The USDA lowered its 2026 and 2027 milk production forecasts in the World Agricultural Supply and Demand Estimates. 2026 production and marketings were projected at 236.9 and 235.9 billion pounds respectively, down 300 million pounds on both from last month’s report. If realized, both would still be up 5.2 billion pounds or 2.2 percent from 2025.

2027 production and marketings were projected at 238.4 and 237.4 billion pounds respectively, down 200 million pounds on both. If realized, both would be up 1.5 billion pounds or 0.6 percent from 2026.

Commercial exports for 2026 and 2027 were lowered on a fat basis due to lower-than-expected shipments of butter and cheese. Commercial exports were virtually unchanged for 2026 on a skim-solids basis but lowered slightly in 2027 due to lower expected shipments of dry whey. Also, for both 2026 and 2027, commercial imports were raised on a fat basis on increased shipments of butter. Commercial imports on a skim-solids basis were unchanged in 2026 and 2027.

Butter and cheese price forecasts were decreased for both years based on recent prices and growth in butterfat output. Nonfat dry milk and whey forecasts were raised to reflect recent prices and strong demand for protein products.

The Class III milk price forecasts were lowered as higher whey prices only partially offset lower cheese prices. The 2026 average was projected at $15.80 per cwt., down 40 cents from last month’s report, and compares to $18.01 in 2025 and $18.89 in 2024. The 2027 average was estimated at $16.90, down 20 cents from last month’s report.

The Class IV forecast was raised as higher nonfat dry milk prices more than fully offset lower butter prices. It was estimated to average $18.90 in 2026, up 35 cents from a month ago, and compares to $17.38 in 2025 and $20.75 in 2024. USDA’s weekly slaughter data showed 52,800 dairy cows sent to slaughter the week ending Sept. 26, down 200 or 0.4 percent from a year ago. Year to date, 2,024,800 cows have been culled, up 78,600 or 4.0 percent from a year ago.

It’s been a week of rebound at the CME, especially on cheese. Cash block Cheddar, which closed Friday at $1.3850 per pound, shot up to $1.6525 Thursday, highest since July 23, but still 12.25 cents below a year ago. The barrels, which had parked at $1.4525 since Sept. 16, was bid up 11.75 cents Thursday, hitting $1.57, highest since Aug. 27 but still 20 cents below a year ago.

Cooler weather is improving milk availability across much of the Central region, according to Dairy Market News. Forecasted cooler temperatures are supportive and, while milk supplies have increased, spot load availability remains limited for Class III producers as Class I and Class IV production increases. Elevated temperatures in the Southwest persist, and milk supplies remain tight. Mid-week Class III spot milk prices ranged from flat-class to $3-over. Cheese makers report steady Cheddar production, while inventories remain ample across the region. Market participants note mozzarella and parmesan orders and sales are strong while inventories are light.

Cheese is long and the tone is flat in the West. Contacts are offsetting the low cheese prices with returns from whey production. Plants are running at full capacity. Contractual milk loads are being met, and cheese production remains steady, generally operating seven days a week.

Swiss cheese demand is down according to some. Spot cheese is available and inventories remain strong. Domestic retail demand is steady while export demand is stable and continues to command higher prices. Sellers report some booking activity for first quarter 2027, according to DMN.

Contacts in the Central region report that cream availability is tightening as Class II processors increase production and take in the maximum amount of cream. Spot loads remain available throughout the region. Reports are of increased production of cream cheese and extended shelf-life products, while ice cream production is declining seasonally. Butter production remains steady as cream continues to move to regional churns. Inventories of 80 percent butterfat butter remain ample, while 82 percent remains tight, according to DMN.

The Daily Dairy Report’s Sarina Sharp wrote in the Oct. 9 Milk Producers Council newsletter: “The gap between U.S. and international milk powder values has widened to a chasm and even buyers in Mexico are starting to look elsewhere. After glancing at prices across the border, Mexican buyers stepped up the volume of their bids at the GDT. That’s evidence of a downshift in U.S. trade prospects, which were already in decline. In August, the U.S. sent just 101 million pounds of NDM and SMP abroad, the smallest monthly volume in over seven years. But production is also scant,” Sharp said.

Cattle are moving north from Mexico again, despite concerns over screwworm. Because income from dairy beef is so important right now, I include some insights from this week’s Western United Dairy’s newsletter. It stated: “On Aug. 24, USDA reopened the Douglas, Ariz., port to cattle imports, which was followed by the Sept. 24 reopening of the Santa Teresa port in New Mexico. Historically, the Santa Teresa port is the busiest livestock inspection port on the border, handling roughly 43 percent of all Mexican cattle imports. While there are no cattle inspection facilities along the Mexican-California border, re-openings at several additional ports in other states are being planned.

“Investigation into the dissemination of New World screwworm (NWS) suggest that fast, long-distance spread most frequently results from transportation of infested livestock. With these recent port re-openings, California producers remain understandably concerned about California and U.S. biosecurity.”

Inspection and treatment requirements for Mexican imports are spelled out by the USDA and its equivalent Mexican agency, SENASICA, but. “Protocols may differ if animals are being imported as general cattle imports or if they are intended for immediate slaughter.”

WUD said, “While the USDA is easing import restrictions on Mexican cattle, it is unlikely that US beef prices will fall quickly. The Santa Teresa cattle inspection port is the busiest in the country, but only about 1,000 cattle a day are expected to cross down from an average of about 3,000 per day. In addition, it takes about five to eight months to raise imported Mexican cattle to slaughter weight. Finally, recovery from the mid-western drought and a 75-year low of the U.S. beef herd inventory will take time.”