You’re bleeding $80/cow every month, and the industry just added 211,000 more cows to make it worse. 5 moves to make before spring.

Executive Summary: Every month you wait, you’re losing $80 per cow. Class III has crashed from $20 to $15.86 since spring—and the industry just added 211,000 cows to make sure it stays there. California’s rapid H5N1 recovery, surging EU production, and strong New Zealand output have created a global oversupply that isn’t easing anytime soon. Need replacements? Quality springers now cost $4,000-plus amid the tightest heifer pipeline in 20 years. Add $4.40 corn to the equation, and margins are getting crushed from every angle. Here’s what’s actually driving the squeeze—and five specific moves to protect your operation before spring.

The U.S. dairy industry just added 211,000 cows in 12 months—the largest herd since 1993, according to USDA NASS—at the exact moment Class III prices dropped from $20 to $15.86 per hundredweight. Meanwhile, anyone trying to expand is staring at $4,000 springers and the tightest heifer supply in two decades. That collision of forces is going to define 2026 economics for operations of every size, whether you’re milking 80 cows in Vermont or 8,000 in the Central Valley.

Let me walk through what the numbers actually show and what the producers who are navigating this successfully are doing differently.

The Production Surge Nobody Can Ignore

USDA NASS confirmed that November 2025 milk production in the 24 major states hit 18.1 billion pounds—a 4.7% jump from the prior year. Nationwide, we’re looking at 18.8 billion pounds, up 4.5% year-over-year. For context, that’s the kind of production growth that typically takes two to three years to accumulate. We got it in twelve months.

And California’s recovery has accelerated the math. After H5N1 hammered the state through late 2024 and into 2025—federal livestock program records indicate roughly 75% of commercial herds experienced infections at some point—production is now running more than 10% above year-ago levels. November 2024 represented a 20-year production low for California. The turnaround has happened faster than most analysts expected, and all that milk is flowing back into national markets.

Here’s what this means for your check: at $15.86 Class III versus $18.50 three months ago, that’s roughly $80-90 per cow per month in lost revenue for a typical Holstein operation. On a 200-cow herd, you’re looking at $16,000-18,000 less coming in between now and spring—assuming prices don’t drop further.

The Heifer Bottleneck Is Real

This is the constraint that will shape expansion decisions over the next three years, so let’s dig into it.

USDA data shows approximately 26.7 heifers expected to calve per 100 milk cows—the lowest ratio in at least two decades. Total dairy heifers expected to calve in 2025? Just under 2.5 million head, the lowest since USDA began tracking this metric.

The economics driving this aren’t mysterious. Ag Proud market reports show beef-cross calves bringing $1,100-1,400 at many auctions, sometimes higher for well-bred Angus or Limousin crosses. Straight dairy heifers? Often $300-500 unless they come from high-genomic programs with strong marketing. When beef-on-dairy creates that much value differential, producers make rational decisions about their breeding programs.

I was talking with a Wisconsin producer last month who’s running about 70% beef semen across his herd. His logic is straightforward: the premium on those crossbred calves more than offsets the cost of purchasing replacements when he needs them. For his operation and cash flow, that math works.

A Northeast producer I know takes the opposite approach—she’s kept her replacement program intact because she doesn’t want to be buying springers at $4,000 when she needs them. Her calculation: the heifer she raises for $2,200 all-in is worth $1,800 more than the one she’d have to buy.

Both strategies can pencil out. The question is which matches your operation’s cash flow, facilities, and expansion timeline.

The practical implication: quality springer replacements now command $3,500-4,000 or more in many markets. If you’re planning any expansion over the next 18-24 months, heifer sourcing needs to be part of your planning conversation this month. The animals aren’t available in the numbers we’ve historically seen.

Global Oversupply Compounds the Problem

It’s not just U.S. production running hot. The latest AHDB market review shows EU milk deliveries jumped around 6% in September after the bloc worked through its bluetongue challenges. DairyNZ and LIC statistics show that New Zealand’s 2024/25 season finished with total milk solids production up 2.9% to 1.94 billion kilograms.

The Global Dairy Trade auctions have posted nine consecutive declines now, reflecting strong global supply meeting softer demand from key importing regions. If you’re shipping to a plant with export exposure—and that includes many operations in Wisconsin, Idaho, and the Southwest—those GDT results eventually flow back into your mailbox price.

For Canadian producers watching from across the border, the U.S. production surge creates its own dynamics. American oversupply tends to intensify pressure on USMCA access negotiations and affects cross-border pricing signals, even within the quota system.

California’s role amplifies these dynamics domestically. The state produces roughly 18% of U.S. milk, but here’s what really matters for price discovery: California Dairies Inc. alone churns over 480 million pounds of butter annually (about 23% of U.S. production), and the state manufactures the largest share of nonfat dry milk powder in the country. When California production swings, commodity pricing moves for everyone.

The Butter Paradox

Here’s something that looks like good news until you understand what’s actually happening.

USDEC data shows butter exports surged in 2025. January alone was up 41% year-over-year, and through the first nine months, total butterfat exports soared 149%.

Sounds great, right? Here’s the catch: U.S. prices had dropped enough to compete in markets we typically can’t reach. Brownfield Ag News reports CME spot butter trading around $1.375 to $1.40 per pound as we moved into January—a long way from the $3.00-plus prices we saw during the supply squeeze.

We were essentially selling butter globally because domestic prices made us competitive, not because we’d developed new market access. That’s fundamentally different from export growth driven by structural demand improvement. When global prices strengthen, that business disappears.

Cheese Exports: The Genuine Bright Spot

If you’re looking for actual strength in the dairy complex, cheese exports tell a legitimately positive story.

