U.S. dairy exports are running at record volumes for cheese and butterfat, and CoBank expects that momentum to carry into a potentially record-setting 2026 for the sector's international business.

Abbi Groves, an agricultural economist with CoBank, says the export performance matters for a specific reason: the products moving overseas in record volumes are the ones the domestic market cannot fully absorb.

"We have seen record exports for butterfat and for cheese, which has been really important because we have a surplus of those things in the domestic market. So being able to move those," Groves says, pointing to the supply-and-demand balance that underpins the outlook.

The dynamic is straightforward for farm margins. When domestic production of cheese and butterfat exceeds what U.S. consumers buy, prices soften unless external demand clears the surplus. Record export volumes for those two categories indicate that international buyers are doing exactly that — pulling excess product out of the domestic balance sheet and supporting the price environment processors pay for milk components.

That matters most for butterfat. American consumers have shifted their milk consumption toward skim components, leaving the U.S. milk supply relatively rich in fat. Cheese and butter exports are the primary channels for monetizing that component surplus. Record butterfat shipments abroad therefore translate the milk-fat oversupply into revenue rather than into price-depressing domestic inventory.

For cheese, the export record reflects sustained international demand for a product category in which the United States has built processing capacity and a competitive cost position. Every additional overseas destination for American cheese absorbs manufactured product that would otherwise compete for shelf space and pricing power at home.

Groves characterizes international business as continuing to be strong, and that strength forms the basis for CoBank's view that 2026 could mark another record year for U.S. dairy exports.

For dairy producers and their cooperatives, the takeaway is directional rather than a price forecast. Export performance in the fat and cheese categories functions as a pressure valve on the domestic market: as long as overseas shipments keep setting records, the surplus products that would otherwise weigh on U.S. prices find a home abroad. The strength of that flow is what makes the 2026 outlook constructive.

Market participants will be watching whether the pace holds. The projection that next year could bring another record rests on international demand remaining firm — the same factor that drove the current records for butterfat and cheese shipments. Groves' assessment signals that, at CoBank, the data on overseas business to date supports continued confidence in that demand heading into 2026.