As reported last week, USDA raised 2026 and 2027 milk production estimates in the latest World Agricultural Supply and Demand Estimates (WASDE), based on the latest milk production data and raised cow numbers for both years. Output per cow was reduced slightly for 2026 but was unchanged for 2027.
Class III and Class IV milk price forecasts were lowered. Look for the 2026 Class III price to average $16.15 per hundredweight, down 45 cents from last month’s projection and compares to $18.01 in 2025 and $18.89 in 2024. The 2027 average was lowered 50 cents to $17.05.
The 2026 Class IV average was projected at $18.40, down 95 cents from a month ago and compares to $17.38 in 2025 and $20.75 in 2024. The 2027 average was projected at $17.40, down $1.20 from last month’s report.
The U.S. corn outlook was for smaller supplies, greater exports and reduced ending stocks. Beginning stocks were cut 125 million bushels to 2 billion, reflecting an increase in feed and residual use partly offset by a reduction in corn used for ethanol. Feed and residual use was raised 150 million bushels based on indicated disappearance in the June 30 Grain Stocks report. Through the first three quarters of the marketing year, feed and residual use totaled just over 5.6 billion bushels, compared to about 4.8 billion a year ago.
Corn production is up fractionally based on updated planted and harvested area. The yield was unchanged at 183 bushels per acre. Total use was raised 50 million bushels on an increase in exports. Exports were higher reflecting expectations of continued global demand. Ending stocks were down 170 million bushels to 1.8 billion. The season average was unchanged at $4.40 per bushel.
Soybean production was projected at 4.475 billion bushels, up 40 million on higher harvested area, which was projected at 84.4 million acres, up slightly from last month. The soybean yield was unchanged at 53 bushels per acre. Supplies were raised 30 million bushels as higher production was partly offset by lower beginning stocks. The U.S. season average was forecast at $11.40 per bushel.
Dairy margins continued flat to slightly weaker over the first half of July as higher milk prices were offset by increasing feed costs with both corn and soybean meal advancing,” according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging, LLC.
The Margin Watch stated that USDA’s July WASDE lowered corn ending stocks more than expected due to higher demand forecasts, with recent hot and dry weather adding risk premium to the market for both corn and the soybean complex.
The Margin Watch warned, “Recent bombing exchanges between Russia and Ukraine in the Black Sea, as oil tankers are being targeted, threatens wheat exports from the region which has caused the wheat market to surge.”
Meanwhile, USDA’s latest Crop Progress report showed 34% of US corn was silking, as of the week ending July 12, up from 16% the previous week, 2% ahead of a year ago, and 4% ahead of the five year average. 68% was rated good to excellent, up 1% from the previous week, but 6% behind a year ago.
The beans are blooming at 50%, up from 34% the previous week, 5% ahead of a year ago, and 6% ahead of the five year average. 19% were setting pods, up 5% from a year ago, and 6% above the five year average. 65% were rated good to excellent, down 1% from the previous week, and 5% behind a year ago.
While summer heat is taking a toll on US milk production and its components, the Daily Dairy Report’s Monica Ganley Quarterra stated in the July 10 Milk Producer Council newsletter that U.S. cows aren’t the only ones suffering.
“Record high temperatures and dry conditions are also weighing on milk production in Europe,” wrote Sharp. “While monthly data won’t be available for some time, weekly collection data is beginning to show dramatic declines, particularly in places like France and the UK where the heat wave has been severe. Yet, even as heat stress accelerates the typical seasonal decline in production in the Northern Hemisphere, global milk production remains robust. Producers in South America and Oceania continue to post volume gains, further contributing to global supply,” according to Sharp.
Checking the demand side of things, the USDA’s May Dairy Supply and Utilization report showed cheese utilization rose for the 17th month in a row, hitting 1.3 billion pounds, up 2.2% from May 2025. Domestic use, at 1.17 billion pounds, was up 0.7% while exports hit 135.3 million, up 18.4%.
HighGround Dairy points out however, “Domestically, natural American cheese fell to its lowest level for the month since May 2022, as weak foodservice sales dampened stateside consumption.”
