Milk Prices Expected to Peak at $18.50 in September
Published: Friday, March 13, 2026
The No. 1 topic last week, of course, was the U.S. and Israel's war with Iran. The ripple effects are affecting the world in many ways, including perhaps the biggest being oil and other goods shipped through the very busy Strait of Hormuz. Even the shipping of dairy products are included.
Farm milk prices are slowly heading back up. The Agriculture Department announced the February federal order Class III price at $14.94 per hundredweight, up 35 cents from January but $5.24 below February 2025 and the highest Class III price since October 2025. Last Friday morning, Class III futures portended a March price at $16.43; April, $17.02; May, $17.33; and June, $17.77; with a peak of $18.50 in September. The February Class IV price is $16.29, up $2.74 from January, but $3.61 below a year ago.
You'll recall January milk output was up 3.2% from a year ago leaving plenty for the Dairy Products Report to detail. Cheese output hit 1.278 billion pounds, up .1% from December, and up 4.7% from January 2025.
Wisconsin produced 311.5 million pounds of that total, down .8% from December, but .4% above January 2025. California provided 207.2 million pounds, down 4.4% from December, and .3% less than a year ago. Idaho cheese totaled 91.4 million, up 4.8% from December, and 1.7% more than a year ago.
Mozzarella production totaled 430 million pounds, up 4.4% from a year ago. American cheese came in at 500.1 million pounds, up slightly from December, and 3.9% more a year ago. Italian-style cheeses totaled 554.1 million pounds, down 1.6% from December, but up 6.5% from a year ago.
Cheddar output jumped to 353.3 million pounds, up 8.2 million, or 2.4%, from December's level, which was revised up 4.7 million pounds from last month's report, and was up 24.3 million pounds, or 7.4%, from a year ago.
Butter production climbed to 231.4 million pounds, up 23.9 million pounds, or 11.5%, from December's level, which was revised up 3.7 million pounds. Output was up 13.2 million pounds, or 6%, from a year ago.
Yogurt production totaled 445.7 million pounds, up 5.9% from a year ago. Hard ice cream, at 57.7 million pounds, was down 3.1% from 2025.
Dry whey crept to 77.4 million pounds, up 4.7 million pounds, or 6.4%, from December, and up 5.4 million pounds, or 7.5%, from a year ago. Whey stocks grew to 62.1 million pounds, up 4.1 million, or 7%, from December and were up 2.3 million pounds, or 3.7%, from a year ago.
Nonfat dry milk output jumped to 144.8 million pounds, up 17.4 million, or 13.7%, from December, but down 9.9 million pounds, or 6.4%, from a year ago. Stocks stood at 214.8 million pounds, down 200,000 pounds, or .1%, from December, and down 86.6 million pounds, or 28.7%, from a year ago.
Skim milk powder production slipped to 41.8 million pounds, down 8.3 million pounds, or 16.6%, from December's level which was revised up 7, and was up 7.3 million, or 21.2%, from a year ago.
HighGround Dairy stated, "USDA lists January 2025 nonfat dry milk ending stocks as 301.38 million pounds on today's report. However, after major revisions to the 2024 ending stock data and February 2025, due to USDA's revision policy, they were not able to provide updated figures for January 2025 data. HighGround estimated January 2025 NFDM ending stocks at 235.205 million pounds. USDA will release the Annual 2025 Dairy Products Production report on April 24, which will have their official update on January 2025 ending stocks."
Dairy margins strengthened nicely, particularly in third quarter, over the second half of February as milk price increases more than offset a modest feed market increase, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.
"Both the Class III and especially the Class IV milk futures continued to see strength," the MW stated. "Some of the increase was attributed to an announcement from USDA to buy additional nutritional items for food banks and nutrition assistance programs. Of the $263 million allocation, $75 million will be used to purchase butter, $32.5 million will be used to purchase Cheddar cheese and cheese products, $10 million will be used to purchase Swiss cheese, $20.5 million on fresh fluid milk, and $10 million on ultra-high temperature milk."
The MW stated that January milk production was lower than analysts' estimates and stated, "U.S. herd expansion continues, particularly in South Dakota and Kansas, to fill demand from new processing plants. Despite elevated production, days of available supply for both butter and cheese remain relatively low." The MW also detailed the January Cold Storage data, concluding that it implied strong demand in the face of increased production domestically and globally.
Another drop in the All Milk Price pulled the January feed price ratio lower for the fourth consecutive month. The Ag Prices report showed January at 2.09, down from 2.26 in December, and compares to 2.82 in January 2025.
The All Milk Price dropped to $17.50 per hundredweight, with a 4.48% butterfat test, down $1.50 from December's $19 on a 4.51% test. It was $6.60 below a year ago which had a 4.46% test. January's price is the lowest since July 2023's $17.30.
The national corn price averaged $4.10 per bushel, unchanged from December and 19 cents below January 2025. Soybeans averaged $10.30 per bushel, down a dime from December, but 30 cents per bushel above a year ago. Alfalfa hay averaged $160 per ton, down $1 from December, and $1 below a year ago.
The December average cull price for beef and dairy combined inched up to $158 per hundredweight, up $1 from December, $32 above January 2025, and $86.40 above the 2011 base average.
