The U.S. Department of Agriculture (USDA) has raised its 2025 milk production forecast to 227.3 billion pounds, reflecting modest herd expansion and improved productivity. This adjustment, up 0.4 billion pounds from the previous forecast, is supported by an increase in both the number of dairy cows and milk per cow. The average all-milk price is now expected to reach $21.60 per hundredweight (cwt), a $0.50 increase from last month’s projection.
Looking ahead, milk production in 2026 is forecast to grow further to 227.9 billion pounds, as herd numbers are expected to continue rising, albeit gradually. However, the all-milk price for 2026 is projected to average slightly lower at $21.15 per cwt, reflecting anticipated price softening for major dairy commodities.
First Quarter Trends
During the first quarter of 2025, total U.S. milk production reached 56.7 billion pounds, down 0.3% from the same period in 2024. This dip occurred despite a 58,000-head increase in the national dairy herd, driven by growth in states such as Texas, South Dakota, and Idaho. These gains offset cow inventory reductions in states including Wisconsin and Minnesota.
The March 2025 all-milk price averaged $22.00 per cwt, up $1.30 year-over-year. Feed costs declined by $0.60 per cwt, pushing the Dairy Margin Coverage (DMC) farm margin to $11.55 per cwt—$1.90 higher than March 2024. These strong margins likely contributed to recent herd growth.
Wholesale Dairy Prices Edge Up
In the latest USDA Dairy Products Sales Report, wholesale prices for Cheddar cheese, butter, and nonfat dry milk (NDM) rose modestly in early May. At the Chicago Mercantile Exchange for the week ending May 9, spot prices for Cheddar 40-pound blocks and 500-pound barrels were $1.8075 and $1.7870 per pound, respectively. Butter averaged $2.3305, NDM $1.2060, and dry whey $0.5360 per pound.
These price increases prompted USDA to revise its 2025 wholesale price forecasts upward, including:
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Cheddar cheese: $1.840/lb (+5 cents)
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Butter: $2.460/lb (+1.5 cents)
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NDM: $1.240/lb (+2 cents)
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Dry whey: $0.535/lb (+2.5 cents)
Imports, Exports, and Domestic Use
U.S. dairy imports increased in Q1 2025, with notable gains in cheese, butter, and infant formula. Exports on a milk-fat basis rose to 3.6 billion pounds, up 0.8 billion pounds year-over-year. However, exports on a skim-solids basis declined slightly to 11.5 billion pounds. Domestic use presented a mixed picture, with declines in cheese and dry whey consumption but increases in butter and lactose.
Outlook for 2026
In 2026, the dairy herd is expected to grow by 10,000 head, reaching an average of 9.420 million cows. Productivity per cow is forecast to increase slightly to 24,195 pounds. Despite this growth, wholesale prices are expected to trend lower:
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Cheddar cheese: $1.800/lb
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Butter: $2.450/lb
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NDM: $1.215/lb
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Dry whey: $0.470/lb
Class III and IV milk prices are also projected to drop to $17.50 and $18.10 per cwt, respectively. Overall, the 2026 all-milk price is forecast to average $21.15 per cwt, $0.45 below the 2025 forecast.
For full details, view the USDA’s May 2025 Livestock, Dairy, and Poultry Outlook.
