Where are butterfat prices going in 2026? The answer is Down, Down and Down. This post will cover the reasons why the Agricultural Marketing Services (AMS) butterfat prices are decreasing. Chart I and II below show the 12-month moving average prices for butter and butterfat through February 2026. While they show significant decreases, the actual monthly data is even lower.
In January 2026, butter prices were $1.43 per pound and in February butter prices were at $1.70 per pound.
Chart II below shows the impact on butterfat prices. Butterfat prices in January 2026 were $1.45 per pound and in February were at $1.78 per pound.
Data for the rest of this post will be based on the available data through December 2025. Chart III below shows an alarming drop in domestic disappearance of butter. December of 2025 had the lowest disappearance rate since 2019. Domestic disappearance from wholesale inventories is an indicator of consumption.
What’s happening to production of butter (Chart IV)? Lower demand reduces the need for production.
Butter Inventories (Chart V) have decreased by 5% in 2025. This is the result of lower production, declining disappearance, increased exports, and decreased imports. The inventory levels do not show any concerns about adequate supplies to meet domestic demand.
To find a home for too much butter, exports of butter have increased to five-year highs as shown in Chart VI.
And imports of butter have dropped by nearly 50%. The monthly imports are low. These lows have not been seen since 2021.
SUMMARY
Every Chart above shows signs leading to lower AMS prices for butterfat. Butterfat revenue for milk producers will likely continue to decrease. Butterfat is the one item that all U.S. producers depend on for revenue. As butterfat decreases in value it does increase the price of milk protein as shown in the formula below. However, the protein price increase will impact only Class III milk for cheese which is approximately 50% of U.S. milk produced.
Currently, AMS milk protein prices have decreased slightly in 2026 as wholesale cheese prices have declined. The details on milk protein prices will be covered in the next post to this blog.
