The same genomic tools that delivered record milk components are now prompting producers to rethink how they approach breeding decisions—and the lessons extend well beyond butterfat.
Executive Summary: Butterfat prices dropped from $3.71 to $1.50 per pound in two years—but the genetics selected during the boom won’t fully express until 2027. That timing gap is the real story here. Producers who invested in high-fat genetics weren’t making bad bets; they were responding rationally to a decade of strong market signals. The problem is structural: genomic selection moves in 5-year cycles while commodity markets can reverse in 5 months. Now, with protein commanding higher premiums in many Federal Orders and replacement heifers at their lowest since 1978, breeding decisions made this season will shape herd economics through 2030. The operations that thrive won’t be those who predicted the protein shift earliest—they’ll be producers who built enough genetic flexibility to perform whether butterfat, protein, or neither pays the premium.

For about fifteen years, the playbook seemed pretty clear. Butterfat was the component everyone wanted more of. Global shortages, strong butter demand, and Federal Order component prices that reached $3.71 per pound in October 2023 made aggressive selection for high-fat genetics look like a solid strategy. Producers who pushed their herds from 3.7% to 4.2% butterfat watched their milk checks respond accordingly.
Then things shifted faster than most of us anticipated.
By late 2024, average butter prices had dropped to $2.65–$2.70 per pound—still workable for most operations, but a significant change from those earlier highs. And the adjustment continued from there. By December 2025, USDA Agricultural Marketing Service reports showed CME butter around $1.50 per pound, with butterfat component values near $1.70—a correction that surprised even some seasoned market watchers.

What changed more fundamentally was the relationship between butterfat production and butterfat value. Processors who struggled to source cream in previous years were now describing 2025 as “a buyer’s market” for butterfat-based products.
What makes this situation worth examining—beyond the price movement itself—is what it reveals about how genomic selection interacts with commodity markets. For producers making breeding decisions right now, there are some genuinely practical lessons here.
How We Got Here
To understand the current landscape, it helps to recall why butterfat became so valuable in the first place.
In the early 2010s, global butterfat supplies were genuinely constrained. The European Union was working to phase out milk quotas, causing production disruptions across the continent. New Zealand faced drought conditions. Meanwhile, consumer preferences were shifting—full-fat dairy products were regaining favor after decades of low-fat messaging.

The U.S. responded by importing increasing quantities of butter and anhydrous milkfat. USDA Foreign Agricultural Service data shows imports climbed from about 10 million pounds in 2011 to over 100 million pounds by 2021—then jumped to 172 million pounds by 2023. The signal to American dairy producers was clear: butterfat demand was outpacing domestic supply.
Genomic selection, which arrived around 2008–2009, gave producers the tools to respond effectively. With the ability to evaluate animals at birth and make breeding decisions based on predicted genetic merit, the industry could achieve in five years what once required fifteen or more.

The production response tells the story. Between 2011 and 2023, U.S. milk production increased about 15%—while butterfat production climbed roughly 28%, according to USDA data analyzed by CoBank economist Corey Geiger. The industry essentially doubled the rate of butterfat improvement relative to overall milk output. By 2024, national milkfat levels had reached 4.23%.
One Wisconsin producer put it to me this way: “We did exactly what the market told us to do. The premiums were there, the genetics were available, and it penciled out.” And he’s right—producers responded rationally to clear economic signals. Those were logical business decisions given the information available at the time.
Geiger has emphasized that U.S. producers responded exceptionally to butterfat demand—and that supply growth has shifted the market from tightness toward relative balance. By April 2025, Holstein genetics had improved so significantly that the Council on Dairy Cattle Breeding rolled back the butterfat genetic base by 45 pounds—almost double any previous adjustment in the breed’s history.
The Timing Challenge Every Producer Faces
Here’s where things get particularly instructive for anyone evaluating their breeding program.

