CoBank research finds top-performing dairy herds earn substantially more income by producing greater quantities of milk components.
U.S. dairy farmers are finding a growing opportunity to increase milk revenue by producing higher levels of butterfat and protein. As consumer preferences continue moving toward cheese, yogurt, butter, cottage cheese and other manufactured dairy products, milk components are playing a larger role in determining farm income.
A recent report from CoBank’s Knowledge Exchange found that dairy herds ranking in the top 10% for milk components generated an additional $101 to $352 per cow each year at average U.S. production levels. At higher production levels, the advantage increased to between $136 and $474 per cow.
“Those numbers can add up fast. For instance, assuming annual average milk production of 24,390 pounds per cow, higher-component herds in the Upper Midwest FMMO had a $256.58 per cow advantage over lower-component herds," said Corey Geiger, Lead Dairy Economist with CoBank.
"At 33,000 pounds of annual production, that advantage widens to $345.58 per cow. For a 100-cow dairy, that’s an extra $34,558 in annual income — and for a 1,000-cow dairy, it represents $345,582 of additional revenue,” Geiger added.
The report examined seven regional Federal Milk Marketing Orders that use Multiple Component Pricing systems. Its findings showed substantial differences in butterfat and protein production among both regions and individual dairy herds.
The Upper Midwest provides a clear example. In 2025, average component levels were 4.37% butterfat, 3.33% protein, and 5.79% other solids. However, the difference between the highest- and lowest-performing groups of herds demonstrates considerable room for improvement.
Abbi Groves, Agricultural Commodities Economist with CoBank, said component optimization gives producers a clear path to improve milk check revenue while helping processors secure the solids their plants need most.
The trend reflects a broader transformation in the U.S. dairy market. More than 80% of farmgate milk now goes into manufactured dairy products, while more than 90% of the nation's milk supply is priced using butterfat, protein and other solids.
Processors are also experimenting with additional incentives, including pricing formulas tied to whey protein concentrate and whey protein isolate.
As demand for dairy ingredients continues to evolve, component production may become an increasingly important measure of dairy profitability.
“These are just some of the opportunities that abound to meet rising demand. Given shifting demand and the growing role components are playing in producer revenue, traditional milk production metrics like rolling herd average no longer tell the full revenue story," Geiger added.
"New benchmarks focused on pounds of components produced will provide a clearer view of what ultimately drives the milk check.”
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