Dairy futures fell sharply on Tuesday as the market weighed higher supply outlooks from the USDA’s March WASDE report. April Class III dairy traded about 4.4 percent lower to close at 16.38 cents a pound, the lowest since Feb. 17. Expectations of larger supplies this year continued to limit gains after prices hit a 10-month high in February.

The USDA raised its 2025 milk production estimate to 231.7 billion pounds, up 0.2 billion from the February forecast. The increase was due to revised data in the latest Milk Production report, which showed higher output for December. Additionally, milk supply and use were increased for 2025 to reflect revised cold storage data and trade data through December.

The milk production forecast for 2026 was raised to 234.7 billion pounds, also up 0.2 billion from February. Increases in the dairy cow inventory are expected to more than offset slower growth in output per cow.

Exports on a fat basis were raised due to higher shipments of butter and cheese. Exports on a skim-solids basis were also raised to reflect higher shipments of cheese and whey products.

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