By Shelby Shank
Field Editor

Declining milk prices are tightening margins for dairy farmers, but a rise in beef prices is providing added revenue to help offset costs.

“Today, dairies are depending more on calf prices, where beef-on-dairy calves have gone from $600 per calf in 2024 to as high as $1,500 per calf for Holstein/Angus cross calves now,” said Dr. Juan Pineiro, associate professor at Texas A&M University.

That sharp increase reflects a broader shift in the cattle industry.

According to CattleFax, 3.22 million beef-on-dairy animals were sold in 2024. A decade ago, there were only 50,000 head sold. This helps the dairy sector fill supply gaps within the beef industry amid historically tight cattle supplies.

At the same time, milk production in Texas is increasing.

The Southwest Marketing Area Market Administrator’s Jan. 13 report showed milk production increased by 1.2 billion pounds, increasing from 17 billion pounds in 2024 to 18.2 billion pounds in 2025.

The increase is largely driven by a growing number of dairy cows in Texas, as well as improved genetics, nutrition and management practices that prioritize cow comfort.

As milk production climbs, prices are moving in the opposite direction. The Statistical Uniform Price report shows milk prices dropped from $20.55 per hundredweight in December 2024 to $16.93 per hundredweight in December 2025.

Cheese prices also declined during that period, falling from $18.62 to $15.86 per hundredweight.

Butter prices saw the most decline, dropping from $2.50 per pound in July 2025 to $1.50 per pound by December. The decrease is due to higher butterfat content in milk as a result of improved genetics and nutrition.

Because dairy farmers are paid based on milk components such as butterfat and protein, not fluid milk, an oversupply of butterfat has contributed to lower prices, even as protein values have gone up.

Texas dairies continue to shrink, but the number of dairy cows is increasing. According to the U.S. Department of Agriculture National Agricultural Statistics Service, Texas lost 10 dairies in 2024 and another 10 in 2025, going from 294 to 274 in the past two years.

During that same period, the number of dairy cows increased from 675,000 to 705,000.

Looking ahead, Texas milk production is expected to continue growing in 2026 but at a slower rate compared to the last 10 years. Some of that slowdown is due to dairy expansion in other states, such as western Kansas. Water availability in the Texas Panhandle is also becoming a limiting factor.

From 2016 to 2021, Texas milk production grew at an average annual rate of 7.6%. That rate has slowed slightly to 7% from 2024 to 2025. Similarly, dairy cow inventory growth has dropped from 4.6% annually between 2016 and 2021 to 4.4%.

“Keeping the same high rate of expansion we have had for the last 10 years would be challenging as more cows would demand more forage production and more forage production would demand more water,” Pineiro said.