NASHVILLE, Tenn. (RFD NEWS) — U.S. milk production is reaching record levels, but those volumes are increasingly disconnected from the long-term health of the dairy herd, raising the risk of tighter and more volatile markets ahead. New analysis from the American Farm Bureau Federation shows that current output strength reflects short-term herd-management decisions rather than durable expansion, leaving the industry less flexible if conditions change.
Milk cow inventories climbed to 9.57 million head in late 2025, the highest level since 1993, even as replacement heifer numbers fell to 3.91 million head — the lowest since 1978, according to USDA data cited by AFBF. Culling has remained historically low, keeping older cows in production longer and inflating near-term milk supplies. That combination has boosted output but weakened the biological pipeline needed to sustain production over time.
A key driver is beef-on-dairy economics. Strong beef prices and premiums for beef-on-dairy calves have encouraged producers to shift breeding toward beef genetics, improving short-term cash flow while reducing the number of dairy-bred heifers entering the replacement pool. AFBF notes this strategy can add the equivalent of several dollars per hundredweight in near-term revenue, but it narrows the industry’s ability to rebuild the herd when conditions turn.
Global supply growth has compounded the pressure. Expanding milk production in the U.S. and other major exporting regions has weighed on farm-level prices while improving U.S. competitiveness abroad. Lower prices have supported record butter and cheese exports, but that relief has not fully offset margin pressure at the farm level as milk prices slid through 2025.
AFBF analysis suggests that milk pricing is no longer the primary signal guiding herd decisions. With supply sustained by aging cows and a thinning replacement pipeline, adjustments may be delayed — and when they occur, they could be sharper than in past cycles.
Farm-Level Takeaway: Record milk output looks strong today, but shrinking replacement numbers mean future supply adjustments could be faster and more volatile.
Tony St. James, RFD NEWS Markets Specialist
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