Weekly protein report: Dairy prices strengthen as export demand builds

7 March 2026

15 minute read

By: Jim Wyckoff

North America

Cattle futures bulls do some perceived bargain hunting

April live cattle on Wednesday rose $4.225 to $238.35. March feeders gained $6.725 to $363.925. The live cattle futures markets saw more corrective buying and perceived bargain hunting amid cash and beef market fundamentals that remain overall bullish. Some improved trader/investor risk appetite in the general marketplace at mid-week also aided the cattle futures bulls. There have been scattered reports of weaker cash cattle trade so far this week. However, USDA at midday Wednesday reported no cash trade yet this week. Live cattle futures continue to trade below the cash market, which is supportive for futures. USDA Monday reported last week’s cash cattle trading averaged $242.71.

China remains the world’s largest importer of several commodities

This policy supports continued Chinese engagement in global agricultural trade, including purchases from major exporters such as the United States, Brazil and Argentina.

Livestock sector restructuring. The plan also highlighted structural reforms in China’s livestock sector, including:

• Regulating overcapacity in the hog industry, which has faced cycles of oversupply and collapsing prices following herd expansions after African swine fever.
• Policy support for the dairy and beef sectors, both of which have recently been protected by tariffs as Beijing seeks to stabilize domestic producers.
• These measures suggest Beijing aims to stabilize livestock markets while protecting domestic production, potentially shaping import demand for feed grains and meat.

Implications for global agriculture. For agricultural markets, the plan reinforces several long-term trends:

• Food security remains a top national priority for China.
• Yield gains and agricultural technology will be central to future production growth.
• Imports will remain critical, particularly for feed and high-protein crops.
• Livestock sector management will influence global demand for feed grains and oilseeds.

Overall, the strategy points to continued strong Chinese influence on global agricultural trade flows, even as Beijing attempts to increase domestic production and stabilize its farm sector.

Middle East war threatens Brazil’s beef exports

Conflict involving the United States, Israel, and Iran disrupts Gulf shipping routes, raising logistics costs and putting up to 40% of Brazil’s beef trade at risk

Brazil’s beef industry is warning that the expanding Middle East conflict could disrupt as much as 30% to 40% of the country’s beef exports, primarily due to shipping and logistics disruptions tied to the Persian Gulf.

According to the Brazilian Association of Beef Exporters (ABIEC), the Middle East directly accounts for about 10% of Brazil’s exported beef volume — roughly 250,000 tons annually. However, the region plays a much larger role in the global logistics network. Gulf ports such as Bahrain, Qatar, Oman and the United Arab Emirates serve as critical transshipment hubs for cargo bound for Asia, including China — the largest importer of Brazilian beef.

ABIEC president Roberto Perosa warned the situation could become severe if the conflict persists. Brazil exported about 3 million tons of beef in 2025, and in a worst-case scenario the war could disrupt the movement of as much as 1 million tons of that volume.

Shipping disruptions are already emerging.

• Some vessels carrying Brazilian beef are waiting offshore because they cannot dock at Gulf ports.
• Several shipping companies have refused to accept new cargo contracts to the region.
• Others are imposing “war surcharges” of about $4,000 per container, dramatically raising export costs.

Perosa said those added costs make many shipments commercially unviable, while vessels stranded at sea continue burning fuel and raising operational expenses.

The problem extends beyond the Middle East market itself. Much of Brazil’s meat exports to Asia rely on stopover logistics through Gulf ports, where cargo is transferred to other vessels or shipped overland to regional markets. If those hubs remain inaccessible, exporters could lose access to key Asian destinations.

Industry leaders say there are no immediate alternative markets capable of absorbing the potentially displaced supply, raising fears of oversupply in Brazil’s domestic cattle sector. Analysts and meatpacking executives have suggested the industry may have to slow cattle slaughter rates if export demand weakens significantly — a move that could reduce sector revenues and pressure cattle prices.

The conflict is also affecting Brazil’s poultry sector. Ricardo Santin, president of the Brazilian Animal Protein Association (ABPA), said companies are attempting to redirect chicken shipments originally destined for Middle Eastern markets to buyers in Africa and Asia to avoid routes passing through the Strait of Hormuz, a key global shipping chokepoint.

Industry officials warn that geopolitical tensions — rather than sanitary or production issues — are now emerging as one of the biggest risks to Brazil’s livestock export sector in 2026.

USDA semiannual report on Brazil livestock sector

EXECUTIVE SUMMARY 

Cattle 

• Brazil is the second-largest cattle producing country in the world. Post forecasts calf crop at 47.2 million head of cattle in 2026, stable from 2025.
• Post estimates Brazil is beginning the reversion of the cattle cycle. Producers are likely to start retaining cattle, sending prices upwards as a result of reduced calf availability.
• Post forecasts a two percent slaughter decrease in 2026 following increased slaughter in the previous years. High cow slaughter is forecasted to decrease, as cow retention starts.
• Post forecasts live cattle exports at 1.2 million head of cattle in 2026 due to strong foreign demand. 

