting terms based on 2026 uncertainty. Some are requiring higher down payments, shorter amortization schedules.

Your immediate action plan:

  • Lock favorable financing before rates climb
  • Complete tech installations to catch 2025 tax advantages
  • Secure feed contracts for the next growing season
  • Build cash reserves during strong margins
  • Start carbon footprint assessments now

Regional Reality Check—What Works Where

  • Corn Belt (Iowa, Illinois, Indiana): Feed costs are stable, so focus on precision feeding systems with rapid paybacks through improved conversion efficiency.
  • Northeast (Vermont, New York, Pennsylvania): Your seasonal operations face unique timing risks if spring freshening hits during price corrections. Flexibility in milking systems matters.
  • Western Dairies (California, Idaho, Washington): High labor costs make automation economics work regardless of milk prices. Robotic milking pencils out in 4-5 years, even with conservative assumptions.
  • Southeast Expansion (Texas, Tennessee, Georgia): Rapid herd growth is creating infrastructure bottlenecks. Get scalable tech in place before you grow into problems.

What Does This All Means for Your Operation

Look, whether Rabobank’s 2026 warnings prove accurate or StoneX’s optimism carries the day, one thing’s certain: this industry’s changing faster than ever, and preparation beats reaction every single time.

The producers who thrive through whatever comes next will be those using today’s strong margins for strategic investments in efficiency, technology, and risk management—not just production expansion.

Your checklist isn’t complicated: Audit technology gaps and calculate region-specific ROI. Build cash reserves during strong margin periods. Diversify revenue streams beyond commodity milk. Create hedging strategies for key input costs. Start carbon footprint reduction programs before they’re mandatory.

The profits rolling in today are real, but they won’t last forever. The question every producer needs to answer: Will you use these margins to build a bridge over the next downturn, or will you hope the water doesn’t rise? Because in this business, hope’s never been a strategy that pays the bills.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Unlocking Dairy Efficiency: The Ultimate Guide to Improving Cow Traffic – This guide offers practical strategies for designing efficient cow traffic systems. It demonstrates how to maximize your technology investments by ensuring smooth animal flow, which directly translates into higher milk production and a healthier, less stressed herd.
  • The 3 Financial Ratios Every Dairy Farmer Should Be Tracking – Move beyond milk price and dive into the numbers that truly drive profitability. This piece provides the tools to measure your farm’s financial health, helping you identify vulnerabilities and make strategic decisions to withstand the market volatility this article warns about.
  • The Genetics Of Sustainability: Breeding For A Better Future – Explore a key strategy for tackling the carbon economics challenge head-on. This article reveals how strategic breeding for sustainability traits can create a more efficient and resilient herd that is positioned to capitalize on emerging low-carbon milk premiums.

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.

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CME Dairy Market Report for September 2nd 2025: A Deep Dive into Today’s Dairy Market Sell-Off

Your October milk check just got $91 million lighter thanks to Washington’s latest “reform.” Here’s what smart farmers are doing about it.

Quick Market Snapshot (2-minute read)

Today’s Reality Check: Post-Labor Day weakness pressured dairy markets. Butter fell a sharp 3.25¢ to $2.0125, and cheese blocks dropped 1¢ to $1.7650.

Your Milk Check: Cooperatives report varied impacts—Wisconsin producers are seeing 15-25¢/cwt declines, while others with better hedging face smaller hits.

Key Levels: Watch butter at $2.00 and cheese blocks at $1.75—breaks below these on heavy volume signal more pain ahead.

Action Items: Consider Class III puts around $17.90; lock 25-50% winter feed; focus rations on protein over butterfat.

EXECUTIVE SUMMARY: Look, I’ve been tracking dairy markets for years, and what happened after Labor Day isn’t your typical seasonal dip. The FMMO “reforms” just shifted $91 million annually from your milk check straight into processor pockets—and December’s component changes will hit even harder. Here’s the kicker, though… while everyone’s focused on butter dropping 3.25¢ and cheese falling a penny, feed costs are sitting at the most favorable levels we’ve seen in months. Your milk-to-feed ratio’s still healthy at 3.8, but that window won’t stay open forever. Smart operators in Texas are riding 10.6% production gains thanks to new processing capacity and mild weather, while California struggles with H5N1 costs. The global picture? We’re selling butter 37% cheaper than Europe, but somehow still can’t move product. Time to get defensive with your pricing strategy and lock in those feed costs before this window closes.

KEY TAKEAWAYS

  • Lock Your Feed Now: December corn at $4.23/bushel won’t last—Texas producers who secured 60% of winter needs at $4.15 are already seeing the payoff as milk prices soften
  • Get Defensive on Pricing: Class III put options at $17.50-$17.00 are lighting up for good reason—October milk checks are tracking 15-25¢/cwt lower depending on your cooperative’s risk management
  • Focus on Protein Over Fat: With FMMO component changes hitting December 1st (protein factor jumping to 3.3%), shift your ration strategy now—butterfat premiums are getting crushed while protein holds steady
  • Watch Those Technical Levels: Butter support at $2.00 and cheese blocks at $1.75—if these break on heavy volume (5+ loads butter, 8+ loads blocks), we’re looking at July lows and even tighter margins
  • Regional Reality Check: California producers need milk-to-feed ratios above 4.2 just to match Midwest profitability due to hay costs running $45-65/ton higher—adjust your expectations accordingly
dairy market analysis, milk price volatility, dairy risk management, FMMO reform impact, dairy farm profitability

When Labor Day’s Over, Reality Hits Hard

You know that sinking feeling when you walk into the parlor on Monday morning and your milk hauler is shaking his head? That’s exactly what happened to dairy markets today.

Butter fell a sharp 3.25¢ to $2,0125, and cheese blocks dropped a full cent to $1.7650—and here’s what’s going to sting your wallet.

Regional Milk Check Reality Check

Don’t believe anyone giving you generic projections. The impact on your October milk check depends entirely on where you’re milking and who you’re shipping to:

  • Wisconsin cooperatives: Reporting 15-25¢/cwt declines depending on marketing strategies
  • California operations: Seeing varied impacts based on risk management programs
  • Texas producers: Geographic premiums providing some buffer against spot weakness
  • Northeast fluid markets: Class I differentials offering partial protection

“We’re seeing milk that used to command a 50¢ premium now at 25¢ over Class,” a Fond du Lac County producer told me yesterday. “When the plants are full and you’ve got extra milk looking for a home, that local basis gets pressured fast.”

Supply Pressures Hitting the Market

Processors came back from the break with cream tanks topped off and zero urgency to chase milk. Here’s why:

The USDA’s Supply-Side Shift: August 12th WASDE report bumped 2025 milk production to 228.3 billion pounds—up 500 million from July’s estimate. That’s 3.4% year-over-year growth, hitting an already saturated market.

Where The Milk’s Coming From

  • Texas leads the charge: 4% annual growth, with some counties posting spring gains as high as 10.6% thanks to mild winter weather and new processing capacity.
  • California struggles: Production is down 1.2% amid battles with H5N1 and heat stress, with new biosecurity costs adding $0.15-0.25/cwt for some operations.
  • Wisconsin and Minnesota are up 2.8%, but regional plant capacity maxed out, pressuring local premiums.

A Deep Dive into the CME Cash Session

The CME cash session told a crystal-clear story if you know the signs:

Butter Market Breakdown

  •  7 offers vs. 3 bids = Sellers desperate to move product
  • All damage from 1 trade = Either forced liquidation or buyers vanished
  • Critical level: $2.00 support—5+ loads trading below triggers $1.95 test

Cheese Block Pressure Mounts

  • 13 loads traded down = Real commercial selling, not spec money
  • Volume with decline = Sustained weakness likely
  • Key support: $1.75—break on 8+ loads targets July lows at $1.70

The Protein Bright Spot

Dry whey showed three bids, zero offers for the third straight session—protein demand holding steady while fat markets crater. While the revenue side of the ledger faces pressure, the expense side offers a critical silver lining for managing margins.

Feed Costs: Your Margin Lifeline

Here’s the silver lining keeping margins alive:

  • December corn: $4.23/bushel
  • Soybean meal: $283.30/ton
  • Milk-to-feed ratio: 3.8

But regional variations are significant:

Midwest Advantage

“We locked 60% of our winter corn at $4.15 back in July,” an Iowa producer shared. “That forward thinking’s paying off now with milk prices softening.”

Western Challenges

California dairies face hay costs $45-65/ton higher than Midwest operations, plus water expenses adding $1.20/cwt. UC Davis Extension data show that Western producers need ratios of 4.2 or higher to match Midwest profitability.

Key On-Farm Strategies

Protein Optimization: Beyond The Buzzword

With FMMO protein factor changes hitting December 1st, smart producers are already adjusting:

What Wisconsin Nutritionists Recommend

  • Balance third-cutting alfalfa quality with commodity proteins
  • Target rumen-degradable vs. undegradable protein ratios
  • Hit 16.8% crude protein without over-supplementing

“We’re shifting from chasing butterfat premiums to optimizing protein yield,” explains a Lancaster County producer running 800 head. “With the December component changes, protein’s where the money is.”

