Key Takeaways:
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US milk production continues to grow, marking seven straight months of year-on-year gains. The country is milking the most cows since 1993, and milk per cow continues to set new monthly records. Although USDA data remains limited due to the government shutdown, strong milk and milkfat output are almost certainly contributing to the heavy supplies of butter and cheese that appear to be exceeding current demand, reflected by declining cash prices. While whey protein values remain the one area showing notable strength, significant headwinds loom for the other major dairy commodities.
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Geopolitical developments remain the primary driver of feed markets. The US and China reached a trade agreement at the start of the month, providing support to soybean markets and the broader grain complex. Under the deal, China committed to purchasing 12 million metric tons of US soybeans during the 2025–26 crop season and 25 million metric tons annually over the following three seasons. While the industry waits to see when and how much China will step in to buy, some remain skeptical about the potential for materially stronger US exports. Recent buying patterns suggest that China has already met a significant portion of its near-term demand through South America, and there is little indication that it plans to stockpile additional supplies.
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It has been a roller-coaster month for cattle, as news of government involvement sent futures sharply lower after reaching record highs in mid-October. While beef values have fallen significantly, they remain at historically strong levels. Even so, lower milk and beef prices alongside higher feed costs have reduced HighGround’s margin projections for the coming year. If this month has taught us anything, it is that volatility can emerge at any time. HighGround continues to remind and encourage producers to actively monitor and manage their margins and take positions that help maintain profitability in an ever-changing environment.
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