Unfortunately for dairy producers, the glut of milk both in the United States and globally is expected to persist into 2026, which means milk prices will likely remain low or slide further at least for first half of the year. However, dairy demand could expand, offering a glimmer of hope for prices.
According to Betty Berning, analyst with the Daily Dairy Report, the bulls ruled the first part of 2025, while the bears closed out the year. “One of the themes of 2025 was the increased volume of milkfat in the United States, which led to multi-year low butter prices,” she said. “Butter churns ran hard due to heavy cream supplies and weaker demand for other fat-heavy products, including ice cream and cream cheese.”
Through November, U.S. dairy cows produced more than 9.1 billion pounds of butterfat, the most ever for the period, and 4.7% more than in the first 11 months of 2024, when adjusted for leap year. Butter production in the first 10 months of this year was nearly 2 billion pounds, another record high and 6.9% more than in the same period in 2024. This led to a massive selloff in the butter market, with prices plummeting more than $1/lb. from their peak of $2.62 set in early July to their late-December low of $1.385/lb.
“Processing capacity was also the talk of the industry, as new cheese plants roared into action,” Berning said. “Most of the new cheesemaking facilities came online in the Central Plains, which pushed output to record levels in the region.”
For the January through October period, more than 6.1 billion pounds of cheese were produced in the Central Plains, up more than 5% from the same period in 2024. As these facilities move beyond the ramp-up phase, Berning noted that even more cheese will be produced in early 2026.
“While cheese exports grew and set multiple records in 2025, absorbing some of this new production, strong export sales will also be needed in 2026 to keep cheese from piling up and prices from falling further,” Berning noted. “In addition, the huge discount that U.S. cheese offered relative to the prices extended by other dairy exporters made it the product of choice for international buyers, boosting U.S. cheese exports. This price advantage will need to be maintained in 2026 for the United States to continue to move large volumes of cheese abroad.”
In the protein space, production of whey protein concentrates and whey protein isolates also set record highs, yet despite growing volumes, prices headed to new high-water marks on relentless demand, which is expected to continue through 2026. Cottage cheese, another protein-heavy dairy favorite, grew to nearly 1.2 billion pounds for the first 10 months of the year, the highest level since 1989.
“Heavy protein demand pushed dry whey prices to more than 70¢ per pound starting in late October, making whey the only dairy commodity to show strength at the end of 2025. Due to both the growing popularity of GLP-1 weight-loss drugs and social media influencers pushing more protein consumption, the trend of rising demand for dairy proteins is unlikely to slow this year,” Berning said.
In addition, whole milk and 2% milks will once again be allowed in the nation’s public schools beginning in the 2026-27 school year, which likely will boost consumption of both fluid milk and butterfat next fall, she added. In addition, consumers are focusing on gut health by eating more fermented products, including yogurt and Kefir.
