The Agriculture Department again raised its 2026 and 2027 milk production estimates in its latest World Agricultural Supply and Demand Estimates, based on the latest Milk Production report and raised cow inventories for both years. Output per cow was reduced slightly for 2026 but unchanged for 2027.

2026 production and marketings were projected at 236.6 and 235.6 billion pounds respectively, up 200 million pounds on both from a month ago. If realized, both would be up 4.9 billion pounds or 2.1 percent from 2025.

2027 production and marketings were projected at 238.1 and 237.1 billion pounds respectively, up 1.1 billion on both. If realized, both would be up 1.5 billion pounds or 0.6 percent from 2026.

Price forecasts for 2026 were lowered for nonfat dry milk (NDM), cheese and butter due to continuing strong growth in the milk supply. The whey price was unchanged from last month. The Class III and Class IV milk price forecasts were both lowered.

Forecasts for 2027 were lowered on NDM, cheese and butter, while the price of whey was unchanged. As a result, the Class III and Class IV price forecasts were both lowered as well.

Look for the 2026 Class III price to average $16.15 per hundredweight (cwt.), down 45 cents from last month’s projection, and compares to $18.01 in 2025 and $18.89 in 2024. The 2027 average was lowered 50 cents to $17.05.

The 2026 Class IV average was projected at $18.40, down 95 cents from a month ago, and compares to $17.38 in 2025 and $20.75 in 2024. The 2027 average was projected at $17.40, down $1.20 from last month’s report.

Summer heat is taking a toll on milk production and its components, but the Daily Dairy Report’s Monica Ganley Quarterra stated in the July 10 Milk Producer Council newsletter that U.S. cows aren’t the only ones suffering.

“Record high temperatures and dry conditions are also weighing on milk production in Europe,” wrote Sharp. “While monthly data won’t be available for some time, weekly collection data is beginning to show dramatic declines, particularly in places like France and the UK where the heat wave has been severe. Yet, even as heat stress accelerates the typical seasonal decline in production in the Northern Hemisphere, global milk production remains robust. Producers in South America and Oceania continue to post volume gains, further contributing to global supply,” according to Sharp.

U.S. fluid milk sales headed south in May, likely impacted by some school closings for summer, after inching up 0.3 percent in April. The USDA’s latest data showed packaged sales at 3.5 billion pounds, down 2.1 percent from May 2025.

Conventional product sales came in at 3.2 billion pounds, down 2.2 percent from a year ago. Organic sales, at 250 million, were down 1.0 percent from a year ago, and represented a typical 7.2 percent of total milk sales in the month.

Whole milk sales totaled 1.3 billion pounds, up 0.1 percent from a year ago, and up 2.4 percent for the five month period. Whole milk represented 37.1 percent of total sales for the month. Skim milk sales, at 134 million pounds, were down 11.3 percent from a year ago and down 8.9 percent year to date.

Packaged fluid sales, January to May, totaled 17.8 billion pounds, down 0.5 percent from 2025. Conventional product sales totaled 16.5 billion pounds, off 0.4 percent from a year ago. Organic products, at 1.3 billion pounds, were down 0.9 percent, and represented 7.1 percent of total milk sales for the year so far. The figures represent consumption in Federal market orders which account for about 92 percent of total fluid sales in the U.S. About 7.5 percent of U.S. fluid sales are consumed in schools.

Block Cheddar climbed to $1.6050 per pound Tuesday, highest CME price since May 13, but it lost a penny Thursday, and was trading Thursday at $1.60, 4.25 cents below a year ago, after closing Friday at $1.5475. The barrels were at $1.6025 Thursday, highest since May 6, and 5.75 cents below a year ago, following a Friday finish at $1.56.

High temperatures in the Central region continue to negatively impact cow comfort and milk output, according to Dairy Market News. Spot milk offers were light in most of the region this week, though some cheesemakers secured loads at below-Class prices from plants with unscheduled downtime. Spot prices at mid-week ranged from $2.00-under to $5-over Class. Cheese production was lighter this week as lighter milk output and limited spot availability had an impact. Demand for cheese was steady in both domestic and international markets. Barrel availability was tighter than blocks. Some cheesemakers anticipate that lighter production will cause spot inventories to tighten in the coming weeks.

Peak spring milk production is in the rearview mirror as temperatures also heated up in the West this week. Idaho handlers said they hit the hottest weekend of the year thus far. Cheese manufacturers received contractual milk, but Class III spot loads were tighter. Spot demand is moderate from cheesemakers. Cheese output was stable and on pace or somewhat ahead of demand for most types. Demand from domestic and international buyers was steady. Retail demand remains heavier than food service demand, according to DMN.

Cash butter was at $1.5875 per pound Thursday, 92.50 cents below a year ago, with 46 loads sold on the week so far. It closed Friday at $1.65.

Central region contacts report that milk component levels and cream production are declining at a more rapid pace than expected.

Spot cream offers were limited, and Class II purchasers were securing most of it. Some butter makers were looking for additional cream to keep churns active. Butter output was steady to lighter, as some plants had downtime this week. Domestic butter demand is unchanged and export interest is strong, says DMN.

Western butter manufacturers report that cream production is keeping up with contractual expectations and spot demand. Butter production is strong. A few butter makers noted that demand for unsalted butter was outpacing production. Butter demand from domestic and international buyers is steady, says DMN.

Dry whey lost a penny Monday but regained 2 cents Tuesday and was trading at 69.50 cents per pound Thursday, 13.75 cents above a year ago, after closing Friday at 69 cents per pound.

A new quarterly report from CoBank warns that “Price increases across most food and beverage categories are tightening household budgets and prompting consumers to make wholesale changes in how they shop. A growing number of Americans are trading down to lower cost food options, reducing discretionary purchases or buying fewer groceries altogether.”

“Inflationary pressures and shifting consumer buying patterns are rippling through the US food chain,” says CoBank, “Reshaping strategies for retailers, manufacturers and suppliers.”

Billy Roberts, food and beverage economist with CoBank, said, “While May’s increase in the food price index was tepid, overall food prices are up 2.7 percent from May 2025 and roughly 26 percent higher than five years ago. Cumulatively, food price increases are proving to be the definitive, everyday stressor for consumers and they’re responding decisively by choosing lower cost options like private label brands, shopping at discount retailers or simply buying less.”