The Agriculture Department raised its 2026 milk production estimate for the fourth consecutive month in this week’s World Agricultural Supply and Demand Estimates (WASDE) and gave our first look into 2027. Department bean counters raised the 2026 forecast slightly, citing expectations of a larger cow herd but a slower growth rate in output per cow. Output in 2027 will be driven by higher milk per cow and a stable herd, according to the WASDE.

2026 production and marketings were projected at 235.4 and 234.4 billion pounds respectively, up 100 million pounds on both from a month ago. If realized, both would be up 3.7 billion pounds or 1.6 percent from 2025,

2027 production and marketings were projected at 236.0 and 235.0 billion pounds respectively. If realized, both would be up 600 million pounds or 0.3 percent from 2026.

The import forecast on a fat basis was raised on increased expectations for butter shipments, the WASDE stated. The skim-solids import forecast was lowered slightly on lower expected imports of milk proteins. The fat-basis export forecast was raised on higher expected exports of cheese and butter. Exports on a skim-solids basis were raised on increased shipments of cheese and whey products offsetting lower expected shipments of nonfat dry milk.

The 2026 price forecasts for cheese, nonfat dry milk and whey were raised from last month’s report, but the butter forecast was lowered to reflect recent prices. The Class III milk price average for 2026 was raised on increased cheese and whey prices and was projected at $17.00 per hundredweight (cwt.), up a dime from last month’s estimate, and compares to $18.01 in 2025 and $18.89 in 2024. The 2027 average was projected at $17.55 per cwt.

The 2026 Class IV price was also raised as higher nonfat dry milk prices will more than offset the effect of lower butter prices. It is expected to average $19.95 per cwt. in 2026, up $1.35 from last month’s report, and compares to $17.38 in 2025 and $20.75 in 2024. The 2027 average was projected at $18.60.

Commercial exports in 2027 were forecast to be higher than in 2026 on a fat and a skim-solids basis due to additional exports of cheese and whey products. Commercial imports were forecast to increase on both a fat basis and skims-solids basis due primarily to increases in imports of cheese and milk proteins.

Domestic use in 2027 is expected to increase on both a fat basis and skim-solids basis. Dairy product prices were forecast to be higher for cheese and butter, but lower for whey and nonfat dry milk compared with 2026, according to the WASDE.

Total corn use was forecast to fall 2 percent from a year ago on reductions to domestic use and exports. Food, seed and industrial use was forecast flat at 7.0 billion bushels. Feed and residual use was projected down to 6.1 billion bushels on smaller supplies and higher prices. Exports were forecast to decline 5 percent from a year ago to 3.2 billion. U.S. share of world trade is expected to decline modestly but remain above the average seen over the past several years, according to the WASDE. “The U.S. remains the largest exporter of corn by a wide margin.”

The soybean outlook shows higher supplies, crush, exports and lower ending stocks from the prior marketing year. The soybean crop was projected at 4.435 billion bushels, up 173 million from a year ago. Along with higher beginning stocks, supplies are 188 million bushels above the 2025/26 marketing year. Total U.S. production was projected at 130.4 million tons, up 4.2 million.

Exports were projected to rise to 1.630 billion bushels, an increase over 2025/26 when tariff measures curtailed shipments to China. U.S. exports are expected to rise in 2026/27 but the U.S. share of global trade is likely to continue its longer-term downward trajectory as large South American supplies, coupled with strong U.S. demand, limit export growth. 

Hopefully, President Donald Trump’s recent trip to China will result in some agreement over tariffs and other trade issues as well as some additional U.S. exports, not just of soybeans, but dairy products and a variety of other U.S. goods. The two have plenty to discuss, including the war in Iran and the thorny issue of Taiwan, even as President Xi stated that the U.S. and China should be “partners, not rivals.”

CME block Cheddar cheese hit $1.64 per pound Wednesday but it dropped 7 cents Thursday morning, falling to $1.57, 36 cents below a year ago, after closing Friday at $1.6225. The barrels, which had been holding at $1.60 since last Thursday, were offered 3 cents lower this week, and also dipped to $1.57, 31 cents below a year ago.

Dairy Market News reports that milk production is strong in the Central region. Spot milk was available, but some contacts reported lower volumes in their local area. Reported spot prices ranged mid-week from $4-under to $2-over class. Some contacts reported that strong demand from other processors was increasing those prices. Cheese production was unchanged, as plants continue to run full schedules. Retail cheese demand is strong, while food service sales are down year over year. Export cheese demand is strong. U.S. prices remain competitive, though some contacts said the price difference is slim and an uptick in domestic prices could cause export demand to decline.

Demand for spot milk in the West was not heavy from cheese makers as contractual intakes were generally covering strong production. Spot availability was mixed. Some manufacturers described their inventories as extremely tight. Domestic cheese demand is steady and international buying is strong, thus keeping prices stable, according to some.

Cash butter was trading Thursday at $1.6450 per pound, 69.75 cents below a year ago. It finished Friday at $1.6650. 76 loads had traded hands so far.

Central region cream production remains strong, according to DMN. Demand is strong from Class II and Class III processors. Spot cream sales to churns were somewhat light, though contacts reported an uptick in interest from purchasers in the Southwest. Butter production is strong, with some increasing production of 82 percent butterfat butter amid strong export demand. Retail butter sales are steady domestically, while food service interest is light, says DMN.

Milk and cream production were keeping butter churns busy in the West. Spot cream demand was stronger from butter makers. Butter production was strong, producing stock before holiday downtime later this month. Inventories are described as stable or increasing.