The dairy industry has plenty of reasons to be optimistic in 2026, according to the 2026 Dairy Outlook from Farm Credit Canada (FCC).
"I would say in Western Canada, things are looking quite good as well, which is great, considering there were some leaner years here at the beginning of this decade." said FCC Senior Economist and author of the report Graeme Crosbie. "The drought struggles that we've had across the prairies have impacted livestock operators too, and there were some years where feed was either very poor or not available or very expensive to buy, so 2025 was a much better year. 2026 is looking to be pretty strong."
A major theme is how dairy producers can take advantage of changing consumer habits, from demand for dairy products containing butterfat to products incorporating protein.
Regional boards are restructuring the way producers are paid to meet the new demand. Crosbie says it comes down to changing the ratio of butterfat and protein produced in milk, shown on a chart in the report.
"Let's assume you're a farm with an average butterfat reading of 4.5% and your protein is 3.4%. So that grid there is meant to illustrate, if I increase or decrease the butterfat component or percentage and do the same with protein, what's an approximation for the change in gross revenue, whether it's positive or negative, given those different scenarios. So as you can tell from the colour-codedness of the chart there too, it's very clearly that the new structure is meant to incentivize more protein in milk and less butterfat in milk, again, to meet that processor requirement of what they're looking for."
But he says changes to meet demand will take time and won't happen overnight.
As far as products to benefit from the "protein craze", Crosbie says there are several. Consumption of most dairy products, such as yogurt, ice cream, butter, cheese and cream, saw growth from 2024 to 2025. Milk consumption was stable year-over-year.
"It's not mentioned in the blog, but…sales of cottage cheese are up 33% or 34% in the last 12 months. Again, people are looking for that added protein and there's some versatility with cottage cheese that you can add it to." he said.
But will the demand for more protein have staying power beyond 2026 compared to butterfat? Crosbie isn't sure but is hopeful.
"The industry is certainly banking on it. I do think there's arguments to be made for that to be the case. We do have an aging population that's becoming a little bit more health conscious as they get older and protein is increasingly being viewed as a healthy component of a healthy diet. I think so, but again, nothing's guaranteed, that's for sure."
Looking ahead, he says this summer's review of the Canada-United States-Mexico agreement will be something to watch. But he stresses until that process is complete and details are known, he advises producers to focus on what they can control on the farm.
You can find the full report on Farm Credit Canada's website.
