Record dairy exports in December

The “Mielke” Market Weekly

“US dairy exports surged to their highest December volume ever, hitting 527.1 million pounds, Besting the prior highwater mark by 8.5%,” said HighGround Dairy. “Seasonally, exports tend to dip from November to December, but that was not the case in 2025 as shipments rose modestly 2.3% month over month.” Cheap prices and a weak dollar, despite the trade uncertainties over tariffs, contributed.

Cheese exports totaled a record 119.3 million pounds in December, up 24% from December 2024 and up 20.4% for all of 2025 from 2024. “U.S. cheese remains the cheapest globally, said HGD, “and some of these sales were likely booked in September, when the spread was wider.” Shipments to Mexico set a new record.

Butter sailings totaled 23.2 million pounds, up 261% from a year ago, and up 162.4% for the year.

Nonfat-skim milk powder exports amounted to 129.9 million pounds, up 18% from a year ago, but they were down 9.2% for the year. Dry whey totaled 38.4 million pounds, up 32.8% from a year ago and up 9.7% for the year.

The U.S. Department of Agriculture Livestock, Dairy and Poultry Outlook said recent data on dairy cow inventories, weekly estimated slaughter and milk-feed ratio support downward revisions for the 2026 expected average number of milk cows. The dairy herd is forecast to average 9.54 million, 15,000 less than last month’s projection. However, with higher-than-expected milk per cow in the last quarter of 2025, the 2026 forecast for milk per cow increased 65 pounds to 24,585 pounds.

The Restaurant Performance Index shows the restaurant industry remained largely in contraction for most of 2025, according to the Outlook. “Restaurants serve as an important channel for food service, thus their reduced activity contributes to lower domestic utilization of dairy products, particularly milk-fat-based items such as butter and certain cheeses.”

USDA’s latest slaughter data showed 60,500 dairy cows sent to slaughter in the week ending Feb. 7, up 4,500 head or 8% from a year ago. Year to date, 341,600 cows have been culled, up 19,100 or 5.9% from a year ago.

CoBank said, “Low crop prices and high production costs are weighing heavily on U.S. farmers as spring planting season draws near and farmers make critical decisions about which crops will offer the most favorable economic return. While late-winter price movements and regional basis signals could influence farmers over the next few weeks, soybeans are expected to increase their share of American farmland in 2026, while planted acreage of corn, wheat, grain sorghum, cotton and rice is expected to decline.”

U.S. soybean acreage is projected to increase nearly 6% this year, according to a CoBank report, with soybeans pulling acres from multiple crops; “The expansion of U.S. soy crush capacity and expectations of continued Chinese demand have lifted soybean prices to more attractive levels than competing crops.”

“Soybeans offer greater profit potential than corn, wheat, sorghum, cotton and rice,” said Tanner Ehmke, lead grains and oilseeds economist at CoBank.

The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. reports, “Dairy margins weakened over the first half of February as milk prices declined (albeit following a sharp rally), while feed costs were steady to slightly higher. Both the Class III and especially the Class IV milk futures caught a bid from late January to early February as continued strength in the export market has absorbed increased dairy product production in the U.S., which has prevented inventories from building despite lackluster domestic demand.

“The U.S. dollar index is trading at its lowest level in four years and over the past 12 months has depreciated 12% versus the Euro and 6% against the New Zealand dollar, making U.S. dairy product exports much more competitive on the global market. Moreover, the U.S. dollar has also declined 19% relative to the Mexican peso, with Mexico sharply increasing its purchases of U.S. dairy.

“With increased milk production and higher components, U.S. cheese production during December rose 6.7% year-over-year to 1.279 billion pounds while butter production of 203.848 million pounds was up 2% from December 2024.

“The average fat test during December rose to 4.51%, up 0.05% from the prior year. U.S. butter prices have been trading at a steep discount relative to both EU (European Union) and Oceania prices throughout 2025, with prices expected to remain competitive through the Northern Hemisphere spring flush. Canada accounted for 37% of total U.S. butterfat trade during 2025, running almost 50% ahead of 2024’s volume, while the U.S. share of Mexico’s butterfat imports more than doubled to 35% (and) New Zealand’s share declined from 80% to 60%,” the MW said.

