USDA Trims Milk Production Estimates for 2026, 2027
Published: Friday, October 16, 2026
The Agriculture Department lowered its 2026 and 2027 milk production forecasts slightly in last Friday morning's World Agricultural Supply and Demand Estimate report, based on the latest Milk Production report. Cow inventories were lowered for 2026 and output per cow was lowered for both 2026 and 2027.
2026 production and marketings were projected at 236.9 and 235.9 billion pounds respectively, down 300 million pounds on both from last month's report. If realized both would still be up 5.2 billion pounds, or 2.2%, from 2025.
2027 production and marketings were projected at 238.4 and 237.4 billion pounds respectively, down 200 million pounds on both. If realized, both would be up 1.5 billion pounds, or .6%, from 2026. I'll have more details next week.
U.S. dairy product output was down some in August but still well above a year ago, as August milk production was down from July, as were components, and more milk went into the bottle or the carton for school reopening.
The USDA's latest Dairy Products report showed August cheese production totaled 1.245 billion pounds, down 17.9 million pounds or 1.4%, from July, but up 17.2 million, or 1.4%, from August 2025. Year to date, U.S. vats produced just under 10 billion pounds, 9,998,787,000 to be exact, up 2.3% from a year ago.
The Oct. 5 Daily Dairy Report stated the increased cheese output was "driven by a 3.7% increase in Italian-style cheeses that offset a .9% decrease in American-style cheeses." The DDR adds: "Manufacturers took advantage of favorable milk prices and made Parmesan, which is typically aged for a year, increasing output by nearly 26%, or 10.9 million pounds, versus last year."
Looking at the top three cheesemakers, Wisconsin produced 303.1 million pounds, down 1.8% from July, but 2.4% above August 2025. California produced 197 million, down 3.8% from July, and 6.6% less than a year ago. Idaho provided 85.6 million pounds, up .7% from July, but .4% less than a year ago.
Italian-style cheese totaled 541.3 million pounds, down 1.7% from July, but 3.7% more a year ago, putting YTD output at 4.3 billion pounds, up 4.2% from 2025.
Mozzarella, at 420.9 million pounds, was up 1.8% from a year ago, with YTD output hitting 3.4 billion pounds, up 2.3% from 2025.
American cheese output slipped to 477 million pounds, down .6% from July, and down .9% from a year ago. YTD 3.9 billion pounds had been produced, down .1% from a year ago.
Cheddar, the cheese sold daily at the CME, saw production fall to 325.9 million pounds, down 3.1 million, or .9%, from July, and down 3 million, or .9%, from a year ago. YTD Cheddar hit 2.7 billion pounds, down .2% from 2025. The lower Cheddar output has helped keep CME prices from falling more than they have.
Butter production slipped to 187.4 million pounds, down 1.7 million pounds, or .9%, from July, but was up 11.1 million pounds or 6.3%, from a year ago. YTD, 1.7 billion pounds had been churned, up 6%, from a year ago.
Yogurt production totaled 468.3 million pounds, up 1.6% from a year ago, with YTD output hitting 3.7 billion pounds, up 5.4%. Hard ice cream, at 64.9 million pounds, was down 2.3% from a year ago, with YTD output hitting 517.3 million pounds, up 2.8%.
The abundant cheese production has resulted in plenty of whey and there's good demand for it. Dry whey output came in at 75.1 million pounds, down 6.1 million pounds or 7.4% from July, but up 5.6 million, or 8.2%, above a year ago. Output for the eight months hit 620.1 million pounds, up 8.5% from a year ago. Whey stocks fell to 61.3 million pounds, down 7.1 million, or 10.4%, from July, but up 10.9 million pounds, or 21.6%, from a year ago.
Another in-demand product right now with CME prices approaching record highs, nonfat dry milk output fell to 132.2 million pounds, down 32.9 million pounds or 19.9% from July, but up 11.5 million or 9.6% from a year ago. YTD output hit 1.3 billion pounds, up 10.5%. Stocks plunged to 216.3 million pounds, down 16.5 million, or 7.1%, from July, and down 8.1 million pounds, or 3.6%, from 2025.
Skim milk powder production climbed to 28.9 million pounds, up 6.9 million pounds, or 31.4%, from July, but was down 14.4 million, or 33.1%, from a year ago. YTD skim milk powder hit 256.8 million pounds, down 21% from a year ago.
With such strong milk and dairy product production, exports remain crucial, especially for cheese. U.S. exports increased 2% on a milk solids equivalent basis in August, according to the U.S. Dairy Export Council (USDEC), which stated "It was a welcome return to growth after a combined 4% decline in June and July. August U.S. export value increased 10% year over year to $919 million."
Cheese sailings totaled 130.1 million pounds, up 9.5% from August 2025 on a 30-day adjusted basis. They were down 9.6% from July, however, which posted an exceptionally high number.
HighGround Dairy says this was the first July-to-August decline since 2021. "The U.S. price advantage over Europe and Oceania narrowed over the summer, which may have contributed to the slowdown, with purchases easing month-on-month from key customers including Mexico, South Korea, Japan and Australia."
Butter exports totaled 15.5 million, down, 12.2% but up 55.8, year to date.
