Lower grain and protein prices are creating one of the more favorable feed-buying opportunities dairy producers have seen in months, even as softer milk prices continue to pressure margins.
During a recent The Dairy Feed podcast, grain market analyst Jake Kingsley says corn and soybean meal futures have retreated to levels that make protecting feed costs attractive through at least the remainder of 2026.
“For us, we have very little feed exposure remaining through September for most of our dairies,” Kingsley says. “With nearby corn futures around $4 and soybean meal near $300 per ton, we’re at the low end of the historical price range.”
Kingsley says many producers had already locked in milk at favorable prices earlier this year and are now using lower feed prices to secure margins.
“With dairies having marketed a fair bit of their milk at pretty good values, they were looking to get feed booked up and cover some of their expenses,” he says.
USDA Reports Provide Modest Support
USDA’s latest Quarterly Grain Stocks and Planted Acreage reports brought few surprises, with only modest acreage adjustments and little change to corn acres, giving feed markets little reason to move sharply.
Kingsley says soybean acreage increased by slightly more than 500,000 acres, while wheat acreage declined by roughly 1 million acres from March expectations. Corn acreage changed very little.
The biggest surprise came from quarterly corn stocks.
“Corn did get a little exciting over there in the quarterly stocks, where the number came in just over 100 million bushels below what the market had been expecting,” Kingsley says.
Although futures rallied following the reports, he says overall feed supplies remain plentiful.
“Supplies remain healthy across the major feed commodities, and futures markets are still in a favorable position for feed buyers,” Kingsley says.
Feed Buying Opportunities Emerge
Kingsley says declining futures prices have prompted many dairy producers to begin purchasing physical feed while also using risk management tools to maintain flexibility.
“There are folks beginning to take their very first layers of physical feed ownership with their vendors,” he says.
Midwestern corn basis levels have also become more attractive.
“The Midwestern basis values, especially on corn, are pretty attractive,” Kingsley says. “There have been opportunities to buy feed or at the very least put very attractive ceilings on your feed exposure for next year.”
Protein markets have also strengthened modestly from recent lows because of seasonal maintenance shutdowns, export demand and production concerns in other regions, but Kingsley says current prices still make sense for many operations.
“There are places where getting protein just outright purchased and priced at these levels makes a lot of sense,” he says.
Milk Prices Face Headwinds
While feed markets have improved, dairy economist Kathleen Wolfley with Ever.Ag says milk markets continue to face pressure from growing supplies.
Recent rallies in both Class III and Class IV futures have been short-lived as expanding production weighs on prices.
“Generally, my sense in the dairy market is that supply is plentiful and demand is trying to keep up,” Wolfley says. “That could put some pressure on milk prices as we roll through the second half of the year and on into next year.”
She points to increasing cheese and butter-powder production capacity, along with sluggish domestic demand, as factors limiting upside potential.
“There’s a lot of supply out there,” Wolfley says. “We have a lot more milk going to cheese plants. We have a lot more milk going into butter powder plants, and domestic demand, at least on the cheese side, doesn’t seem to be keeping up, forcing us to really push into that export market and stay competitive.”
Global markets are also adding pressure. Europe continues to move product into export channels, while weaker Global Dairy Trade Pulse auction results suggest additional softness in skim milk powder markets.
“I don’t expect U.S. milk supplies to change much over the next six to nine months,” Wolfley says. “With beef returns still very lucrative, dairies have a strong incentive to keep as many cows as possible,” Wolfley says.
Looking Ahead to 2027
Even with uncertainty surrounding milk prices, Wolfley and Kingsley encourage producers to begin evaluating opportunities beyond next year.
Wolfley says each farm’s risk management strategy should be tailored to its financial goals and tolerance for risk.
“If producers are looking ahead to 2027, they should work with their brokers and dairy advisers to develop a strategy that fits their goals for managing risk and protecting profit margins,” she says.
Kingsley agrees, noting that today’s relatively inexpensive feed prices could provide opportunities for producers willing to look further ahead.
“What we’re watching is the availability and price of inputs for this South American crop that’ll go into the ground later this year and how that may impact their ability to produce,” he says.
He also points to the developing El Niño forecast and the possibility that several years of favorable crop production could eventually give way to weather-related challenges.
“We don’t have to sit here and project $5 or $6 corn or $400 soybean meal today,” Kingsley says. “But at the levels we’re seeing, it’s hard to stay on the sidelines for too long.”