Butter use totaled 215.5 million pounds, up 10.6%, with domestic usage up 5.6% and exports up 88.8%. HighGround Dairy said year to date butter utilization through May surpassed the 1 billion pound mark, the earliest that has ever happened.
Nonfat-skim milk powder utilization came in at 204.3 million pounds, down 8.5%, as exports plunged 20.1% due to high U.S. prices. Domestic usage was up 9.7% and HighGround Dairy said that elevated domestic demand may help keep U.S. prices from falling back to the $1.20 per pound level seen at the start of the year.
Dry whey disappearance totaled 80.5 million pounds, up 14.5% from a year ago. Domestic use was down a whopping 52.2%, however exports soared 112.3%.
“US prices have been discounted relative to Europe, which may be one reason for the strong shipments,” said HighGround Dairy.
U.S. fluid milk sales headed south in May, likely impacted by some school closings for summer. The USDA’s latest data showed packaged sales at 3.5 billion pounds, down 2.1% from May 2025, after inching up 0.3% in April.
Conventional product sales came in at 3.2 billion pounds, down 2.2% from a year ago. Organic sales, at 250 million, were down 1% and represented a typical 7.2% of total milk sales in the month.
Whole milk sales totaled 1.3 billion pounds, up 0.1% from a year ago and up 2.4% for the five-month period. Whole milk represented 37.1% of total sales for the month. Skim milk sales, at 134 million pounds, were down 11.3% from a year ago and down 8.9% year to date.
Packaged fluid sales, January to May, totaled 17.8 billion pounds, down 0.5% from 2025. Conventional product sales totaled 16.5 billion pounds, off 0.4% from a year ago. Organic products, at 1.3 billion pounds, were down 0.9%, and represented 7.1% of total milk sales for the year.
Chicago Mercantile Exchange block cheddar closed Friday, July 17, at $1.6275 per pound, up 8 cents on the week and the highest since May 13 but still 1.50 cents below a year ago. The barrels finished at $1.6125, 5.25 cents higher but 4.75 cents below a year ago. There were 27 loads of block that traded hands on the week and seven of barrel.
High temperatures in the Central region continue to negatively impact cow comfort and milk output, according to Dairy Market News. Cheese production was lighter last week as lighter milk output and limited spot availability had an impact. Cheese demand was steady in both domestic and international markets. Barrel availability was tighter than blocks. Some cheesemakers anticipate that lighter production will cause spot inventories to tighten in the coming weeks.
Peak spring milk production is in the rearview mirror as temperatures also heated up in the West last week. Idaho handlers saw the hottest weekend of the year so far. Cheese output was stable and on pace or somewhat ahead of demand for most types. Demand from domestic and international buyers was steady. Retail demand remains heavier than food service demand, according to Dairy Market News.
Cash butter saw its Friday close at $1.59 per pound, down 6 cents on the week, and 92.25 cents below a year ago. There were 57 sales on the week.
Central region contacts report that milk component levels and cream production are declining at a more rapid pace than expected.
Butter output was steady to lighter, as some plants had downtime last week. Domestic butter demand was unchanged. Export interest is strong, said Dairy Market News.
Western butter manufacturers report that cream production is keeping up with expectations and spot demand. Butter production is strong. A few butter makers noted that demand for unsalted butter was outpacing their production. Butter demand from domestic and international buyers is steady, said Dairy Market New.
Grade A nonfat dry milk continued its downward slide, dropping to $1.47 per pound Friday, 8.5 cents lower on the week, lowest Chicago Mercantile Exchange price since Feb. 2 but still 18 cents above a year ago. There were 37 sales on the week.
Dry whey lost a penny Monday, July 13, dropping to 68 cents per pound but regained 2 cents Tuesday and ended the week at 69.5 cents per pound, a half-cent higher on the week and 13.75 cents above a year ago. There were three trades last week.