FMMO Now: What Farmers Need To Know

June 1st’s Federal Milk Marketing Order reforms created the biggest structural change in a decade:

What Changed

  • Class I skim pricing returned to “higher-of” Class III or IV
  • Make allowances updated: cheese to $0.2519/lb, butter $0.2272/lb
  • Net effect: $91 million annually transferred from producer checks to processor margins

Who Gets Hit Hardest

Order 5 regions with manufacturing-heavy operations feel the biggest squeeze. December’s component factor changes (protein to 3.3%, nonfat solids to 9.3%) will create another pricing shift (USDA AMS, Bullvine analysis).

Options Market Signals Caution

On the futures board, September Class III settled at $17.94 and October near $17.84 — a backward curve, meaning the market expects prices to rebound over the coming months. But, with today’s cash price moves, that hope might be premature (CME Group).

Class III put options at $17.50 and $17.00 strikes are lighting up—volume spikes showing producers getting defensive fast. Implied volatility jumped 15% last week, making hedging more expensive but potentially more valuable (CME data).

Smart Hedging Moves

  • Put options around $17.90-$18.00 to establish minimum milk prices
  • Call spreads on feed protect against crop weather surprises
  • Timing matters: Wait for volatility dips to reduce option costs

The Big Picture: Global Markets and Tomorrow’s Level

Global Export Disconnect

Here’s the head-scratcher: U.S. butter at $2.01/lb trades 37% below EU prices ($3.18/lb) and 36% under New Zealand ($3.14/lb).

That massive discount should drive explosive exports, but Global Dairy Trade’s September 1st auction saw its overall price index drop 4.3% to an average of $1,209/MT—international weakness removing any upward price pressure from world markets.

Tomorrow’s Critical Levels

What I’m Watching At 10:00 AM

  • Butter: Support test at $2.00—more than three loads below triggers $1.95 target
  • Cheese blocks: $1.75 line in sand—heavy volume break signals July lows retest
  • Dry whey: Bid strength continuation could support protein complex recovery

Volume Thresholds That Matter

  • Butter: >5 loads confirms directional moves
  • Blocks: >8 loads breaks technical levels
  • Any NDM volume signals export developments

Your Regional Action Plan

Upper Midwest Producers

  • Immediate: Review cooperative marketing agreements for basis risk
  • Feed strategy: Lock winter corn before harvest pressure lifts futures
  • Component focus: Optimize protein rations for December changes

Western Operations

  • Cost management: Evaluate water-saving technologies, rotational grazing
  • Hedging priority: Protect against feed cost spikes with call options
  • Margin reality: Adjust profitability expectations 15-20% below national averages

Texas Expansion Areas

  • Capacity planning: Monitor regional plant utilization rates
  • Growth management: Balance herd expansion with local milk demand
  • Weather hedge: Prepare for potential winter weather disruptions

The Bottom Line

This isn’t just market noise—it’s structural change happening in real time. The supply situation is strong, demand is cautious, and FMMO reforms are reshuffling who gets what from every hundredweight.

What Winners Are Doing Now

Locking feed costs at current favorable levels
Getting defensive with put options on Class III
Focusing on protein over butterfat in ration management
Managing cash flow for smaller October checks
Planning component strategies for December FMMO changes

The margin squeeze is real, but it’s not panic time. Producers with solid risk management, flexible feeding programs, and tight cash flow control will weather this downturn better than those hoping for a quick recovery that might not come.

Feed costs are still your friend. Protein optimization is becoming crucial. And regional differences matter more than ever in determining who stays profitable through this challenging period.

Smart money is getting defensive now—not waiting to see how much worse it gets.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Dairy’s Great Divide: How the Market Split Could Shake Your Milk Check

New Zealand’s crushing it with 8.9% milk solids growth while Australia bleeds 4%—same region, different worlds.

Executive Summary: Here’s what’s happening—the dairy world’s splitting right down the middle, and it’s messing with everything we thought we knew about global markets. New Zealand farms are banking serious cash with an 8.9% milk solids surge and farmgate prices dancing between NZ$7.25-$8.75 per kilo, while their Aussie neighbors are getting hammered by drought—down 4% in July with feed costs that’ve literally doubled in some regions. What’s wild is European butter futures are trading €452 below spot prices, which usually means a correction’s coming, and the US keeps playing price anchor with dairy products running $2,000+ per tonne cheaper than Europe. The bottom line? Feed costs are crushing margins everywhere, labor’s getting expensive, and the smart money is spreading sales and hedging positions right now before these market splits get worse.

Key Takeaways:

  • Lock in your milk solids advantage—New Zealand’s 8.9% jump shows how seasonal tracking can boost cash per liter when you time it right
  • Beat the butter price drop—stagger your fat purchases over 60-90 days since European futures are screaming “correction coming”
  • Survive the feed cost explosion—Australian operators facing doubled hay costs need alternative feed strategies and tighter budgeting now
  • Watch tomorrow’s GDT auction like a hawk—21,145 tonnes of powder hitting the market will tell you where prices are headed
  • Find your niche before the US flood hits—with American exports running $2,000/tonne under Europe, you need value-add products to stay competitive
global dairy markets, milk price forecast, dairy risk management, dairy supply and demand, dairy industry trends

The thing about markets right now—it feels like the dairy world’s split in two. Down in Canterbury, farmers are pushing the limits, pumping out record milk solids. Just a couple of thousand kilometers (“klicks”) away, mates in Australia are making some of the toughest calls of their careers.

I caught up with a few operators in Canterbury who say this winter’s milking stretch is longer than ever. And why not? Fonterra’s latest report shows that milk solids in July jumped 2.2% from the same period last year, and the season-to-date increase is 8.9%. They’re banking serious cash with farmgate prices floating between NZ$7.25 and $8.75, even as feed supplies grow tight.

But hop across the ditch and it’s a different story entirely. Australia’s milk production in July dropped 4%, with Victoria down 5.1%, South Australia experiencing a 9.6% decline, and Tasmania not far behind at 6.1% lower. Farmers around Shepparton are getting squeezed, with feed costs shooting up—hay’s doubling to A$350–$400 per tonne, water’s scarce, and every single day’s a math puzzle on whether to keep cows or not.

This split isn’t just a geographical quirk… it’s rewriting the global playbook.

The Market’s Tale of Two Hemispheres

Last week, the European Energy Exchange saw over 3,000 tonnes of dairy futures change hands, with butter alone accounting for half of that volume, according to EEX trading data. The September butter futures settled at €6,658 per tonne—that’s a hefty €452 below the current spot price of €7,110, signaling markets are bracing for a fall.

For processors, that’s your cue. Prices tend to soften heading into autumn as milk components normalize. If you’re buying big fat volumes—say anything over 50 tonnes a month—consider staggered purchases over the next 60–90 days. Don’t bet on the dip being deeper.

Meanwhile, the Singapore Exchange showed Whole Milk Powder slipping $60 to $3,835 a tonne. With the big Kiwi spring flush looming, buyers remain cautious about China’s appetite for New Zealand’s products. That said, Fonterra has just lifted restrictions on its Instant Whole Milk Powder sales from October onward—a smart move, given it fetches about $95 a tonne more than standard powder.

America Holds the Line

Stateside, it’s full steam ahead. July production climbed 3.4%—the herd actually grew by 14,000 cows that month—with better yields thanks to genetics and feed management. StoneX data points to a 4.7% rise in component-adjusted milk solids.

The knock-on? US cream and cheese products trade at a steep discount—over $2,000 per ton cheaper than European counterparts, according to CME data. That pricing is driving exports and helping prop up US milk prices.

Producers at the Wisconsin Cheese Makers Association are experiencing a surge in exports, with some, such as Ellsworth Cooperative Creamery, reporting international volumes up 23% year-over-year. But counterparts in Canada are feeling the heat—competition is fierce and margins are tighter.

Europe’s Mixed Bag: Regulation, Weather, and Red-Hot Cheese Markets

UK dairy is holding pace—with volumes up 4.4%, butterfat at 4.15%, and protein climbing to 3.36%, per AHDB data.

However, the story is more complex on a continental scale. The Netherlands faces setbacks due to regulation and bluetongue, capping output, while Poland is up and running, boosting yields amid fewer restrictions.

Italy wasn’t spared summer’s wrath. Heat waves reduced production by 10–15%, resulting in approximately 1.8 million litres lost daily, as confirmed by ISTAT data.

Cheese and whey prices are surging: Cheddar’s up 17%, Edam 10%, Gouda 12%, and whey a staggering 18% year-over-year, European Commission reports reveal.

Some Friesland producers are scrambling to secure milk, paying premiums to keep plants humming.

What It Means for Your Milk Check

Butter’s in tight supply, pushing prices up, while protein is squeezed by global supply and discounting. Cheese producers are bidding fiercely to grab milk flows.

Tomorrow’s Global Dairy Trade auction will be telling, with 21,145 tonnes of Whole Milk Powder and 9,700 tonnes of Skim Milk Powder on offer.

Watch participation carefully—bidder count and volume will tell if demand’s holding or fading.

Play It Smart This September

If you’re buying fat, especially over 20 tonnes per month, start hedging now in tranches. That backwardation in European butter suggests prices will soften soon, but don’t wait to lock in a deal.

Powder producers should brace for pressure when volumes from New Zealand and Argentina hit. Focus on higher-margin streams.

If you’re servicing Australia, watch for supply gaps turning into import opportunities—high-value ingredients are the smart spot.

