While President Donald Trump rattled the markets this week in his pursuit of Greenland, threatening additional tariffs on nations critical of his venture, the USDA issued its monthly Livestock, Dairy, and Poultry Outlook on Jan. 16. As usual, it mirrored milk price and production projections in the preceding World Agricultural Supply and Demand Estimates report issued Jan. 12.

The Outlook reported that dairy cow slaughter in the first half of 2025 was below 2024 levels. “The low culling levels likely indicate that producers chose to extend the productive life of existing cows partially due to tight supplies of replacement heifers, elevated replacement cow prices, and high feeder cattle prices increasing the value of cross-bred calves. Moreover, the low feed prices through most of 2025 likely helped farmers to keep dairy cows longer in the productive cycle. However, during the second half of the year, the slaughter rates have been mostly above the 2024 levels, with weekly dairy cow slaughter in the last four weeks of the year averaging only slightly above last year’s levels.”

USDA will issue its Cattle report on Jan. 30 and include milk cow inventory data along with dairy replacement heifer numbers. The report will give insight into the current state of the herd and will inform the outlook for much of 2026.

Meanwhile, the USDA’s latest Livestock Slaughter report was scheduled to be issued Thursday afternoon. The latest weekly report showed 45,500 head of dairy cattle sent to slaughter the week ending Jan. 3, up 3,000 from the previous week, and 1,400 or 3.2 percent above that week a year ago.

The latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. stated; “Dairy margins were mixed over the first half of January with continued weakness in nearby periods as lower milk prices offset a decline in feed costs, and stable profitability further out on the curve.

“USDA released a surprisingly bearish January crop report,” according to the MW, “raising corn production to a record 17.021 billion bushels on higher yields and increased acreage, counter to pre-report market expectations. While the soybean balance sheet was not quite as bearish, it likewise featured rising inventories on both the domestic and world balance sheets, with corn and soybean meal prices slumping as a result.

“Milk futures remain under pressure from heavy supplies and dairy product production,” according to the MW, which also detailed highlights from the November Cold Storage report that I have previously reported.

The MW stated that butter prices have dropped to a five-year low and cheese trading down to levels last seen during the onset of the COVID-19 pandemic, however “Low prices are beginning to stimulate demand.”

The 6.3 percent jump in the Jan. 6 Global Dairy Trade auction (GDT) broke a five-month losing streak, according to the MW. “Low prices need to be maintained for the U.S. to remain competitive on the global market though, with high cattle prices sustaining dairy margins for now,” the MW concludes.

Speaking of the milk futures; settlements Wednesday were not encouraging. The January contract was at $14.75 per hundredweight; February, $15.30; March, $15.38; April, $15.80; and May, $16.25; with the peak at $17.75 in October.

A quick note on the feed front; corn export sales are strong and almost double the five-year-average, according to Western United Dairy’s weekly update. Soybean sales remain well behind the historical average, but purchases from China are starting to pick up and export inspections are increasing.

The second Global Dairy Trade of 2026, Event 396, saw the weighted average rise 1.5 percent, following the surprising 6.3 percent boost on Jan. 6. Volume fell to 61.3 million pounds, down from 64.6 million on Jan. 6. The average metric ton price hit $3,615 US, up from $3,533 on Jan. 6, and the highest since Nov. 18, 2025.

Anhydrous milkfat again led the gains, up 3.0 percent, after leading Jan. 6 by 7.4 percent. Butter was up 2.1 percent, after a 3.8 percent rise. Skim milk powder was up 2.2 percent, after jumping 5.4 percent, and whole milk powder was up 1.0 percent following a 7.2 percent rise. GDT Mozzarella led the declines, dropping 2.3 percent, after inching 0.7 percent higher last time. Cheddar was down 1.4 percent, after inching up 0.6 percent. Lactose was down 1.8 percent.

StoneX says the GDT 80 percent butterfat butter price equates to $2.3515 U.S. per pound, up from $2.3040 on Jan. 6. GDT Cheddar equated to $2.0838, down from $2.1158 last time. GDT skim milk powder averaged $1.1862 per pound, up from $1.1629, and whole milk powder averaged $1.5644, up from $1.5453 per pound.

Analyst Dustin Winston reports that North Asia (which includes China) market share of purchases was down from the previous event but stronger than last year. Southeast Asia and Oceania purchases were up from the last event, which led to an increase in market share from the first event of the year but less than last year.

China got serious on buying cheese and butter in December. The latest data showed cheese imports totaled 49.0 million pounds, up 24.4 percent from December 2024, an all-time high, according to HighGround Dairy. The largest year-on-year gains came from Australia and New Zealand.

Butter imports hit 36.6 million pounds, up 28.9 percent, a multi-year high not seen since Jan. 2020, says HighGround, which credited falling Kiwi prices toward the end of fourth quarter 2025. New Zealand accounted for 94 percent market share, says HGD, and the Jan. 20 GDT results “Showed North Asia maintaining a strong share of butter sold, suggesting demand from the region has carried into the new year.”

Skim milk powder imports were down 34.8 percent and whole milk powder was off 4.4 percent. HighGround says, “Strong internal cream production has increased the availability of skim solids domestically, reducing the need for skim milk powder imports, while whole milk powder demand remains supported by displaced internal production.”

Back on the home front, cash block Cheddar saw some strength in the Martin Luther King Day holiday shortened week. It climbed to $1.36 per pound Wednesday, highest since Jan. 7, but gave back a penny Thursday, slipping to $1.35, up 6 cents on the week thus far, but still 48.25 cents below a year ago. It closed Friday at $1.29. Traders were anticipating Friday afternoon’s December Milk Production and Cold Storage reports.

The barrels were holding at $1.3575 per pound Thursday, which was where they closed Friday, and are 46.25 cents below a year ago.

HighGround’s Monday Morning Huddle stated “Outside of 2020, the last time Cheddar blocks were below $1.30 per pound was in 2016, and before that it was 2010 and 2009, highlighting how rare this price level is.”

Dairy Market News reports that milk output is strong in the Central region and Class I demand was strengthening. Spot sales of Class III milk were steady compared to the previous week but remain light overall, as cheesemakers have plenty of milk within their networks. Class III prices at mid-week ranged from $4-under to $1-over Class. Spot volumes remained available but some contacts who reported downtime in recent weeks said their plants were now operating full schedules and they were selling fewer spot loads.