U.S. milk production remains steady in 2025, but lower cow numbers and shifting demand are shaping a softer outlook for 2026. USDA’s December Livestock, Dairy, and Poultry Outlook projects 2025 milk production at 231.4 billion pounds, unchanged from last month. USDA lowered the 2026 forecast as dairy cow inventories decline.
Milk Production and Cow Numbers
Milk production continued to grow modestly through late 2025, supported by higher milk output per cow. In October, U.S. milk production totaled 19.47 billion pounds, up 3.7% from October 2024. Daily production averaged 628 million pounds.
The national dairy herd averaged 9.575 million head in October, an increase of more than 200,000 cows from a year earlier. Average milk production per cow reached 2,033 pounds, up 29 pounds year over year.
USDA expects the dairy cow herd to peak late in 2025 and then decline through 2026. While milk yields per cow should continue to rise, lower cow numbers are expected to offset those gains. As a result, USDA lowered its 2026 milk production forecast to 234.1 billion pounds.
Dairy Cow Culling and Farm Margins
Dairy cow culling picked up during the second half of 2025 and now aligns more closely with 2024 levels. Even so, dairy cow slaughter remains low compared to the past decade.
Farm margins have tightened. In August, the Dairy Margin Coverage (DMC) program reported a margin of $11.52 per hundredweight over feed costs. That margin was more than $2 lower than August 2024. Both milk prices and feed costs declined from last year, but lower milk prices weighed more heavily on margins.
Wholesale Dairy Prices Show Mixed Trends
Wholesale dairy product prices showed mixed movement heading into December. National prices for Cheddar cheese blocks, butter, and nonfat dry milk declined between early November and early December. Dry whey prices increased over the same period.
CME spot prices for the week ending December 5 averaged:
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Cheddar cheese barrels: $1.46 per pound
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Cheddar cheese blocks: $1.41 per pound
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Butter: $1.46 per pound
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Nonfat dry milk: $1.16 per pound
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Dry whey: $0.74 per pound
International prices also sent mixed signals. Export prices for butter and skim milk powder declined in Oceania and Europe. Cheddar cheese and dry whey prices increased modestly in some global markets.
Exports, Imports, and Domestic Use
Dairy exports remained a bright spot in 2025, especially for butter and cheese. On a milk-fat basis, exports totaled 1.5 billion pounds in August, well above year-earlier levels. Cheese exports reached record highs.
On a skim-solids basis, exports declined compared to August 2024. Lower shipments of skim milk products drove the decrease. Dairy imports also declined, led by lower butter and cheese imports.
Domestic use trends differed by product category. From January through August, domestic use declined on a milk-fat basis. Over the same period, skim-solids use increased. Butter, skim milk products, lactose, and whey protein concentrate posted year-over-year gains. Cheese and dry whey use declined.
Price Outlook: 2025 Holds, 2026 Softens
USDA maintained its 2025 all-milk price forecast at $21.00 per hundredweight. Weaker cheese prices offset strength in butter markets. USDA projects the Class III milk price to average $18.10 per cwt in 2025. The Class IV price is forecast at $17.40 per cwt.
Looking ahead, USDA lowered milk price forecasts for 2026. The all-milk price is now projected at $18.75 per cwt. Class III milk is forecast at $17.05 per cwt, while Class IV milk is projected at $14.40 per cwt. Ample milk supplies and weaker cheese demand are expected to pressure prices.
What It Means for Dairy Producers
The dairy market enters 2026 with mixed fundamentals. Milk production growth is slowing, and cow numbers are expected to decline. Demand for cheese remains weaker, while whey-based protein demand continues to provide support.
Producers may face tighter margins next year as milk prices ease. Cost control, efficiency, and risk management will remain critical. The pace of herd adjustment and demand recovery will help determine how markets perform through 2026.