Beyond The Percentages: The Real Cost Behind Production

Victorian producers aren’t just losing volume; they’re getting hit by a surge in input costs, as documented by Dairy Australia:

  • Quality Hay: A$350–$400 per tonne (up from A$180–$200)
  • Water Allocation: Prices are 250% above 2024 levels
  • Grain Supplements: Costs have risen 20–30% across most categories

Meanwhile, Kiwi operators report wage pressures of more than 15% as they stretch labor through extended milking seasons.

Weather’s Still a Wild Card

La Niña may prolong Aussie droughts, while early autumn chills might boost European butterfat and protein.

Stay Sharp, Stay Connected

Markets are messy and fractured. What works for your mate 10 klicks away might not fit your setup.

Keep your ear to the ground, watch feed costs, labor, and weather, and know when it’s time to make moves.

September will be the month to separate the clever from the late movers.

Look, I’ve been tracking dairy markets for decades, and this September split is something else entirely. The full analysis breaks down exactly which regions are winning, which are losing, and most importantly—what you should be doing about it right now.

Don’t get caught flat-footed when these market shifts hit your milk check.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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Daily CME Dairy Market Report for Tuesday, August 26, 2025: Cheese Buyers Stepped Up While Butter Slipped

71¢ Class III–IV spread today; that’s real money on the milk check—don’t leave it on the table.

Executive Summary: Here’s the short version, neighbor: barrels jumped 4¢, blocks gained 1.5¢, and that tugged September Class III up to $18.64/cwt while butter slid 5.5¢ and pinned Class IV at $17.93/cwt, which is exactly why the spread matters right now. The math flows through the Federal Order formulas—protein and fat convert those spot moves into pay price—so a penny on cheese isn’t just trivia, it’s mailbox money when USDA posts the monthly Class and Component prices. Globally, EEX and NZX boards keep saying the same thing: U.S. butter looks cheap on a $/lb basis, but EU SMP keeps leaning on our NDM rallies, and that’s why Class IV keeps lagging in 2025’s shoulder season. The practical takeaway: a staged Class III hedge at $18.64 can stabilize revenue while waiting for powders to stop leaking—start with 20–30% of Q4 and adjust if barrels hold $1.80 support for a few more calls. On feed, DEC corn near 4.09 and DEC meal around 293 make the milk-to-feed ratio workable, not wild, which argues for ration tweaks that buy components rather than adding fresh cows just to chase volume. According to the USDA’s pricing framework, small spot shifts compounded over a few weeks can swing component checks more than most people admit—so timing hedge windows to the monthly announcement cycle is just good housekeeping. Bottom line: optimize for component value and hedge the cheese strength now—waiting for Class IV to do the heavy lifting in this setup isn’t a strategy.

Key takeaways

  • Capture the spread: Locking 20–30% of Q4 at $18.64 can lift revenue stability by roughly $0.20–$0.30/cwt versus staying fully floating if barrels hold $1.80 support this week; stage in, don’t chase.
  • Component over volume: With Class IV at $17.93 and powders capped by EU SMP, focus on protein/fat yield—USDA’s formula turns small spot gains into real dollars when the monthly bulletin posts.
  • Global read-through: EEX/NZX signals indicate that U.S. butter is export-competitive, but SMP pressure persists; stay nimble on IV hedges and prioritize cheese-led coverage until FX or SMP shifts the tone.
  • Practical step today: Re-run rations with DEC corn ~4.09 and DEC meal ~293 to see if a half-point bump in components beats paying up for spot milk basis in the Upper Midwest this week.
  • Process discipline: Time pricing decisions to the CME spot call cadence and USDA announcement schedule—microstructure and release timing drive how quickly the math hits the milk check.
dairy market report, milk pricing, Class III vs Class IV spread, dairy risk management, farm profitability

The split was remarkably clean today: barrels popped 4¢ and blocks added 1.5¢, pulling September Class III to 18.64/cwt. In contrast, a 5.5¢ butter dump leaned on Class IV at 17.93/cwt, so component value steered the check more than the headline average—and it showed on the tape and the settle screen. Here’s the thing, though: cheese strength like this often shows up in near-term checks if it sticks for a few sessions, but butter’s slide is still the ceiling for Class IV-heavy pools until either NDM or butter flips the tone, which the market didn’t hint at today.

What moved—and why it matters

ProductClosing PriceToday’s MoveWeek-to-Date ContextReal Impact on Farm
Cheese Blocks$1.8100/lb+1.50¢Firm-to-higherDirectly lifts Class III; every penny here shows up in component value
Cheese Barrels$1.8000/lb+4.00¢The day’s enginePre-Labor Day restocking and fall foodservice drove bids; the strongest Class III read-through today
Butter$2.1850/lb−5.50¢Slipping this weekCaps Class IV until fat or powder firm; 4a/4b pools feel it first
NDM Grade A$1.2525/lb−0.50¢Flat-to-softerGlobal SMP pressure is still capping rallies; IV math notices
Dry Whey$0.5700/lbNCStableQuiet but real Class III support in the background

The thing about barrels today—no trades, higher anyway—was a dead giveaway that bids did the work. Buyers wanted just-in-time coverage during the Labor Day stretch, when school menus and pizza/c-store pulls come back in full force, which is exactly the late-August pattern we tend to see on the call. Butter felt like a motivated-seller tape with nine offers stacked against eight bids, and that’s how a 5.5¢ air pocket prints on light flow when buyers don’t need to chase at the offer—more tone setter than trend by itself, but Class IV still hears it.

Trading mechanics—why cheese felt “real” and butter felt “order-driven”

Barrels showed buyer initiative with two bids versus one offer, while butter flipped that script with offers in control; on a one-lot kind of day in butter/blocks/NDM, that imbalance is all it takes to move price without proving depth beyond the call’s short windows. A caution worth underlining on light-activity days: one-lot prints can stretch price without confirming follow-through. Better question before bigger moves on the basis or spot milk tied to a single call: “Do those bids stick tomorrow?”.

Support and resistance looked straightforward: barrels built a psychological floor at 1.80, while butter’s first test is whether 2.15–2.18 holds as a landing zone or if sellers press again into the next call—that’s the zone to watch for stop-and-reverse behavior midweek.

Microstructure Benchmarks (4-week rolling averages; pilot scaffold)

ProductTrades (4-wk avg)Bids (4-wk avg)Offers (4-wk avg)
BlocksPublishing begins next report (CME Spot Call baseline)Publishing begins next reportPublishing begins next report
BarrelsPublishing begins next reportPublishing begins next reportPublishing begins next report
ButterPublishing begins next reportPublishing begins next reportPublishing begins next report
NDMPublishing begins next reportPublishing begins next reportPublishing begins next report

Today’s read: barrel bidding was noticeably active relative to a “normal” balanced call, while butter offers were roughly in line with what plants expect on a motivated-seller Tuesday heading into late August.

Options Watch: Front-month Class III options implied volatility tracking launches here; the initial read is steady day-over-day, with a verifiable CME-sourced series to be displayed alongside settlements, beginning with the next report, to maintain this signal’s audibility for risk books.

Global landscape—U.S. butter looks cheap; powder lanes are crowded

What’s interesting is how the global board lines up: EEX nearby butter in the mid-€6.6-6.7k/MT neighborhood and NZX butter in the high-$6.6-7.1k/MT range convert into the low-to-mid $3s per lb at today’s euro reference rate. As a result, U.S. butter, currently priced at $2.18 and in the low $2.30s, looks export-competitive once spreads, capacity, and freight align with buyer coverage windows again. SMP remains the street fight—EEX SMP sits near the mid-€2.4-2.5k/MT band while U.S. NDM holds near $1.25/lb, which is exactly why Class IV can’t catch a sustained bid until either EU prices lift or FX swings back our way for several sessions in a row, a dynamic exporters are managing daily. Oceania boards show AMF/butter is firm enough to keep New Zealand competitive in Southeast Asia, so U.S. powder wins are more likely to be tactical cargoes into timing gaps than a sustained flow until pricing or currency tilts our way—classic shoulder-season behavior.

Global Price Conversions: European (EEX) and Oceania (NZX) prices are converted to a comparable $/lb basis. Formula: €/MT to $/lb = (€/MT × USD/EUR) ÷ 2204.62; same-day euro reference rate drawn from central-bank publication for USD/EUR comparisons.

Feed and margins—workable, not wild

December corn closed 4.0925/bu and December soybean meal 293.10/ton, putting a standard 16% protein ration in the zone where a Class III 18.64/cwt check creates a workable income-over-feed, but not an “open the fresh-cow floodgates” setup, especially where hay quality took a heat hit and needs ration tweaks to keep butterfat numbers honest. Keep the milk-to-feed ratio simple for planning: today sits shy of the “3.0 feels green-light” rule of thumb, so the play is tightening rations for efficiency rather than expansion—the same counsel most nutritionists are giving across Wisconsin’s cheese alley and California’s 4a country this week. And a mechanical reminder: the USDA Class & Component formulas serve as guardrails that transmit these spot/futures moves into the monthly pay price, which is why hedge windows should be sequenced around those releases.

Forecast anchors—official releases and what the strip is saying

USDA’s Class & Component Prices are published monthly and anchor pooled milk checks, so cash-flow planning and hedge windows should live on that cadence—it’s unglamorous, but it prevents mailbox surprises when settlement math hits the statement. The strip is saying the quiet part out loud: September Class III settled 18.64 while Class IV sat 17.93, and until fat and powder firm together, expect the III–IV spread to keep signaling which pools are advantaged on component value as late-summer checks settle. For hedge books, the straightforward read is to layer some Q4 milk on cheese-led strength and keep IV hedges opportunistic on rallies until powders stop finding sellers—the same pacing plant buyers tend to use ahead of fall promos when barrels are doing the heavy lifting.

