Shrinking Dairy Herd Not Enough to Offset Tight Profit Margins

Dairy market profitability isn’t in a great spot. Slaughter is up 5.8% year-to-date and the size of the milking herd fell by 16,000 head early this summer. USDA data suggests herd size will continue to diminish. Over the last 23 years, five times has the dairy herd seriously shrank. Each contraction period lasted an average of 13 months, resulting in 162,000 fewer cows. The most significant size reduction belongs to 2009’s 249,000 head cut in 13 months.

But the size of the nation’s dairy herd only amounts to half of the total production equation. Milk production per cow (PPC) makes up the other half. Feed costs and adverse weather can cause PPC to dip below trends like in the first half of 2023. Poor margins have spurred supply-side adjustments and although a decline in herd size is expected, it likely won’t be enough to offset the milk supply.

Read more on the state of the dairy market here.