Beef 

• Post forecasts Brazil will remain the second-largest beef producer and the largest exporter in the world.
• Production: Post forecasts a two percent decrease in 2026, reaching 12.5 million metric tons Carcass Weight Equivalent (CWE), consistent with reduced cattle slaughter and cattle cycle reversion.
• Consumption: Post forecasts a one percent decrease in 2026, reaching 8.3 million metric tons CWE, due to reduced availability of beef domestically and increased indebtedness.
• Exports: Post forecasts a five percent decrease in exports in 2026, reaching 4.15 MMT CWE. This forecast considers diminished beef production due to the start of reversion of the cattle cycle, strong external demand, devalued Brazilian real and impact of tariffs imposed by trading partners. 

Swine 

• Pig Crop: Post forecasts a 3.3 percent increase in 2026, due to strong external demand, positive domestic demand, increased availability of feed due to record corn and soybeans crops and devalued domestic currency.
• Slaughter: Post forecasts a one percent increase in 2026, reaching 49.2 million head. Pork ∙ Production: Post forecasts a three percent increase in 2026, reaching 4.9 million metric tons CWE as a result of increased slaughter and feed availability, strong foreign demand and investments made to increase production.
• Consumption: Post forecasts a one percent increase in consumption in 2026 at 3.07 MMT CWE. Expected lower pork prices will likely increase consumption.
• Exports: Post forecasts a seven percent increase in 2026, based on firm external demand, increased purchases from new markets, export growth to existing consumers and Brazil’s sanitary status versus its competitors.

Senate Democrats push bill to break up major meatpackers

Wall Street Journal exclusive outlines proposal targeting industry consolidation and foreign ownership

A group of Senate Democrats led by Senate Minority Leader Chuck Schumer (D-N.Y.) is preparing legislation that would restructure the US meatpacking industry by forcing major processors to split their operations and limit market concentration, according to a Wall Street Journal exclusive reported by Patrick Thomas.

The proposal would prohibit companies from processing more than one type of meat — potentially requiring major firms to spin off beef, pork or poultry divisions into separate companies.

The bill would also impose caps on market concentration in the beef sector and grant the Federal Trade Commission authority to order divestitures, including selling plants or spinning off business units.

Targeting industry consolidation. The measure would directly affect the dominant firms that currently control most US beef processing:

• Tyson Foods
• JBS
• Cargill
• National Beef Packing Company

Together, these companies process roughly 80% of US beef, making the sector one of the most concentrated in the American food system. Tyson alone processes about one in every five pounds of chicken, beef, and pork consumed in the US

The legislation would also mandate a review of foreign ownership in the meatpacking sector, including Brazilian-based JBS and pork processor Smithfield Foods, which is majority owned by Hong Kong–based WH Group.

Political push tied to high beef prices. Schumer and other Democrats are framing the proposal as part of a broader effort to address consumer affordability as beef prices remain elevated.

The bill arrives amid increasing scrutiny of the meatpacking sector in Washington. The Trump administration has already launched investigations into possible anti-competitive practices in the industry while pursuing other policies aimed at lowering prices, including increasing beef imports.

President Donald Trump recently signed an executive order to quadruple beef imports from Argentina and earlier reduced tariffs on Brazilian beef — moves intended to increase supply, though they have yet to significantly reduce retail prices.

Industry backlash and uncertain prospects. Industry groups sharply criticized the Democratic proposal, arguing it would weaken the efficiency of the US food system. Julie Anna Potts, president of the Meat Institute, said breaking up meat processors would raise costs across the supply chain. “This clearly will drive up costs for producers and consumers,” Potts said, calling the proposal “absurd.”

While industry officials see the legislation as unlikely to pass in the Republican-controlled environment, some analysts believe it could still push regulators or the Trump administration to take additional steps to reshape the sector.

Tight cattle supply complicates price fight. The debate comes as the US cattle herd has fallen to its lowest level in roughly 75 years, according to data from USDA. Years of drought and financial losses during the pandemic led ranchers to shrink herds, constraining beef supply even as consumer demand remains strong.

The tight supply has driven cattle prices to record levels, squeezing packer margins and prompting plant closures. Tyson, for example, shut down a large beef facility in Lexington, Nebraska earlier this year and reduced output at its Amarillo, Texas plant, eliminating thousands of jobs.

As a result, Washington faces a complex policy challenge: record cattle prices benefiting ranchers but high retail beef prices frustrating consumers, all within a highly consolidated processing industry.

