LUBBOCK, TEXAS (RFD NEWS) — Milk prices are showing signs of recovery after a difficult start to 2026, even as production remains elevated, according to University of Georgia agricultural economist Will Secor.
The all-milk price averaged $17.50 per hundredweight in January, the lowest January level since 2021, driven by a sharp increase in milk production that ran more than 3% above a year earlier. That supply pressure weighed heavily on prices early in the year.
By February, however, conditions began to shift. Milk prices rose about $0.80 per hundredweight from January, a roughly 5% increase, improving margins despite continued higher feed costs. Production remained strong, but demand — particularly from export markets — helped support prices.
Wholesale dairy product prices have also strengthened, with gains in cheese, butter, nonfat dry milk, and whey contributing to improved market conditions. Export volumes are running more than 10% above last year through the first two months.
Looking ahead, risks remain. Strong production levels continue, supported in part by profitable beef-on-dairy dynamics, while export demand could face pressure from higher prices and global uncertainty.
New USDA data shows a shifting balance in global dairy trade as supplies remain strong. The latest outlook raises U.S. milk production forecasts and adjusts trade expectations.
“U.S. milk production forecast, we raised by 600 million pounds this month, just reflecting the latest milk production report,” explains USDA World Agricultural Outlook Board Chair Mark Jekanowski. “In terms of dairy product trade, we’re looking at pretty large cheese and butter supplies and quite competitive prices globally. We reduced our fat-basis imports forecast by half a billion pounds this month, and we raised our fat-basis exports forecast by 1.5 billion pounds. Milk solid basis products raised our export forecast by 700 million pounds.”
Jekanowski says the increase in milk production is being driven primarily by herd growth.
“The U.S. milk production forecast we raised — that is driven by an increase in cow inventories — so continued growth in cow inventories that more than offsets a little bit of a slowdown in the growth in milk per cow,” Jekanowski continues. “So overall, on net, higher milk production. And year over year, we’re looking at an increase of about 3.6 billion pounds of milk production in the U.S.”
He says that growth in supply continues to shape the outlook as markets adjust to larger dairy production levels.
There is also potential for profitability in the dairy market, especially in byproducts like butter and cheese. Dairy markets analyst Shawn Hackett says the milk food chain is shifting into a more profitable landscape and that the U.S. dairy sector is being driven by strong demand for a secure domestic supply.
Hackett also says producers are holding onto animals longer and using dairy cows for beef breeding to capture higher prices, and that shift has helped support production levels longer than expected.
“You’re keeping animals on the farm for longer, past their peak production levels, before you replace them, and we’re starting to see the milk-per-cow numbers over the last several months really fall off significantly,” Hackett explains. “We might have gone too far with this whole breeding to beef cattle and such, to where our dairy herd needs to be upgraded. We may see an extended period of much-below-normal milk-per-cow efficiency, which then breeds into an inability to produce your components at the levels that you’ve been anticipating, at a time that the market is wanting to stockpile a lot of these products, like the milk powder, like the whey, that are storable.”
Hackett warns that adopting a beef-on-dairy herd management strategy may be weighing on long-term efficiency as milk per cow output declines.
“We might have actually pushed too far over the edge and lost our normal process of keeping the dairy herd fresh, and it’s something to watch,” he says. “If these numbers continue to fall, we could be looking at far more constrained production ahead than what the USDA and many have been expecting. We’ve never gone down this road before, so all this is fresh, unbridled territory, but when I think it through, the dairy producer is getting a check. He has a bank account. His dairy cows to beef that he’s been doing month after month, bringing all kinds of extra income. So, it’s very hard for the dairyman to say, ‘I’m going to stop doing that.’”
Hackett says the big question now is whether producers shift back toward building herd health for the long term, even if short-term profits from beef markets remain strong.
