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A divide is emerging between producers who use advanced price protection tools and those left vulnerable to market fluctuations.
According to agricultural lender Trever Athorp with BankFirst, the ability to manage risk through programs like the Dairy Revenue Protection and Dairy Margin Coverage has become the primary indicator of a farm’s long-term viability.
Lenders are increasingly focusing on the “knowledge, skills, and ability” of producers to forecast their specific cost of production, he says. Those who locked in pricing as early as mid-2025 are finding themselves in a much stronger position to handle current lower prices than those relying solely on balance sheet equity to cover operating gaps.
“The most important thing from the bank’s perspective is, do you have a plan?” Athorp says.
While the sector faces headwinds, there are signs of targeted growth. Many producers are investing in new milking centers and expansions, often using 2025 profits to prepay 2026 feed expenses. This “prepaid” strategy is expected to provide a significant cushion for checkbooks through the first half of the year.
Furthermore, a slight easing of interest rates, projected at roughly a quarter-percent for the duration of 2026, is expected to offer some relief on interest expenses for operating loans. However, Athorp emphasizes that financial tools alone aren’t enough; success requires a unified front between the farmer, lender, and consultants.
“Get all parties talking,” he says. “The bank, the marketing people, your nutritionist, your veterinary services, all those people are such a critical part of your success on the dairy.”
