Takeaways
- The 2026 dairy outlook faces headwinds on increasing production that appears to be outpacing demand.
- Potential improvements to the supply and demand balance may occur later in the year.
- Opportunities from new local processing could support Georgia producers this year.
Overall, 2026 may be a tough year for the dairy industry in Georgia. Supply growth outpaced demand in the latter half of 2025, cratering prices for milk and many dairy products. This market situation is unlikely to change in the near term, with prices expected to be low through much of the year ahead.
2025 in Review
Dairy margins in 2025 started strong but fell significantly as the year progressed (Figure 1). This was largely due to the price of milk plummeting, rather than to changes in feed prices. The U.S. all-milk price started at $24.10/cwt (more than 20% above 2024) but declined to around $20/cwt by October (20% below 2024).
Note. Monthly milk price ($ per cwt) compared to commercial prepared feed ($ per cwt) in the United States in 2024 and 2025 compared to the average of 2019 to 2023.
Data Source: USDA National Agriculture Statistics Services; compiled by the Livestock Marketing Information Center.
Production Increased
This milk price decline was largely due to significant production increases. Production in the U.S. has increased cumulatively by a little more than 2% year-over-year. However, monthly milk production since July has been up on average by over 3.5%. Higher cow numbers (up 2.2% since July) and more milk per cow (up 1.6%) are both contributing to this increased production.
In Georgia, milk production through October was up by over 7% compared to 2024, according to the U.S. Department of Agriculture (USDA). However, significant increases in monthly production data began in late 2024. Georgia’s milk production increases in 2025 were driven largely by increased milk production per cow throughout the year and more milk cows in the latter half of 2025. This significant production increase in Georgia surpasses that of other areas in the Southeast. Florida is the next-largest Southeastern producer and saw a 1.7% increase in milk production through late 2025.
Most dairy product production was higher through October 2025. Butter production was up over 6% through October, and cheese production was up more than 2%. Inventory also was up for many products in 2025 compared to 2024. Butter inventory is just below year-ago levels (1.5% below), while cheese inventory is up around 1.8%.
Amid higher production, dairy-product prices have softened. Butter prices were in free fall from late summer until early fall. Over the year, butter prices declined from around $2.63/lb in January (roughly similar to 2024) to around $1.65/lb in mid-December, a drop of over 40% compared to 2024, along with a drop in sales of more than 1%. Cheddar cheese prices started the year strong (up nearly 20%), but trended sideways to lower compared to the previous 12 months. Cheese 40-lb block prices closed the year below 2024’s prices by around 10%. However, sales were up around 4%. Whey provided one bright spot as lower production supported prices throughout the year.
Exports
Exports have been stable in 2025. Butter and cheese exports have seen significant volume growth thanks to lower prices. Butter exports are up by nearly 150%, while cheese exports are up over 15% through September 2025. However, milk powder and whey exports have lagged. Nonfat dry milk exports have lagged last year’s exports in all months and across most markets.
2026 Outlook
The market fundamentals do not indicate that milk prices will improve in the short term. For prices to improve, milk production likely needs to come down. This will need to come from a decrease in dairy cows, which may take time, as the monthly reported dairy cow inventory was the highest ever recorded (since 1998).
Given the strong beef cattle markets, it is likely that significant cow culling may occur in the first quarter of 2026. This may help prices and margins improve by the tail end of 2026, but it may not occur until 2027. However, strong cattle prices and the growth of beef-on-dairy-calf marketing opportunities may curtail some of that culling. Some price support may come from higher dairy demand, which has been trending higher over recent years alongside increasing consumption.
The USDA is projecting product and milk prices to drop in 2026, with the all-milk price projected to be $18.75/cwt. Given the 5-year average basis between U.S. and Georgia all-milk prices of around $3/cwt, the Georgia all-milk price may average around $21.75/cwt in 2026. However, new Federal Milk Marketing Order pricing mechanics implemented in 2025 may create a new price relationship.
Additional Forecast Risks
Additional risks may emerge on the export and disease fronts. U.S. exports appear to be under pressure globally as major export regions, including the EU and New Zealand, have increased milk production significantly in 2025. In September, global milk production was up 4% year-over-year. Highly pathogenic avian influenza (HPAI) may also play a role in 2026 after having a relatively minor impact in 2025. Wisconsin reported its first case of HPAI in a dairy at the end of 2025. The impacts from HPAI in dairy are less significant than in poultry, but it will be an area to watch.
New Processing Facility in Georgia
Lastly, the new milk-processing plant in Valdosta, GA, owned by Walmart, started operating at the end of 2025. Additional processing capacity in the state is a positive for dairy producers. This change in the processing landscape may impact the flows of milk in the state and the Southeast more broadly. Any changes in this area should be watched carefully in 2026.
