The Agriculture Department announced the first Class III milk price of 2026 at $14.59 per hundredweight (cwt.), down $1.27 from December, $5.75 below Jan. 2025, and the lowest Class III price since July 2023’s $13.77. Wednesday’s futures settlements had February at $15.45; March, $16.98; April, $17.34; May, $17.68; and June at $17.83, with a peak of $18.10 in October. 

The Class IV price is $13.55, down 9 cents from December, $7.18 below a year ago, and the lowest Class IV since Feb. 2021’s $13.19.

Meanwhile, you’d think US dairy farms were in the spring flush. December milk output hit 19.568 billion pounds, up 4.4% from Dec. 2024. The 24 State total, at 18.823 billion pounds, was up 4.6%. Fat and protein were both up from last year which put component adjusted production up 5.9%, according to StoneX.

November output was revised up 6 million pounds to 18.8 billion, 4.5% above a year ago. The 24 State total was revised up 3 million pounds, to 18.1 billion, up 4.7%.

Output for all of 2025 amounted to 231.482 billion pounds, up 2.5% from 2024, and 222.476 billion for the 24 States, up 2.6%. Cow numbers for the year were up 148,000 head and output per cow averaged 24,392 pounds, up 214 pounds. 

December cows numbered 9.567 million, up 9,000 from the November count, which was revised down 12,000 head, but was up 212,000 or 2.3% from a year ago. The 24 State count was 9.138 million, up 9,000 from the November total, which was revised down 4,000 head, but is 222,000 or 2.5% above a year ago. 

December output per cow averaged 2,045 pounds in the 50 States, up 41 pounds or 2.0% from a year ago. The 24 state average, at 2,060 pounds, was up 42 pounds or 2.1% from 2024. The November average was revised up 4 pounds in the 50 States and up 2 pounds in the 24-States.

Idaho was up 5.6%, thanks to 40,000 more cows offsetting a 5 pound drop per cow. Indiana was up 3.1% on 5,000 more cows and a 10 pound gain per cow. Michigan was up 4.5% on 20,000 more cows. Output per cow was unchanged. Ohio was up 2.5% on 5,000 more cows and a 10 pound gain per cow. 

There’s plenty of dairy in the freezer though exports have kept stocks in check. The Agriculture Department’s latest Cold Storage report showed December butter stocks had shrunk to 199.3 million pounds, down 11.1 million pounds or 5.3% from November, and a whopping 14.96 million or 7.0% below Dec. 2024. 

American type cheese crept to 789.8 million pounds, up 2.5 million or 0.3% from the November level, and up 18.6 million pounds or 2.4% from a year ago. The “other” cheese holdings climbed to 559.9 million pounds, up 7.2 million or 1.3% from November, but were just 468,000 pounds above a year ago. 

The total December cheese inventory hit 1.372 billion pounds, up 10.2 million or 0.7% from November, and up 18.0 million pounds or 1.3% from a year ago. There were no revisions in any of the November data.

Speaking of exports, US dairy sailings in November hit 515.2 million pounds, up 13.8% from November 2024. The totals were buoyed by stronger shipments to Canada, South Korea, Indonesia, and Australia, according to HighGround Dairy’s analysis, where exports increased by at least 6.6 million year-over-year. Sales to Mexico, the top US destination, however, dropped on an annual basis for the fourth month in a row, down 1.6%. Sailings to China, our Number two export market, were up just 0.7%.

Butter exports totaled 25.1 million pounds, up 245.2% from a year ago, second-highest all-time total, just behind August 2008, according to HighGround, which stated “US butter has been at a sizable discount to global prices for some time, with the largest discount occurring in September and October 2025, when some of these sales would have been booked. 

Cheese exports hit 111.9 million pounds, up 28.1%, and up 20.1% year to date. Nonfat/skim milk powder totaled 121.3 million pounds, up just 0.1%, but down 11.1% year to date. Dry whey, at 37.8 million pounds, was up 18%, marking the six month in a row of an increase, according to HGD. 

Another drop in the All Milk Price and higher prices for corn and hay pulled the December feed price ratio lower, down for the third month in a row. USDA’s Ag Prices report showed December at 2.26, down from 2.38 in November, and compares to 2.73 in December 2024. 

