Econ Roundup: Demand Supports Milk Prices, Feed Costs Rising
August 4, 2026
Following months of slowing milk production growth, a larger milking herd and a rebound in component growth drove a 3.1% increase in component-adjusted milk production in May. But even as supplies grow, healthy demand both at home and abroad is helping to balance the market.
Exports rose 14% on a milk solids basis in May, boosted by a 102% increase in butterfat exports and 18% growth in cheese exports. Domestically, demand for dairy proteins like whey protein concentrates and nonfat dry milk are so strong that export availability is limited. Circana data indicates that consumers’ appetite for high protein dairy products at retail is virtually insatiable — sales of cottage cheese have risen 11% so far this year, and sales of Greek yogurt have increased 6%. While quick service restaurant foot traffic fell in May, limiting cheese use growth, full-service restaurant foot traffic continues to grow, supporting butter use even as cheese remains under pressure.
The most likely factor to change market direction is summer heat waves denting milk production growth in the United States and Europe. Milk collections fell almost 11% in France and 8% in Germany as they experienced extreme heat stress, potentially limiting EU milk production growth in the coming months. At home, beyond localized effects on dairy yields, drought is raising doubts about crop yields compounding the effect of low storage levels and renewed grain exports to China strain supplies. With feed costs increasing and the All-Milk Price easing as NFDM prices retreating from their Spring rally, current futures suggest DMC margins are poised to fall below the $9.50/cwt maximum coverage level from July to October.
