The beginning of 2026 saw a modest rally for Class III milk futures. However, that rally screeched to a halt as the production pace of milk, cheese and butter continues to climb, pressuring prices lower.
What’s happened
Multiple months of milk production reports have shown year-over-year increases in milk production, and that has taken its toll on Class III milk futures prices. The most recent report showed that trend continues.
On June 22, the USDA released the May U.S. Milk Production report. The report was bearish as total milk production in May was up 2.3% from last year.
The biggest reason for higher milk production is more cows. The report also showed that the U.S. dairy herd added another 10,000 cows throughout the month of May, pushing the herd up to a record 9.665 million head. This also included another revision of 10,000 extra cows added to the April total that previously wasn’t reported on. The U.S. dairy herd is still in expansion mode. In 2026, the U.S. dairy herd grew 99,000 head in five months.
From a marketing perspective
Not only are there more cows, but milk production per cow is increasing as well. Production per cow averaged 2,128 pounds for the month of May, which was 8 pounds higher than this time last year.
Thankfully, demand for dairy products remains firm, but might production be on the verge of outpacing demand?
United States Dairy Exports in April totaled 258,049 metric tons, up 17% from April 2025 but down 3% from the previous month. Butter exports overall were strong at 14,849 metric tons, but down slightly from March. Cheese exports came in at 64,168 metric tons, up 30% from last year and a new all-time record.
The recent cold storage report showed total cheese in cold storage at the end of May at 1.423 billion pounds, down 1% from a year ago and up 1% from April. Cheese inventories currently sit at 5-year lows despite very strong production across the U.S. Butter in cold storage at the end of last month was 335.601 million pounds, down 8% year over year, but up 9% from the previous month.
Prepare yourself
Due to continued high milk production Class III milk futures have lost nearly $3 since April. From a technical standpoint, the futures markets are oversold on daily charts, and at some point, a technical correction may be likely. However, due to the extent of ample supply, it may be hard for milk futures prices to find reason to see any significant price rally in the months ahead.
Reach Naomi at naomi@totalfarmmarketing.com or find her on X at @naomiblohm.
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