Why This Moment Is Different

Those of us on the dairy farm right now are feeling the pinch of milk prices that have fallen significantly in the past six months, with February’s Class III price announced at $14.94 per hundredweight, up 35 cents from January but still well below the 2025 average Class III price of $18.01 per hundredweight. The February Class IV price was announced at $16.29 per cwt., up $2.74 from January’s low of $13.55 per cwt. and $1.09 below last year’s average. Looking ahead, Class IV

futures milk prices have bounced back hard, with March’s price on the CME now trading above $19. April through June Class IV milk futures are trading above $20, while Class III milk futures prices are taking a little longer to rebound, moving just above $18 in June.

When you look at the fundamentals, not a lot has changed. The latest USDA Milk Production report still has the nation’s milk production up 3.4 percent in January, marking the seventh consecutive month of year-over-year growth above 3 percent. The number of milk cows in the nation’s dairy herd are still at all-time high levels, with January’s herd at 9.58 million head, up 14,000 from December. So, what has changed?

Reasons for Optimism

In February, Sara Dorland from Ceres Risk Management spoke about the current market situation and explained why this moment, with milk production up so dramatically, is different from other times in the past when a surge in milk production led to long periods of lower milk prices. She listed three reasons for optimism as to why this moment is different: all the new capacity coming online, the huge demand for dairy protein-based products right now, and the opportunity for sales overseas.

Dorland referenced more than $10 billion in new dairy processing capacity that is being built from 2025 to 2027, with a significant portion of that intended to meet export demand for US dairy products. Nearly a quarter of that investment is in the Northeast. Dairy processors in New York are investing more than $3 billion in new and expanded processing facilities. Chobani is building a $1.2 billion facility in Rome, NY, while the new Fairlife plant in Webster is a $600 million facility. Expansions at both the Great Lakes Cheese plant in Franklinville and the Cayuga Milk Ingredients Plant, both estimated at above $200 million, are planned as well. In Pennsylvania, Schreiber Foods just announced a $132.9 million expansion to grow its yogurt production.

While a portion of the added capacity is focused on domestic sales, a significant amount of the added product will move overseas. The global demand for US dairy products is evident when you look at how dairy exports did in 2025. With year-over-year growth in dairy export volumes up 4 percent, the US shipped more than 2.32 million metric tons of product overseas last year, the second highest ever after shipping 2.41 million metric tons in 2022. Despite the concern over reciprocal tariffs impacting sales, the dollar value of US exports in 2025 was up 15 percent year over year to $9.63 billion, just shy of the 2022 record of $9.66 billion.

Protein Possibilities

Domestically, there is a structural shift going on in the dairy industry, with consumers replacing traditional sources of dairy like fresh fluid milk, yogurt, and cheese with high-protein options like ultrafiltered milk, Greek yogurt and whey protein isolates added to other foods. That’s because Americans are leaning into a healthier lifestyle. That’s partly driven by the estimated 9 percent of Americans who are considering using a GPL-1 medication like Ozempic to lose weight.

An even higher number – 25 percent of all Americans – are actively seeking protein-rich foods for a healthier lifestyle. That’s driving huge production increases in products that meet that demand. The latest USDA Dairy Products report shows that dry whey production is up 11 percent year over year while production of both whey protein isolate and whey protein concentrate is up 12 percent year over year. Regular cottage cheese production is up nearly 17 percent from a year ago, while yogurt production is up 6 percent. More traditional products are also up, with butter up 6 percent and total cheese up nearly 5 percent.

This shifting trend is also evident when you look at the price of whey compared to butter and cheese prices. Ten years ago in March, whey was trading on the CME at about 25.5 cents per pounds, while butter was trading at about $1.99 a pound and cheese was at $1.52 per pound. This week on the CME, whey futures were trading at nearly 64 cents per pound, while cheese was still trading at $1.62 per pound and butter was still at $1.80 per pound. While markets fluctuate often, this ten-year snapshot shows whey prices are up 150 percent.

After declining in sales for several decades, cottage cheese sales are booming, going from a $1.3 billion market in 2023 to $2 billion in 2025. An Intel Market Research report projects that cottage cheese sales will reach $2.65 billion by 2032, with flavored varieties of cottage cheese increasing by 52 percent in the past year. Yogurt sales surged about 10 years ago and then leveled out. However, that industry has seen a nearly $3 billion increase in sales in the past three years, driven almost primarily by higher protein types like Greek and Skyr. In fact, an article on edairynews estimates that Greek-style yogurts are now approaching $6 billion in sales.

Despite the downturn in mailbox prices, this moment is different than other times when we went through a dairy price recession. There are many reasons why we can be optimistic about a short-term market reset. The increased dairy processing capacity, shifting consumer preference toward protein, and the huge global demand for US dairy right now are already pushing a rebound in commodity prices moving into the spring. January’s margin under the USDA Dairy Margin Coverage was well below the $9.50 maximum threshold for the program. However, USDA’s DMC Decision Tool projects those margins to rebound to above $10 by April. That will be a much-needed reprieve for those on the farm working to manage through this downturn.