U.S. dairy producers are confronting a challenging paradox: output continues to rise, while milk prices steadily fall. Class III milk futures recently dropped to new lows for 2025, driven by a combination of herd expansion and operational efficiency that has outpaced demand. According to the USDA's latest report, milk production from the top 24 producing states hit 18.8 billion pounds in July, a 3.5% increase compared to the same month last year.

This surge in output is being fueled by favorable economics. Lower feed costs, enhanced production methods, and record-high calf and beef prices have motivated producers to retain older cows in production and delay culling, while simultaneously increasing heifer retention to grow herd sizes. As of July, the U.S. dairy herd reached 9.04 million cows, an increase of 154,000 from the previous year and 8,000 more than June 2025. Milk per cow averaged 2,081 pounds, up 36 pounds year-over-year.

However, this growth in supply is pressuring margins. The oversupply is eroding market prices, a dynamic that reflects a well-known commodity cycle: low prices cure low prices, but only after significant market correction. Compounding this, many producers, feeling squeezed by the market, are increasing production in hopes of maintaining profitability-ironically deepening the supply surplus.

This environment demands a strategic response. Relying on market recovery without action introduces unnecessary financial risk. As Bryan Doherty of Total Farm Marketing notes, "Hope is not a strategy." Instead, producers should pursue deliberate risk management tactics that align with their operational goals. This includes exploring forward contracts, hedging strategies using futures and options, and USDA-backed risk mitigation programs.

Successful marketing strategies begin with understanding available tools and knowing when to apply them. Producers should invest in developing this knowledge and regularly consult with market advisors to evaluate changing market conditions and adjust strategies accordingly. Emotional reactions to market downturns often lead to poor decisions; instead, actions should be based on sound analysis and realistic profit goals.

Discipline and communication are essential. Establishing clear objectives, maintaining open dialogue with marketing professionals, and continuously reassessing plans can help producers navigate volatility. In today's market, outproducing the competition without a strategy can lead to operational stress rather than loterm sustainability.

As Doherty emphasizes, "Marketing never takes a day off." In a climate where every decision impacts the bottom line, taking control of marketing and risk strategies is more than a recommendation-it's a necessity.