Why are low-fat milk prices holding steady?
Low-fat milk: $3.59 per gallon, U.S. average price in September 2026. 1-month −3.4%, 3-month −4.3%, 1-year −1.6%. 5-year range $3.19 to $3.89, average $3.67.
Price check: Near its usual level. −2.1% versus its 5-year average, −1.6% versus a year ago.
The short answer
- Retail low-fat milk prices declined to $3.59 per gallon in September 2026 as expanding dairy cow herds and record domestic milk production eased farm-gate raw milk costs. [1] [2] [3]
- The price drop reflects an easing in wholesale manufacturing prices following a sharp mid-year spike in skim milk component demand and Class IV milk values. [4] [5] [6]
What's driving the price
Political, regulatory and trade factors
- Modernized Federal Milk Marketing Order pricing rules (Dec 2024 to Dec 2025), USDA Agricultural Marketing Service: A USDA final rule taking effect in June 2025 overhauled milk pricing formulas by raising manufacturing make allowances for cheese, butter, and nonfat dry milk, which reduced uniform pooled farm-level pay prices by 85 to 93 cents per hundredweight during the first three months of implementation. [pushed prices down] [12] [13] [14]
Macro factors: supply, weather, disease, energy
- Dairy protein demand squeeze on skim solids (Dec 2025 to Jul 2026): Rapidly growing consumer demand for high-protein products such as Greek yogurt, cottage cheese, and protein drinks diverted raw skim milk away from powder drying plants, pushing Chicago Mercantile Exchange spot nonfat dry milk to a record $2.30 per pound and lifting USDA Class IV milk prices from $13.55 per hundredweight in January 2026 to $22.32 in May 2026. [pushed prices up] [4] [5]
- Production expansion and feed cost deflation (Dec 2024 to Dec 2025): Lower corn and soybean meal feed costs reduced operating expenses and encouraged dairy operations to expand production by 2.8 percent in 2025, with major dairy states like Idaho increasing daily output by more than 7 percent and generating heavy milk surpluses that drove farm-level pay prices down. [pushed prices down] [3] [7] [8]
- Highly pathogenic avian influenza dairy herd outbreaks (May 2024 to Dec 2024): The spread of H5N1 avian influenza into dairy cattle herds across states such as Texas and California caused severe mastitis and slashed milk yields by up to 73 percent during acute infection periods, causing supply disruptions that helped drive USDA Class III milk prices past $23 per hundredweight by September 2024. [pushed prices up] [4] [9] [10] [11]
- Mid-2026 herd expansion and wholesale market cooling (Jul 2026 to Sep 2026): USDA raised 2026 milk production forecasts to over 237 billion pounds on growing cow inventories, which eased fluid milk supply tightness and led Class IV milk prices to retreat from spring highs to $17.36 per hundredweight by August 2026. [pushed prices down] [1] [2] [4] [7]
Supply chain right now
- Raw materials & farming (stable): Lower grain feed costs and expanding cow herd sizes have kept farm-gate milk production at high volumes across major dairy regions. [1] [7] [8]
- Processing & manufacturing (moderate): Processors face persistent competition for skim solids as manufacturers allocate fluid milk supplies toward high-margin protein foods like yogurt and cottage cheese. [5] [6]
- Logistics & freight (stable): Refrigerated tanker capacity remains steady and established regional mileage fuel adjustments under federal marketing orders have kept shipping disruptions low. [15]
- Retail & distribution (stable): Supermarkets are passing along the recent late-summer decline in wholesale Class I and Class IV milk prices to keep retail fluid milk competitive. [4] [15]
Researched 2026-10-18 with Google Search. Every point links to its sources; unsourced claims were removed.
Low-fat milk prices, last 12 months
| Month | Price per gallon |
|---|---|
| September 2026 | $3.59 |
| August 2026 | $3.71 |
| July 2026 | $3.80 |
| June 2026 | $3.75 |
| May 2026 | $3.63 |
| April 2026 | $3.52 |
| March 2026 | $3.40 |
| February 2026 | $3.41 |
| January 2026 | $3.43 |
| December 2025 | $3.37 |
| November 2025 | $3.41 |
| September 2025 | $3.65 |
| August 2025 | $3.66 |
Source: U.S. Bureau of Labor Statistics, Average Price Data, series APU0000FJ1101.
Sources
- Dairy - Market Outlook | Economic Research Service (ers.usda.gov)
- ers.usda.gov (ers.usda.gov)
- dairyherd.com (dairyherd.com)
- ams.usda.gov (ams.usda.gov)
- farmprogress.com (farmprogress.com)
- Terrain | Component Shifts to Shake Up Dairy Markets in 2026 (terrainag.com)
- USDA raises milk production estimates - Dairy Star (dairystar.com)
- Economic Review of Milk Costs in 2024 and Projections for 2025 and 2026 - farmdoc daily (farmdocdaily.illinois.edu)
- The Unexpected Battle Against Avian Flu in US Dairy | Choices Magazine Online (choicesmagazine.org)
- U.S. Milk Production Report—January 2025: Navigating Avian Flu Impacts and Market Dynamics (thebullvine.com)
- H5N1 outbreaks hit U.S. dairy farm with $737,500 in losses | AGDAILY (agdaily.com)
- Terrain | New Federal Milk Marketing Order Rules Now Effective (fcsamerica.com)
- USDA Finalizes Major Overhaul of Federal Milk Marketing Order Pricing - The AG Center (theagcenter.com)
- Three Months In: Early Impacts of FMMO Amendments (fb.org)
- ams.usda.gov (ams.usda.gov)