The Agriculture Department again raised its 2026 milk production estimate in the World Agricultural Supply and Demand Estimate report, based on increased cow inventories that more than offset slower growth in milk per cow. 

2026 production and marketings were projected at 235.3 and 234.3 billion pounds up 600 million pounds on both from a month ago. If realized, both would be up 3.6 billion pounds or 1.6% from 2025. 

Prices for cheese and nonfat dry milk (NDM) were raised for 2026 on recent price strength, strong domestic demand, and improved price competitiveness for cheese on the international market. Butter prices were lowered on recent price declines, and whey prices were unchanged. 

Class III prices were raised on higher cheese prices. Look for the 2026 Class III to average around $16.90 per hundredweight (cwt.), up 25 cents from last month’s estimate, and compares to $18.01 in 2025, and $18.89 in 2024.

Class IV prices were raised on higher NDM prices offsetting lower butter prices. The 2026 Class IV is projected to average $18.60, up $1.45 from a month ago, and compares to $17.38 in 2025 and $20.75 in 2024. 

HighGround Dairy warns “About 60% of the continental US is in drought conditions, according to the US Drought Monitor, as of March 31. This compares to just 43% a year ago on April 1, 2025. The Southeastern US is especially impacted, along with Arkansas, southern Texas, Colorado, Utah, Wyoming, and Nebraska. This has the potential to have an impact on crops and grazing in these regions. For staple crops like soybeans and corn, 44% of the potential growing area is in drought, while 65% of winter wheat is affected by drought,” says HGD.

So-called make allowances are draining dairy farm income due to changes made in federal milk pricing. So says Wisconsin-based American Dairy Coalition (ADC) which stated that the changes “Erased nearly 20 years of gradual modest progress in their milk checks, virtually overnight.”

The ADC called on the USDA to “bring transparency to the system filling comments with the Agricultural Marketing Service by the March 30 deadline on the rulemaking notice for mandatory, audited manufacturing cost and yield surveys tied to make allowances used in Federal Milk Marketing Order (FMMO) pricing formulas.

“These built-in processor credits now totaling $3 to $5 per cwt. continue to cut into farmer milk checks,” the ADC charged, and the filing builds on ADC’s earlier request for additional time. Despite a short 30-day window and limited outreach, dairy farmers responded. Of 76 total comments, about 60 came from individual producers.”

“Farmers showed up because this hits their milk checks directly,” says Laurie Fischer, ADC CEO. “Make allowances are not line-items farmers see when they review their milk check statements. They are embedded in the FMMO pricing formulas.”

CME Cheddar block cheese plunged 10.75 cents Wednesday and lost 1.25 cents Thursday, falling to $1.5525 per pound, lowest price in a month. That’s 19.25 cents below a year ago after closing last Thursday at $1.6725. The markets were closed for Good Friday. The barrels fell to $1.5725 Thursday, following their last Thursday finish at $1.5925, and are 23.25 cents below a year ago.

Central contacts tell Dairy Market News that large volumes of milk are readily available for the spot market. Farm output continues to trend higher as the spring flush begins. Many facilities ran busy schedules this week to build inventories after downtime last week due to the spring holidays. Class III spot prices at mid-week ranged $7-under to $2-under Class. Spot cheese purchases were slow to steady. Export demand was lighter but is expected to increase, says DMN.

Cheese output is stable to stronger and cheese inventories are not heavily building. Domestic demand was somewhat lighter to stronger while food service continues to be outpaced by demand from other sectors. Export demand is steady to strong.

CME butter sunk to $1.7275 per pound Wednesday, lowest since Feb. 18, 2026, but regained a penny Thursday, closing at $1.7375, 61 cents below a year ago. It closed last Thursday at $1.79. 84 loads have traded hands so far this week.

Cream production is strong in the Central region. Milk components are down but trend higher year over year. Butter manufacturers increased production after a slower week last week due to the spring holidays. Strong demand for cream from Class II and III manufacturers is keeping spot availability light. Demand for bulk butter remains strong amid favorable pricing, especially on the export market. Retail demand for butter is steady. Butter inventories are holding steady, with manufacturers keeping production in line with current demand, says DMN.

Domestic demand varies from steady to strong for bulk butter and from the retail sector. Some manufacturers report butter sales are up year over year. Export demand is strong. However, more challenging logistics and/or costs are causing hesitation for some international buyers, according to DMN.

