Market Reports

Butter futures jumped this week on the heels of a bullish Cold Storage report. USDA pegged January 31 butter inventories at 215.4 million pounds, down 17.4% from the year before. Domestic butter demand was robust and exports were strong enough to offset the significant growth in U.S. butterfat output. More recently, though, USDA’s Dairy Market News reported that butter churns are running “seven days a week… at or near max capacity.” And manufacturers tell Dairy Market News they are “building inventories to prepare for upcoming slower production periods.”

On Thursday, USDA announced that it would spend $263 million buying food to donate to food banks and nutrition assistance programs under Section 32 of the Depression-era Agricultural Act of 1935. USDA will spend nearly half of the $148 million allocated for dairy products on butter, with another $42.5 million for Swiss and Cheddar cheese, and $30.5 million on conventional and ultra-high temperature milk.

It was another dramatic week on LaSalle. Seemingly inspired by the Olympians in Milan-Cortina, the markets underwent their own fits of athletic prowess as they jumped, twirled, and in some cases tumbled. The market tone is unsettled as buyers and sellers are going head-to-head. By the conclusion of Friday’s spot session, every commodity sat at a lower price than a week prior. However, that simple conclusion belies the volatile activity that occurred over the course of the week.

Product scarcity seems to be driving the gains in the milk powder market as buyers seeking product are coming up empty-handed. According to USDA’s Dairy Products report, combined output of NDM and skim milk powder (SMP) was just 170.3 million pounds in December, down 6.2% compared to the same month last year. NDM prices have been climbing since January, but the trajectory accelerated meaningfully this week. After taking a brief respite on Monday, the spot price for NDM rose every day between Tuesday and Friday, delivering an 18¢ increase, and qualifying as the commodity’s strongest week since May 2007.

After rising unabashedly last week, the resolve of dairy markets was tested in recent days with mixed results. The CME was abuzz with activity as buyers and sellers gathered to test the limits and fortitude of the market’s newfound vigor.

But even though the specter of excess global milk supplies has by now become familiar, the bears seem to have taken a breather this week. For the second event in a row, the Global Dairy Trade index moved up, rising 1.5% on the back of stronger prices for fats and powders. Similarly, the CME spot market did an about face with values rising across nearly every product. While we remain a far cry from declaring that the bulls have returned, these increases are nevertheless an indication that the market may be finding some support at prevailing levels.

The dairy markets have been swamped under a tidal wave of milk and are now fumbling around for the bottom. After catching a quick breath last week, spot nonfat dry milk (NDM) slipped back under the surface, falling a penny to $1.255. CME spot butter bounced back from multi-year lows, climbing 5.5ȼ to $1.355 per pound. And CME spot Cheddar blocks continued to sink, falling 2.5ȼ to $1.29. Meanwhile, whey remained buoyant. Spot whey powder rallied 3.5ȼ to 73.5ȼ.

It strengthened every day so far in 2026. The unexpected rally propelled CME spot nonfat dry milk to $1.265 per pound today, up 9ȼ for the week to its highest perch since mid-August. It’s unusual to see milk powder prices climb amid a rapid increase in U.S. milk output. But the dramatic expansion in U.S. dairy processing capacity has reduced the need for balancing.

While impressive, the U.S. is far from the only place that is demonstrating such a growth trajectory for milk production. Volumes are rising in nearly every corner of the globe. While complete data is not yet available, cumulative milk production across the top five main dairy exporters - Argentina, Australia, Europe, New Zealand, and the U.S. - likely grew by at least 3.5% between September and November, a feat that has not been achieved since 2014.

The U.S. dairy industry is drowning in butterfat. In October, America’s dairy herd cranked out 3.7% more milk than the year before, and cream production soared 5.9% year over year. On Monday, USDA will publish a fresh round of milk production data, and even greater gains are likely.