USDA’s February Livestock, Dairy and Poultry Outlook points to a slightly smaller dairy herd in 2026, but stronger productivity is lifting total milk output and price forecasts for the year.
Herd Outlook Trimmed, But Milk Per Cow Surges
USDA now projects the 2026 dairy cow herd to average 9.540 million head, 15,000 fewer cows than last month’s estimate. However, higher milk-per-cow performance is more than offsetting the smaller herd.
Milk production for 2026 is forecast at 234.5 billion pounds, up 0.2 billion pounds from the prior projection. Milk per cow is now expected to reach 24,585 pounds, 65 pounds higher than previously forecast.
The revision follows strong late-2025 productivity. In December, milk output per cow averaged 2,045 pounds, 41 pounds above the prior year. Annual 2025 milk production reached 231.5 billion pounds, up 2.5 percent year over year.
Culling Trends and Replacement Tightness
While the herd grew through much of 2025, early 2026 slaughter data suggests elevated culling activity. Cow inventories were larger entering the year, and producers appear to be removing older, less efficient animals.
Replacement inventories remain tight. As of January 1, 2026, there were 3.905 million milk replacement heifers, representing 40.8 percent of productive cows — slightly below year-ago levels. Fewer replacement animals could limit aggressive expansion later in the year.
At the same time, strong beef prices are providing an incentive to cull lower-producing cows, particularly as milk prices softened late in 2025.
Wholesale Dairy Prices Mixed but Trending Firm
From early January to early February, USDA wholesale dairy product prices were mixed:
-
Butter: +15.17 cents per pound
-
Nonfat dry milk (NDM): +8.10 cents
-
Cheddar blocks: -1.48 cents
-
Dry whey: -1.06 cents
CME spot prices through mid-February show butter near $1.67 per pound, Cheddar blocks near $1.41, and NDM near $1.60.
International markets are strengthening. Oceania and European butter and skim milk powder prices moved higher in recent weeks. U.S. butter and cheese remain competitively priced globally, while U.S. NDM and whey are less competitive.
2026 Dairy Price Forecasts Raised
Stronger product markets are pushing milk price forecasts higher:
-
Cheddar cheese: $1.605 per pound
-
Butter: $1.680 per pound
-
NDM: $1.315 per pound
-
Dry whey: $0.690 per pound
As a result:
-
Class III milk: $16.65 per cwt (+$0.30)
-
Class IV milk: $15.70 per cwt (+$1.25)
-
All-milk price: $18.95 per cwt (+$0.70)
For context, the 2025 all-milk price averaged $21.17 per cwt, down $1.38 from 2024. Dairy Margin Coverage (DMC) margins remained above the $9.50 trigger most of the year, though December margins dipped below that threshold.
Trade: Exports Strong, Imports Lower
November 2025 dairy exports surged:
-
Milk-fat basis exports: +60.8 percent year over year
-
Skim-solids basis exports: +7.3 percent
Butter and cheese shipments were particularly strong, supported by competitive pricing and international demand.
Imports declined in November on both milk-fat and skim-solids bases. For 2026, USDA lowered import expectations on a milk-fat basis but expects exports of butter and cheese to remain firm.
However, skim-solids exports are forecast slightly lower in 2026 due to softer competitiveness in dry whey and skim milk powder.
Domestic Use and Foodservice Demand
Domestic disappearance from September through November showed mixed trends:
-
Milk-fat basis demand declined 1.7 percent
-
Skim-solids basis demand increased 4.4 percent
The difference reflects weaker butter and specialty cheese demand alongside stronger consumption of high-protein dairy ingredients such as NDM and whey protein concentrate.
The Restaurant Performance Index remained below 100 for much of 2025, signaling contraction in foodservice. Slower restaurant traffic continues to weigh on certain dairy categories.
Market Takeaway
The 2026 dairy outlook reflects a transition year:
-
Herd growth is stabilizing.
-
Productivity gains are driving milk output.
-
Wholesale prices are firming.
-
Export demand remains supportive for butter and cheese.
While overall milk prices are forecast below 2025 levels, USDA’s upward revisions suggest improving fundamentals heading deeper into 2026.
Livestock, Dairy, and Poultry Outlook: February 2026 (PDF):
https://ers.usda.gov/sites/default/files/_laserfiche/outlooks/113844/LDP-M-380.pdf?v=32393
Dairy forecast table (XLSX):
https://ers.usda.gov/sites/default/files/_laserfiche/outlooks/113844/dairy-forecast.xlsx?v=93548
