US milk production starts 2026 strong despite tightening structural signals

Milk production in the United States’ (US) 24 Selected States began the year in a strong position, supported by both herd expansion and higher yields, although it slowed down compared to December. Meanwhile, constrained replacement inventories and an increasing reliance on herd expansion raise questions about the long-term sustainability of output growth. As output expands, falling milk prices and continued consolidation across the sector highlight mounting margin pressure despite abundant supply conditions.The US 24 selected states’ output reached 8.64 million tons in January. This represented an increase of 3.4% compared to the previous year. Although production faced a notable increase, this also represents a notable slowdown compared to the 4.6% annual growth observed in December. The challenging weather conditions observed in January could have contributed to the decline in productivity growth, as they affected feeding, logistics, transport, and cow comfort.That said, the production in January remained expanding. Both a growing herd and improved productivity supported the output growth during the month. The number of producing cows increased by 2.2% year-over-year to 9.15 million heads, while milk yields per cow rose by 1.2%. Production growth was particularly strong in California (+4.7%), Texas (+7.6%), and Kansas (+26.1%), all observing a higher number of cows and yields per cow numbers and stronger yields per animal. At the same time, milk volumes declined in Washington (-6.1%), Pennsylvania (-3%), and New Mexico (-3.8%), influenced this time by a smaller herd and lower yields per cow. That said, production conditions remained supportive across most states, although increasingly concentrated in the most productive regions.The US dairy herd expanded, but sustainability challenges persistThe herd’s expansion played an increasingly relevant role in the output expansion. While yields increased, they were below herd expansion. This suggests that the recent output growth relies more on the expansion of the dairy herd than on improving productivity per cow.This reliance implies an increasing importance of the sustainability of dairy herd expansion in a setting with limited heifer replacements. Farm revenues have been supported by breeding strategies supporting beef-on-dairy, restricting the availability of heifers to replace dairy cows exiting the production system. According to the USDA, the number of dairy heifer replacements faced a decline of 0.27% year-over-year, reaching 3.9 million heads on January 1, 2026.As a result, the dairy herd is increasingly relying on keeping cows in production for longer, supporting output growth over the last year. Nonetheless, the age composition of the herd and production efficiency can decline in the long run. While current production levels appear strong, they are increasingly dependent on structural management decisions and the biological limits set by the aging dairy herd.Declining milk pricesPrices have fallen alongside the elevated milk output. The United States Department of Agriculture (USDA) reported that farmgate milk prices averaged $19 per hundredweight (cwt) in December, declining by 18.45% over the previous year. Although the annual decline slowed down slightly from November, prices remain under significant pressure. All 24 Selected States reported lower prices. California (-$2.87 per cwt), Virginia (-$3 per cwt), and Florida (-$3.1 per cwt) showed comparatively more resilience, while Arizona (-$6.1 per cwt) and Washington (-$5.9 per cwt) experienced the steepest declines. Lower prices reflect the abundant supply conditions and pressure farm margins, limiting incentives to further expand production.Farm numbers continue to declineBeyond price dynamics, broader structural pressures continue to shape the sector. Nationally, the number of licensed dairy operations declined by around 4% over the past year, underscoring the ongoing consolidation trend within the industry. Production growth is increasingly concentrated among larger and more capital-intensive farms, which are better positioned to manage cost volatility and adopt productivity-enhancing technologies. While consolidation can strengthen operational resilience at scale, it also reflects continued structural adjustment across dairy-producing regions. Overall, the US dairy sector enters 2026 with solid production strength. January’s 3.4% increase confirms continued expansion supported by herd growth and stable yield gains. Yet beneath the strong output figures, structural signals point to increasing sensitivity. Constrained replacement inventories, ongoing consolidation, softer milk prices, and weather-related risks all suggest that while supply remains abundant, the sustainability and pace of further expansion may become more closely tied to margin developments and herd dynamics in the months ahead.