Growing Milk Inventories Should Continue into 2026
Published: Friday, November 28, 2025
The government is back at work. However, the issue may be revisited next year. The deal funds the government through Jan. 30, 2026, as HighGround Dairy points out, with the exception of agriculture, military construction, veteran's affairs and the legislative branch. These three were part of a "minibus" appropriations package, and their budgets were approved for one full year.
As I reported last week, the Agriculture Department raised its estimate of 2025 milk output, the eighth consecutive month to do so, in its World Agricultural Supply and Demand Estimates report, citing "higher milk cow inventories and robust milk per cow through the third quarter of 2025." The 2026 forecast was also raised, as the higher inventories and increased productivity is expected to carry into 2026.
2025 production and marketings were projected at 231.4 and 230.5 billion pounds, respectively, up 1.4 billion on both from a month ago. If realized, both would be up a hefty 5.5 billion pounds, or 2.4%, from 2024.
2026 production and marketings were projected at 234.3 and 233.3 billion pounds, respectively, up 300 million pounds from a month ago. If realized, both would be up 2.9 billion pounds, or 1.3%, from 2025.
The 2025 butter price forecast was reduced as increased supplies of milkfat have resulted in sharply lower prices in third and fourth quarter. Cheese and nonfat dry milk (NDM) prices were also lowered as increased milk supplies put downward pressure on prices. The whey price forecast was raised on strong demand.
Butter, cheese and NDM prices for 2026 were lowered, based on increased milk supplies. The whey price forecast was raised, as strong demand is expected to continue into 2026.
Class III milk prices were reduced, as lower cheese prices more than offset higher whey prices. The 2025 average was lowered a nickel from last month's report, to $18.15 per hundredweight, and compares to $18.89 in 2024 and $17.02 in 2023. The 2026 average was raised 25 cents to $17.65 per hundredweight.
Class IV milk prices were reduced on lower butter and NDM prices. Look for the 2025 average to come in at $17.35 per hundredweight, down 80 cents from a month ago, and compares to $20.75 in 2024 and $19.12 in 2023. The 2026 average was projected at $14.50, down $2.75 from last month's estimate.
This month's corn outlook is for increases in supply, exports and ending stocks. Total supply is 144 million bushels higher as larger beginning stocks were partially offset by lower production. Beginning stocks were 207 million bushels higher. Corn production was forecast at 16.8 billion bushels, down 62 million from September's estimate due to a reduction in yield from 186.7 to 186 bushels per acre. Harvested area was unchanged at 90 million acres. Total use is up 100 million bushels, reflecting a higher export forecast. Exports were raised 100 million bushels to 3.1 billion, reflecting shipments to date. Inspection data imply exports set a monthly record during September and again in October. With supply rising more than use, corn ending stocks were up 44 million bushels to 2.2 billion. The season-average corn price was raised 10 cents to $4 per bushel.
Soybean production was forecast at 4.3 billion bushels, down 48 million, or 2.8%, from the 2024-25 crop year. Soybean yield was projected at 53 bushels per acre, down a half bushel. Soybean supplies were projected to be 61 million bushels lower than the September forecast, due to lower beginning stocks. Soybean exports were forecast at 1.64 billion bushels, down 50 million from the previous forecast due to lower supplies and higher exports by Brazil and Argentina. The U.S. season average soybean price was raised 50 cents to $10.50 per bushel.
The USDA's weekly slaughter report was restored last week and showed 52,500 head of dairy cows were sent to slaughter the week ending Nov. 8, up 600 from a year ago, or 1.2%. To date, 2,261,000 head have been culled, down 94,200, or 4%, from a year ago.
U.S. dairy exports remained strong in August, totaling 235,210 MT, up 3.7% from August 2024, but down on a monthly basis for the second month in a row. HighGround Dairy said, "Trade woes in 2025, when July and August's sales were likely booked, probably weighed on values, causing them to fall. Softness in some of the powders, specifically, whey protein concentrate 80% protein, lactose and nonfat dry milk/skim milk powder shipments drug the totals down."
Cheese exports totaled an impressive 119.3 million pounds, up 28.1% from a year ago, a record high on a 30-day adjusted basis, according to HighGround's Cara Murphy in the Nov. 24 Dairy Radio Now broadcast. It was the fourth time in 2025 that a new high water mark was set, "highlighting just how much cheese the U.S. has sent abroad." Mexico was the top destination, with a 31% market share, followed by South Korea, Japan and Australia. Cheddar set a record for the third time in 2025, with 24.3 million pounds exported, up 139.7%.
Murphy warned, however, that European cheese prices fell substantially in October and are trending around $1.50 per pound, very close to those in the U.S., so 2026 exports may not look as strong as those in 2025.
Butter sailings, at 17.7 million pounds, fell from July's level, but were up 190.5% from a year ago. New Zealand and European prices remain at about $1.50 premium to the U.S. so U.S. exports may remain strong, according to Murphy.
Nonfat/skim milk powder exports totaled 124.4 million pounds, down 17.6%, as U.S. prices are not competitive globally, Murphy said. Exports to Mexico were down sharply as were sailings to the Philippines and Indonesia. Dry whey exports totaled 39.9 million pounds, up 10.6% from 2024, with strong sales to China. The world has plenty of milk, according to Murphy, and output is up substantially in Europe and New Zealand, even in Latin America and China.
Speaking of China, the latest data shows October whey product imports hit 142.3 million pounds, up 14.4% from a year ago, highest October on record, according to HighGround Dairy. The U.S. saw increased sales but was "somewhat surprising given the Chinese government's recent directive to reduce hog production. It may still be too early for that policy to materially affect whey demand for pig feed."
The U.S. remains the top origin for lactose, though October volumes slipped 2.6%. Year-to-date, U.S. market share has declined from 74% in 2024 to just 60%, according to HighGround, "as trade disputes continue to weigh on Chinese purchases of U.S. goods."
Return to Top of Page