Impact of Surging Diesel Prices on US Farmers

Higher fuel costs hit fieldwork, harvest, drying and freight — squeezing already tight margins

Surging diesel prices are especially painful for US farmers because diesel is the primary fuel that powers modern agriculture — from planting to harvest to transporting grain and livestock.

Here’s how the impact flows through the farm economy:

Direct impact: higher operating costs

Diesel fuels:

• Tractors and combines
• Grain trucks and semis
• Irrigation engines
• Grain dryers
• Livestock equipment

A spike of 30–50 cents per gallon during planting or harvest season can translate into thousands of dollars in added costs per farm, depending on acreage.

For row crop producers:

• Corn and soybean operations are highly mechanized and diesel intensive.
• Harvest season requires long combine hours and heavy truck movement to elevators.

For livestock producers:

• Diesel powers feed mixing, manure handling, and transport.
• Rising fuel prices increase feed delivery costs.

Unlike many businesses, farmers cannot easily pass these costs on. They are price takers in global commodity markets.

2. Freight and basis pressure

Higher diesel prices also:

• Raise trucking rates to local elevators
• Increase barge freight on the Mississippi River
• Lift rail fuel surcharges
• Increase export handling costs

When transportation costs rise, local cash grain prices (basis) often weaken as elevators widen margins to cover higher freight expenses.

For example:

• A 10–20 cent weakening in basis can erase already thin profit margins.
• Export competitiveness declines if US freight costs rise relative to Brazil or Argentina.

Given current geopolitical disruptions in the Strait of Hormuz and global diesel crack spreads widening, freight markets are already tightening.

3. Input cost ripple effects

Diesel price spikes often move alongside broader energy markets:

• Nitrogen fertilizer production relies heavily on natural gas and energy.
• Crop chemicals and seed logistics become more expensive.
• Equipment parts and maintenance costs rise with freight. 

If elevated diesel prices persist, farmers could face higher 2026 input contracts, not just short-term fuel pain.

4. Inflation and demand risks

Diesel is embedded in the food supply chain. Rising transportation costs:

• Increase grocery prices
• Pressure meat and dairy margins
• Reduce consumer purchasing power

If food inflation accelerates, it can dampen demand or shift consumption patterns — indirectly affecting farm commodity prices.

5. Margin stress in a high-interest-rate environment

This is particularly concerning given:

• Elevated borrowing costs
• Tighter working capital conditions in several Fed districts
• Already compressed crop margins

Higher diesel costs worsen liquidity stress, especially for highly leveraged operators. Farmers who forward-priced crops earlier may have locked in revenue before this energy spike — but their fuel costs remain exposed unless hedged.

Bottom Line: Surging diesel prices function like a direct tax on US agriculture:

• Higher production costs
• Weaker basis
• Higher freight
• Inflation spillovers

If the Middle East conflict persists and refined product markets remain tight, diesel could become one of the most immediate margin pressures facing US farmers this season.

Weekly USDA dairy report

CME GROUP CASH MARKETS (2/27) BUTTER: Grade AA closed at $1.8400. The weekly average for Grade AA is $1.8320 (+0.0670). CHEESE: Barrels closed at $1.5600 and 40# blocks at $1.5225. The weekly average for barrels is $1.5320 (+0.0620) and blocks $1.5460 (+0.0566). NONFAT DRY MILK: Grade A closed at $1.7100. The weekly average for Grade A is $1.6775 (+0.0537). DRY WHEY: Extra grade dry whey closed at $0.6325. The weekly average for dry whey is $0.6400 (-0.0850). 

BUTTER HIGHLIGHTS: Domestic butter demand varies from steady to stronger across the country. East region stakeholders report steady export demand. Central and West region stakeholders report strong export demand. Generally strengthening milk production is providing plenty of cream volumes. Demand from butter manufacturers is mixed. Some butter manufacturers are taking in more cream and further building inventories. Butter production schedules are heavily active and generally churning seven days a week. 80 percent butterfat butter spot load availability is stable. Demand from international buyers is keeping domestic 82 percent butterfat butter spot loads tight. Bulk butter overages range from 3 cents below to 12 cents above market across all regions. 

CHEESE HIGHLIGHTS: East region cheese production is steady to strong, with retail size packaging running at typical seasonal levels. Bulk demand is slower than expected. Most cheese makers are relying on contracted loads as spot milk and condensed skim for Class III remain scarce. Inventories are gradually building, particularly for bulk cheese. Central region milk production is strengthening, supporting active cheese output as plants run busy schedules. Demand varies by product, with curds steady to light but barrel interest strong; retail sales are steady to stronger, and food service demand is unchanged. Cheese availability on the spot market is adequate, and export interest is strong, keeping inventories manageable. West region milk production is increasing, leading to busy cheese manufacturing schedules and production boosts for higher fat varieties. Demand for spot milk is stronger and spot cheese availability is reported as stable to tight depending on variety. Domestic demand is steady, while international interest ranges from steady to strong, keeping inventories from accumulating excessively. 

