Is There Any Light at the End of the Tunnel for Dairy?
What’s Happened…
The dairy industry continues to experience what might be termed a revolution. A transformation from family farms to larger multi–family farms and to even larger corporate farms. This comes from efficiency, increased production, and a revenue incentive to keep the cow numbers up, as beef-on-dairy breeding is providing a positive revenue stream. Multiple years of ample feed supplies at low prices are also contributing to the prospect of even more milk production. Abundant crops in the U.S. in 2025 should keep feed prices low for at least the next several months. The larger dairy operations become, the more likely lenders will “stick with them,” helping to finance them through challenging times. This also suggests a longer amount of time between price valleys and peaks. Lastly, though world demand is strong, it is not likely to grow fast enough to counter increasing supplies in the first half of 2026.
Why this is Important…
Identifying trends can help in developing your marketing strategy. When viewing current numbers from the most recent USDA Milk Production report, the top 24 dairy-producing states show a supply picture that looks glum for prices, suggesting price rallies will be limited in both strength and duration.
Milk production during November totaled 18.1 billion pounds, up 4.7 percent from November 2024. A revision for October increased production to 18.7 billion pounds, up 3.8 percent from October 2024. Efficiency was also on the rise in the 24 major states where November production was up 43 pounds per cow from the same month a year earlier, averaging 1,979 pounds. The number of milk cows on farms increased by 214,000 in the 24 major states, at 9.13 million head. The November figure was also 1,000 head more than the previous month.
What can you do about it?
Recognizing that the days of “out-producing” your neighbor may not be enough. This practice, while fruitful for many over the last couple of decades, doesn’t do much to offset smaller and smaller margins. Detailed attention to marketing tools to manage pricing opportunities in conjunction with deliberate and strategic input buying starts with conversations of how you either become an expert in these areas or hire it to be done.
Do your homework and decide your approach. Are there ways to add potential revenue streams through responsible option-writing strategies? Contact your advisor on this question. Prepare yourself for the time when price changes occur. What might be the telling signs that price changes may be on the horizon? Here again, your advisor might be able to help. The bottom line is to take action, especially in parts of the operation that may not be in your comfort zone. Learning and knowledge may make a big difference and provide much needed light in an over-supplied market.
Find out what works for you…
Work with a professional to find the strategy or strategies that are best suited for your operation. Communication is important. Ask critical questions and garner a full comprehension of consequences and potential rewards before executing. The idea is to make good decisions for the operation and less emotionally–charged responses to market moves, which are always dynamic.
About the Author: With the wisdom of over 36 years at Total Farm Marketing and following across the Grain Belt, Bryan Doherty is deeply passionate about his clients, their success, and long-term, fruitful relationships. As a senior market advisor and vice president of Brokerage Solutions, Doherty lives and breathes farm marketing. He has an in-depth understanding of the markets and marketing tools, a strong listener, and communicates with intent and clarity to ensure clients are comfortable with their decisions.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Examples of seasonal price moves or extreme market conditions are not meant to imply that such moves or conditions are common occurrences or likely to occur. Futures prices have already factored in the seasonal aspects of supply and demand. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation.
Author
Bryan Doherty