U.S. dairy production is expected to grow in 2026. At the same time, stronger product prices are improving the outlook for producer returns.
In its March 2026 Livestock, Dairy, and Poultry Outlook, USDA raised its forecast for both the dairy herd and total milk production. The agency now expects the national herd to average 9.570 million head, up 30,000 head from last month and 72,000 head above 2025.
USDA also increased its milk production forecast to 234.7 billion pounds. This is 0.2 billion pounds higher than last month and 3.0 billion pounds above 2025.
Herd Growth Continues Into 2026
Dairy herd expansion carried into January. Higher cow numbers and steady productivity supported that growth.
In January 2026, the U.S. dairy herd averaged 9.58 million head, up 189,000 head from a year earlier. Milk per cow reached 2,068 pounds, an increase of 1.17 percent.
As a result, January milk production totaled 19.810 billion pounds, up 3.2 percent year over year.
Kansas, Texas, South Dakota, New York and Idaho posted the largest herd gains. Meanwhile, herd numbers declined in Pennsylvania, New Mexico, Washington and Illinois.
Producers continue to retain cows in the herd. Strong returns from beef-on-dairy calves are one factor supporting those decisions.
2025 Set the Stage for Higher Supply
The 2026 outlook follows strong production growth in 2025.
Last year, the dairy herd averaged nearly 9.5 million head, the largest since the early 1990s. After recovering from HPAI impacts, milk per cow reached 24,391 pounds.
Total milk production increased 2.8 percent, the largest year-over-year gain since 2006.
Milk components also moved higher. The average milk-fat test reached 4.32 percent, while skim-solids averaged 9.12 percent. Milk-fat production increased 4.8 percent, and skim-solids rose 3.3 percent.
Product Prices Move Higher
USDA raised its 2026 price forecasts for several key dairy products.
Cheddar cheese is now forecast at $1.615 per pound. Butter is projected at $1.870, and nonfat dry milk at $1.390 per pound. In contrast, dry whey is forecast lower at $0.660 per pound.
These changes affected class prices differently. USDA left the Class III price unchanged at $16.65 per cwt. However, it raised the Class IV price to $17.15 per cwt, up $1.45.
USDA now forecasts the all-milk price at $19.70 per cwt, up $0.75 from last month.
Export Demand Supports Prices
Stronger export demand continues to support the outlook.
USDA raised its 2026 export forecast on both a milk-fat and skim-solids basis. On a milk-fat basis, exports are now expected to reach 18.0 billion pounds, up 0.5 billion pounds from last month.
On a skim-solids basis, exports are forecast at 48.3 billion pounds, up 0.3 billion pounds.
Higher shipments of butter and Cheddar cheese, combined with steady domestic demand, are expected to tighten supply and support prices.
Domestic Margins Remain Tight
Despite the improved outlook, margins started the year under pressure.
The January 2026 all-milk price averaged $17.50 per cwt, down $6.60 from a year earlier. The Dairy Margin Coverage margin above feed costs was $7.81 per cwt, down $6.04.
Lower milk prices drove most of the decline, even as feed costs eased. The milk-feed ratio dropped to 2.09, lower than both last year and December levels.
Recent Markets Show Mixed Signals
Recent wholesale prices show mixed movement.
From early February to early March, prices for butter, Cheddar cheese and nonfat dry milk increased. Meanwhile, dry whey moved slightly lower.
For the week ending March 7, USDA reported:
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Butter: $1.8559 per pound
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Cheddar blocks (40-lb): $1.5008 per pound
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Nonfat dry milk: $1.5399 per pound
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Dry whey: $0.6912 per pound
U.S. butter and cheese prices also remained competitive in global markets earlier in the year. This helped support export demand.
Outlook Points to More Milk and Firmer Prices
Overall, USDA expects milk supply to grow in 2026. A larger herd will offset slightly lower gains in milk per cow.
At the same time, stronger product prices and exports are improving the revenue outlook.
However, margins may remain sensitive to shifts in milk prices, feed costs and demand. Producers will continue to monitor these factors closely through the year.
Livestock, Dairy, and Poultry Outlook: March 2026 Download PDF
Dairy Forecasts Download XLSX