There’s a fundamental tension in dairy genetics that this butterfat cycle illustrated clearly: the timeline for genetic change doesn’t align with the timeline for market change. Not even close.
| Timeline Stage | Genetic Expression Timeline | Market Cycle Timeline |
| Initial Decision | Evaluate genomic young sires, select matings | Respond to current component prices |
| Early Phase | Breeding + gestation (0-24 months) | Prices can shift 20-40% in 6-12 months |
| First Expression | Heifers enter lactation (24-36 months) | Market conditions completely different |
| Herd-Level Impact | Genetic shift reaches 50%+ of herd (48-84 months) | 8-16 complete market cycles have occurred |
| Full Expression | Total timeline: 5-7 years | Total reversal possible: 6 months |
Extension data from Penn State, University of Wisconsin-Madison, and industry genomic selection studies. Market cycle data from USDA Agricultural Marketing Service CME component pricing.
When you’re evaluating a genomic young sire and making a breeding decision today, the consequences of that decision won’t fully appear in your bulk tank for at least 3 to 4 years. Meaningful herd-level shifts? Those generally take five to seven years to materialize—that’s standard extension guidance from places like Penn State and Wisconsin. Meanwhile, component prices can move 30% or more in six months. We just watched butterfat drop from $3.71 to $1.70 in about two years.
Dr. Chad Dechow, associate professor of dairy cattle genetics at Penn State, has written extensively about this dynamic in the Journal of Dairy Science. His research has documented how genomic selection has accelerated genetic change to the point where market conditions sometimes shift before the genetics fully express in production.
What this means in practical terms: A producer who selected aggressively for butterfat in 2021 and 2022, responding to then-strong prices, won’t see those genetics fully express until 2025–2027. By then, market conditions will have already evolved—and the genetic direction will be largely set.
You know, this creates a challenging planning environment. Producers are essentially making long-term commitments based on market conditions they can’t fully predict. When those decisions align with where markets ultimately go, results are excellent. When they don’t, adjustments take time.
“U.S. producers did an exceptional job responding to butterfat demand. For 10 years, the market couldn’t supply enough of it, and now there’s a relative balance—it’s almost too much of a good thing.” — Corey Geiger, Lead Dairy Economist, CoBank
What This Looks Like Across Different Operations
For farms that followed market signals and invested in high-butterfat genetics, current conditions present real considerations. But the impact varies meaningfully depending on operation size, financial structure, and regional market.
Consider a typical Upper Midwest cheese milk producer with 800 to 1,200 cows who increased herd butterfat from 3.8% to 4.2% over the past decade. At peak butterfat prices, component calculations suggest that improvements could have added six figures to the milk check annually. The exact amount varies by market and pricing formula, but the direction was consistently positive during the premium period.
Many of those operations reasonably invested in facility improvements, purchased replacement heifers, and structured financing around component premiums that appeared sustainable. Those were logical business decisions given the information available.
Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, has tracked these dynamics in his monthly Dairy Situation and Outlook reports. He’s observed that Upper Midwest cheese plants face different economics than fluid milk processors in the Southeast or butter-powder operations in the West—so the regional experience varies considerably.
What’s also important to recognize: some operations that emphasized butterfat genetics timed things well. Farms that built equity during 2018–2023 and maintained manageable debt loads are navigating this transition reasonably. The greater pressure tends to fall on operations that expanded more recently with higher leverage.
As one California producer explained to me: “Every cycle looks obvious in hindsight. The question is always whether you’re positioned to handle the turn when it comes.”
The Export Development
One factor that’s helped absorb domestic butterfat supply is significant growth in U.S. dairy exports.
According to the U.S. Dairy Export Council, through the first three quarters of 2025, U.S. butterfat export value reached almost $400 million—surpassing the previous full-year record of $351 million set in 2013. The U.S. has essentially shifted from a consistent butter importer to a competitive exporter.
This export growth has provided meaningful market support. But some context is helpful.
Much of the growth reflects price competitiveness rather than permanent structural demand. In late 2024, U.S. spot butter was around $2.65 per pound, versus $3.17 in New Zealand and $3.60 in the EU—roughly 30% below European suppliers’ prices. That price differential attracts buyers, though it may not represent a permanent market position.
Trade policy considerations also matter. The American Farm Bureau Federation noted in mid-2025 that “dairy’s trade balancing act” remains sensitive to geopolitical developments affecting markets like Canada, Mexico, and Asia.
The practical implication: exports help balance supply, but building a long-term strategy for export markets requires careful attention to factors beyond domestic control.
The Protein Discussion
As butterfat values have moderated over the past 18 months, protein has emerged as the more valuable component in several Federal Milk Marketing Orders—a shift from the pattern of recent years.
| Year | Butterfat Value ($/lb) | Protein Value ($/lb) | Premium Winner | Advantage ($/lb) |
| 2021 | $2.85 | $2.12 | Butterfat | +$0.73 |
| 2022 | $3.45 | $2.38 | Butterfat | +$1.07 |
| 2023 | $3.20 | $2.55 | Butterfat | +$0.65 |
| 2024 | $2.25 | $2.40 | Protein | +$0.15 |
| 2025 | $1.70 | $2.65 | Protein | +$0.95 |
Federal Order component pricing basis. Actual values vary by region and specific co-op formulas. For a typical Holstein producing 24,000 lb milk annually at 4.0% fat (960 lb) and 3.2% protein (768 lb), this swing represents significant per-cow value shifts.
So what’s driving this? Several factors are worth watching.

