MRV BLOG: MRV’s 2025 Year-End Dairy Overview

Check-in here to see the MRV commentary on what we have seen and are seeing in the dairy market.  These insights have been developed from MRV’s proprietary data, industry experience, and industry reports referenced below. Here’s our latest:

The year opened with dairy markets under sustained pressure as milk prices trended lower and commodity values weakened across the board. Class II, III, and IV prices declined early, with Class III reaching multi-month lows and the spread between Class III and IV widening enough to raise depooling concerns. Butterfat and protein values slipped to their lowest levels in months, pulling down FMMO blend prices. Abundant milk supplies, global oversupply, and soft spot markets set a cautious tone through winter, while animal health challenges and cold-weather stress added operational strain. Exports provided only partial relief early on, as volumes fluctuated despite improving values and continued strength in U.S. cheese shipments.

Spring and summer brought sharper volatility but improved demand signals. Milk production increased modestly as herd efficiency improved, while expanded processing capacity supported higher butter and cheese output. Commodity prices found intermittent support as inventories tightened in select categories and exports strengthened, particularly to Mexico and other key international markets. U.S. cheese and butter exports posted record or near-record volumes, benefiting from competitive pricing and strong overseas demand. Still, heavy milk availability, especially in the Midwest, kept spot prices rangebound and limited sustained price recovery. Policy changes in June, including revisions to Class I pricing and updates to federal dairy programs, introduced both near-term price support and longer-term uncertainty around demand and competitiveness.

By late summer and fall, the market remained unsettled as production growth increasingly outpaced demand. Butter and cheese inventories rebuilt, milk powder markets lagged amid weaker global demand, and price rallies struggled to hold. While revised FMMO pricing formulas and higher Class I values provided late-year support, the broader complex continued to reflect oversupply conditions. Rising butter and Italian cheese production, strong whey utilization for higher-value products, and elevated stocks underscored the imbalance. Exports remained a critical outlet but faced growing competition as global production expanded and seasonal demand softened.

Looking Ahead to 2026:
As the industry turns the page, the fundamental challenge remains excess milk. USDA forecasts point to continued growth in U.S. production into 2026, while major global exporters are also adding supply. Inventories of key products, particularly cheese and butter, are expected to remain burdensome, keeping downward pressure on Class III and IV prices through at least the first quarter. Export markets will be essential but increasingly competitive, with limited room to absorb surplus volumes. Heading into 2026, market stability will depend on disciplined production growth, sustained export performance, and strategic risk management as the industry works through another cycle of supply-driven price pressure.

This information cited by MRV Marketing, LLC is for informational and reference purposes only. It is not intended to be a conclusive statement of future market conditions. It is not legal advice or legal documents. The data used in these documents contains references to information created and maintained by other organizations or agencies. Please note that MRV Marketing, LLC does not control and cannot guarantee the accuracy of these outside materials.

Statistical data referenced here is gleaned from reports by MRV Proprietary Data