Regional color—Upper Midwest feels the lift first; California minds the butter

Upper Midwest plants are pulling hard into fall cheese demand, and that’s where the 4¢ barrel print does the most good immediately for mailbox checks and short-haul spot milk premiums for weekend pasteurizer runs—one extra clean load more than earns its keep in late August. California’s story is different—4a math feels the butter slip directly, even as Westside feed costs eased a touch with corn drifting and meal not spiking, so cash-flow planning favors steady, not sprinting, while processors manage butter stocks and churn time into early fall. In both regions, the same operational refrain kept coming up: keep components tight, watch the call, and don’t let a one-lot Tuesday swing the pricing plan without a second day of confirmation on the spot tape and the futures close—it’s just good discipline in August.

What to do now—moves that travel from barn to boardroom

  • Price risk: Consider layering 20–30% of Q4 Class III at or above today’s settle to lock cheese-led strength; keep Class IV hedges opportunistic on rallies until NDM stops leaking.
  • Feed check: Re-run ration economics with DEC corn at ~$ 4.09 and DEC meal at ~$ 293; can a ration tweak buy a half-point of component cheaper than chasing the spot basis this week?
  • Premiums & formulas: Call the plant to confirm how barrels/blocks roll into the pay price and whether fall-promo premiums are available for consistent loads and quality in a ~71¢ III–IV spread world.

Market voices—how participants read the day

Floor chatter after the call: “barrels are doing the heavy lifting,” which fits a two-bid/one-offer setup and a no-trade uptick that tells you buyers are leaning—when that starts pre-holiday, it often carries a few sessions if fundamentals hold. The processor from the Midwest said fall promos are real on the books, and butter coverage feels adequate for immediate needs—which is exactly the kind of split that prints a cheese-up/butter-down Tuesday in late August. From a risk seat, the guidance was to respect the spread: hedge the thing the market is rewarding (cheese) and avoid forcing the thing it’s discounting (powders) until the global board and FX stop rewarding Europe and Oceania for more than a day or two at a time.

Bottom line—the component mix did the talking

Cheese strength nudged near-term checks higher, while butter softness reminded everyone that Class IV can cap upside until powders and fat firm together, which argues for managing risk by class instead of treating “the milk price” as one big number this week. One cue into tomorrow’s call: let the 1.80 barrel floor dictate whether to add a little Class III protection, and don’t chase Class IV until the powder board, FX, and U.S. spot stop pulling against each other for more than a day or two—it’s the patient money that tends to stick into October.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

 Learn More:

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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.

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When the Dairy Market Takes a Dive: What Every Producer Needs to Know

Milk prices held steadier than expected last week — but the underlying pressures are real. Here’s what smart producers are doing.

EXECUTIVE SUMMARY: Listen up — there’s some serious turbulence brewing in dairy markets right now. The Global Dairy Trade auction saw just a 0.3% price dip, but don’t let that fool you — U.S. cheese prices plummeted nearly 4% in one week, and China’s still pulling back hard from imports while Europe floods the market with surplus milk. Here’s what caught my attention… the producers who are thriving right now aren’t the ones with the most cows — they’re the ones milking smarter, not harder. We’re talking about farms that can break even at $17/cwt, while others are scrambling at $20. The difference? They’ve got their feed costs locked down, they’re culling strategically, and they’re using risk management tools that most farmers ignore. This isn’t just a rough patch — it’s a fundamental shift separating the wheat from the chaff.

KEY TAKEAWAYS:

  • Lock in your downside with Dairy Revenue Protection — it’s not just insurance, it’s profit protection when milk hits $16-17/cwt (and with current trends, that’s not fantasy anymore)
  • Feed strategy wins are real money — producers locking soybean meal contracts now are saving $30-50 per cow monthly compared to spot pricing
  • Strategic culling delivers 5-12% efficiency gains — removing the bottom 20% performers can boost your per-cow average by 200+ pounds monthly
  • Lender relationships matter more than ever — proactive communication about cash flow keeps credit lines open when markets get ugly (and they’re getting ugly)
  • Market intelligence pays — tracking Global Dairy Trade auctions and China’s import data gives you a 2-3 week advance warning on price moves that can make or break your quarter
dairy farm profitability, milk price volatility, cost of production dairy, dairy risk management, global dairy market

We get it. You see those market signals, and it makes your stomach drop.

Let’s sit down with a coffee and unpack what’s really going on with the dairy market in 2025—and what you can do on your farm to face these times head-on.

The Numbers Don’t Lie — And They’re Talking

Here’s what the latest data tells us:

U.S. milk production in July 2025 hit 19.23 billion pounds, up 3.3% from last year, with nearly 9.47 million cows and average milk per cow climbing about 1.7% to over 2,000 pounds monthly. What’s particularly noteworthy is that producers across the Midwest are crediting better herd management and refined feeding programs with driving these gains.

Meanwhile, European producers aren’t sitting idle. EU milk production reached 160.8 million tonnes in 2023, marking steady growth driven by favorable weather conditions and lower feed costs.

Now here’s the kicker: China, our longtime dairy superconsumer, has pulled back hard. Multiple industry reports confirm that they’ve dramatically scaled back imports due to high inventories sitting in warehouses, as well as economic headwinds that aren’t expected to subside anytime soon.

Look at the Global Dairy Trade auction on August 19—prices declined just 0.3%, suggesting some market stabilization after months of volatility. To put that in perspective, Fonterra’s benchmark unsalted butter sold for $7,175 per tonne, while their key Whole Milk Powder product fetched $4,025 per tonne.

But closer to home? CME cheese prices tell a different story.

Block cheddar dropped from $1.83 to $1.76 per pound (a 3.8% decline), while barrel prices took a 5% hit over the week ending August 22. Meanwhile, the European Mild Cheddar index is holding firmer at €4,435 per tonne, showing some regional price differences. That’s your classic foodservice demand warning signal right there.

What You Need to Do Right Now

If you can’t break even with milk around $17/cwt, it’s time for a hard look at your cost structure. Here’s what smart producers are focusing on:

  • Get serious about risk management. Tools like Dairy Revenue Protection aren’t just government programs—they’re lifelines when markets get nasty.
  • Optimize your feed strategy. With grain markets looking somewhat friendlier than last year, this might be your chance to lock in favorable contracts, especially on soybean meal. But don’t get greedy—flexibility has value too.
  • Make tactical culling decisions. I know it’s painful, but removing your lower-performing cows earlier can save serious feed costs and help you right-size production for market realities.
  • Don’t ghost your lender. Keep that relationship strong. Share your numbers, explain your plan, and show them you’re thinking ahead.

The Big Picture — Supply, Demand, and Reality

Here’s what’s fascinating about this cycle:

Europe’s creating what everyone’s calling a “wall of milk,” with massive volumes getting processed into skim powder. The U.S. is steadier but still quietly adding volume through those productivity gains I mentioned.

Add in the Southern Hemisphere’s seasonal flush—New Zealand’s spring milk is just starting to ramp up—and you’ve got a supply picture that’s, frankly, overwhelming.

But demand? That’s where things get interesting.

China’s absence has left this massive hole that nobody else can fill. This is creating some interesting trade shifts. For example, with European products needing a home, recent shipments of EU butter to the U.S. surged by over 80%. At the same time, China has been taking advantage of lower tariffs to buy huge volumes of whey from the U.S., even while shunning milk powder.

Southeast Asia and the Middle East are buying, sure, but they’re opportunistic and price-sensitive. They’ll nibble at the edges, but they can’t absorb the surplus.

Technology in Tough Times

What strikes me is how many producers continue to invest in automation, despite tight margins.

Robotic milking systems are now operating on about 20% of Canadian farms, and I get why—better consistency, reduced labor headaches, more detailed cow monitoring.

But let’s be real: these aren’t magic bullets. Recent industry analysis indicates that while efficiency improvements can be substantial, success ultimately depends on how effectively you manage both the technology and your operations. In this market, you’d better have rock-solid numbers before making that kind of investment.

Eyes on the Horizon

Mark your calendars for a few key dates:

The next Global Dairy Trade auction, scheduled for September 2, will reveal whether the price stabilization holds. China’s August import data (due in mid-September) could be a real game-changer if it signals a resumption of buying. Europe’s production report in late September will tell us if their supply surge is finally moderating.

And here’s something most folks miss: keep an eye on the U.S. Restaurant Performance Index. It’s your early warning system for foodservice demand, which drives a huge chunk of cheese consumption.

Bottom Line — Tough Times, Tougher Farmers

This industry has weathered brutal cycles before, and this time will be no different.

The producers who stay sharp on their numbers, utilize available safety nets, and make tough decisions now will be the ones who emerge stronger. This downturn won’t last forever, but the choices you make today will define your operation tomorrow.

The bottom line? While everyone else is complaining about prices, savvy operators are positioning themselves to emerge from this downturn stronger than when they entered.

What strategies are working on your farm to weather this storm? Share your insights in the comments below.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Cheese Blocks Lead, But Margins Are in a Squeeze – Your CME Dairy Deep Dive August 19th, 2025

Margins are locked up tight—did you know Midwest IOFC is hovering just above breakeven, with Class III nearly $0.60/cwt squeezed by feed costs?

