USDA estimates milk production upward trend to end

The “Mielke” Market Weekly

The U.S. Department of Agriculture left its 2025 milk production estimate unchanged in this week’s World Agricultural Supply and Demand Estimate report and lowered its 2026 estimate, based on a reduced cow inventory more than offsetting a higher rate of growth in milk per cow.

2025 production and marketings were projected at 231.4 and 230.5 billion pounds, respectively, unchanged from a month ago. If realized, both would be up 5.5 billion pounds or 2.4% from 2024.

2026 production and marketings were projected at 234.1 and 233.2 billion pounds, down 200 million pounds on production and down 100 million from a month ago on marketings. If realized, production would be up 2.7 billion pounds or 1.2% from 2025.

The 2025 import forecast was lowered on a fat basis, mainly due to less expected butter imports, and was unchanged on a skim-solids basis. Exports on a fat basis were raised, with U.S. butter continuing to be competitive in international markets. Exports were unchanged on a skim-solids basis for 2025.

Fat basis imports for 2026 were lowered primarily on reduced demand for imported butter products. Skim-solids basis imports were raised slightly. Ex-ports were raised on a fat basis for 2026 due to additional shipments of butter. Skim-solids basis exports were lowered due to fewer shipments of skim milk powder.

The 2025 butter price average forecast was raised slightly. The cheese price forecast was lowered on recent price weakness. The nonfat dry milk and whey price forecasts were unchanged. The Class III milk price estimate was lowered, while the Class IV price was raised.

The 2026 cheese and butter price forecasts were lowered as price weakness in late 2025 is expected to carry into 2026. The whey price was raised on strong demand, which is expected to continue into next year. The NDM forecast was unchanged.

The 2025 Class III price was projected to average $18.10 per hundred-weight, down a nickel from last month’s estimate, and it compares to $18.89 in 2024 and $17.02 in 2023. The 2026 projection is $17.05, down 60 cents from a month ago.

The 2025 Class IV price is estimated to average $17.40, up a nickel from a month ago, and it compares to $20.75 in 2024 and $19.12 in 2023. The 2026 average is projected at $14.40, down a dime from last month’s estimate.

This month’s corn outlook is for greater exports and lower ending stocks. Exports were raised 125 million bushels to 3.2 billion, up 12% from last year’s record high. Export data showed robust foreign demand in November and implies total shipments during the September-November quarter will likely exceed 800 million bushels, surpassing the prior high set in 2007. Corn ending stocks are down 125 million bushels to 2.0 billion. The season-average corn price was unchanged at $4.00 per bushel, according to the WASDE.

Global corn production for 2025/2026 was forecast at 1.576 billion tons, down slightly. The outlook is for lower production, trade and higher ending stocks relative to last month. Foreign corn production was cut, with declines for Ukraine, Canada, Nigeria, Indonesia and Senegal partially offset by increases for the European Union, Russia and Zimbabwe.

Soybean supply, use and price projections were unchanged. Global oilseed production was raised. The global soybean outlook includes higher production, increased crush, lower exports and raised ending stocks. Global soybean production was increased to 422.5 million tons, reflecting higher crops for Russia and India but lower output for Canada and Ukraine.

The Dec. 9 Daily Dairy Report said, “First-quarter (corn) shipments surpassed the prior record set in September through November 2007. Through early November, U.S. commitments to ship additional corn were 28% above last year’s pace, and full-season exports notched a new all-time high in the 2024-2025 crop year.”

Soybean exports remain depressed, according to the DDR. “U.S. commitments to export soybeans through early November were 40% lower than the prior year, and September through November shipments lagged 2024 volumes by 45%. Despite U.S. assertions that China promised to buy U.S. soybeans, China’s state-owned buyers have purchased only a few U.S. cargoes,” the DDR said.

