Milk prices hit yearly low

Local dairy farmers now face the lowest federal Class III milk price of the year. The USDA announced on Tuesday that the October figure stands at $15.16 per hundredweight. This represents a drop of 88 cents from September. The price is also $1.75 lower than the October 2025 rate.

Production levels continue to climb, adding pressure to the market. September output reached 19.4 billion pounds, a 2.6 percent increase from the same month last year. The national cow count hit 9.743 million in September. That number is the highest for the dairy herd since 1993. StoneX noted that component adjusted production is up 3.5 percent from last year.

Washington State saw a 1.7 percent rise in production during the period. This growth came from 1,000 more cows and a 25 pound gain in output per cow. Idaho production also rose 3.5 percent. Wisconsin output increased 3.3 percent. These regional increases contribute to the national trend of supply outpacing demand.

Economic margins for producers have tightened. Dairy economist Bill Brooks of Stoneheart Consulting reported that milk production margins fell for the fourth month in a row. The margin now sits at $9.23 per hundredweight. Input costs remain high, with feed costs ranking as the sixth highest ever for the month of September. The milk-feed ratio dropped to 1.90 in September, down from 2.40 in September 2025.

Farmers are not the only ones affected by the shifting market. Restaurant performance has improved from May through August compared to the same period in 2025. Food service sales grew 4.1 percent from January through August 2026. This growth exceeds the 0.9 percent rise seen in grocery store sales. The USDA Outlook suggests this indicates stronger consumer demand for dairy products.

Traders are watching futures markets for signs of recovery. The Class III futures contract for November sits at $17.81. December is priced at $16.99. January is set at $16.92. These figures suggest a potential price stabilization in the coming months. The market will await the next USDA data release to confirm the trend.

The USDA also confirmed a new detection of highly pathogenic avian influenza in a dairy herd in Indiana. Cases have also been identified in Yakima County. One person in Yakima died from the virus, and two others were infected. The USDA, FDA, and CDC state that the commercial milk supply remains safe. Milk from impacted animals is diverted or destroyed before it enters the human food supply.