EXECUTIVE SUMMARY: Hey, here’s what’s really going on—everyone talks about cheese leading the market, but it’s feed costs and weak powder exports that’ll make or break your milk check. Look at today’s numbers: block cheese up $0.02/lb, sure, but butter dropped to $2.32/lb and dry whey sank to just $0.59/lb. IOFC ratios in Wisconsin and California are pinched, with some herds seeing margins slip below $1.50/cwt profit. Globally, the U.S. still undercuts Europe on butter, but powder competition from New Zealand is brutal. That’s why the big co-ops are hedging feed like crazy… and pushing for forward risk programs. If you’re not watching both Class III futures and your soybean meal contract, you could be missing real opportunities for profit. Try this: reset your hedging—lock in a milk floor, book feed when it dips, and don’t sleep on export chatter. That combo could easily put an extra $4,000–$7,000 in your pocket this quarter.

KEY TAKEAWAYS

  • Cheese blocks are propping up Class III, but dry whey at $0.59/lb wipes out up to $0.40/cwt from your pay price. Check your monthly USDA checkoff for the hit.
  • Soybean meal hit $295.70/ton—a 7% rise over summer—so locking feed early could save you thousands on IOFC alone. Talk to your nutritionist before the next rally.
  • Export butter opportunities remain strong, but logistics will decide whether U.S. product actually clears the dock. Watch USDA and trader calls for trends.
  • Culling’s picking up across Midwest dairies due to heat and feed pressure; monitoring herd health now means less risk come fall. Review your cow records and adjust if needed.
  • Don’t wait for whey or powder prices to rebound—use DRP or puts on Class III while the floor’s holding at $18.86, lock in margin, and keep cash flow steady.
Dairy market analysis, CME dairy prices, dairy farm profitability, IOFC dairy, dairy risk management

That’s what I’m seeing out here—dairy’s never just the spot cheese price. If you want paychecks that translate to growth, watch those feed numbers and export flows like a hawk. Seriously, try these tweaks. They’re what the progressive outfits are doing… and they’re seeing the difference right in their milk checks.

What’s happening in the CME dairy pit today? If you blinked, you might’ve missed it—cheese blocks put on a small rally ($0.02/lb up), but everything else? Butter nudged lower, NDM keeps feeling soft, and dry whey? It’s almost like nobody showed up to buy. That’s the sort of start that gets barn conversation rolling: “Are the cheese buyers trying to lift this whole market on their own?”

What strikes me about today’s story isn’t just who’s leading, but who’s dragging. Block cheese is standing up—anyone milking for Class III is grateful for it. But whey’s like that last stubborn heifer—won’t budge, and until she does, Class III just can’t run.

Here’s a quick scan of the numbers that hit your milk check:

ProductPriceMoveKey DriverShort-Term OutlookFarm Impact
Cheese Block$1.85/lb+2.00¢Food Service DemandSlightly BullishShoring up your next Class III check.
Cheese Barrel$1.81/lbFlatRetail Packager DemandNeutralNo change, but block strength helps.
Butter$2.32/lb-1.25¢Export Pricing GapTentativeSoftens Class IV—needs global pull.
NDM Grade A$1.265/lb-0.50¢Export CompetitionWeakSqueezes Class IV, flattens margins.
Dry Whey$0.59/lb-1.50¢OversupplyHeavyThe biggest drag on Class III right now.

What This Means for Your Milk Check

Class III September futures parked at $18.86/cwt; Class IV, $18.42/cwt. If you’re hedging next month’s milk, the window sits around $18-$19/cwt—solid, not a home run, but block cheese is your best friend. A floor trader mentioned, “Everybody’s selling butter; nobody needs it now.” With nine open offers and zero bids at the close, it’s like waiting for rain when you’ve got hay stacked high. Butter barely moved (just two trades all day), and the rest just marked—to market. Low conviction leads to wide spreads, and that usually means volatility is waiting in the wings if traders wake up.

The Squeeze at Home: Feed Costs & Herd Health

If you’re watching feed costs, there’s good news and bad. December corn trickled down to $4.03/bu (small win), but soybean meal surged to $295.70/ton. IOFC ratios in Wisconsin and upstate New York are not great. We’re seeing a 2.15 ratio; guys feeding fresh cows in California say their basis is even hotter. One Chippewa Falls producer texted, “Block numbers look strong, but feed costs have us on edge.” Midwest cows aren’t showing peak yield, culling’s ticking up, and if prices don’t turn, regional supplies could tighten come September. Northeast producers echo the same sentiment: young cows are keeping up, but older cows are dropping off.

The Global Wild Card: Will Exports Show Up?

Here’s the thing, though—exports are the wild card. U.S. butter is a steal compared to European or New Zealand products. Export brokers expected a flood of outbound loads, but freight and logistics are real headaches, and some are starting to wonder if it’ll get solved this season. Processors in the Southwest are amped for exporting butter if logistics open up—“Asia wants the fat, but we need more trucks than we’ve got,” said one plant manager. NDM and powders? We’re still getting undercut by Europe on SMP, and New Zealand’s pricing is tough. Southeast Asia’s buying, but every contract feels like a knife fight. Mexico’s steady, but picky.

A look at the IOFC numbers for August (see the chart at the end of this article) shows margins in the Midwest remain tight, and with feed options limited and meal basis burning out west, everyone’s feeling the pinch.

Actionable Strategy: Farmer’s Short List

Here’s what I’d do (and what I’m hearing from guys across the belt):

  • Lock a floor with DRP or put it in if Class III fits your cost structure; don’t wait for the whey.
  • Hedge soybean meal, especially if your ration’s heavy.
  • Keep your cash flow plan on a tight leash. Sideways checks for September; don’t overlever if whey and powder keep softening.
  • Watch export chatter and FMMO headlines—basis changes next season could change the local payout picture.

Industry Pulse and Final Insights

The FMMO reform discussion is currently trending. Webinar feedback suggests that Southwest and Northeast producers should watch how test formulas play out. Regulatory changes are coming—could be a game changer for your Class III/IV checks if the USDA gets its way.

If there’s one theme, it’s balance—cheese blocks are trying to hold margins, but the rest of the barn’s getting squeezed. Export prospects are real but fragile, and feed is where next month’s check could get eaten up. If you haven’t dialed in a risk plan, don’t wait. And if you want the real scoop, check those IOFC visuals—sometimes the charts say as much as any table.

Stay loose, ask around, and keep sharing what’s happening at your place—the smartest moves come from what we learn off each other’s experience.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Market ‘Balance’ or Farmer Trap? Why This Cattle Price Plateau Could Cost You Big

Think the market’s stable? Think again — this plateau might be a trap!

EXECUTIVE SUMMARY: Look, I’ve been watching this industry long enough to know when something doesn’t smell right. Everyone’s talking about market “balance,” but history shows these calm periods usually end badly. Debt levels are climbing — many producers are sitting above 40% debt-to-asset ratios — while replacement heifers have skyrocketed from $1,600 to over $4,000 in just 18 months. Meanwhile, processing capacity is expanding faster than the milk supply can keep up, creating pockets of oversupply that could drive down local prices. Dr. Nicholson’s economic models at Wisconsin aren’t pretty — they show potential milk price drops of $1.90 per hundredweight and export losses hitting $22 billion. Here’s the thing: smart producers aren’t waiting around to see what happens. They’re tightening their belts, building cash reserves, and hedging their bets right now.

KEY TAKEAWAYS:

  • Debt management is critical — keep your debt-to-asset ratio below 35% to avoid getting squeezed when markets turn
  • Build liquidity like your business depends on it — aim for six months of operating reserves because cash creates options when others are forced into crisis decisions
  • Start hedging now while you can — use Class III futures or feed cost hedging to lock in margins before volatility hits
  • Diversify your buyer relationships — don’t put all your eggs in one processor’s basket, especially with new capacity coming online everywhere
  • Focus on operational efficiency ruthlessly — every dollar you save on feed conversion or labor costs today becomes margin protection when prices drop

The chatter in the dairy industry is all about “market balance.” Prices have plateaued, and many believe this stability will last. But here’s the thing — this perceived comfort might just be setting you up for a devastating fall.

History is littered with periods where seemingly stable prices plunged unexpectedly, catching producers completely off guard. Think back to the early 2000s and the 2014-2015 cycles — long stretches of steady pricing that lulled producers into aggressive expansion and debt accumulation. When the market suddenly shifted, those who had leveraged too heavily saw their equity vanish overnight.

Current Warning Signs Are Flashing Red

Today, multiple vulnerability indicators are blinking simultaneously, and frankly, they’re being ignored by too many operators who’ve bought into the “balanced market” narrative.

Debt levels are rising across the industry, with many producers carrying debt-to-asset ratios exceeding 40% — a historically critical stress marker that has preceded major financial casualties in previous downturns. Cash flows are being squeezed by stubbornly high feed and input costs that refuse to come down despite commodity corrections.

Interest rates are hovering near 5% for qualified operations, making expansion financing and debt refinancing particularly costly propositions. Add persistent policy uncertainties — from potential trade disruptions to shifting immigration and labor regulations — and you’ve got a perfect storm brewing beneath the surface calm.

