The U.S. dairy industry is currently navigating an $11 billion infrastructure surge, with approximately 50 projects spanning 19 states.
According to Extension dairy specialist Leonard Polzin, this capital investment creates a “T”, stretching from Texas and Kansas up through the Dakotas and across the northern tier from Washington to New York. However, he says, while processing capacity is growing, the financial picture for producers remains complex.
A significant portion of this new capacity is focused on cheese production, but domestic demand has remained largely flat. This has forced the industry to rely heavily on international markets to clear surplus supply, Polzin explains. While 2025 saw a substantial increase in cheese exports, Polzin notes that these sales are often happening at “steep price discounts,” serving more as a safety net than a profit driver.
“We’re using exports purely as that clearing function, not as a price premium function,” he says. “Instead of increasing milk checks, what they’re doing is providing that floor on milk checks.”
As the industry moves into the second and third quarters of 2026, experts are watching for potential price volatility. There is a growing concern that international buyers may have “front-loaded” their inventories during low-price periods, which could lead to a slump in sales later this year. To mitigate these risks, Polzin suggests that Class III producers take a more inquisitive approach to their business partnerships.
“The first thing I would do before making any changes is ask questions,” he advises. “I’d go to my processor and ask exactly the product mix they’re making very specifically… that’s going to tell you a lot more about where your individual price volatility is coming from.”
Beyond traditional milk checks, many producers are turning to beef-on-dairy crosses and forward-curve risk management to find stability. While 2026 presents a “hazy picture” regarding supply structure, the move toward specialized product mixes and diversified revenue remains the primary path forward for the American dairy farm.
