The ongoing war with Iran continues its ripple effect around the globe. The shut-down of the Strait of Hormuz has trickled down to every gas station in America as crude oil prices shot higher, even topping $100 per barrel.

HighGround Dairy points out that about 20-25 percent of the world’s seaborne oil trade moves through this waterway and the region produces about 30 percent of global fertilizer, which is also not moving. “With Northern Hemisphere planting almost underway, prices have moved higher, crimping already tight margins for U.S. crop farmers,” HGD warned.

The March 10 Daily Dairy Report stated, “While the war in Iran could alter trade routes and the volumes of U.S. crops used for biofuel production, it’s too soon to forecast the direction or scale of the impact. USDA will wait until next month to tweak those assessments.”

The Agriculture Department raised its 2026 milk production estimate in this week’s World Agricultural Supply and Demand Estimate report, as increases to the dairy cow inventory more than offset slower growth in output per cow.

2026 production and marketings were projected at 234.7 and 233.7 billion pounds, up 200 million pounds on both from a month ago. If realized, both would be up 3 billion pounds or 1.3 percent from 2025.

Imports were raised on a fat basis on additional imports of butter but they were unchanged on a skim-solids basis. Exports were raised on a fat basis due to higher shipments of butter and cheese, as well as on a skim-solids basis due to higher shipments of cheese and whey products.

Based on recent price strength, 2026 cheese, butter, and nonfat dry milk (NDM) price forecasts were raised, while the whey price forecast was lowered. The Class III milk price forecast was unchanged with higher cheese prices offsetting lower whey prices. The 2026 Class III average remained at $16.65 per hundredweight (cwt.), down from $18.01 in 2025 and $18.89 in 2024.

The Class IV price forecast was raised due to the stronger butter and NDM price outlook. The Class IV average was raised to $17.15, up $1.45 from a month ago, and compares to $17.38 in 2025 and $20.75 in 2024.

The USDA’s slaughter data showed 58,300 cows sent to slaughter the week ending Feb. 21, down 1,800 from the previous week, but 6,700 head or 13 percent more than a year ago. Year-to-date 460,000 cows had been culled, up 32,400 or 7.6 percent from a year ago.

Checking CME dairy prices; block Cheddar cheese hit $1.63 per pound Monday, highest price since Nov. 11, 2025, but it dropped 8 cents Tuesday and 4 cents Wednesday, then inched back up a quarter-cent Thursday to $1.5125, 18 cents below a year ago. It finished last Friday at $1.6175.

The barrels dropped 5.75 cents Wednesday to $1.5125 and held there Thursday, 17.75 cents below a year ago, following a Friday finish at $1.57.

Central region farm milk output is increasing, reports Dairy Market News, and demand for Class III milk was steady, though some plants were selling milk due to plant downtime. Class III prices at mid-week ranged $5-under to flat Class. Cheesemakers were running busy schedules, though some were down for maintenance this week. Contacts say interest is strong from retail cheese customers, while food service demand remains down from a year ago. Export cheese demand is strong, but some contacts are concerned that rising shipping costs will negatively impact international interest.

Cheese manufacturers in the West are receiving plenty of milk and running heavy schedules. Class III spot milk demand is mostly moderate. 

Spot cheese availability is mixed depending on producer contractual commitments and type. Stakeholders convey mozzarella loads are tighter.

Domestic demand varies from lighter to somewhat stronger. Sellers indicate retail sales are stronger than food service sales. Global disruptions have brought some delivery challenges, says DMN, but demand from international buyers is mostly steady.

After cash butter hit $2.1375 per pound last Tuesday, it closed Friday at $2.01, still 17 cents higher on the week. It regained 0.75 cents Monday, hitting $2.0175, but plunged 12.25 cents Tuesday and lost 4.25 cents Wednesday. It was unchanged Thursday, holding at $1.8525, 49 cents below a year ago.

Central region milk output continues to grow, however there are reports that milk component levels are down slightly from last month. Cream production is strong and contacts say Class II processors continue to purchase significant volumes. Demand for cream from butter makers is steady and churns are running full schedules. Retail butter demand is strong, but food service sales remain down from last year. Butter produced in other countries is being sold at a premium to U.S. butter, contributing to continued strong export demand, according to DMN.

Strong milk production in the West is providing enough cream to fill contractual obligations to butter manufacturers but spot cream availability is somewhat tighter, says DMN. Some butter manufacturers were more reluctant to bring in spot loads at higher prices, which contributed to mixed demand. Butter producers continue to run strong production. Domestic demand varies from steady to stronger, while international demand remains strong however global disruptions are negatively impacting sales or deliveries in some cases, DMN warned.

Grade A nonfat dry milk was the shining star this week and climbed to a Thursday close at $1.7650 per pound, up 8.50 cents on the week so far, highest CME price in four years, July 1, 2022. It closed Friday at $1.68.

Dry whey was holding at last Friday’s close of 64 cents per pound, until it gained a penny Thursday, and hit 65 cents per pound, 20 cents above a year ago.