U.S. dairy culling is slowing. The USDA’s latest data shows 44,500 dairy cows culled the week ending Nov. 29, down 9,600 from the previous week, and up just 600 or 1.4% from a year ago. Year to date, 2,412,200 head had been sent to slaughter, down 90,200 or 3.6% from a year ago, a percentage that had been running 7%-8% the previous 5-6 months.

In politics, the Trump administration announced a $12 billion aid package this week for U.S. farmers. A USDA press release called it a one-time bridge payment in response to temporary trade market disruptions and increased production costs that are still impacting farmers. At first glance, the package offers nothing specific to dairy farmers, and opinion varies as to the market’s reaction to the latest government intervention.

Meanwhile, Sen. Kirsten Gillibrand, D-N.Y., introduced legislation this week to “Support family farms and grow agritourism businesses across the country.” The legislation would better tailor federal resources like loans, grants, broadband access and educational programs that support family-owned and operated farms, according to a joint press release from supporting lawmakers. Companion legislation was also introduced in the House.

Agriculture Secretary Brooke Rollins said a $700 million Regenerative Pilot Program will help American farmers adopt practices that improve soil health, enhance water quality and boost long-term productivity, all while strengthening America’s food and fiber supply.

“Protecting and improving the health of our soil is critical not only for the future viability of farmland, but to the future success of American farmers,” a USDA press release said. “In order to continue to be the most productive and efficient growers in the world, we must protect our topsoil from unnecessary erosion and improve soil health and land stewardship. The package encourages these priorities while supporting farmers who transition to regenerative agriculture.”

The Federal Reserve, on a 9 to 3 vote Wednesday, announced a 25-basis point interest rate cut, the third since President Trump has been in office.

CoBank got out its crystal ball this week and took a look into 2026. “Economic uncertainty surrounding U.S. trade policy is much lower than it was a year ago,” the report said, “steadying the broader outlook for 2026. The reduced market anxiety can be seen in historically low volatility metrics for equity, bond and currency markets, as well as in historically tight corporate credit spreads.”

“The effective across-the-board tariff rate is now about 17%, but based on tax collections, the actual average import tax paid is only about 10%,” the report said. “That rate is expected to drop further as the reduced tariffs on China and imported food products take effect and more bilateral agreements are finalized.”

Lead dairy economist Corey Geiger stated in the Dec. 15 Dairy Radio Now broadcast, “We have sent price signals the last 10 years to dairy farmers to make more butterfat, and they’re meeting the challenge, so much so that, in the last five months, butterfat production on U.S. dairy farms is up 5-6%.”

Consumer demand is not bad, Geiger said, but trying to find outlets for that much more fat is difficult and will impact Class IV markets, butter and nonfat dry milk.

There is incredible demand for whey protein, whey protein isolates and ultra-filtered milk, Geiger said, and that is being fueled in part by the rising popularity of weight loss drugs. Estimates are that 23% of U.S. households now have someone on one and that has changed eating patterns, according to Geiger. “People consume less calories and choose more nutrient-dense foods that are high in protein and fruits and vegetables,” he said.

The 52-week rolling average on yogurt sales is up 9.5% from a year ago, according to Geiger, and is the leader in dairy case sales gains. Four dairy products are among the top 10 leaders of all products sold in grocery stores, he said. Natural cheese is Number 2, cottage cheese is Number 6 and dairy creamers are doing well, he said.

One more key factor in 2026 is that some cheese plants will be initiating butterfat caps or they will redo their pricing formulas as an incentive for protein production. The bottom line on dairy farms will vary, Geiger said. Class IV futures in August were around $19 per hundredweight, and now, we are talking $13-$14. Class III is not quite as bearish, he said, and is in the $17 range, but the saving grace on many dairy farms is the beef-on-dairy breeding programs. Beef prices have been record high and have contributed 20%-25% of the dairy’s bottom line, he concluded.