The Economic Modeling Says It All

Crucially, recent economic modeling from Dr. Charles Nicholson at the University of Wisconsin-Madison isn’t speculative forecasting — it’s hard data analysis. His research reveals specific scenarios where various trade and policy shifts could result in milk price reductions of up to $1.90 per hundredweight and cumulative U.S. dairy export value decreases of $22 billion over a four-year period.

That’s not a theoretical risk — that’s economic modeling based on current market structure and realistic policy trajectories.

The replacement cattle market tells an even more dramatic story. Replacement heifers have surged from around $1,600 per head in mid-2023 to over $4,000 by late 2024 — a 150% spike driven by inventory scarcity and the beef-on-dairy trend. When input costs are exploding while revenue streams remain stagnant, that’s a classic vulnerability setup.

Meanwhile, dairy processing capacity has been expanding aggressively, with new mega-plants coming online across multiple regions. But milk production growth isn’t keeping pace uniformly, creating potential pockets of oversupply that could hammer local pricing.

Are You on This List? Identifying the Most Vulnerable Operations

Are the operations walking the tightrope right now? Those who expanded aggressively during recent favorable periods, especially in high-cost regions where water, feed, and regulatory pressures add operational complexity. Small to mid-size operations with thin margins and limited cash reserves are particularly exposed.

The highest-risk profiles include:

  • Operations with debt-to-asset ratios above 40% and debt service coverage below 1.25
  • Producers dependent on single-buyer relationships or concentrated market exposure
  • Facilities in regions facing water restrictions, increased regulatory pressure, or limited processing alternatives
  • Operations that banked on continued export market stability without downside protection

Here’s what really concerns me: the early warning signs I’m seeing mirror patterns from previous market corrections. The disconnect between soaring replacement costs and stagnant milk premiums? That’s a classic vulnerability indicator that preceded past crashes.

Your Defensive Playbook: Strategic Protection Plan

Market turbulence isn’t a question of if — it’s when. Smart operators aren’t sitting around hoping this plateau continues. They’re actively building defensive positions while opportunities still exist.

Diversification isn’t optional anymore. Don’t put your operation’s future on a single buyer or market channel. I’m seeing forward-thinking producers develop relationships with multiple processors, exploring emerging opportunities in specialty markets and value-added product streams.

Risk management tools deserve serious consideration. Whether through Class III milk futures, options contracts, or cross-hedging strategies for feed costs, you need downside protection. Recent analysis shows that effective hedging strategies can significantly manage margin risk during volatile periods.

Cash reserves aren’t a luxury — they’re survival insurance. Target at least six months of operating reserves. Operations with strong liquidity positions will have options when others are forced into crisis decisions.

Financial discipline matters more than ever. Aim for debt-to-asset ratios below 35% and debt service coverage ratios above 1.25. These aren’t arbitrary benchmarks — they’re financial stress indicators that historically separate survivors from casualties.

Take Action Now — Your 4-Step Priority Plan

If I were making decisions on your operation tomorrow, here’s my immediate action checklist:

1. Get a Real-Time Financial Snapshot. Immediately calculate your actual debt-to-asset ratio and debt service coverage. If you’re above 40% and below 1.25, respectively, you need a deleveraging plan now, while milk prices still provide some flexibility.

2. Lock In Your Risk Management. Don’t gamble with your operation’s future. Whether it’s forward pricing a portion of your production, establishing feed cost hedges, or negotiating flexible supply agreements with multiple buyers, your goal is to minimize as much uncertainty as possible from your profit and loss (P&L) statement.

3. Hunt for Efficiencies Ruthlessly. Every dollar you save in feed conversion, labor productivity, or operational costs today becomes a dollar of margin protection when the market turns. This requires disciplined focus on measurable improvements.

4. Hoard Cash Like Your Business Depends on It. If that means pausing expansion plans or selling non-core assets to build liquidity reserves, do it. In a downturn, cash creates options, and options are the difference between survival and failure.

The Bottom Line

Don’t be lulled into complacency by the current price plateau. This “market balance” narrative is dangerous precisely because it breeds the kind of strategic inaction that destroys operations when cycles inevitably turn.

The dairy industry’s current stability might be real, but it’s also fragile. External shocks — whether from trade policy changes, weather events, disease outbreaks, or broader economic disruption — could unravel today’s equilibrium faster than most producers realize.

The next market cycle isn’t coming someday — it’s building momentum right now, beneath the surface of this apparent calm. The question isn’t whether it will arrive, but whether your operation will be positioned to weather it when it does.

Will you be ready?

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

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Verified Strategies for Navigating 2025’s Dairy Price Squeeze

Milk prices drop 4.1% but your feed bill’s the same—here’s how smart producers are still making money

EXECUTIVE SUMMARY: Look, here’s what’s really happening out there—the old “more cows, more money” playbook is broken. I’m talking to producers from Ontario to Idaho, and the ones still making decent money aren’t the guys with the biggest herds. They’re the ones pushing butterfat above 4.1% and protein over 3.3%, which can mean an extra $2 per hundredweight when milk prices are getting hammered.The Global Dairy Trade took a 4.1% hit in July, and powder prices dropped 5.1% to $3,859 per metric ton—but here’s the thing. Feed costs are actually holding steady around $4.50 for corn and $350 for soybean meal, so if you’re smart about efficiency, your margins don’t have to tank.China’s cutting back on imports by 12-15%, Europe’s drowning in €850 per cow compliance costs, and everyone’s scrambling to figure out what’s next. Meanwhile, the producers who maintain 60-90 days of operating cash and hedge 40-60% of their production are sleeping soundly at night. Stop chasing volume and start chasing components—that’s where the money is in 2025.

KEY TAKEAWAYS

  • Lock in Feed Cost Savings: Target feed costs under $9.50/cwt by tracking your receipts against USDA data on a monthly basis. Every dollar you save here goes straight to your bottom line when milk prices are soft.
  • Component Premium Strategy: Push for butterfat over 4.1% and protein above 3.3%—this can net you an extra $2/cwt in premiums. Pull your latest DHIA report and see where you stand right now.
  • Smart Risk Management: Hedge 40-60% of your milk production through DMC or forward contracts. With China backing out and market volatility hitting hard, unprotected milk is a gamble you can’t afford to take.
  • Cash Flow Defense: Build and maintain 60-90 days of operating cash reserves. Call your lender this week and ask for their benchmark data on what successful operations are keeping liquid.
  • Strategic Market Timing: Use 2025’s feed cost stability (corn near $4.50/bu) to improve feed conversion ratios. Wisconsin Extension trials show 4-6% improvements are realistic with better TMR protocols.
dairy profitability, milk price volatility, component premiums, dairy risk management, dairy market trends

The thing about this market? It feels like watching fresh cows trickling into a dry lot on a chilly morning—uneasy, unpredictable, and every farmer feeling it a bit differently. I’ve received quite a few calls lately from folks in Ontario to Idaho, and the question is always the same: how do we handle falling milk prices amid rising input costs?

Those Global Dairy Trade index numbers aren’t just stats—they land right in your bank account.

Global Prices Are Sending a Clear Message

At the July 15, 2025, Global Dairy Trade event, the index slid 4.1%, with whole milk powder easing 5.1% to $3,859 per metric ton. For those of you in cooler climes like the northern U.S. or Canada, this slump echoes in your contracts too—European futures have their own skirmishes with skim milk powder and butter prices wavering, though sometimes not as sharply as headlines might suggest.

However, here’s the thing—if your nutritionist isn’t providing you with data, ask for it. Wisconsin Extension trials showed that herds implementing TMR protocols saw a 4–6% improvement in feed conversion ratio. That’s real fuel for boosting milk production without breaking the bank. With feed costs holding steady—corn is hovering near $4.50 per bushel and soybean meal is under $350 per ton, according to the USDA’s June 2025 Feed Grains Outlook—your margins depend heavily on capturing these efficiencies.

Herd Growth: More Cows, But Are We Making More Money?

However, let’s be clear about what the headlines often overlook: more milk doesn’t automatically translate to higher margins. Yes, U.S. dairies increased cow numbers by more than 45,000 head since July 2024, with rolling averages inching up—some hitting 24,000 pounds per cow or better. However, sharp operators I know keep a close eye on component checks, pushing to keep butterfat above 4.1% and proteins above 3.3%. That’s becoming a critical tactic, especially as risk management becomes a staple, not an option.

And what about the Australians and Kiwis? While Fonterra reports a 1.5% increase in collections, places like Gippsland in Australia actually saw a 2% drop in production year-over-year, due to dry weather. The growth we’re seeing isn’t universal—it’s pockets of efficiency, careful grazing, and smart tech upgrades keeping some farms afloat.

China’s Changing Game—Buying Less Powder, Investing More at Home

One of the game-changers in this market is China. Market analysts project a 12-15% decline in China’s whole milk powder imports for the latter half of 2025, driven by an estimated $5 billion state-backed investment in domestic processing capacity—including robotics, new plants, and larger herds—which is reshaping global trade.

This is why you’re hearing about hedging at every co-op meeting. If your risk advisor suggests hedging half of your production, don’t just nod—ask them for the Rabobank or USDA FAS data they’re using. Tools like the Dairy Margin Coverage (DMC) program are experiencing unprecedented use.

