Record Dairy Exports Highlight Latest USDA Report
Published: Friday, August 28, 2026
Dairy demand remained strong in June according to the USDA's latest Supply and Utilization data. Starting with cheese, disappearance totaled 1.24 billion pounds, up .9% from June 2025.
HighGround Dairy reported that record exports narrowly offset the loss in domestic consumption. Domestic use was down 1.5%. HighGround cited "poor food service demand, particularly for pizza, while even grocery purchasing ticked lower. Inexpensive U.S. cheese compared to global competitors, however, kept exports moving at a strong clip." Exports totaled 142.4 million pounds, up 23.8% from a year ago, and up 23.8% year to date (YTD).
Butter utilization hit 228.4 million pounds, first time ever to top 200 million pounds for the month of June, according to HGD, and up 10.3% from a year ago. Domestic usage was up 8.4% while exports were up 35.2% from a year ago.
Nonfat and skim milk powder usage totaled 195.8 million pounds, down 7.6%. Domestic use was up 11.1%, while exports dropped 19.1%. HighGround blamed high U.S. prices and volatility as June exports fell to their lowest 30-day adjusted level since January 2025, and the smallest for the month since 2019.
Dry whey disappearance slipped to 79.1 million pounds, down 2.7% from a year ago. Domestic use was down 47.3%, while exports were up 47.1%.
HighGround stated that export volumes and dollar values indicate that the data may include lower-value items like whey permeate. "Given this possibility, the data becomes more convoluted, meaning June's impressive upswing may not necessarily be greater international demand for U.S. dry whey. Domestic use is substantially lower because Americans prefer high-protein products, which come from whey protein concentrate and whey protein isolates rather than sweet whey powder so the outcome is not entirely unexpected."
China's July demand numbers had a lot of negatives. Combined whole milk and skim milk powder imports were down 40.3% from a year ago. HighGround Dairy points out, "Whole milk powder imports dropped to their lowest level since last October and marked the weakest July volume observed since 2011. Given the growth in inventories within China, paired with lackluster consumption, the pullback is not all that surprising, especially after Chinese buyers pulled demand forward aggressively earlier in the year."
Import volumes remain higher on year-to-date basis, up 3.2%.
"However, domestic milk and milk powder production have dropped like a stone," said HGD, "while buyers are becoming increasingly nervous about potential El Niño impacts later in the year. That combination is expected to bring China back to the market for additional product, and we saw some evidence of that buying interest come through at this week's GDT event."
Whey product imports were down 30.6% and down 7.1% year to date.
Butter imports were up 13.4%, and up 11.5% year to date. Cheese was down 30.1%, but up 16% YTD.
The September federal order Class I base milk price was announced by the USDA at $17.04 per hundredweight, down $1.72 from August, $1.66 below September 2025, and the lowest Class I price since March. It equates to $1.47 per gallon, down from $1.61 a year ago. The nine-month Class I average stands at $18.29, down from $19.37 a year ago, and compares to $19.67 in 2024.
"Dairy margins were flat to slightly stronger through the first two weeks of August as strength in milk and powder markets helped offset higher projected feed costs," according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.
"Class III and Class IV futures found support during the period," the MW reported. "With powder markets particularly strong as tighter availability and improving demand provided a bullish catalyst. The seasonal return to school should also provide support for fluid milk, cheese, and yogurt demand as August marks the peak of back-to-school purchasing across much of the country."
The MW warned of a more challenging outlook for feed costs, based on the recent World Agricultural Supply and Demand Estimates (WASDE) report, which I detailed last week.
Last Thursday's Class III futures settlements had the August contract at $16.63 per hundredweight; September, $16.80; October, $17.13; November, $17.31; with the peak for the year in December at $17.40 per hundredweight.
Meanwhile, the Agriculture Department's monthly Livestock, Dairy and Poultry Outlook, issued Aug. 18, mirrored milk price and production projections in the Aug. 12 WASDE. The outlook stated, "Dairy replacement heifer supplies remain tight. According to the recent USDA NASS Cattle report, milk replacement heifers totaled 3.6 million head as of July 1, an increase of 100,000 head from July 1, 2025. The ratio of replacement heifers to milk cows remained at 37% as of July 1, compared to a year ago."
Based on dairy cow numbers and dairy slaughter, the 2026 forecast for the annual average number of dairy cows was revised upward by 5,000 head to 9.665 million. 2026 milk per cow is expected to average 24,480 pounds, 15 pounds lower than the previous forecast.
The outlook projects the 2027 dairy herd to average 9.695 million head, unchanged from last month's projection. However, the forecast for yield per cow was lowered 10 pounds to 24,550 pounds.
Checking the week's CME prices, block Cheddar closed last Friday at $1.5275 per pound, down 7.25 cents on the week, and 22.25 cents below a year ago, as traders anticipated the afternoon's July Milk Production report and last Monday's July Cold Storage numbers. The barrels closed last Friday at $1.5650, up a quarter-cent, but 19.50 cents below a year ago. Sales totaled 10 loads of block and no barrel.