Milk production margins decreased for the fifth month in a row to the lowest level since August 2023's $7.79 per hundredweight, with a $1.47 per hundredweight loss from December to $9.11 per hundredweight, according to according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo.
"Income over feed costs in January were above the $8 per hundredweight level needed for steady to higher milk production for the 27th month in a row," said Brooks. "Input prices were steady to lower in January with one of the three input commodities inside of the top 10 for January all-time. Feed costs were the 10th highest ever for the month of January and decreased 3 cents per hundredweight from December."
He adds, "Milk income over feed costs for 2026 (using Feb. 27 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $10.63 per hundredweight, a loss of $1.81 per hundredweight versus 2025. Income over feed costs in 2026 would be above the level needed to maintain or grow milk production and up 49 cents per hundredweight versus the previous estimate," Brooks concludes.
The USDA's latest slaughter data showed 58,300 cows sent to slaughter the week ending Feb. 21, up 6,700 head, or 13%, more than a year ago. Year to date 460,000 cows had been culled, up 32,400, or 7.6%, from a year ago.
Block Cheddar closed the first Friday of March at $1.6175 per pound, up 9.50 cents on the week, highest since Nov. 11, 2025, and only a half-cent below a year ago. The barrels finished at $1.57, a penny higher, highest since Nov. 26, 2025, but 6 cents below a year ago. There were 10 sales of block and one barrel.
Dairy Market News reports that milk production is trending higher in the Central region and some cheesemakers received more offers for milk this week. Prices mid-week were unchanged from last week and ranged $1-under to $2-over class. Cheese output is strong and plants were running full schedules. Demand for barrels remains strong. Retail cheese sales increased slightly, but food service demand is unchanged. Global interest continues, says DMN.
Milk production is seasonally increasing in the West. Cheesemaker intakes vary from stable to increasing but plants reported heavily active cheese production. Domestic demand is strengthening. Some sellers were prioritizing export sales over domestic, which decreased availability for domestic buyers. International demand is stable to stronger.
CME butter skyrocketed 26.50 cents last Monday, topping $2 per pound for the first time since Sept. 9, 2025, highest single day gain since June 4, 2020 when it pole vaulted 29 cents. It hit $2.1375 last Tuesday, highest since Aug. 26, 2025, but gave back 11.75 cents last Wednesday and 3 cents last Friday, to close at $2.01, up 17 cents on the week, but 30 cents below a year ago. There 92 sales on the week, 47 last Friday alone, highest single day total since Oct. 16, 2024.
Cream output remains strong in the Central region. Spot Class II cream demand is strengthening as processors prepare for spring holidays. Retail butter sales are steady to higher, but food service demand is down from last year. Spot interest from international purchasers is strong as U.S. prices remain competitive.
Strengthening milk production and strong fat components continue to provide more than sufficient cream for the West. Cream demand from Class II and III manufacturers, such as ice cream and cream cheese producers, is seasonally increasing but butter manufacturers have plenty. Domestic butter demand is mixed. Increased prices had buyers pushing back some. Export demand remains strong in areas not impacted by global disruptions, says DMN.
Grade A nonfat dry milk fell to $1.6525 last Thursday, but closed last Friday at $1.68, 3 cents lower on the week, but still 55.50 cents above a year ago, with a whopping 59 sales on the week, highest weekly total since the week of Feb. 1, 2021.
Dry whey closed last Friday at 64 cents per pound, 0.75 cent higher on the week, and 15 cents above a year ago, with one sale reported for the week.
The Agriculture Department issued its 2025 Cold Storage Summary Feb. 27. Butter stocks peaked in May at 364.8 million pounds, followed by June at 355.6 million. The lowest inventory occurred in December at 187.7 million pounds.
American cheese peaked in May, at 835.2 million pounds, and were at their lowest level in November with 787.2 million. The "Other" cheese inventory hit a high just under 593 million pounds in July. The low point was in November, with 552.5 million in storage. The biggest total in cheese stocks hit 1.445 billion pounds, followed by May's 1.437 billion. The smallest total cheese inventory was in November at 1.362 billion pounds.
In politics, the House Agriculture Committee passed its farm bill last week, 34 to 17. The National Milk Producers Federation applauded the bill, which includes "Key provisions that support and strengthen the dairy industry," said Gregg Doud, president and CEO. "We stand ready to work with members of both the House and Senate on a bipartisan basis to pass a farm bill this year that will provide critical support for dairy farmers and their cooperatives."
International Dairy Foods Assn. President Michael Dykes also gave it a thumbs up, stating the bill "strengthens key dairy programs and expands SNAP dairy nutrition incentives. Building on the success of the Healthy Fluid Milk Incentives program, Dairy Nutrition Incentive Projects will encourage SNAP participants to purchase more nutrient-dense dairy foods and help ensure federal nutrition programs support healthier food choices for families across the country."
Meanwhile, National Milk says it "significantly escalated its public engagement ahead of this summer's U.S.-Mexico-Canada Agreement Review, with an NMPF co-op farmer testifying before Congress and the head of its trade team speaking on behalf of a new coalition NMPF launched to help strengthen the agreement."
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