Last week was full of news for the dairy market. Friday’s release of the USDA’s WASDE report left heaviness in the market with expectations of higher to steady milk production into 2027. On top of that, President Trump drops a bombshell last Tuesday, banning many Canadian dairy products in the United States.
The WASDE report revealed projected expectations of 238.6 billion lbs. of milk to be produced in 2027. That is up 600 million lbs. from the August WASDE report. There was a slight increase in both Fat Basis and Skim-Solid Basis Supplies with lower exports in both categories, leaving ending stock projections higher for both 2026 and 2027 projections.
Ending stocks for 2026 for the Fat Basis category were 12.8 billion lbs., an increase of 300 million lbs., and for 2027 12.2 billion lbs., a 200-million-pound increase from the August report. On the Skim-solid category, ending stocks were 9.5 billion lbs., up 300 million lbs. from last month and for 2027, 9.1 billion lbs., up 200 million from last month. While supply may be plentiful, ending stocks are still within line for what the market has seen over the last few years.
The only bright spot on the balance sheet was some positive expectations of growing domestic use in both this year and next year. On a Fat Basis, Domestic Use was projected to increase 700 million lbs. in 2026 and 2 billion lbs. in 2027. On a Skim-solid Basis, domestic use was projected to increase 300 million lbs. this year and a 700 million lbs. increase for 2027.
As far as prices are concerned, the USDA was mixed on prices projected for this year and next. From last month’s report, there were increases in Nonfat Dry Milk in both 2026 projections and 2027, as well as an increase in 2027 projections for Dry Whey. That helped drive increases in Class IV Milk prices of 40 cents this year and 35 cents projected for next year. The All-Milk price was increased for 2026 by 5 cents to $19.90 yet steady for 2027. On the other hand, Cheese and Butter saw decreases in projected price from last month’s WASDE report. Class III milk fell 5 cents for 2026 to $16.20 projected and 15 cents for 2027.
While the WASDE report told a story we are well aware of, that supply is plentiful and demand is high, the market is left wondering how trade with Canada will fit into all of this. On one hand, we may see less imports coming from Canada as well as a benefit for domestic processors of having less competition in certain product categories.
The administration is certainly attempting to create a more reciprocal trading relationship for U.S. farmers, but this could create a longer-term bearish outcome. Canada has already imposed retaliatory tariffs on U.S. dairy products, limiting our foreign customer base. Not to mention the fact that this announcement contradicts the USCMA, possibly putting strain on our relationship with Mexico in the process.
Experts believe Mexico offers an important opportunity as Iowa State University recently published. While Mexico’s production has risen, it has not been keeping up with demand. The United States has a huge opportunity to capitalize on our neighboring country with advantages provided in the USMCA as well as competitive pricing. It is important that the USMCA holds its integrity as far a Mexico is concerned.
September 29th is the date President Trump has placed for a ban to go in effect on many dairy products, alcoholic beverages and motorcycles. The impact, beneficial or detrimental to the dairy balance sheet is still to be determined.
For more on markets, read:
- Diesel Prices Are Surging, But a Bigger Fertilizer Crisis Could Be Right Behind It
- Is $7 Corn Possible? What It Would Mean for Feed Costs, and Why Timing Matters
- Beef-on-Dairy Calf Prices Cool, But Demand Holds
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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