The February Federal Order Class I base milk price was announced by USDA at $15.47 per hundredweight, up 77 cents from January but $5.55 below February 2025. It equates to $1.33 per gallon, down from $1.83 a year ago.

Agriculture Secretary Brooke Rollins announced steps this week to boost low milk prices and expand dairy consumption through Section 32 purchases of what the National Milk Producers Federation called, “A balanced, effectively targeted mix of dairy products, including the first major butter purchases in five years.”

“Dairy farmers have shared in the struggles faced throughout the agricultural economy, and these purchases will provide important relief to producers who will benefit from the additional demand, helping them provide nutritious dairy products to Americans and the world,” said NMPF President & CEO Gregg Doud.

USDA will purchase $75 million of butter, $32.5 million in Cheddar cheese, $20.5 million in fresh fluid milk, $10 million of Swiss cheese and $10 million in ultra-high temperature (shelf-stable) milk.

Checking Chicago, after dropping 8.50 cents the previous week, block Cheddar climbed to $1.51 per pound Thursday, the highest since Nov. 24, 2025, but it closed the President’s Day holiday-shortened week at $1.4975, up 11 cents on the week and 40.25 cents below a year ago, as traders awaited the afternoon’s January milk production report. I’ll have complete details next week. The barrels finished Friday at $1.49, 5 cents higher, the highest since Dec. 2, 2025, but 31 cents below a year ago. There were 14 sales of block on the week and one of barrel.

Milk production is seasonally strong in the Central region as contacts tell Dairy Market News that farm-level output is up from a year ago. Class III spot milk at mid-week ranged from $2-under to $1-over class. Demand is strong for barrel cheese. Retail and food service demand was unchanged. Export interest remains strong.

Milk production continues to cover the needs of cheese manufacturers in the West. Domestic retail demand is steady, while domestic food service demand is moderate, said DMN. Demand from international buyers was steady to strong.

The butter closed Friday at $1.87 per pound, up 16.50 cents on the week, highest since Sept. 11, 2025, but still 54.50 cents below a year ago on 38 sales.

Cream production is strong in the Central region. Some butter makers were securing additional cream to run busier production. Bulk butter demand is strengthening, while retail and food service sales are steady. Domestic 82% butterfat remains competitive globally and contributes to strong export demand.

Milk output is providing cream to cover contractual obligations with butter makers in the West, but spot loads of cream were tighter in some parts. Butter output is generally busy, with churns running seven days a week. Export demand is keeping 82% product tight. Domestic demand is steady, says DMN.

Grade A nonfat dry milk finished Friday at $1.6850 per pound, 8.50 cents higher, the highest since July 21, 2022, and 44.50 cents above a year ago, with 10 sales.

The Daily Dairy Report’s Monica Ganley Quarterra wrote in the Feb. 13 Milk Producers Council newsletter, “U.S. milk powder production remains limited and with insatiable demand for protein pushing milk through other avenues, the trend doesn’t seem likely to reverse course any time soon. However, the spring flush is on the horizon, which should usher more milk to the dryer and help relieve the squeeze. Further, and perhaps more importantly, U.S. product is now clearly uncompetitive with alternative international suppliers.”.

Chicago Mercantile Exchange whey was bid 2 cents higher Tuesday, hitting 74 cents per pound, but was offered 6 cents lower Friday and closed at 68 cents per pound, 13.50 cents above a year ago. There were no sales on the week.

Global Dairy Trade is doing well, and Tuesday’s weighted average was up 3.6%, following a 6.7% jump Feb. 3. It was the fourth consecutive gain, though volume continued to slip seasonally, at 49 million pounds, down from 53 million Feb. 3, and the lowest since June 17, 2025. The average metric ton price hit $4,028 U.S., up from $3,830 Feb. 3, and the highest in nine events.