Europe’s Compliance Crunch and Margin Squeeze

For European producers, the mountain to climb looks steeper. The European Agricultural Fund for Rural Development recently estimated that environmental compliance costs could reach as high as €850 per cow, and the European Dairy Farmers’ Association confirms that margins have dipped below 3%. The price per hundred kilos may hover near EUR53, but when you factor in growing paperwork and strict audits, chasing component premiums is the real strategy to keep things running.

Herd managers across northern Europe are doubling down on ration tweaks just to eke out extra euro per tank, especially on butterfat numbers, which remain the shining stars in this squeeze.

The Bottom Line: Managing Break-Even and Cash Flow in Bumpy Markets

Farm finances are front and center. With feed costs workable near $9.50 per hundredweight (cwt) but becoming a stretch above $11/cwt, the risk is high. Add new barn debts or payments on robot leases, and that margin tightens fast, especially if you’re caught unprepared. For cash flow, lenders I trust in Ohio say surveys show 80% of stable operators keep 60–90 days’ operating cash in reserve. Don’t take my word for it—call your farm credit rep and ask for their 2025 Small Farm Panel data.

The old “expansion is the answer” mantra isn’t holding water anymore—unless you’re securely hedged and have a plan to manage feed costs, holding steady or trimming non-critical expenses might be your best move. That could mean swapping hay varieties, leaning more on home-grown silage, or revamping ration strategies—all of which are trending upward these days.

Tactics That Survive (According to Real Data)

So, what separates the survivors from the rest in 2025? It comes down to executing these data-driven best practices:

  • Target Key Feed Cost Metrics: Aim for a rolling average under $9.75/cwt, verifying your monthly receipts against USDA and CME records.
  • Verify Component Premiums: Use your DHIA test sheets to confirm eligibility. An average butterfat content of over 4.0% typically qualifies for processor incentives—check your contract for the exact rate.
  • Audit Your Risk Coverage: Ensure 40–60% of your production is covered by hedging or margin protection. Use the report from your processor’s portal, not just a broker’s pitch.
  • Benchmark Your Payout: Compare your monthly net milk check to regional averages for similarly sized operations.

Monday Morning Actions

Pull your July DHIA test sheet. Log your herd’s butterfat, protein, and SCC in your farm software. Know your numbers cold.

Calculate your current feed cost/cwt using your latest invoice data. Compare it directly with the USDA’s monthly outlook.

Cross-check your export contract details with the latest Rabobank and USDA FAS trends. Confirm your risk coverage is adequate for the current market.

Schedule a 30-minute call with your ag lender. Review your current compliance and operating costs against their official benchmarks.

What’s the takeaway? This market’s testing every assumption we had about volume, efficiency, and hedging. The operators who continually adapt—looking both backward at lessons learned and forward to technological advances—will be the leaders when the turning point arrives. And if you want the nitty-gritty regional detail or a gut check on your numbers, well, you know The Bullvine’s got your back. This ride? We’re all in it together.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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.

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Why Whey’s Flying and Butter’s Getting Crushed: The Market Split Every Dairy Producer Needs to Understand

Think all milk markets move together? Think again. It’s a split, and you need to know why.

EXECUTIVE SUMMARY: Here’s the deal: dairy markets aren’t moving as one anymore. Protein prices—think whey and cheese—are surging, up 6.5% in Europe and driving 34% growth in U.S. exports, while butter’s getting hammered despite record production. The USDA’s August forecasts tell the story: the milk supply’s growing, but fat-based prices, such as butter, which recently traded at $2.52/lb, has since slid into the low $2.30s, squeezing margins hard for herds that push butterfat. Meanwhile, Europe’s tightening supplies, combined with a surge in cheese production, are sending whey futures through the roof. For U.S. producers, it’s all about exports now—that engine’s keeping domestic prices afloat. Bottom line? Stop thinking of milk prices as a single number. Your components matter more than ever, and smart hedging based on your herd’s profile can protect real profit in this messy market. This shift isn’t temporary—it’s the new reality, and you need to act on it.

KEY TAKEAWAYS

  • Whey futures jumped 6.5% in Europe as processors prioritize cheese over butter—track EEX weekly to catch these protein signals early and adjust your marketing timing
  • U.S. cheese exports hit 52,191 metric tonnes in June, a 34% surge that’s reshaping global trade flows—use this momentum if you’re naturally high-protein to capture better pricing
  • Component-specific hedging is now essential: Class III (cheese/whey) vs Class IV (butter/powder) pricing can swing your margins by hundreds per cow—know your herd’s profile and hedge accordingly
  • Currency and export dependency create new risks—a stronger dollar could torpedo U.S. competitiveness overnight, so monitor USDEC trade data monthly to stay ahead of shifts
  • European supply constraints mean cross-border milk flows are increasing—if you’re near processing regions, this volatility creates arbitrage opportunities for savvy producers

A significant shift is occurring in dairy markets that is impossible to ignore. Protein components—think whey and cheese—are charging upward, driven by tightening milk supplies and serious export momentum. But flip the coin, and fat components, especially U.S. butter, are getting hammered by record production volumes that just won’t quit. This isn’t some temporary blip we can wait out. It’s fundamentally changing how we need to think about our operations.

Europe’s Milk Squeeze is Getting Real

Take what’s happening across Europe. France is tightening up—and I mean really tightening. According to FranceAgriMer’s August 2025 data, milk deliveries decreased by 0.7% in the first half of this year, with the dairy herd at a record low, standing at approximately 3.075 million heads as of December 2024. This isn’t just a weather pattern; it’s a structural shift.

But here’s where it gets interesting… Denmark has been holding its own, showing modest gains in milk deliveries, with butterfat numbers around 4.34%—a pretty solid quality indicator. And the UK? They’re pulling off something fascinating: shrinking herds but climbing milk production. AHDB recorded a 5.2% production jump in May 2025 despite fewer cows in the system. Farms over there are really dialing in their genetics and management protocols.

This patchwork means milk is flowing across borders more and more. Processors in tighter regions like France and Germany are relying on surplus milk from Denmark and Poland just to keep their plants running at capacity. This complexity is making spot markets incredibly volatile. If you’re not plugged into these regional flows, you’re basically flying blind.

What stands out is the surge in whey futures on the EEX market, which recently jumped 6.5%, reaching around €967 per tonne. This isn’t just a feed story anymore. It reflects processors prioritizing cheese production, as it’s more profitable when milk is scarce. Whey prices have become a barometer for the health of the European milk pool.

The U.S. Export Engine—Running Hot but Vulnerable

ProductJune 2024 Export Volume (MT)June 2025 Export Volume (MT)Year-over-Year Growth (%)
Cheese38,93952,19134%
ButterBaseline2x Baseline100.4%

Swing over to the U.S., and the USDA bumped their 2025 milk production forecast to a hefty 229.2 billion pounds. That’s a lot of milk looking for a home. Fortunately, exports are soaking up much of that growth. USDEC reported June 2025 cheese exports hitting a record 52,191 metric tonnes—a 34% jump year-over-year—and butter exports doubled.

The reality is that the export engine is essentially propping up the entire domestic price structure. If those shipments to Mexico, South Korea, and Japan start slowing down… well, farmgate prices could take a serious beating.

On the CME, block cheese prices climbed near $1.85 per pound in early August while butter prices slid into the low $2.30s. That spread is complicating margin calculations for many producers, especially those naturally high in butterfat.

MetricJuly 2025 ForecastAugust 2025 ForecastChangeImpact
Milk Production (Billion lbs)228.9229.2+0.3More supply pressure
Butter Price ($/lb)$2.565$2.520-$0.045Bearish for fat-focused herds
Class IV Price ($/cwt)$19.05$18.95-$0.10Lower margins
Class III Price ($/cwt)$18.50$18.50UnchangedStable for protein producers

Oceania’s Playing Defense

In New Zealand and Australia, the mood is cautious. Whole milk powder futures barely budged—up just 0.2%—while skim milk powder is getting pounded by competition from both U.S. and European suppliers. Fonterra’s making moves, though, increasing the availability of their Instant WMP to chase premium market segments. Smart play, considering standard WMP is turning into a commodity slugfest.

Supply-Side Risks to Watch

European drought conditions remain unresolved. The 2024 Bluetongue outbreak is still constraining replacement heifer availability. U.S. feed costs remain elevated, which could eventually pressure production growth.

Systemic & Technical Risks: As the recent cancellation of a GDT Pulse auction—one of the key platforms for short-term price discovery—demonstrated, the industry’s reliance on digital platforms introduces new vulnerabilities. Technical failures at critical moments can instantly disrupt price discovery and procurement strategies.

Any one of these factors flipping could shift supply-demand dynamics significantly.

Your Action Plan: How to Thrive in a Split Market

For those of us actually running operations, here’s the bottom line: treating dairy as one big bucket isn’t going to cut it anymore. Fat and protein components behave like completely separate markets.

Know exactly where your herd’s component yields sit. If you’re naturally high-protein, keeping a close eye on Class III market pricing will better protect your bottom line than Class IV prices. Conversely, if you’re pushing butterfat numbers, you need to watch CME butter futures like a hawk and consider some hedging strategies.

Currency movements? They’re not background noise anymore. A strengthening dollar can quickly torpedo U.S. export competitiveness, and that impact is felt at the farm gate.

Keep track of the major export buyers. Mexico’s price sensitivity, South Korea’s import patterns, Japan’s product quality demands—these aren’t vague global forces; they shape what lands in your milk check.

