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Oversupply and weak consumer demand have led to modest declines in milk, butter and cheese prices at wholesale markets and grocery stores.
Lower prices for dairy staples are good news for shoppers who have suffered from soaring food prices due to inflation and higher tariffs.
“There’s a lot of milk here in the United States right now,” Stephen Cain, vice president of economic policy and market analysis at the National Milk Producers Federation, told USA TODAY. “Domestic demand is a little soft this year as farmers are pumping out a lot of milk, which leads to higher dairy production.”
What’s going on in the dairy wholesale market?
Cain said wholesale market prices for milk, cheese and butter have been lower than normal for the past year, but have fallen even more significantly over the past six months.
He said prices, especially for butter and cheese, had eased significantly. The main reason for this is the milk supply.
Milk production, which normally grows by an average of 1.5 to 2 percent, has increased by nearly 4 percent this year, he said.
Kane said oversupply and slowing demand will lead to downward pressure on prices.
But wholesale market prices aren’t always reflected in shoppers’ retail stores, or there can be a lag, he said.
“Retail prices will start to ease to some extent, but it will take some time for retail prices to come down along with market trends,” he said.
He said that even when wholesale and commodity prices fall, retailers may not immediately lower prices.
Additionally, Phil Prado, head of insights at dairy-focused agricultural markets and risk management firm Ever.Ag, said the wholesale dairy market has been volatile and often cyclical over the past 18 months. For example, the wholesale price of butter, which has been above $3 a pound for almost two years, is now about half that price, Prado told USA TODAY.
One of the challenges in the dairy industry is that, unlike factory production, you can’t add or remove shifts, Prado says.
“Dairy farmers will receive a signal to slow down milk production because they are under price pressure, but they will not just lay off cows,” he said, adding that the production cycle is very complex, involving biology and weather.
What are the store prices for milk, butter, and cheese?
Prices for milk, butter and cheese are falling, according to the Bureau of Labor Statistics’ latest Consumer Price Index numbers.
A gallon of milk cost $4 (rounded from $3.997) in November, down 4.2% from $4.17 in August. Milk prices fell 3.4% from $4.14 in November 2024.
A pound of stick butter cost $4.31 in November, 10.7% lower than the August price of $4.83, and 10.1% lower than the November 2024 price of $4.79.
A pound of cheddar cheese cost $5.64 in November. This was 8.0% lower than the August price of $6.12 and 0.7% lower than the November 2024 price of $5.658.
Why is consumer demand for milk, butter, and cheese decreasing?
Kane said consumer demand for milk, butter and cheese in retail and grocery stores is generally strong, but consumer demand has declined in food service industries such as fast food. Cheese consumption in particular, which typically increases by 2-3% domestically, fell by 2% last year, he said.
“When consumers exit, they exit most from food service first and then retail (grocery),” Cain said.
This decline in demand could continue into 2026, especially among low-income consumers who are cutting back on discretionary spending, he said.
Despite relatively low U.S. dairy import and export activity, there is also an oversupply in the global dairy market, impacting prices, Cain said.
Mr Prado said it was unusual to see “everyone clicking on all cylinders at the same time” globally.
Additionally, while milk consumption continues to decline, demand for other dairy products such as whey, yogurt, ultra-filtered milk and other protein drinks is providing a tailwind for dairy farmers, processors and brands, said Garth Boyd, head of food and agriculture at Kearney, a global strategy and management consulting firm.
More than 53 dairy processing plants are under construction or adding capacity in the U.S., representing about $10 billion in capital expenditures, Boyd said.
Betty Lin-Fisher is a consumer reporter for USA TODAY. Contact her at blinfisher@USATODAY.com or follow her at @blinfisher on X, Facebook and Instagram and @blinfisher.bsky.social on Bluesky.. Sign up for our free The Daily Money newsletter, breaking down complex consumer and financial news. Subscribe here.
