Key Takeaways:
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Margins are historically strong, and with many headwinds still in play, HighGround encourages producers to act now to protect them. Futures from March 2026 onward are presenting favorable margins, ranking above the 83rd percentile compared to the past ten years, representing historically strong levels. Just three months ago, the outlook was the opposite, a reminder of how quickly markets can shift direction. Producers with unhedged exposure in Q2 through Q4 2026 should be having conversations with their advisor today about locking in coverage while the opportunity exists.
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Dairy commodity prices have surged despite abundant global milk supplies. NFDM has led the charge, climbing 53% since the start of 2026 to its highest level since mid-2022, pulling butter and cheese higher with it. However, the spring flush is arriving, US milk production is running 3%+ above year-ago levels with the largest herd since 1993, and new processing capacity is still coming online. The supply headwinds that could pressure this rally are not hypothetical. They are already in motion.
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The closure of the Strait of Hormuz is pushing energy, fertilizer, and freight costs higher, while the Supreme Court’s IEEPA tariff ruling has added continued uncertainty to trade policy. As a result, feed costs are rising, creating additional pressure across the supply chain. These are the kinds of exogenous shocks that can compress margins quickly and without warning, exactly the environment where risk management earns its keep.
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