Chicago Mercantile Exchange block Cheddar saw a third week of decline, falling to $1.3450 per pound Thursday, the lowest price since June 30, 2023. It did, however, see its first positive move in three weeks Friday, inching up a half-cent to $1.35, 3 cents lower on the week and 35 cents below a year ago. After plunging 17 cents the previous week, the barrels held all week at last Friday’s close of $1.4125, 27.75 cents below a year ago. There were 45 loads of block traded on the week and no barrels.

Central region cheese production is strong, said Dairy Market News, but there were reports that output was down from recent weeks. Winter weather was impacting the production and transportation of milk and some cheesemakers secured spot loads to maintain steady production. There was some downtime reported this week and milk was sold on the spot market. Retail cheese demand is strong ahead of the end of year holidays and food service interest is steady. Contacts report strong demand from international purchasers, according to DMN.

Strong milk production is supplying plenty for cheese manufacturers in the West. Spot loads were tighter in some parts of the region due to demand from Class II or Class IV manufacturers. Cheese makers are running strong production to meet December holiday demand, although some sellers described domestic demand as flat. Export demand varies from steady to strong, said DMN.

Cash butter held at last Friday’s close of $1.4775 per pound the first three days of the week, then inched up a quarter-cent Thursday to $1.48. It stayed there Friday, up a quarter-cent on the week but $1.0650 below a year ago on eight sales.

HighGround Dairy said in its Monday Morning Huddle, “Old crop butter, product made before Dec. 1, 2025, can only be traded through the end of February 2026 at the Chicago Mercantile Exchange. Since processors made record levels of butter in 2025, a hefty amount may reach the exchange ahead of the old crop deadline, keeping a lid on significant upward moves over the next 2 ½ months.”

DMN says cream production is strong in the Central region, as components remain strong and are up from a year ago. Demand for cream is steady as Class II purchasers are pulling on the cream supply. Butter makers are not purchasing significant volumes of cream and utilizing internal volumes to run busy schedules. Loads of 80% butterfat butter are available, but strong export demand is keeping 82% butterfat butter inventories tighter. Retail demand for butter is strong, while food service interest is tepid, said DMN.

Milk production in the West remains above a year ago, and there is plenty of cream available. Cream demand from butter manufacturers is stronger, thus butter production is strong. Domestic butter demand is stronger. The availability of unsalted butter is tighter while international demand is steady. Some butter producers continue to make international loads their priority, according to DMN.

Grade A nonfat dry milk saw Friday’s close at $1.16 per pound, down a penny on the week and 23 cents below a year ago on six sales for the week.

Dry whey closed Friday at 76.50 cents per pound, up 2 cents on the week and 5.50 cents above a year ago. There were three CME sales for the week.

September U.S. dairy exports totaled 499.3 million pounds, up 0.6% from September 2024. HGD points out that exports accounted for 16.3% of total U.S. milk solids, with softer sales going into the largest U.S. destinations. Combined exports to Mexico, China and Canada were lower but were more than offset by stronger demand from South Korea, Japan, New Zealand and Australia.

NDF milk and skim milk powder exports continue to disappoint, totaling 111.3 million pounds, down 18.5% from a year ago and the lowest September total since 2017, according to HGD. Sales to Mexico fell 17.3%, and Southeast Asian demand was down 21%.

Cheese exports totaled 116.5 million pounds, up 34.5%. “On a 30-day adjusted basis, September set a new record,” said HGD, “indicating no sign of U.S. cheese exports slowing, particularly given the very low prices at the CME currently and the price advantage the U.S. holds over other dairy exporting regions.” Mexico, South Korea and Australia were the key contributors to the higher sales.

Dry whey exports amounted to 41 million pounds, up 8.3%, and butter sailings totaled 15 million pounds, up 168.6% and up 137.0% year to date.

Tuesday’s Global Dairy Trade Pulse auction, which was the 95th, saw 5.8 million pounds of product sold, about the same as that on the Nov. 25 event. The prices on both skim milk and whole milk powder continued to inch lower.

“Futures are pointing toward lower prices for the upcoming GDT”, said StoneX, “a result of expected declines primarily in the fat products.”