Big Picture: Supply Growth Meets Mixed Demand
U.S. milk production is climbing to its highest levels in years. Larger herds and rising yields are pushing output higher in both 2025 and 2026, yet prices are expected to remain stable. The USDA’s August Livestock, Dairy, and Poultry Outlook forecasts the all-milk price at $22.00/cwt for 2025 and $21.90/cwt for 2026. Strong export demand is helping balance the added supply, while domestic consumption shows uneven growth across products.
Production Expands Into 2026
Milk production is now projected at 229.2 billion pounds in 2025 and 230.4 billion pounds in 2026, both upward revisions from last month. In June, the national herd reached 9.47 million head, the largest since 2021. Productivity also climbed, with milk per cow up 1.7% year over year, driving a 3.25% gain in monthly output—the strongest increase in four years. Expansion has been led by Texas, Idaho, Kansas, and South Dakota.
Wholesale Prices Show Mixed Trends
Markets have seen volatility this summer. Cheddar block prices fell to about $1.70/lb, butter slipped to $2.52/lb, while dry whey strengthened near $0.58/lb and NDM held around $1.29/lb. U.S. butter and Cheddar remain priced well above international levels, potentially limiting export competitiveness if global values weaken further.
Herds Grow, Margins Tighten
Despite herd expansion, producer margins remain under pressure. June’s all-milk price averaged $21.30/cwt, down $1.50 from last year. Feed costs eased, but not enough to offset weaker milk prices. Lower culling rates show producers are holding onto cows longer, aided by cheaper feed and tight heifer supplies.
Exports Shine, Powder Products Lag
International demand has been a key bright spot:
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Butter exports more than doubled in the first half of 2025, reaching the strongest levels since 2014.
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Cheese exports climbed 11%, setting new records, with Mexico, South Korea, and Japan as top markets.
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Overall milk-fat basis exports surged nearly 30% year over year.
By contrast, skim-solids shipments fell 3.6%, weighed down by weaker demand for skim milk powder, whey protein concentrate, and lactose.
Consumption and Trade Balance
Imports softened on a milk-fat basis (-4.7%) but rose on a skim-solids basis (+5.1%) due to milk protein concentrate. Domestic use was mixed: butter and American-style cheese gained traction, while other cheese types and dry whey slipped.
Price Outlook Steady but Cautious
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2025 Forecasts: Cheddar $1.84/lb, butter $2.52/lb, NDM $1.275/lb, whey $0.575/lb. Class III $18.50/cwt, Class IV $18.95/cwt, all-milk steady at $22.00/cwt.
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2026 Forecasts: Butter and NDM edge higher, Cheddar and whey unchanged. Class III $17.85/cwt, Class IV $18.85/cwt, all-milk at $21.90/cwt.
What to Watch
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Global competition: U.S. butter and Cheddar premiums remain wide versus Oceania and EU.
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Herd dynamics: Tight heifer supplies and lower culling could prolong herd expansion.
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Export momentum: Cheese and butter continue to anchor U.S. trade strength.
Further Resources: Full details are available in the USDA Livestock, Dairy, and Poultry Outlook — August 2025, including downloadable Dairy Forecast Tables (XLSX).
