Producer Pay Forecast: September 26, 2026

U.S milk production continued to outpace expectations this summer, placing more pressure on dairy prices despite support from export demand. The USDA has revised 2025 milk production forecasts upward while trimming price forecasts. Spot butter remains below $2.00/lb. at the CME, a 15-year low when you exclude the global pandemic (2020-2021). This has dampened the outlook for class III and IV futures. The market has entered a soft patch that requires the continued support of export strength to help absorb domestic oversupply. Exports once again supported butter through August, providing a sizeable drawdown in stocks. Cheese inventories are growing as domestic demand remains lackluster, leading to further pressure on class III values in the coming months.

Key Highlights & Market Signals

• Milk production and Herd Trends

        o August milk production was up 3.3% YoY and July values were revised upward to 4.27% YoY

        o Milk per cow was up 1.4% YoY in August

        o The U.S milking herd was up 1.9% YoY in August

• CME spot market (Week ending 9/26)

        o Butter averaged $1.67/lb. this week—down $0.12/lb. from the prior week average of $1.7910

        o Blocks averaged $1.6285/lb., also down WoW

        o NDM averaged $1.1475/lb., unchanged WoW

        o Dry whey increased WoW, averaging $0.6440/lb.

• Cold Storage

        o Butter stocks fell 5.7% YoY in August and came down 25.64 million pounds MoM

        o American style cheese stocks grew 3.1% YoY

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As always, please feel free to reach out with any questions, comments or concerns!

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*WoW- Week over week

*YoY- Year over year

*MoM- Month over month

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