U.S. Output Continues to Expand
U.S. milk production is expected to rise again in 2026, strengthening the country’s position as the main driver of global dairy growth. The USDA forecasts U.S. milk output at 106.2 million metric tonnes, up 1.2 per cent from 2025. This increase represents most of the net growth among major dairy-exporting nations. While several key regions face supply pressure, the United States continues to expand at scale.
Processing Capacity and Cheese Demand Support Growth
Herd expansion and rising processing capacity continue to support U.S. milk output. Strong demand for cheese plays a central role in absorbing higher milk volumes. Domestic consumption remains firm, while exports also show steady performance. These market signals encourage producers to add cows, even as capital, labour, and compliance costs remain high. Investments in modern plants and productivity improvements further support output growth.
Mixed Production Outlook Across Major Exporters
Milk production trends outside the United States show clear divergence. Argentina is expected to post the strongest percentage growth in 2026, with output rising by 4.0 per cent. Improved pasture conditions and better feed availability follow drought impacts seen in 2024. Australia is forecast to increase milk production by 1.8 per cent, supported by favourable rainfall and relatively low feed costs. However, long-term industry consolidation continues to limit faster expansion.
Supply Constraints in New Zealand and the European Union
New Zealand’s milk production is projected to decline by 0.5 per cent in 2026. Falling cow numbers offset the benefit of strong milk prices and export demand. The European Union is also expected to record a 0.5 per cent decline for the second consecutive year. Environmental rules, disease pressure, rising costs, and herd contraction continue to weigh on output. Gains in milk yields per cow remain insufficient to reverse the trend.
Global Market Implications
Overall milk production among major exporters is forecast to rise by only 0.4 per cent in 2026. The United States accounts for most of this increase. Tighter supplies in the European Union and New Zealand may support global dairy prices. This environment could also strengthen export demand for U.S. dairy products, particularly cheese and other value-added categories. The USDA outlook highlights the growing influence of the United States in shaping global dairy trade and price direction.