Butter production has been trending higher every year over the last five years with 2026 well above the rest. The latest Dairy Products report released earlier this month had butter production at 187 million pounds of butter, up 6.3 percent from last year for the month of August, although slightly less than July’s production. Seasonally August butter production is lower than the first half of the year with a rebound of higher production in the winter months.
Cheese production has a similar story, coming in at 1.245 billion pounds of total cheese production in August. That is 1.4 percent higher than August 2025 and 1.4 percent below July 2026 production. Parmesan, Blue and Gorgonzola cheese had the biggest percentage increases in production year over year.
The reason for increases in production is directly related to the increasing number of dairy cows in the United States. The September Milk Production report was released last week showing a total of 9.72 million head for the third quarter of the year, up 39,000 head from second quarter and up 172,000 head more than the same period last year. This huge increase in the number of milk cows caused total milk production across the 24 major States to increase 2.7 percent year-over-year, a total of 19.3 billion pounds of milk.
A large amount of milk brings a surplus of supplies for each component with butter and cheese seeing some of the biggest increases. Production of these products has been optimized as manufacturers push production capacity to keep up with the overabundance of milk available. Inventories tell more to the story. Butter inventory while lower than last month on the latest Cold Storage report show an increase of 16 percent more on hand than a year ago. Cheese inventories increased 2 percent year over year while also down slightly from last month.
Butter and cheese prices have felt the impact of increased supply. Butter prices have fallen 29 percent this September when compared to last September using the AMS Class Price announcements. Cheese prices have fallen 14 percent. However, NDM and Dry Whey have rallied over the last year.
The differences in NDM and Dry Whey price increases versus the Butter and Cheese price declines can be found solely in the massive demand increase for protein products. While advertisements focus on Cheese for retail growth, the consumer has not so silently shown the shift in diet demands for more protein rich foods in fast and convenient packaging.
In the short term, butter and cheese inventories are lower than last month with production off from the spring, and milk production has seasonally declined all in the face of the holiday season coming up around the corner. So, all is not lost, some price volatility as retailers fill their stores is expected. From there, all eyes are on cow numbers as cull prices are high, but calf prices are even higher. The question is, how much longer can producers maintain these huge cow numbers, especially with increasing feed costs.
Sarah Jungman is a commodity broker with 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 sjungman@jpsi.com.
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. There is risk of loss in trading commodity futures and options on futures. It may not be suitable for everyone. This material has been prepared by an employee or agent of JSA and is in the nature of a solicitation. By accepting this communication, you acknowledge and agree that you are not, and will not rely solely on this communication for making trading decisions.
