U.S. Milk Checks Face Greater Exposure to Global Dynamics

International markets have a more direct path to the U.S. butterfat and protein component values that appear on milk checks.

The U.S. has an abundance of milk. For years, we’ve increased production faster than domestic demand could keep up with. Thanks to investment in new processing capacity, the industry can handle the milk. Exports have been critical to clearing the market of the extra product, but that makes prices more susceptible to global dynamics. As a result, international markets have a more direct path to the U.S. butterfat and protein component values that appear on milk checks. And heavy global supply will weigh on domestic milk prices.

More of Everything

Several new U.S. processing plants have come on line over the past two years that have enabled an expansion in milk production. As of June 2026, USDA data show there were 354,000 more milk cows in the U.S. than there were in June 2024. On average, each of those cows produces almost 2% more milk than their 2024 counterparts. Those factors combined mean we’re producing an additional 36 million pounds of milk each day, not to mention the higher component levels that mean more butter and cheese can be made from each pound of that milk.

Through the first half of 2026, the U.S. has produced 7.5 billion pounds of cheese. That’s 178 million pounds (2.4%) more than last year and 402 million pounds more than two years ago (adjusting for the leap year).

Butter output climbed as well, by nearly 150 million pounds versus the same period two years ago.

That’s a substantial pile of additional cheese and butter, and more than American consumers will likely work up an appetite for all at once.

Domestic disappearance of cheese (a proxy for domestic demand) in the first half of 2026 was about 6.8 billion pounds, which is about 112 million pounds more than the same period two years ago. That’s excellent demand growth, but it’s still less than a third of the increase in supply over the same period.

Thankfully, we’ve seen exports of cheese and butter climb to record highs. But the celebration of repeatedly setting new export records might be masking the importance of how critical these exports have become.

Export growth is now necessary support for the cheese and butter markets that drive milk prices.

Exports Shift to Cheese and Butter

Historically, U.S. dairy exports focused on clearing the market of surplus byproducts — primarily dry whey powder and nonfat dry milk from the cheese and butter manufacturing process. But exports of those products have been relatively flat or declining over the past few years. Instead, cheese and butter have been the drivers of export growth.

The strong export growth is worth celebrating. But beyond just being a good thing, the export growth is now necessary support for the cheese and butter markets that drive milk prices. If we were to return to the export levels of a few years ago, the U.S. market would be flooded in cheese and butter well beyond what could be consumed domestically, and overburdensome inventories would crush prices.

Since we have no choice but to export the additional production, U.S. dairy markets are increasingly at the mercy of international prices. U.S. prices need to remain competitive with prices in Europe and New Zealand to keep product flowing.

While commodities like nonfat dry milk and whey have always been susceptible to this price competition and international volatility, it’s a newer development for cheese and butter markets that have historically been much more domestically focused.

That matters for milk checks. Movements in whey and nonfat dry milk prices lead to changes in the other solids component price and the Class IV skim milk value. When butter and cheese prices move with international prices, so do the more impactful and closely watched butterfat and protein component prices.

Markets Skew Toward Downward Pressure

With U.S. milk output climbing and other global exporters like the EU and New Zealand expected to be actively supplying and competitive in global markets in the months ahead, we could experience downward pressure on U.S. component and milk prices.

A close eye on global markets will be increasingly important in understanding our domestic component values,

Protein demand is certainly a bright spot in U.S. markets, and consumer demand more broadly is nothing to scoff at. But they’re no match for supply-side growth.

In this new era where cheese and butter exports are not just nice but necessary, a close eye on global markets will be increasingly important in understanding our domestic component values, and risk management strategies may need to be adjusted accordingly.