USDA Raises Milk Production Forecast for 2025, 2026
Published: Friday, July 18, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department again raised its 2025 and 2026 milk production forecasts in its latest World Agricultural Supply and Demand Estimates report issued last Friday. The raise was based on higher cow inventories and an increased rate of growth in milk per cow as evidenced in the latest Milk Production report.
2025 production and marketings were projected at 228.3 and 227.3 billion pounds, respectively, up 500 million on both from a month ago. If realized, both would be up 2.4 billion pounds, or 1.1%, from 2024.
2026 production and marketings were projected at 229.1 and 228.1 billion pounds, respectively, up 900 million pounds from a month ago. If realized, both would be up 800 million pounds, or .4%, from 2025.
The 2025 price forecast for cheese was lowered, based on recent prices. Butter, nonfat dry milk (NDM) and whey prices were increased from the previous month's forecast based on robust demand.
The 2025 Class III milk price forecast was lowered, as lower cheese prices more than offset higher whey prices. The 2025 average was projected at $18.50 per hundredweight, down 15 cents from last month's estimate, and compares to $18.89 in 2024 and $17.02 in 2023. The 2026 average was projected at $17.85, up a nickel from a month ago.
The Class IV price was raised on higher butter and NDM prices. It is expected to average $19.05 in 2025, up 20 cents from last month's estimate, and compares to $20.75 in 2024 and $19.12 in 2023. The 2026 average was estimated at $18.60, up 40 cents from a month ago.
The 2026 butter, NDM and whey prices were raised while the cheese price was unchanged. The Class III price was raised on the increased whey prices, while the Class IV price was raised on the higher butter and NDM prices.
Meanwhile, President Trump's tariff pause ended last week after allowing trading partners three months to make a new deal with the U.S. Letters were sent to over 20 countries informing them of their new tariff and urged them to make a deal, according to Lucas Fuess, Rabobank senior dairy analyst.
Speaking in the July 14 Dairy Radio Now broadcast, Fuess said the rate varies country to country, as do the deadlines. He said this doesn't signal an escalation as far as dairy is concerned. Trade with Mexico remains uninhibited due to the U.S., Mexico, Canada trade agreement, although Canada will likely see higher duties on some products.
The Canadian supply management program remains a protective barrier to U.S. dairy products, though Canada buys a fair amount of U.S. butter. And we await more details on trade talks with China, says Fuess.
Reuters reported that Trump also warned that he would impose an additional 10% tariff on "countries aligning themselves with the anti-American policies of the BRICS group of nations." The group is made up of Brazil, Russia, India, China, South Africa, Egypt, Indonesia, Iran and United Arab Emirates.
Meanwhile, Agriculture Secretary Brooke Rollins said in a news conference that there will be no amnesty for migrants in the U.S. and that mass deportations will continue. The administration had given some mixed signals on the issue and appeared open to some exceptions in the agriculture and hospitality industries.
USDA also announced the National Farm Security Action Plan, which it says "Elevates American agriculture as a key element of our nation's national security, addressing urgent threats from foreign adversaries and strengthening the resilience of our nation's food and agricultural systems."
"We feed the world. We lead the world. And we'll never let foreign adversaries control our land, our labs or our livelihoods," Rollins stated. "This Action Plan puts America's farmers, families and future first."
And, in a reversal, Mexico's National Service of Agro-Alimentary Health, Safety and Quality (SENASICA) last Wednesday reported a new case of New World Screwworm (NWS) in Ixhuatlan de Madero, Veracruz in Mexico, which is about 160 miles northward of the current sterile fly dispersal grid, on the eastern side of the country and 370 miles south of the U.S./Mexico border.
"This new northward detection comes approximately two months after northern detections were reported in Oaxaca and Veracruz, less than 700 miles away from the U.S. border, which triggered the closure of our ports to Mexican cattle, bison and horses on May 11, 2025," a USDA press release stated.
Two weeks ago, USDA announced a risk-based phased port reopening strategy for cattle from Mexico. However, "This newly reported NWS case raises significant concern about the previously reported information shared by Mexican officials and severely compromises the outlined port reopening schedule of five ports from July 7-Sept. 15. Therefore, in order to protect American livestock and our nation's food supply, Secretary Rollins has ordered the closure of livestock trade through southern ports of entry effective immediately."
Last but not least, the "Big Beautiful Bill" got a thumbs up from the National Milk Producers Federation for its dairy and agriculture provisions, which it says will "create greater financial certainty for producers."
The Senate Ag Committee's portion of the bill includes numerous NMPF-backed requests including renewing the Dairy Margin Coverage program through 2031; updating its production history calculation to be based on the highest production year of 2021, 2022 or 2023; and extends the ability for producers to receive a 25% premium discount for locking in their coverage for the duration of the bill.
"It also funds USDA to conduct mandatory dairy processing cost surveys every two years to provide better data on future make allowances," said NMPF, "folds remaining Inflation Reduction Act conservation dollars into the farm bill baseline, resulting in increased long-term funding for popular, oversubscribed programs like the Environmental Quality Incentives Program, and provide new trade promotion funding based on current programs that return well over $20 in export revenue for every dollar invested in the programs. Funding is increased for animal health programs that help prevent, control and eradicate animal diseases, such as the outbreak of H5N1 in dairy cattle," according to NMPF.