Dry whey exports, at 66.3 million pounds, hit a record for the second month in a row, according to HighGround, and increased by 4.4 million pounds or more year over year to China, Canada and Vietnam. "U.S. whey has traded at a significant discount to European product since second quarter 2026," says HGD, "Which has supported strong export volumes."
Exports of nonfat/skim milk powder fell to 100.8 million pounds, down 19.3% from a year ago, as high US prices sent buyers elsewhere, and put exports at their lowest level since June 2019, according to HGD. "Some of August's volumes were likely booked in May, when CME spot prices hit an all-time high and carried roughly a 60-cent per pound premium to European and Kiwi product."
USDEC says, "U.S. suppliers saw healthy growth in milk protein concentrate (MPC) and low-protein whey, as global protein demand continued to drive demand. Year-over-year exports of MPC had their biggest month in nearly four years, with volume rising 36% to 5,225 metric tons (MT) in August. Protein-fortified product manufacturers appear to be turning to MPC, given the supply and price situation for WPC80+. U.S. MPC shipments to Brazil jumped 533%, and exports to Japan rose from 2 MT in August 2025 to 222 MT this August."
Overall, it remains to be seen how well U.S. exports keep up with continued high milk and dairy product production.
Checking prices, CME Cheddar block cheese closed last Friday at $1.3850 per pound, up 7 cents on the week, highest in three weeks, but 31.50 cents below a year ago. The barrels held at $1.4525, where they have been since September 16, 25.75 cents below a year ago. There were 41 loads of block sold last week.
Dairy Market News reports that milk supplies in the Central region continued loosening as milk output was steady to slightly higher. Distribution challenges persist across the region as elevated diesel prices are contributing to rising transportation concerns. Spot milk availability varies by area; available in the Midwest, but remains tight in the Southwest. Spot prices at mid-week ranged 50 cents-over to $4-over class. Cheese processors across the region indicate strong demand and steady production, with increased interest in Mozzarella and provolone. Colored Cheddar markets remain steady. Inventories for both blocks and barrels are described as heavy, and spot loads of each are readily available.
Cheese manufacturers in the West report milk needs are being met and spot milk remains generally available. Most plants maintained strong production. Spot cheese is available and inventories remain strong. Domestic demand is mixed, with retail and food service down. Contacts note slight improvements in food service following the latest Restaurant Performance Index.
Export demand continues to perform well, with premium prices reported in markets such as Asia and Mexico. Freight costs continue to influence cheese prices throughout production and delivery, according to DMN.
The CME butter meltdown continued, falling to $1.25 per pound last Thursday, lowest since Feb. 1, 2021, but regained 2.50 cents last Friday to close at $1.2750, 6.50 lower cents on the week, and 33 cents below a year ago, on 37 loads traded.
Cream supplies are holding steady in the Central region and spot loads are accessible, says DMN. Contacts indicate processing facilities are taking in heavy volumes of contracted cream, while cream multiples are softening nationwide. Market participants continue reporting strong cream movement to Mexico. Butter churns remain active, despite persistently low butter prices. Inventories of 80% butterfat product remain heavy, while 82% stocks are light.
Cream availability remains steady in the West. Some contacts believe prices may be peaking, but expect more clarity in the coming weeks. Butter inventories are not tight and plenty of product is available. Churns continue to run seven days a week. Export demand has picked up significantly and the relatively low butter price continues to support export growth. Domestic demand remains soft, with markets still feeling sloppy and more buyers focused on cheese than butter. Freight remains difficult, with rates jumping roughly 50% year over year. "These increases are reshaping the marketplace and limiting long-distance hauling due to wider regional price spreads," says DMN.
Grade A nonfat dry milk jumped 4.75 cents this week, closing last Friday at $2.2675 per pound, highest since May 18 and just 2.75 cents shy of the all-time record high, and $1.14 above a year ago. There were 16 sales posted on the week.
Dry whey is also trading in the clouds, closing Friday at 86 cents per pound, highest since Feb. 8, 2022, up 3.5 cents on the week, and 22.50 cents above a year ago. It peaked at 86.75 cents on Feb. 7, 2022. There was one sale.
USDA's latest weekly slaughter data showed 52,800 dairy cows sent to slaughter the week ending Sept. 26, down 200 or .4% from a year ago. Year to date 2,024,800 cows, have been culled, up 78,600, or 4%, from a year ago.
Enrollment for the 2027 Dairy Margin Coverage (DMC) program is now open, with signups running through Dec. 18. This voluntary risk management program was recently strengthened to provide greater risk protection for dairy producers. Contact your local Farm Service Agency for details.
The USDA's Animal and Plant Health Inspection Service (APHIS) confirmed detection of highly pathogenic avian influenza in two dairy cattle herds in Washington. APHIS will complete genetic sequencing and announce final results as soon as available. A USDA press release stated, "The affected herds were tested after exhibiting clinical signs consistent with avian influenza. Prior to this detection, the herds consistently tested negative through routine surveillance conducted under the National Milk Testing Strategy program."
"These are the first confirmed case detections of HPAI in livestock in the state of Washington. While dairy cattle in a total of 19 states have been infected since the start of the outbreak in March 2024, APHIS has seen cases in only a small number of states this year. APHIS is working closely with the Washington Department of Agriculture to conduct additional on-farm investigations, diagnostic testing, and epidemiological data collection to better understand the detection and prevent further disease spread."
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