Grade A nonfat dry milk topped $2 per pound Wednesday and hit $2.06 on Thursday, highest CME price since Feb. 25, 2014’s $2.07. It closed last Thursday at $1.9725. Thursday’s price is 89.25 cents above a year ago. The highest powder price ever was $2.16 per pound on Dec. 5, 2007.

Dry whey was at 70 cents per pound Thursday, up 1.25 cents on the week so far, and 23.50 cents above a year ago. It closed last Thursday at 68.75 cents per pound.

The global dairy price climb halted this week, ending six consecutive gains. The Global Dairy Trade weighted average fell 3.4% Tuesday, following a 0.1% increase March 17 and 5.7% on March 3. Volume fell to 36.4 million pounds, lowest since June 17, 2025, and down from 43 million pounds on March17. The average metric ton price slipped to $4,228 US, down from $4,330 on March 17.

Butter led the declines, down 8.1%, after inching 0.9% lower on March 17. Anhydrous milkfat was down 7.1%, after leading the gains last time with a 6.4% boost. GDT Mozzarella dropped 6.2%, following a 0.5% increase. Cheddar was down 3.1%, after inching 0.1% higher. 

Lactose was off 0.6%, following a 0.3% slip, and buttermilk powder was up 0.7%. Skim milk powder dropped1.6%, after jumping 5.2%, and whole milk powder was off 0.7%, after dropping 4% last time.

StoneX says the GDT 80% butterfat butter price equates to $2.7354 US per pound, down from $3.0392 on March 17. 

HighGround Dairy wrote “After months of hand-to-mouth buying to refill pipelines, escalating Middle East tensions have finally stayed key buyers’ hands heading into April, with uncertainty driving up the true cost of doing business. Commodity values are only one piece of the equation, layer in insurance, freight, and storage, and it becomes expensive to move product and hold it during a period of potential demand erosion.”

The National Milk Producers Federation (NMPF) Exports & Trade (NEXT) member cooperatives accepted 413 offers of export assistance in the first quarter of 2026, helping capture sales contracts for 50.7 million pounds of American-type cheese, 14.3 million pounds of butter, 3.9 million pounds of anhydrous milkfat, 15 million pounds of whole milk powder, and 2.5 million pounds of cream cheese. 

National Milk also reports that after signup rates were lagging previous years for the Dairy Margin Coverage Program, a full-court communications press helped push enrollment levels above year-ago levels.

“Participation in USDA’s Dairy Margin Coverage program rose to 13,349 this year, up from 12,989 in 2025,” says NMPF. “Currently, 57% of dairy farms are enrolled, compared to 53% last year.” 

“The gain came after a comprehensive NMPF effort to get the word out and the growth highlights that farmers continue to recognize the importance of this safety net and benefit from its support. Congress improved DMC as part of farm-support provisions in last year’s budget reconciliation bill, with an updated production history and an increase in the amount of milk covered under the program.”

“As that effort was under way, the February margin under USDA’s Margin Coverage Program was generating another month of payments, with a reported margin for the month of $8.46 per cwt, up 65 cents per cwt from the month before. Farmers who elected coverage at the maximum $9.50 per cwt level received a payment of $1.04 per cwt for the month,” according to NMPF.

“An 80 cent per cwt increase in the all-milk price from January drove the higher margin, which was tempered by 15 cent per cwt gain in the February DMC feed cost formula, due primarily to a higher soybean meal price.”

The DMC Decision Tool on the USDA website projected at the end of March that February’s payment might be the year’s last, or a possible small one for March. USDA expected margins to average $10.61 per cwt for the year, says NMPF.

Bovine tuberculosis (TB) has been detected in two herds in Michigan. The Michigan Department of Agriculture and Rural Development (MDARD) reported the herds from Alpena and Presque Isle counties and said the cases were detected during annual whole-herd surveillance tests.

“Both herds are located in areas where bovine TB is known to be present in the free-ranging white-tailed deer population, and both herds illustrate why it is so crucial to consistently perform surveillance testing and actively manage this disease,” said State Veterinarian Nora Wineland. 

“The most effective way to prevent bovine TB from infecting cattle herds is to protect cattle from contact with wild deer and the disease they could be carrying, which takes the collective efforts of hunters, producers, industry, and government agencies in Michigan.”