Butter led the pack, up 10.7% after jumping 8.8% Feb. 3. Anhydrous milkfat was up 3.8%, following a 5% gain. Lactose was up 7.8% after inching 1.5% higher. Skim milk powder was up 3% after leading the gains last time with a 10.6% jump. Whole milk powder was up 2.5% after a 5.3% advance. Cheddar was down 1% after jumping 3.8%. Mozzarella was up 5% after jumping 10.6%.

StoneX said the GDT 80% butterfat butter price equates to $2.8086 U.S. per pound, up from $2.5549 Feb. 3, and it compares to CME butter, which closed Friday at $1.87. Cheddar equated to $2.1481, down from $2.1646, and it compares to Friday’s CME block Cheddar at $1.4975. GDT skim milk powder averaged $1.3486 per pound, up from $1.3037, and whole milk powder averaged $1.6809, up from $1.6395. CME nonfat dry milk closed Friday at $1.6850 per pound.

Analyst Dustin Winston said the North Asia (which includes China) market share of purchases was smaller than the previous event but larger than last year. Southeast Asia/Oceania market share increased from the last event and last year.

HighGround attributed the strength to approaching holidays in key buying regions, which “Increases purchasing, drives markets higher and makes commodity supplies tighter than one would expect given the huge global milk volumes. It seems markets will head lower at some point, but the ride down will be bumpy.”

The Feb. 18 Daily Dairy Report said, “On Feb. 17, China welcomed in the Year of the Horse, and the country will spend the next 14 days celebrating, leading people to return to their hometowns and elevating dining occasions both at home and in foodservice. It’s also China’s largest gift-giving season, and dairy products such as premium ultra-high temperature milk, yogurt gift boxes, cheese snacks and infant formula are popular gifts for visiting families. And, as with the religious holidays such as Ramadan and Easter, urban Chinese households will be cooking with butter, cream and cheese,” the DDR said.

In politics, the NMPF praised the House Agriculture Committee for putting together a farm bill that will bring greater certainty to producers at a difficult time.

Key highlights for dairy included authorizing long-term dairy product processing cost surveys, initially authorized and funded in the One Big Beautiful Bill Act, extending the Dairy Forward Pricing Program, the Dairy Indemnity Program and the Dairy Promotion and Research Program.

It supports voluntary, producer-led conservation programs such as the Environmental Quality Incentives Program, with a continued designation of conservation funds for livestock producers and a directive for states to prioritize methane-reducing practices. It also establishes a long-term policy directive for the government to proactively negotiate protections for common cheese names like Parmesan and feta, as championed by NMPF.

Other highlights include Moving Food for Peace program administration to USDA and continuing $200 million in annual funding for Ready-to-Use Therapeutic Foods that incorporate milk powder to treat chronic malnutrition globally; reassigning export promotion funding initially included in the OBBBA into existing farm bill programs like the Market Access Program to make it easier to use by cooperators such as the U.S. Dairy Export Council.

The bill also expands economic opportunities for farmers to partner with local food distribution organizations to provide fresh, locally grown foods, including milk and other dairy products, to eligible community institutions, and it includes full-fat fluid milk and hard cheeses in the Dairy Nutrition Incentive Program. It also reauthorizes the Farm and Ranch Stress Assistance Network.

The International Dairy Foods Association said, “The draft farm bill would expand the SNAP (Supplemental Nutrition Assistance Program) Healthy Fluid Milk Incentives projects into a broader Dairy Nutrition Incentive Project that encourages the consumption of additional varieties of milk, as well as cheese.”

“The bill builds on the strong momentum behind dairy nutrition incentives and reflects a clear commitment to making America healthy again,” said Michael Dykes, IDFA president and CEO. “By expanding SNAP dairy incentives to include additional nutritious dairy products and providing certainty to core federal dairy programs. this legislation ensures low-income families have greater access to affordable, wholesome dairy foods while giving farmers and processors the certainty they need to continue delivering for America.” Markup is scheduled for the week of Feb. 23.

NMPF, USDEC and the Consortium for Common Food Names also celebrated this week’s signing of a new U.S.-Indonesia trade agreement that would provide key market access expansions and protections for American dairy products.

Lastly, a reminder: Signup for 2026 Dairy Margin Coverage ends Feb. 26. Market conditions indicate payments may be expected throughout the year.