Mid-year checkup
Rob Goodling, business consultant for Farm Credit East, recently provided information on what the dairy industry can expect as producers passed the halfway mark in 2026.
Goodling’s information was based on the 2025 Northeast Dairy Farm Summary and 2026 Mid-year Outlook. Summary input is based primarily on average farms that have strong financial records.
Feed and crop input applies to both home-raised feeds and purchased feeds; non-milk income includes sales of crops, calves and cull cows. Goodling said over the past five years, feed costs have trended up and down, with the last two years at just under $10/cwt for feed. Crop input costs for 2025 were slightly higher.
“Some of the noise we saw in 2025, which isn’t quantified in the dataset, came back to the availability of forages in 2025, and the quality,” Goodling said. “If you look at market values for feeds, they weren’t necessarily climbing. We saw a slight increase in purchased feed costs and overall crop inputs because of the growing season throughout 2025 that rippled into 2026. There were challenges that helped create a slight increase in feed and input costs in 2025.”
Total costs have been mostly flat for the past four years. Considering the net cost of production, which has been hovering at just above and reduced to $20, the main factor is non-milk income. Goodling said that has been the predominant industry story for the past year or two and it remains a relevant topic.
Regarding non-milk income, there’s a large change in net cost of production because it’s coming from non-milk sales. For many, milk price and non-milk income are dictating farm position.
The milk price in 2025 wasn’t strong, but from a cash margin position standpoint, it wasn’t too different from 2024 when the price was stronger. Examining 2022 and 2025 together provides a picture of where prices are headed.
In 2022, milk prices covered cash needs with an additional cash margin before considering non-milk income. The 2025 milk price was only $22.21, but cash needs were over $27. With milk price and cash needs, it looks like a deficit position until non-milk income and other income available to the operation are considered.
“It’s important to think about the opportunities available to an operation to benefit from milk income and looking at cost controls,” Goodling said. “Overall, 2025 wasn’t a strong year. It was buoyed by non-milk income revenue versus just milk income.”
In reviewing the end of 2025 and early 2026, Goodling focused on milk price and feed costs.
“USDA forecast in January for Class III was $16.35 per hundredweight,” Goodling said. “The five-year average through 2025 was $18.59. The Class IV average price was projected to be $14.45 per hundredweight and the five-year average through 2025 was $19.56.”
However, in early 2026, a weak milk price was predicted. Feed costs have been relatively stable over the past couple of months and the past two or three years. Goodling listed estimated feed costs from a margin or DMC point at about $10.68/cwt, corn at $4.10/bushel, soybean meal at $295/ton and alfalfa hay at $300/ton. Pricing alfalfa hay is difficult because there is no projected forecast market on hay.
“The challenge was the milk price didn’t have much strength for the year, and how are we going to account for that in our operations?” Goodling said. “The big thing was the number of milk cows in the U.S. was climbing – and it still is. Through April 2026, we are … approaching 9.7 million [cows].”
When cow numbers grow, milk production climbs. However, milk production didn’t climb as fast as anticipated simply because per-cow production didn’t increase. Goodling noted that in the Northeast, that aspect is related to the quality and quantity of 2025 forages.
“We see the dairy herd growing while beef prices are near all-time highs,” Goodling said. “Usually when beef prices are this strong, we see traction on the dairy side.”
For Class III and IV milk in the first half of the year, prices were below the average Class III average per month. Prices rallied in April and May but have been trending downward through summer.
“For the first half of the year, Class III prices averaged $15.90 with the current forecast,” Goodling said. “We’re looking at finishing the annual average for this year at $16.57. Right now there’s a little more optimism for Class III price for the remainder of the year.”
He explained the unusual aspects of Class IV milk, including a weak price followed by a rally for the first quarter of 2026.
“Non-powder and other protein sales drove the pace on Class IV up into an average of $18.71,” Goodling said. “It isn’t projected to stay there and is trending downward, but potentially above the original forecast for 2026. The average for the year is Class IV finishing at $18.41 if current market conditions hold.”
The value of dairy exports from the U.S. is up about 7% over the previous year. The key is the 2026 trend across products, with butter, dry whey and cheese currently trending upward. Dry skim milk has been variable and slightly trending down over the past four years. Exports are supporting some of the favorable milk prices.
“Coming into 2026, we figured milk price was going to be suppressed, but data suggest there is positive news related to price,” Goodling said. “We aren’t at 2022 and 2024, but it’s above where the projected price would be in the middle of the year.”
The U.S. isn’t the only dairy country experiencing a production bump. The EU is also ahead year-over-year. The question is how long can global demand support the supply levels contributed by both the U.S. and EU?
“The challenge remaining for 2026 is a lot of moving parts,” Goodling said. “While we had some good milk prices and potential sales from livestock, we have fertilizer costs, fuel costs and potentially labor. Costs overall are eroding that, and 2026 will still be challenging.”
by Sally Colby
