Beef and milk prices often move together

Global dairy markets are not isolated from developments in the beef sector. Dairy cows are not only milk producers but also part of the broader protein market. As a result, the economic relationship between milk and beef prices plays an important role in farmers’ herd management decisions.

Historically, both markets have often moved in the same direction. Feed costs, weather conditions and global demand for animal protein influence both milk and beef production costs. When these factors tighten supply or increase demand, both prices tend to rise.

That pattern was visible again during 2024 and 2025. Milk prices strengthened across major exporting regions while beef markets also moved upward. In several countries, beef prices reached historically elevated levels as global cattle inventories remained tight and demand for animal protein stayed firm.

However, the relationship between the two markets is not perfectly symmetrical. Beef prices tend to be significantly more volatile than milk prices and often react faster to supply constraints.

When beef becomes more valuable than milk

For dairy farmers, beef prices create an additional economic signal. Every cow in the herd has an alternative value: it can either produce milk or enter the beef supply chain.

When beef prices rise strongly, the opportunity cost of keeping cows in milk increases. Culling animals and selling them into the beef market becomes more attractive financially. In theory, this should tighten milk supply.

But in practice, the adjustment rarely happens immediately.

Herd management decisions are tied to biological production cycles. Farmers cannot instantly reduce herd size without affecting future productivity. Most culling decisions are therefore linked to natural points in the production cycle, particularly after calving or during herd restructuring periods.

As a result, price signals from the beef market typically influence milk supply with a noticeable delay.

Strong prices encouraged herd expansion first

Another factor complicates the current situation. During the first half of 2025, dairy farmers were facing a combination of relatively strong milk prices and attractive beef prices at the same time.

Rather than triggering immediate herd reductions, this price environment initially supported milk production. In several key producing regions, favourable margins and stable feed conditions encouraged farmers to maintain or even expand herd sizes.

Strong calf and cull cow prices also improved overall farm income, making dairy production more attractive in the short term. Instead of reducing herds, many farmers chose to keep cows in production and raise replacement heifers.

This means that the first effect of high beef prices was not lower milk output but continued production growth.

Culling decisions come later in the cycle

The influence of high beef prices on milk supply tends to appear only later.

As the production cycle progresses, farmers begin reassessing the economic performance of individual animals. When beef prices remain elevated while milk margins narrow, culling less productive cows becomes more financially attractive.

Even then, adjustments usually follow a specific order.

Farmers typically remove the least productive animals first. These cows contribute relatively little to overall milk output, which means the immediate impact on total production is limited. At the same time, younger and genetically improved heifers continue entering the herd, often with higher productivity than the animals they replace.

Because of this replacement dynamic, herd reductions do not automatically translate into proportional declines in milk supply.

A possible effect in late 2026

Looking ahead, persistently high beef prices could still influence milk production dynamics. If milk prices face pressure while beef markets remain strong, culling incentives may gradually increase.

The timing of this adjustment suggests that any impact would most likely appear later in the production cycle, potentially during late 2026 or early 2027.

Even then, the effect may remain moderate. Dairy herd management tends to prioritize productivity improvements rather than abrupt herd reductions. The replacement of older cows with more efficient animals often offsets part of the production loss.