FLUID MILK HIGHLIGHTS: Milk production is steady to strong nationally. Some regions are experiencing increased production due to favorable weather conditions, while most regions are holding steady with seasonally high volumes. Milk components remain strong and contacts indicate that cream volumes are high. Class I demand is strong and some bottlers are securing spot loads of milk to fulfill orders. Class II demand is growing. Producers attribute this to seasonal increases in ice cream production and upcoming spring holidays. There is increased activity in the cream spot market for Class II use. Class III production is generally steady. Cheese makers continue to purchase spot loads of milk in some regions, where other regions are having difficulty finding spot volumes. Class III milk ranges from $1-under to $2 over Class this week. Demand for Class IV is strong and churns are operating at or near full capacity. Many operations are purchasing spot loads of cream. Milk powder demand is also strong, encouraging manufacturers to keep dryers running. Condensed skim inventories are tight and there is some difficulty finding spot loads for Class III use. Cream multiples for all Classes range:1.10– 1.38 in the East; 1.05 1.27 in the Midwest; 0.80 1.27 in the West. 

DRY PRODUCTS HIGHLIGHTS: Nonfat dry milk (NDM) prices were higher across all regions this week, with tight inventories and limited spot availability. The largest NDM increase occurred at the high end of the price range for low/medium heat in the West. Dry buttermilk prices strengthened, with notable gains at the high end in the Central and East while holding steady at the low end, and prices in the West increased across the series. Dry whey markets were mixed: the Central region price series was steady except for a slip at the low end of the mostly range, the Northeast range was unchanged and the West saw declines at the low ends but gains at the high ends of the price series. Lactose prices were steady overall, except for a slight decline at the lower end of the range, as strong demand and limited inventories support a firm market tone. Whey protein concentrate 34% markets were mostly higher this week, with firmness at the top of the mostly range and spot inventories remaining tight. Dry whole milk prices increased at both ends of the price range, while acid and rennet casein prices remained unchanged. 

INTERNATIONAL DAIRY MARKET NEWS

WEST EUROPE: A major investment is underway in Sweden's dairy sector as a cooperative group plans to commit 300 million Euro to build a new cheese processing facility, aimed at expanding capacity, modernizing production, and strengthening the region's cheese value chain to better serve both domestic and export markets. EAST EUROPE: Polish cheese exports to Ukraine have increased amid evolving regional trade and pricing conditions, reflecting adjustments in supply availability and buyer demand. 

OCEANIA: AUSTRALIA: Australia's January 2026 milk production was 718.8 million liters, up 10.6 million liters (1.5 percent) year over year. Victoria, Australia's largest milk-producing state, led with a 1.6 percent increase, with gains also recorded in New South Wales (+3.3 percent) Queensland (+4.2 percent) Tasmania (+1.5 percent) and Western Australia (+0.4 percent), while South Australia declined (-4.3 percent). 

NEW ZEALAND: The major New Zealand dairy cooperative announced an updated forecast for the 2025/2026 farmgate milk price, raising the midpoint to $9.50 per kilogram of milk solids (kgMS) and tightening the forecast range to $9.20-$9.80 per kgMS. Milk production data from New Zealand for January 2026 were recently released. These data show total January 2026 production was 2.43 million metric tons, up 2 percent compared to a year earlier. SOUTH AMERICA: 2025 milk production in South America was up compared to the year prior. Industry sources note Brazil milk output for 2025 to be 27.34 billion liters, representing 8.9 percent increase compared to 2024. Industry sources indicate growth of US exports to South America both in terms of value and volume. 

JANUARY US MILK PRODUCTION (NASS): Milk production in the 24 major States during January totaled 19.1 billion pounds, up 3.4 percent from January 2025. December revised production, at 18.8 billion pounds, was up 4.4 percent from December 2024. The December revision represented a decrease of 36 million pounds or 0.2 percent from last month's preliminary production estimate. 

MARKET SUMMARY AND UTILIZATION: During January, 12.2 billion pounds of milk were received from Federally pooled producers. This volume of milk is 3.3 percent lower than the 2025 volume. Regulated handlers pooled 3.6 billion pounds of producer milk as Class I products, down 2.4 percent when compared to the previous year. The all-market average Class utilization percentages were: Class I = 29%, Class II = 16%, Class III = 28%, Class IV = 27%. The weighted average statistical uniform price was $16.07 per cwt, $1.04 lower than last month and $5.16 lower than last year. 

FEBRUARY RETAIL MILK PRICES (FMMO): US simple average prices are: $3.68 per gallon for conventional whole milk, $3.63 per gallon for conventional reduced fat 2% milk, $5.28 per half gallon organic whole milk, and $5.28 per half gallon organic reduced fat 2% milk.