StoneX dairy broker Dave Kurzawski expects milk output to slow from 2.3% in June to 1.8% in July. "Farmers likely continued to add cows with the herd forecast up 1.8%, but hot and smoky weather likely dented milk production per cow which we expect will slow from plus .3% year over year in June to flat against last year. Components in the milk continue to grow."
"The protein content of milk pooled in Federal Milk Market Orders in July was up 1.2% from last year which was weaker than the plus 1.7% in May and plus 1.6% in June," said Kurzawski. Fat content in July was up 1.4% from last year, stronger than June which was only up 1.1% but weaker than May which was up 1.7%. I'll have complete milk production details next week.
Speaking of milk output, cooler than usual August weather in the Central region is improving cow comfort and supporting steadier milk flows, according to Dairy Market News. Contacts say spot milk is available and volumes are moving at both sides of the price range. Some reported purchasing spot loads below class prices due to plant down time. Central region spot prices lowered on both ends of the range from $1 under to $3 over, at mid-week. Cheese demand is good, says DMN, and inventories are high due to active cheese production schedules.
Retail and food service cheese demand was holding steady in the West. Milk availability was mixed, with milk readily available in California, but more limited in the Northwest due to ongoing hot weather, smoke and haze. No changes are reported in production capabilities. Cheese markets are mixed, says DMN.
Cash butter fell to $1.43 per pound last Wednesday, lowest since July 29, but it closed last Friday at $1.4625, a quarter-cent higher on the week, and 77.25 cents below a year ago. There were 60 loads finding new homes on the week.
Cream availability was unchanged from last week in the Central region and remains somewhat mixed, according to DMN. Class II processors continue to purchase the bulk of the spot cream, constraining some loads for making butter. Churns are running primarily on contracted cream, with limited reliance on spot loads. Demand is steady, supported by domestic interest and firm export activity. Contacts note inventories of 80% butterfat butter remain high, whereas 82% product is tight.
Butter manufacturers in the West report milk and cream production continues to meet their needs. California milk and cream is readily available. Northwest milk production is tighter, due to ongoing smoke, haze and fires. This is reducing cow comfort, resulting in decreased fat components in the milk and required bringing in marginal amounts of outside cream. Spot loads have been easy to obtain. Butter production is strong and churns are running at full capacity. Unsalted butter for international sale is a priority, due to strong export demand. Domestic demand remains steady, according to DMN.
Grade A nonfat dry milk continued its climb higher, hitting $1.82 per pound last Thursday, highest since June 10, but it finished last Friday at $1.80, up 5.50 cents on the week, and 54 cents above a year ago. There were 41 sales for the week. Hard to believe it started the year at $1.1750 per pound.
Dry whey closed the week 1.25 cents higher, at 70.25 cents per pound, 14.75 cents above a year ago. There were two sales on the week at the CME.
USDA's latest weekly slaughter report showed 52,900 dairy cows sent to slaughter the week ending Aug. 8, up 1,800, or 3.5%, from a year ago. Year to date, 1,651,600 head had been culled, up 69,100, or 4.4%, from a year ago.
Tyson Food's announcement of a restructuring of its beef operations has raised a lot of eyebrows around the country as beef prices remain high. The Aug. 14 Daily Dairy Report stated that Tyson will "focus on three strategically selected hubs in the central U.S.—in Nebraska, Kansas and Texas. The company's press release cited the nationwide cattle shortage as the reason." Tyson announced that two facilities, one in Illinois and the other in Utah, will be shuttered and has put its Pasco, Wash. plant up for sale.
The company noted the restructure will allow it to "maintain a similar level of cattle harvesting across a more efficient and modern network," according to the DDR, which pointed out that the U.S. beef herd is at its lowest level in decades. The latest Cattle Inventory report showed little rebuilding, the DDR warned, and forces difficult decisions for meatpackers.
The high beef prices have been crucial for financially struggling dairy farmers but tough to swallow for consumers at the grocery store. This latest development could have long lasting repercussions.
In politics, the U.S. and Canada worked on ironing out differences in trade policy last week after the Trump administration threatened additional tariffs if agreement could not be reached.
The International Dairy Foods Assn. president and CEO, Michael Dykes, stated, "IDFA appreciates the Trump administration's continued focus on ensuring that U.S. dairy farmers, processors and exporters receive the market access promised under the U.S.-Mexico-Canada Agreement, including through fair and transparent administration of Canada's dairy tariff-rate quotas. We believe a strong and enforceable USMCA is essential to the growth of North American dairy trade and we are encouraged that U.S. and Canadian officials are re-engaging to address longstanding U.S. concerns with Canada's dairy policies. This announcement provides additional time for the United States and Canada to reach meaningful solutions to these issues."
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