Growth in GLP-1 weight loss medications like Ozempic and Wegovy appears to be influencing dairy consumption patterns. Circana research found that consumers using these medications often increase protein intake to preserve muscle mass—with Danone reporting roughly 40% growth in yogurt sales among GLP-1 users based on that data. Greek yogurt and other high-protein dairy products are showing measurable gains among this demographic.
The broader high-protein trend also continues. The International Food Information Council’s national consumer surveys show that the percentage of Americans actively trying to increase protein intake rose from 59% in 2022 to 71% in 2024, then settled at 70% in their 2025 survey.
And with well over half of U.S. milk flowing into cheese production according to USDA utilization data, processors continue to value milk with favorable protein-to-fat ratios for optimal yields.
This naturally raises a question: Could the butterfat experience repeat with protein?
The dynamics differ somewhat. Protein has biological constraints that limit how quickly it can increase. Extension specialists like Dr. Kent Weigel at the University of Wisconsin-Madison have noted that protein percentage is more physiologically constrained than butterfat and tends to improve more gradually, even under strong selection pressure.
That said, the basic market structures—selection indices that primarily reflect current prices, commercial incentives that favor trending traits—haven’t fundamentally changed.
What this suggests: responding to protein market signals makes sense, while the butterfat experience offers a useful perspective on building flexibility into longer-term genetic planning.
Thinking Differently About Breeding Decisions
For producers making breeding decisions this season for heifers that won’t enter the milking string until 2028 or 2029, what approaches are worth considering?
Conversations with producers who’ve thought carefully about this reveal some common themes.

Consider scenarios rather than single predictions. Rather than optimizing entirely for current market conditions, there’s value in selecting genetics that perform reasonably well across multiple possible futures. This isn’t about being overly cautious—it’s about acknowledging genuine uncertainty about what component values will look like in 2029.

In practice, this might mean maintaining some genetic diversity even when current prices favor a particular trait. Keeping 25–30% of replacement genetics in “non-premium” lines might cost 1–2% in near-term milk check value while providing meaningful flexibility if conditions shift. Think of it as a relatively inexpensive form of insurance.
Align genetics with processor requirements. This consideration sometimes gets overlooked. Commodity prices fluctuate considerably quarter to quarter. But your cheese plant’s preferred protein-to-fat ratio? That tends to be fairly stable over multi-year periods.

Different cheese types have different optimal compositions. Mozzarella plants typically target protein-to-fat ratios around 0.95 to 1.05 for optimal stretch and yield. Cheddar operations often prefer ratios in the 0.85-0.90 range. If your milk goes to a specific plant, selecting toward that specification may make more sense than following monthly component price movements.
| Cheese Type | Optimal Protein:Fat Ratio | Target Protein % | Target Fat % | Why It Matters |
| Mozzarella | 0.95 – 1.05 | 3.3 – 3.5% | 3.4 – 3.6% | Too much fat = poor stretch & oil-off; too little = rubbery texture |
| Cheddar | 0.85 – 0.90 | 3.1 – 3.3% | 3.6 – 3.8% | Lower ratio optimal for aging; high protein reduces yield |
| Swiss | 0.90 – 0.95 | 3.2 – 3.4% | 3.5 – 3.7% | Balance critical for eye formation; ratio affects gas production |
| Cream Cheese | 0.40 – 0.50 | 2.8 – 3.0% | 6.0 – 7.0% | High fat essential for texture; protein secondary consideration |
| Parmesan/Asiago | 0.95 – 1.00 | 3.4 – 3.6% | 3.5 – 3.7% | Long aging demands protein; low fat reduces rancidity risk |
Optimal ranges vary by specific plant equipment, cultures, and product specifications. Contact your field representative for your plant’s specific targets. Component ratios shown are protein:fat on a percentage basis.