Weekly monitoring isn’t optional. Watch EEX whey futures for protein market signals. Track CME block cheese and butter for U.S. component pricing. Check GDT auction results every two weeks for Oceania’s direction—that influences global powder markets. A monthly deep-dive into USDEC trade data will tell you if the U.S. export story is holding up.

Tailor your hedging strategy to match your herd’s component profile, not some generic industry average. A 4.2% butterfat herd has a very different risk profile than a 3.2% protein operation.

Markets today are complex and messy. However, within that complexity lie opportunities for producers who get granular, adapt quickly, and think in terms of components—not commodities. The next few months will tell us a lot about where these trends head. Stay sharp, stay flexible, and keep the information flowing. The dairy game has changed, but it’s far from over.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • How Feed Efficiency And Sustainability Are Related – This article provides tactical strategies for optimizing your herd’s feed conversion. It reveals methods for improving component yields and overall herd health, directly impacting your ability to capitalize on the protein premiums discussed in the main analysis.
  • Navigating The Twists And Turns Of The Dairy Markets – For a deeper strategic dive, this piece breaks down the broader economic forces and cyclical trends shaping today’s dairy prices. It offers a framework for long-term risk management that complements the immediate component-hedging tactics in the main article.
  • Data-Driven Decisiveness: A Deep Dive into Dairy Comp 305 – Looking forward, this article demonstrates how to leverage herd management software to make precise, data-backed decisions. It shows how technology can help you identify high-performing animals and fine-tune your operation to thrive in the new component-focused market reality.

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.

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Screwworm Is at the Gate: Is Your Dairy Ready for a Quarantine Shutdown?

If the screwworm closed your milk route tomorrow, could your farm take the hit… or would you be out of options overnight?

EXECUTIVE SUMMARY: Alright, let me give it to you straight—everyone thinks plant shutdowns and milk dumping are old news, but one parasite on the border could upend your whole operation. The government’s putting $750 million into a new fly factory in Texas, and that’s not hype—APHIS says it’s the only way to stop the screwworm, which showed up just 370 miles south of us. Our industry generated over $780 billion in value last year, with Texas dairies accounting for $3.4 billion alone (USDA NASS). Butterfat averages are up too—4.15% nationally in 2023—but if quarantine hits, none of that matters if the milk truck can’t get to your tank. Herd expansion’s happening, feed margins have just improved by $150 a head in some spots, but more cows mean a bigger risk if disease shuts the plant down. This isn’t just a Texas phenomenon—other countries have dealt with screwworm infestations, and the same market fluctuations apply globally. If you haven’t checked your insurance for quarantine or lined up backup processors, you’re gambling with more than just milk prices. You owe it to yourself—and your bottom line—to get ahead of this now.

KEY TAKEAWAYS

  • Every farm needs a quarantine plan: losing access to your main processor (even for just one day) could mean dumping thousands of dollars’ worth of high-butterfat milk—just ask dairies who remember dumping during the Covid pandemic.
  • Check your policy exclusions: Most Dairy Revenue Protection (DRP) plans do not cover lost milk if you’re shut down due to a screwworm quarantine—call your broker and obtain confirmation in writing this week.
  • Lock in processor and hauler backups: Farms with two+ alternatives for milk hauling and processing have a 90% higher chance of staying operational during regional shutdowns (USDA, 2025).
  • Boost on-farm biosecurity: Tighten up visitor logging, water sanitation, and fly control now; screwworm loves dense herds—especially with today’s feed-driven expansion.
  • Track your margins and herd health monthly: With national butterfat at 4.15%+ and feed margins improving ($150/head/year in some Midwest regions), don’t let a quarantine erase those gains—monitor components and costs, and keep your contingency plans sharp.

The thing about biosecurity emergencies on a dairy is that the worst ones always show up when you least expect them. Maybe you’re finally getting a break on feed prices—or your herd’s butterfat is trending up—then, bang: there’s talk of quarantine and sterile flies on the news. The New World Screwworm, a parasite we mostly remember from history books, is officially back on the industry’s radar. And trust me, USDA’s $750 million factory in Edinburg, Texas, isn’t window dressing. It’s the kind of investment you only see when there’s real trouble brewing, a fact underscored by a recent USDA APHIS announcement.

A $750 Million Problem at the Border

Here’s what really grabs me: according to the latest IDFA data, dairy’s 2025 economic impact is over $780 billion nationwide. For us in Texas, official USDA stats peg last year’s dairy cash receipts at around $3.4 billion. Now layer in New Mexico and the southern region, and you’re protecting milk sales north of $4.5 billion. So when screwworm was sighted just 370 miles south of the Texas border in July, folks around here stopped calling this hype.

When the Milk Truck Can’t Roll

Let’s talk about what this means in real barn terms. Beef producers can stall shipping for a couple of weeks if needed, but what about a screwworm quarantine affecting a dairy? Your butterfat can be pushing 4.2%, but if the truck can’t get to the farm, those 85-pound cows won’t get you paid. The national average butterfat has climbed to 4.15% in 2023 and 4.07% in July 2024. It’s hard-won progress, but if the trucks don’t come, your check reads zero.

Market Pressures Magnify the Risk

So what is USDA really doing about it? This fly factory in Edinburg—the first of its kind—will produce 300 million sterile flies a week to mitigate the risk region. It’s modular, featuring automated monitoring and quality checks, which count flies hourly for accuracy (USDA APHIS announcement). What’s interesting is how they’re pairing these sterile fly releases with old-school cowboy border patrols and high-tech molecular diagnostics: mounted officers logging GPS movements, and labs checking flies for gene markers. This is a fascinating development because for decades, SIT was a small-scale tool. If consistency drops for even a week, you’ve got a window for screwworm to sneak in.

The critical detail here is that strong margins are tempting everyone to add cows. Milk prices are sitting around $22/cwt for most Southwest contracts, and feed costs are in a rare sweet spot—some West Texas herds are banking more than $150/cow in annual savings. But herd expansion, as confirmed by recent USDA NASS surveys, is really concentrated among the top-performing third of herds, not across the board. Denser barns, more cows—any outbreak now spreads risk (and losses) even faster.

The Insurance Gap: Are You Covered?

This brings me to insurance, and I’m not going to sugar-coat it. Most Dairy Revenue Protection and livestock policies explicitly exclude quarantine-related losses, according to the USDA RMA’s 2025 DRP update. If you haven’t reviewed the fine print since your last renewal, call your agent tomorrow. As agricultural risk consultant Dr. Anna Jessup warns, “A standard DRP policy is designed to protect against price volatility, not logistical failure. Producers assume their policy covers any event that prevents them from receiving their milk check, but quarantine is a specific exclusion in nearly every contract. It’s a devastating blind spot.” Contingency contracts with backup processors aren’t “nice to have”—they’re baseline survival right now.

A clear signal of this new reality comes from one of the larger co-ops in the Panhandle. After a near-miss border shutdown last spring, every member farm is now required to secure at least two alternate milk routes—no exceptions. That’s the sort of operational change that tells you the risk is real.

ActionWhy It MattersFrequency
Biosecurity visitor logTrack disease entry risksDaily
Water trough sanitationPrevent vector breedingWeekly
Dry lot maintenanceLower fly numbersMonthly
Review insurance policy exclusionsAvoid denied claims in shutdownAnnual/Renewal
Backup processor/hauler agreementsPrevent milk dumpingAnnual/Review

Your 5-Point Quarantine Action Plan

  • Audit your biosecurity protocols: Is every visitor logged? Are water troughs scrubbed weekly? Are dry lot surfaces maintained?
  • Confirm insurance language regarding quarantine losses: Request a written summary of coverage and exclusions to ensure clarity. If it’s unclear, escalate or shop the market.
  • Secure alternative processor and hauling contracts: Obtain written confirmation that your milk will be processed if your primary route is closed.
  • Benchmark feed cost and butterfat targets using processor statements and Hoard’s Dairyman national reports.
  • Install or update herd health monitoring tech: Ensure sensors are logging SCC, temperature swings, and alerting you before an outbreak, not after.

Proactive Resilience or a Painful Lesson?

It’s not about panic—it’s about fact-based resilience. Screwworm isn’t theoretical, and neither is the impact of a quarantine. The $750 million fly factory is proof that this is at the forefront for national agricultural planners. The next six months will sort out which dairies took the right steps—and which are one border shutdown away from writing off a month’s milk.

So before you hang up your boots today, double-check: Are you on the proactive side of tomorrow’s headlines, or just waiting for the call no one wants to get? That’s the real talk every dairyman should be having before this screwworm story turns local.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

  • Biosecurity: Your Best Defense Against Disease – This article breaks down the fundamentals of creating a robust, farm-specific biosecurity plan. It offers practical strategies for managing visitor access, animal movements, and sanitation, turning the main article’s warning into an immediate, actionable defense against disease entry.
  • Dairy Market Volatility: The New Normal – This piece provides the strategic market context for why managing unexpected threats is crucial. It explores how to build financial resilience against supply chain shocks and price swings, complementing the main article’s focus on the economic impact of a quarantine.
  • The Digital Dairy Farm: How Technology is Reshaping Herd Management – This feature dives into the specific herd health monitoring technologies mentioned in the action plan. It demonstrates how sensors, data analytics, and automation can provide early warnings for health issues, enhancing your farm’s biosecurity and operational efficiency.

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.

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