USDEC confirmed that August 2025 reached 54,110 metric tons—the highest monthly volume in the history of U.S. cheese exports. That’s 28% above year-ago levels, and the growth has come from multiple markets rather than depending on any single buyer.

Mexico remains our foundation, accounting for roughly a third of total U.S. cheese exports, according to USDEC trade data. But South Korea, Japan, and Australia all posted strong growth in the first half of 2025. The fundamentals here—growing global demand, improved U.S. product quality, established market relationships—look durable.

One constraint worth watching: USTR data shows USMCA quota utilization is still around 42%, suggesting meaningful upside if Canadian market access improves. That’s a trade policy question beyond any individual producer’s control, but it represents real unrealized potential.

The GLP-1 Demand Question

GLP-1 drugs have some dairy economists predicting significant demand shifts. The actual data tells a more nuanced story, concerning in specific categories but not the catastrophe some suggest.

Kaiser Family Foundation polling indicates about 12% of American adults have used a GLP-1 medication at some point, with roughly 6% currently taking one. That’s real market penetration.

Cornell University and Numerator recently published detailed grocery purchasing data on this population. Households with GLP-1 users reduced cheese purchases by 7.2% and butter by 5.8%. They cut sweet bakery items and cookies by 6-11% across categories.

Here’s how I’d frame this practically: it matters, but it’s not an existential threat—yet. The protein density of dairy actually positions products like Greek yogurt and cottage cheese favorably for consumers who are eating less but prioritizing nutrient-dense foods.

Where I’d watch more carefully is high-fat categories. If GLP-1 adoption reaches the 15-24% levels Morgan Stanley projects for the early 2030s, premium ice cream and butter-heavy applications could face meaningful headwinds. Worth factoring into long-term product mix thinking, but not a reason to panic about 2026.

Current Price Reality

Let’s be direct about where we are.

According to USDA’s official Class and Component Price announcements, December Class III came in at $15.86/cwt—January futures point to the low-to-mid $15 range. That’s the math when production expands as quickly as it has.

The Class III to Class IV spread has been particularly notable. December showed Class III at $15.86 versus Class IV at $13.64—a $2.22 gap favoring cheese markets over butter and powder. If you’re a Class IV shipper, you’ve felt that spread directly in your check. Geography and market assignment matter more than usual right now.

On the feed side, corn has been trading around $4.40 per bushel according to Trading Economics futures data. USDA projects an average farm price around $4.00 for the 2025/26 marketing year, which would provide some relief—but that’s not guaranteed.

What to Do Before Q2

Based on the data and the producer conversations I’ve been having, here are five moves worth considering before spring:

• Run your break-even calculation this week. Know exactly what Class III price puts you underwater. If you haven’t updated this math since prices were $20, you’re operating blind. Have contingency triggers ready—what do you cut first at $15? At $14?
• Audit your heifer pipeline now. Calculate your replacement availability for the 2027-2028 calving. If you’re below 28 heifers per 100 cows, start sourcing conversations immediately. Set a price ceiling before you need animals urgently—desperation buying at $4,500 in twelve months is a lot more expensive than planned purchasing at $3,800 today.
• Evaluate your beef-on-dairy math quarterly. The premium calculation shifts with calf prices and heifer availability. A 70% beef semen strategy that worked at $1,400 crossbred calves might need adjustment if those prices soften. Don’t set-and-forget your breeding program.
• Review feed cost protection. With corn at $4.40 and possible relief toward $4.00, evaluate whether forward contracts make sense for Q1-Q2 before spring planting volatility. Locking in $4.25 corn looks smart if prices spike; it looks expensive if they fall to $3.80. Know your risk tolerance.
• Examine your processor relationship. If you’re Class IV-dependent and watching checks come in $2.20 below Class III equivalents, it’s worth exploring whether component shipping options or processor alternatives exist in your region. Not every operation has flexibility here, but some do and aren’t using it.

The Bottom Line

The operations that navigate the next 12-18 months successfully won’t be the ones waiting for prices to recover on their own. They’ll be the ones who used this window to lock in replacement animals before the shortage intensifies, controlled feed costs where possible, and knew their break-even to the penny.

Dairy has always been cyclical. Strong production, recovering global supply, and moderating prices—we’ve been through this pattern before. What’s different this time is the heifer constraint underneath it all. The industry can’t simply expand out of tight margins when replacement animals don’t exist.

That constraint will eventually support prices. But “eventually” might be 2027 or 2028. The question is whether your operation’s financial position lets you wait that long—and whether you’re taking the steps now that position you to expand when the cycle turns.

The fundamentals of dairy demand remain constructive. Protein consumption is growing. Convenience continues driving category growth. Despite years of plant-based competition, real dairy holds its market share.

Those realities matter. But so does the math of $15.86 Class III with $4.40 corn and $4,000 springers. The producers who acknowledge both—the long-term demand strength and the short-term margin pressure—are the ones making decisions right now that they won’t regret in 2027. 

Key Takeaways 

• You’re bleeding $80/cow monthly — Class III crashed to $15.86; that’s $16,000 vanishing from a 200-cow herd before spring
• 211,000 cows added in 12 months — Largest U.S. herd since 1993; prices won’t recover until supply corrects
• Springers hit $4,000+ — Tightest heifer pipeline in 20 years; replacement economics have flipped
• Global milk keeps flooding in — California +10%, EU +6%, New Zealand +3%; no relief coming in 2026
• 5 moves to make now — Know your break-even, source heifers before desperation, reassess beef-on-dairy, lock feed, review your processor

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

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