Having a conversation with your fieldman or co-op representative about end-user requirements over the next five years is time well invested. Useful questions include: What’s your target protein-to-fat ratio? Are anticipated product mix changes expected to shift component preferences? What component levels create operational challenges for your plant?
Use financial tools alongside genetic planning. Programs like Dairy Margin Coverage and Dairy Revenue Protection, along with component futures, can help manage margin volatility regardless of herd genetic composition.
DMC enrollment for 2026 coverage is approaching—evaluating whether current coverage levels match your risk profile makes sense given margin trends. USDA’s Farm Service Agency offers enrollment details and decision tools through local offices and at farmers.gov.
Monitor genetic diversity metrics. Holstein inbreeding has accelerated under genomic selection. Average inbreeding for Holstein females reached 8% by 2020, with young genomic bulls averaging 13.7%. The trend has continued upward, with average female inbreeding rising each year since 1981.
Beyond fertility and health considerations, genetic similarity increases collective exposure when market conditions or disease pressures change unexpectedly.
Evaluating a sire’s expected inbreeding contribution alongside his PTAs reflects recognition that diversity has practical value in uncertain environments. Inbreeding data is available on CDCB’s website at uscdcb.com, and most AI companies include this information in sire catalogs and mating programs.
Regional and Operational Considerations
A few additional factors for producers working through these decisions:
Regional context matters. Upper Midwest cheese milk producers face different dynamics than Southeast fluid milk shippers or California producers selling into butter-powder markets. The component value discussion plays out differently depending on your market channel. Understanding your specific situation helps calibrate how national trends apply to your operation.
Scale affects flexibility. Larger operations generally have more capacity to maintain diverse genetic lines within their herd. Smaller operations may need different approaches—perhaps breeding group strategies or working with AI representatives to build diversity into mating programs with fewer animals.
Financial structure shapes options. Operations with lower leverage and stronger equity positions can more readily weather margin compression while genetic adjustments work through the herd. Operations with recent expansion debt face different calculations. Honest assessment of your situation helps identify which strategies fit best.
The replacement market is constrained. USDA’s January 2025 inventory report showed dairy replacement heifers at 3.914 million head—the lowest since 1978. CoBank’s August 2025 analysis reported average heifer prices around $3,010 per head, with top heifers at California and Minnesota auctions reaching $4,000 or more.
If your approach involves significant culling and replacement, current heifer market conditions meaningfully affect the economics. This makes breeding decisions on your existing herd inventory more consequential when outside replacements are both expensive and limited.
The Bottom Line
The butterfat boom is over, but the lesson is permanent: Chasing the hot market of the moment is a slow-motion gamble.
Genomic selection delivered exactly what it promised—unprecedented genetic progress toward the traits producers selected for. The problem wasn’t the tool. The problem was selecting into a market environment that proved more temporary than the genetic changes themselves.
The winners in 2030 won’t be the ones who chased today’s milk check. They’ll be the ones who bred for the cow that works in any market.
That means building herds with enough flexibility to perform when butterfat pays, when protein pays, and when neither pays particularly well. It means matching genetics to processor needs rather than spot prices. It means treating diversity not as a compromise but as a genuine competitive advantage.
The operations that thrive through the next cycle—and there will always be a next cycle—will be those that learned this lesson now, while the butterfat correction is still fresh.
The question for every producer making breeding decisions today is simple: Are you building a herd for this year’s premium, or for the decade ahead?
Key Takeaways:
- The timing gap is structural and permanent. Breeding decisions take 5-7 years to express; markets can reverse in months. Build for multiple scenarios, not today’s price sheet.
- Chasing butterfat wasn’t a mistake—the signals were real. The lesson isn’t to ignore markets; it’s to avoid over-concentration in any single trait when you can’t predict what pays in 2030.
- Protein now commands higher premiums, but the same mismatch applies. Don’t repeat the butterfat pattern by going all-in on the next hot component.
- Your processor’s requirements beat spot prices for planning. Cheese plants have stable protein-to-fat targets (mozzarella: 0.95-1.05; cheddar: 0.85-0.90). Align genetics to your actual market channel.
- Diversity is insurance with a cheap premium. Maintaining 25-30% of replacements in balanced genetics costs 1-2% short-term but provides real optionality when—not if—markets shift again.
Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.
Learn More:
- CDCB Unveils Net Merit 2025: Updating Dairy Genetic Selection – Deep dive into the specific trait adjustments in the new 2025 index, explaining how the increased emphasis on livability and butterfat directly impacts your sire selection strategy for the next genetic cycle.
- Dairy’s $4,000 Heifer Shock: How 30-Month Biology Determines 2027’s Winners – Analyzes the critical shortage of replacement heifers, providing the math behind why your retention strategy and “beef-on-dairy” decisions might be costing you more than you realize in long-term equity.
- US Dairy Market in 2025: Butterfat Boom & Price Volatility – How Farmers Can Protect Profits – Offers specific risk management tactics beyond genetics, detailing how to use hedging and insurance tools to lock in margins when component prices decouple from milk volume.
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