The All Milk Price dropped to $19.00 per cwt. with a 4.51% butterfat test, down 70 cents from November’s $19.70 on a 4.46% test. It was the lowest level of 2025 and $4.30 below a year ago which had a 4.46% butterfat test.

The November average cull price for beef and dairy combined fell to $157 per cwt., down $2 from October, after losing $3 the month before. It was still $38 above Dec. 2024, and $85.40 above the 2011 base average.

Quarterly milk cow replacements averaged $2,860 per head in January, down $250.00 from October, but $200 above January 2025. Cows averaged $2,800 per head in California, down $200 from October, but $200 above a year ago. Wisconsin’s average, at $3,170 per head, was down $190 from October, but $310 above January 2025.

Milk production margins decreased for the fourth month in a row to the lowest level since January 2024s $9.74 per cwt., with an 84 cent per cwt. loss from November to $10.58 per cwt., according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Missouri.

“Income over feed costs in December were above the $8 per cwt. level needed for steady to higher milk production for the 26th month in a row,” says Brooks. “Input prices were mostly higher in December with two of the three input commodities inside of the top ten for December all-time. Feed costs were the 11th highest ever for December and increased 14 cents per cwt, from November.” 

Milk income over feed costs for 2025 were $12.44 per cwt., a loss of 2 cents from the previous estimate, and income over feed would be above the level needed to maintain or grow milk production, and down 96 cents per cwt. from 2024’s level. 

Milk income over feed costs for 2026 (using Jan. 30 CME settling futures prices for Class III milk, corn, and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $10.14 per cwt., says Brooks, a loss of $2.30 per cwt. versus 2025. Income over feed costs would also be above the level needed to maintain or grow milk production, and up 50 cents per cwt. versus the previous estimate.

The latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC., says “Dairy margins strengthened over the second half of January as higher milk prices more than offset a slight rise in feed costs.” 

The MW reported highlights from the December Milk Production and Cold Storage reports. It also stated that the January Cattle Inventory report “Revealed a continued decline in heifer numbers with 3.905 million in the national herd on January 1, down 11,000 from last year, which was revised slightly upward from the previous estimate, and the lowest since 1978, as the ongoing beef on dairy breeding trend to capitalize on historically high beef and calf prices exacerbates the shortage. The number of replacement heifers expected to calve also declined to 2.498 million, down 3,000 from last year, and total heifers as a percentage of the total milking herd at 40.8% is historically very low,” the MW concluded.

The cash markets were buoyed by a strong Global Dairy Trade this week. Block Cheddar, after falling to $1.3625 per pound last Friday, climbed to $1.4675 Thursday, highest since Nov. 26, 2025, but still 39.25 cents below a year ago. 48 loads have traded so far this week. The barrels were at $1.44 Thursday.

Milk output is steady in the Central region, according to Dairy Market News. Spot volumes were available following downtime at production facilities throughout the region last week, due to a winter storm. Production resumed this week and spot market demand for Class I and Class III milk was strengthening, with spot milk prices ranging $3-under to flat at mid-week. Cheesemakers were running busy schedules. Domestic cheese demand is steady, and export demand is strong.

Cream production is strong in the Central region. Downtime at plants last week, due to winter weather, pushed more cream to the spot market this week. 

Class II processors were ordering fewer loads this week while interest from butter makers was steady to higher. Butter makers were running busy schedules. Domestic demand is strong while interest from retail and food service end users was unchanged from last week. Export demand was strong. Inventories are tight. 

All commodities saw gains, led by skim milk powder which jumped 10.6%, after a 2.2% rise on Jan. 20. Whole milk powder was up 5.3%, following a 1.0% gain. Buttermilk powder was up 6.4%. Butter jumped 8.8%, following a 2.1% rise last time, and anhydrous milkfat was up 5.0%, after rising 3.0%. Cheddar was up 3.8%, following a 1.4% loss, while GDT Mozzarella was up 10.6%, after leading the declines last time, dipping 2.3%. Lactose was up 1.5%, following a 1.8% dip.