Dairy expansion in the US meets a heifer shortage

US milk output is surging, with record herd sizes and productivity shaping the market. But behind the growth lies a structural threat: a critical shortage of replacement heifers threatening future supply. At the same time, farmgate prices are under pressure, and avian influenza continues to disrupt herds.Milk production in the 24 Selected States reached 8.51 million tons in August, reflecting an increase of 3.3% from the previous year. This represents a slight slowdown from the 4.3% annual increase in output observed in July, after a correction by the United States Department of Agriculture (USDA). In the last report, the USDA changed July’s milk production from 8.53 million tons to 8.6 million tons.Overall, production growth occurred across most states, led by Idaho (+8.19%), Texas (+6.02%), Kansas (20.45%), California (+1.75%), and Wisconsin (+2.03%). This expansion was offset by a contraction in Washington (-8.05%).The strong August performance has reinforced growth throughout the year, with the cumulative output increasing by 1.82% year-over-year to 67.39 million tons as of August. Expansion has been supported by improvements in productivity per cow, sustained since March, along with an expanding dairy herd. In August, the dairy herd accounted for 9.08 million animals. This represented an increase of 1.95% compared with the previous year.The high availability of milk has taken a toll on milk farmgate prices, averaging $20.8 per cwt in July (€39.23 per 100 kilo) and declining by 8.77% over the previous year.Conversely, the milk feed-price ratio reached 2.36 in July, declining by 5.6% over the previous year but increasing by 0.85% over the previous month. This suggests that the profitability of investing in expanding production is much lower than the previous year, though conditions have not deteriorated further.Herd dynamics and heifer shortageWhile the dairy herd is expanding, growth is coming from slowing down the culling of older cows. The country is facing a critical shortage of replacement heifers, with the population reaching its lowest level in 20 years. The decline has been driven by the high prices of beef, which made rearing beef calves more profitable than dairy cows. This represents a threat for the availability of milk in the long term, especially as $10 billion in new dairy processing plants are expected to open by 2027, according to CoBank. While the industry is reacting and heifer values are increasing, recovery is expected to begin in 2027, as it takes over three years for dairy calves to enter production.Avian influenza: An ongoing challengeWith California and Texas recovering from the impacts of avian influenza, the confirmation of a new case of infection in Nebraska confirms that the virus remains spreading in the US. The infection was identified in a dairy herd in central Nebraska on September 15 and has been quarantined. The identified strain had a high similarity to the one identified in California, which was significantly affected by avian influenza in the previous year.Avian influenza continues to pose a challenge to the dairy industry, as it reduces feed intake and milk output in cows, while also creating health risks for farm workers and raw milk consumers. Importantly, the virus is neutralized through pasteurization. Avian influenza represents an ongoing challenge for the dairy industry, as infected cows consume less feed and produce less milk. Moreover, it can be transmitted to farm workers in contact with the animals and to consumers of raw milk, while it is inactivated through pasteurization.