U.S. Dairy Herd Hovers Near 30-Year High as Beef-on-Dairy Economics Reshape Industry

# U.S. Dairy Herd Hovers Near 30-Year High as Beef-on-Dairy Economics Reshape Industry The U.S. dairy herd has swelled to approximately 9.5 million head, marking the highest cow numbers in more than 30 years. This expansion, driven largely by beef-on-dairy breeding economics, is reshaping milk markets and putting pressure on prices heading into 2026. ## A 30-Year Milestone According to USDA data and analysis from CoBank lead dairy economist Corey Geiger, the collective U.S. dairy herd now hovers near levels not seen since the early 1990s. Over the past 12 months, roughly 211,000 additional dairy cows have entered the national herd, producing an extra 414.1 million pounds of milk in November alone. "When looking back to October milk, the extra 200,000-plus cows were responsible for 61% of the additional milk compared to the 39% share attributed to added efficiency in milk produced per cow," Geiger noted. "This helps shape the picture for higher supply-side milk volumes, putting pressure on the demand side of the equation." ## Beef-on-Dairy: The Game Changer The primary driver behind this herd expansion is the beef-on-dairy breeding trend. Rather than breeding replacement heifers, dairy farmers are increasingly using beef semen on their lower-genetic-merit cows, producing crossbred calves that command premium prices in the beef market. This strategy now contributes between $4 and $5 per cwt to dairy farm revenues. In early January 2026, sales of beef-on-dairy calves were fetching a $1,400 average at auctions in Lancaster, Pennsylvania. "Until that financial contribution reverses or margins to produce milk fall further, we may have a larger dairy herd and more milk to disperse in the marketplace," Geiger explained. ## Regional Expansion Patterns The herd growth has been particularly pronounced in certain regions: - **Texas** has reached 699,000 head, the most since 1958, reflecting massive Southern Plains expansion - **South Dakota** has more than doubled its dairy cow numbers over the past decade - **California** remains the nation's top dairy state, though numbers have stabilized ## Milk Prices Under Pressure The surge in milk production has already impacted prices. Farm milk prices dipped sharply in the second half of 2025 due to the supply increase: - Class III prices dropped by $1.38 per cwt since August's $17.24 payout - Class IV experienced steeper losses, falling from $18.50 to $13.64 per cwt by December - USDA economists lowered their all-milk price forecast for 2026 from $18.75 to $18.25 per cwt "That $4.85 reduction per cwt has put significant pressure on West Coast dairy farmers where larger volumes of butter and milk powders are produced at processing plants," Geiger said. ## Global Market Dynamics U.S. producers are not alone in expanding output. European Union milk production has been robust in recent months, with output up 5.5% by October. New Zealand, the world's second-largest dairy exporter, has seen milk production up 2.5% season-over-season. "The EU milk shed, with the United Kingdom, is 1.6 times the size of the U.S.," Geiger noted. "Strong production from that continent tends to put pressure on global milk prices as dairy products and ingredients search for a home abroad." ## Component Production Tells a Complex Story While overall milk production has increased, the component story is nuanced: **Protein production** has moved 4.3% to 5.7% higher during the June-to-November window, with markets easily absorbing the extra output given growing demand for yogurt, cottage cheese, high-protein dairy shakes, and whey powders. **Butterfat production** has been more challenging for markets. Dairy fats peaked at 6.3% growth in September, with no month under 5% through year's end. "Markets simply have become saturated despite growth in per capita butter and creamers, along with strong butter exports," Geiger explained. ## Limited Culling Response Despite margin pressure, the dairy industry has seen only modest increases in cow culling. From mid-September through year's end, 15 consecutive weeks of increased slaughter netted just 24,000 additional cows culled, representing only 11% of the 200,000-plus additional dairy cows. The continued strong returns from beef-on-dairy calves are keeping cows in production longer than traditional economics would suggest. ## 2026 Outlook USDA forecasts the dairy herd will peak at approximately 9.575 million head in late 2025, then gradually decline through 2026 as lower milk prices compress margins. Total milk production is still expected to increase to 234.1 billion pounds in 2026, driven by continued per-cow productivity gains. If current financial conditions persist, payments under USDA's Dairy Margin Coverage Program may resume as milk income over feed costs could fall below the $9.50 level. The most likely scenario for market recovery, according to Geiger, involves a pullback in EU milk production first, as European producers lack the beef-on-dairy income buffer that U.S. dairy farmers currently enjoy. --- *For more information on dairy market trends and analysis, visit [CoBank](https://www.cobank.com/knowledge-exchange/animal-protein) or the [USDA Economic Research Service dairy outlook](https://www.ers.usda.gov/topics/animal-products/dairy/market-outlook/).*