Market Reports

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.

In a world flush with milk, competition for market share is getting fiercer by the day. The U.S. has struggled to gain traction on milk powder sales, and it may lose ground for cheese, butter, and whey powder if the price is not right. It’s possible that first-quarter cheese sales will disappoint after the October rally pushed importers to look elsewhere. Indeed, given the scale of U.S. cheese output, anything short of the recent record-setting volumes is likely to feel inadequate.

Combined milk collections among the world’s five largest dairy exporters jumped 4.3% year over year in October, the fastest growth for the group since 2014, when Europe was preparing to end its quota system. Competition for exports is fierce, prompting a race to the bottom in the dairy markets. At the Global Dairy Trade (GDT) auction this week, the GDT Index extended its eight-event losing streak. The 4.3% drop pushed the GDT Index to its lowest level since early 2024.

Milk continues to gush across the United States. In the most recent Milk Production report, USDA pegged October production at 19.47 billion pounds, representing a year over year gain of 3.7%. A larger herd continues to drive stronger output, but the tide may be shifting. For the first time this year dairy producers reduced cow numbers by 6,000 head during October, bringing the national herd to 9.575 million head. Even so, cow numbers are up an astonishing 208,000 head compared to a year ago.

Producers who had put off expansions when interest rates first climbed in 2022 eventually moved forward with their plans, and many are just now putting cattle into new heifer barns and milk parlors after completing the multi-year permitting, financing, and construction process. Meanwhile, in New York and throughout the heartland, dairy producers jumped at the opportunity to supply new dairy processing facilities. Based on the timing of new processing, the U.S. dairy herd is likely to continue to grow.

The commodity markets swung wildly back and forth this week, buffeted this way and that by politics and anxiety. While the U.S. economy continues to expand, growth is uneven. Lower-income consumers are struggling, and many middle-class Americans are watching their budgets more closely. They’re dining out less and seeking bargains when they do. Many shoppers are trading down to store brands or switching to discount retailers. This week, the Trump administration and a federal judge sparred over the timing and amount of Supplemental Nutrition Assistance Program (SNAP) benefits the government will fund during the partial shutdown, leaving the 43 million Americans who receive SNAP benefits in limbo.

Falling international prices spooked the U.S. milk powder market. At this week’s Global Dairy Trade (GDT) Pulse auction, skim milk powder (SMP) prices fell 0.7% from last week’s GDT event, dropping to a 13-month low of $2,530 per metric ton, equal to nonfat dry milk (NDM) at around $1.22 per pound. Whole milk powder prices slipped 0.9% to a one-year low. Manufacturers in Europe and Oceania are flush with milk, and dryers are running hard.

Dairy markets both in the U.S. and across the globe continue to feel out the balance of supply and demand. Although the dramatic price decreases seen during the last few weeks have given way to more modest movements, the overall market tone remains bearish. Tuesday’s Global Dairy Trade (GDT) auction, albeit glitchy, ultimately saw the GDT Price Index move down 1.4%, the fifth consecutive lower result. The decline in the index reflected lower prices across every product except anhydrous milkfat.