September 29 marked the official start of the ban on many Canadian dairy products, along with restrictions and increased tariff rates on others. President Trump intends to use the ban to address the unfair quota system, a long-standing dispute over fair dairy market access for products on both sides of the border.
However, this is not the only foreign trade development since our last article.
China Trade Outlook Improves
President Xi met with President Trump last week to discuss lowering trade tariffs on many agricultural products, including dairy. As of September 28, the U.S.-China Board of Trade was operationalized. Dairy was included as one of the products being considered for tariff reductions in the “30-For-30” list.
Leaders in the U.S. dairy industry are encouraged by dairy being considered for tariff reductions. A two-month tariff truce extension is a welcome sight, and the market is encouraged by the prospect of opening trade opportunities in China. Tariffs had priced out most U.S. products, while other countries were more competitively priced.
The impact of this agreement is not immediate, so there is still much to learn about how it will affect U.S. dairy demand. Still, it is a step in the right direction.
Historically, China has been an important trade partner for whey, NFDM, lactose and other dairy ingredients. Since the start of the Chinese trade war, the United States has done an excellent job finding new trade partners and expanding its products in countries where it previously had limited market share.
Adding China back to the current export demand picture could benefit a growing U.S. milk supply.
Milk Supply Continues to Grow
Milk production continues to increase, as the August Milk Production report released by USDA last week showed. The 24 major milk-producing states produced 19.2 billion pounds of milk during August, up 1.8% from August 2025.
Milk production averaged 2,070 pounds per cow, up 4 pounds from last August. The number of milk cows in the 24 major states also increased by 151,000 head over the last year to 9.26 million cows. That was up 15,000 head from July alone.
In addition to the increase in milk production, USDA also released its forecast for milk production in 2026 and 2027. The September Outlook projects 237.2 billion pounds of milk to be produced in 2026 and 238.6 billion pounds in 2027, driven by higher expected cow numbers and continued improvement in milk yields.
Domestic milk disappearance is forecast to be higher in both 2026 and 2027. The All-Milk price forecast for 2026 increased 5 cents from last month’s projection to $19.90. The 2027 forecast remained unchanged at $19.80.
While milk production continues to weigh heavily on dairy markets, experts are hopeful recent trade developments can help demand continue to grow despite the growing supply.
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 in St. Joseph, Missouri. Jungman’s office is located in Winterset, Iowa. She may be reached at 515-272-5799 or through www.agmarket.net.
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