In the previous article, we were discussing how the severe winter conditions were bringing a rally for dairy products, led by butter. A historic winter event which shut down most of the south and southeast parts of the country. Weather conditions brought a quick rush of buying, with retailers trying to stock shelves ahead of the storms. Today it is a much different picture outside, with historically warm temperatures. The extreme cold suppressed production temporarily. Now that temperatures have risen, it is being reported that not only has production come back to normal, but now many farms are starting to see an early spring production surplus.
Last week, the USDA released the February WASDE report, giving us data that confirms their stance on another year of higher production. Milk production increased another 200 million pounds from last month’s report, coming in at 234.5 billion pounds of milk projected for 2026. That is 3 billion pounds more than the 2025 estimates.
The USDA lowered domestic use for Fat Basis, which caused a 400 million increase in beginning stocks for the 2026 Fat Basis Supply, offset only slightly by an increase in exports and a decrease in imports bringing the 2025 ending stocks number up to 12.8 billion pounds of milk. For 2026, there was a 700 million increase in ending stocks, partially due to the beginning stocks increase, but also lower domestic use. 2026 also had a bright spot to offset some of the higher supply, there was a 500-million-pound increase in exports projected.
From a Skim-Solid Basis, the beginning stocks number for 2026 was actually decreased by 200 million pounds, coming from slightly higher domestic use in 2025. For 2026, the USDA lower export projections in this category slightly, bringing the 2026 expected ending stock for Skim-Solid Basis down to 9.0 billion pounds, the lowest expected ending stock number in years. 200 million lower than the 2025 estimate, 400 million lower than 2024, and 800 million lower than 2023. Domestic usage is the main driver to pull that ending stocks number as low as projected number published here.
As a result, the 2025 Dairy Prices were all unchanged, outside of a 2-cent increase to the estimated All Milk Price. For 2026, there were some fairly significant increases in every dairy category. This biggest increase happened to be in Class IV Milk which increased $1.25 cents from last month’s report to $15.70.
These numbers lay out an important snapshot of the state of the dairy markets today. Supply is plentiful, but usage is steady. Exports are the shining light on the market but we need domestic usage to increase if we want to significantly change the outlook for prices going forward. One way that could be possible is a combination of the new push for whole foods, especially when looking at school options available like we may see as early as this fall.
Sarah Jungman is a commodity broker with AgMarket.Net and AgDairy, the dairy division of John Stewart & Associates Inc. (JSA). JSA is a full-service commodity brokerage firm based out of St. Joseph, MO. Sarah’s office is located in Winterset, Iowa and she may be reached at 515-272-5799 or through the website www.agmarket.net.
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