The bill will impact the Supplemental Nutrition Assistance Program (SNAP), which provides funding for low-income households to purchase food. Dairy is a major category of those purchases, according to HighGround Dairy, and the USDA says about 42 million people participated in the program in 2023.
A key aspect included substantial reductions to SNAP funding, says HGD, and "The largest cuts since the food stamp program began in 1939, impacting millions of people who currently receive benefits. Cuts are estimated differently by various news sources," according to HGD. However, the program has been slashed significantly to the tune of about $200 billion over the next 10 years.
"The age threshold for mandatory work participation has been raised from 54 to 64 years old, and parents with children over the age of 13 will now also be subject to these requirements. In contrast, previously, parents with dependents were generally exempt from this requirement. The Congressional Budget Office estimated that these changes would cut more than 2 million individuals from the program," said HGD. "Moreover, beginning in 2028, the changes could shift some of the financial responsibility for SNAP to the states."
The USDA's latest weekly slaughter report showed 45,100 dairy cows were sent to slaughter the week ending June 28, same as the previous week, but 1,400, or 3%, less than a year ago. Year to date, 1,287,900 head had been culled, down 100,800, or 7.3%, from a year ago.
Cash block Cheddar closed last Friday at $1.66 per pound, down 2.50 cents on the week and 23 cents below a year ago. The barrels saw their Friday finish at $1.6750, 4.50 cents lower, 17.50 cents below a year ago, and an inverted 1.5 cents above the blocks. Sales amounted to 42 loads of block and nine of barrel.
Central region cheese production picked up following the holiday weekend, according to Dairy Market News. A few contacts noted that lighter milk output in recent weeks was reducing their ability to run full schedules. Some are searching for spot milk to meet production needs and report that it's somewhat difficult to obtain. Mid-week prices ranged from flat to $2-over. Domestic cheese demand is mixed, with retail and food service demand light. Export demand is strengthening as international prices remain at a premium to US levels, says DMN.
Class III spot milk demand is strong from cheesemakers in the West, but milk availability is tighter with seasonally lower milk output throughout the region. Downtime at other production facilities shifted some milk availability back to cheese producers. Cheese production varied from steady to stronger. Demand for cheese is steady domestically but food service sales continues to lag behind retail sales. International demand is steady to strong, according to DMN.
CME butter hit $2.62 per pound last Monday, highest price since Nov. 13, 2024. It then reversed direction and fell to $2.5625 last Wednesday, but finished last Friday at $2.59, down 1.50 cents on the week and 51 cents below a year ago on 17 sales.
Central region milk output is declining and components are down from prior weeks but remain above a year ago, according to DMN. Cream is available for purchase, but contacts say spot volumes are less excessive than in previous weeks. Cream multiples are increasing in the Central region, and contacts say demand for cream remains strong from both butter and ice cream makers. Butter production picked up following the holiday weekend. Domestic butter demand is light. Export demand is strong as domestic prices remain below global prices.
Downtime in parts of the West resulted in more cream availability. Butter production was steady to stronger. A few manufacturers say cream prices were keeping them from fuller capacities. Butter demand is steady domestically. Some manufacturers indicate retail demand is up year-over-year while food service demand was down at the start of July. Export demand is strong.
Grade A nonfat dry milk closed last Friday at $1.2675 per pound, up .75 cents on the week and 8.75 cents above a year ago, with nine sales reported for the week.
Dry whey saw its close at 56.75 cents per pound down 4 cents on the week but 5.75 cents above a year ago, on 10 CME sales for the week.
A declining labor force participation, lower birth rates and a collapse in net migration are combining to squeeze the U.S. labor supply, according to a new quarterly report from CoBank's Knowledge Exchange. "The looming labor shortage could begin to weigh on businesses and strain economic growth as soon as later this year. With the labor supply about to get tighter, businesses and industries operating in rural America should be increasing their focus on technology to overcome labor availability challenges," the report warned.
"Barring an unforeseen change in labor force participation rates or immigration policies, the pool of available workers is set to shrink precipitously in the next few years," said Rob Fox, director of Co-Bank's Knowledge Exchange. "The problem will be even more acute in states with lower population growth in the Upper Midwest, Corn Belt and the Central Plains. Increased adoption of technology, namely AI and robotics, will likely be at the core of any strategy to address the oncoming labor squeeze," he said.
"The labor force participation rate has trended downward since 2000, and the trend may be accelerating. Nearly 2.5 million working-aged people dropped out of the labor force in the past eight months alone. The U.S. fertility rate has plummeted since the Great Financial Crisis in 2008, reducing the number of native-born citizens entering the workforce."
The loss of those new workers coincides with baby boom generation retirements, amplifying the impact on the overall labor supply. Those two factors, combined with more restrictive immigration policies and aggressive deportation efforts, will put significant stress on the U.S. labor supply with the potential to impede economic growth.
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