Milk prices are pulling profit margins down

Too much milk and butterfat production have caused milk prices to plummet over the past five months. As a result, margins have drifted downward.

Since Aug. 1, Class IV milk futures fell nearly $5 per hundredweight (cwt.) from an average of $19.40 to $14.80 per cwt. for the first half of the new year. Class III futures declined too, but only by about $1.20 per cwt. as processors search for more protein to fill strong consumer demand.

Milk pricing formulas have shifted back in favor of protein for this very reason. Looking forward into 2026, margins will be impacted by a variety of factors and could remain sluggish through the first, and perhaps second quarter of the year. As milk production and demand come into balance, milk checks should improve via indications from CME futures contracts in the second half of 2026.

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Abbi Prins

January 8, 2026

hoards.com