Milk production in the United States has seen significant growth, up more than 4% compared to the previous year, marking the strongest increase since 2021. This surge, driven by higher butterfat and protein levels, allows processors to produce more dairy products. However, the increased supply has led to price pressure, and dairy farmers can expect lower milk checks in Q4 2025.
Globally, milk production is also rising, with the European Union and New Zealand seeing strong output. In New Zealand, high milk prices are supporting a potential record season, and across the world, favourable weather and high milk prices are sustaining output.
Declining Prices Amid Increased Supply
Despite the growing supply, milk prices have fallen recently, with butter and cheese seeing the steepest drops. The CME spot butter price has dropped below $2 per pound, the lowest since 2021. However, dry whey prices have edged up due to strong protein demand, offering some relief for Class III milk prices.
Supportive Factors for Farmers
Fortunately, feed costs are expected to remain low due to a solid harvest, and cow and calf sales continue to fetch record prices, providing farmers with some financial cushion despite weaker milk prices.
Outlook for 2026
With abundant milk supply and softer prices, dairy farmers may face challenges in the near term, but supportive factors like low feed costs and additional revenue from calves should help stabilise their margins through 2026.