“Price increases across most food and beverage categories are tightening household budgets and prompting consumers to make wholesale changes in how they shop. A growing number of Americans are trading down to lower cost food options, reducing discretionary purchases or buying fewer groceries altogether,” warned a new report from CoBank.
“Inflationary pressures and shifting consumer buying patterns are rippling through the US food chain,” said CoBank, “Reshaping strategies for retailers, manufacturers and suppliers.”
“While May’s increase in the food price index was tepid, overall food prices are up 2.7% from May 2025 and roughly 26% higher than five years ago,” said Billy Roberts, Co Bank food and beverage economist. “Cumulatively, food price increases are proving to be the definitive, everyday stressor for consumers and they’re responding decisively by choosing lower cost options like private label brands, shopping at discount retailers or simply buying less.”
Changes in consumer behavior haven’t gone unnoticed by manufacturers and retailers, said CoBank. “Large grocery chains are unveiling price rollbacks and value positioning to maintain traffic and protect market share. Food and beverage manufacturers are emphasizing affordability through pricing adjustments, promotions and productivity gains aimed at offsetting rising input costs.”
Market research firm Numerator said, “4 out of 10 consumers cite rising prices as their top concern for the year ahead. Cost pressures building across everyday goods are straining some demographics more than others, a disparity likely to persist while gas and energy prices remain elevated. Nonetheless, inflationary pressures, including those triggered by the war in Iran, are continuing to impact many sectors of the U.S. economy,” said CoBank.
In politics, the American Dairy Coalition applauded the proposed Federal Trade Commission right-to-repair settlement with Deere & Company that could save farmers millions in repair costs. “This proposed settlement represents important progress toward reducing unnecessary repair costs and restoring farmers’ ability to maintain their equipment efficiently and affordably. Every dollar saved on repairs goes directly back into farm operations and family budgets,” said Laurie Fischer, American Dairy Coalition CEO.
Announced July 8 by the FTC and the attorneys general of Illinois, Arizona, Michigan, Minnesota and Wisconsin, the proposed agreement would require Deere to make repair software, diagnostic tools and technical resources available to farmers and independent repair providers as they are available to Deere dealerships. The settlement is subject to approval by the U.S. District Court for the Northern District of Illinois, said the American Dairy Coalition.
U.S. Secretary of Agriculture Brooke Rollins announced that ten additional meat and poultry companies have adopted USDA’s voluntary Product of USA label, “marking continued momentum behind the Administration’s efforts to help consumers easily identify products that are truly born, raised, harvested, and processed in the United States.”
A USDA press release stated, “Since USDA launched its nationwide awareness campaign earlier this year, more processors across the country have committed to using the Product of USA label, giving consumers greater confidence that when they purchase products bearing the claim, they are directly supporting American farmers, ranchers, processors, and rural communities.”
Looking across the pond, the July 14 Daily Dairy Report said, “A change in agricultural policy in Europe is shaping up. After years of policy aimed at reducing animal agriculture’s environmental impact, the European Commission’s new Livestock Strategy, issued last week, signals a new approach. The document recognizes that farm numbers have fallen and sets out five priorities for the future, focused on sustainability, competitiveness, resilience, geographical differences, and promoting excellence in agriculture. This is a shift from years of policy discussions centered on reducing livestock numbers in some regions.”
Last week’s Global Dairy Trade Pulse, number 112, saw 6.8 million pounds of product sold, up from 6.5 million on June 30. The price on anhydrous milkfat and skim milk powder moved higher, while butter and whole milk powder were lower.
Fonterra updated its forecast farmgate milk price. The revised forecast is $9.25 per kilogram of milk solids, with a new range of $8.00 to $10.50. This is down from the opening forecast of $9.75 announced in May.
Fonterra CEO Richard Allen said the change to the forecast “reflects softer-than-expected demand at a time of strong global supply.”
This article originally appeared on Farmers Advance: Price increases across most food and beverage categories are tightening household budgets
Reporting by Lee Mielke, Farmers’ Advance / Farmers Advance
USA TODAY Network via Reuters Connect
By Lee Mielke, Farmers' Advance | USA TODAY Network
