Dairy Market Update: Key Trends Shaping 2026
5 things dairy producers should know as margins tighten and planning for 2026 begins
Cheese and Butter Remain Soft, Whey Provides Support
Cheese prices continue to trade near historic lows, weighing on Class III futures
Butter production has surged due to higher component production, creating oversupply
Dry whey remains the strongest contributor to milk prices, helping keep Class III futures in the upper $15 range despite weak cheese markets
Curtis Bosma from HighGround Dairy described whey as “the unsung hero” heading into 2026
Milk Production Growth Continues Across the U.S.
October 2025 marked the fifth consecutive month of at least 3 percent year-over-year milk production growth
Idaho and California showed the largest increases, with California up 221 million pounds year over year
Increased efficiency across herds continues to pressure markets, even as producers report strong performance
Bird Flu Impacts Being Monitored, Limited Market Reaction So Far
Recent positive cases in Wisconsin have drawn attention, but Curtis does not expect immediate market impact
Timing matters, as production losses now would not align with peak seasonal demand
Curtis noted that recent cases appear to have less severe production losses compared to earlier outbreaks
Ongoing monitoring remains critical as conditions evolve
Exports, Inventory Behavior and Commodity Dynamics to Watch
U.S. cheese prices have become more competitive globally after recent declines
Lower prices may encourage inventory buildup among buyers, which could affect demand later in 2026
Specialty cheese production may increase due to improved margins at current milk input costs
Butter markets often see increased CME activity early in the year as older inventory moves
Alternative Revenue Streams Are Reshaping Margin Conversations
Beef-on-dairy revenue is contributing an estimated $4 to $5 per hundredweight for some producers
Additional income from digesters, solar and other projects can push non-milk revenue to $7 or $8 per hundredweight
These revenue streams may delay supply contraction even at lower milk prices
Curtis cautioned that margin management is becoming more complex and more important
As producers look ahead to 2026, Curtis Bosma emphasized that depressed margins do not mean there are no options, but they do require proactive planning and disciplined risk management.
For deeper analysis and context, listen to the full December market update with Curtis Bosma on Apple Podcasts or Spotify, or watch the conversation below.
