CME Dairy Markets

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Archive for CME Dairy Markets

November 12 Market Shock: Cheese Crashes to $1.55 as Milk Heads for $16 – Your Action Plan Inside

Wednesday, November 12th, 2025

Warning: Today’s cheese collapse confirms what smart money already knows – milk’s heading for $16. Action plan inside.

Executive Summary: Today’s 8-cent cheese collapse to $1.5525 sent an unmistakable message: the U.S. dairy industry has entered a margin crisis that smart money says could stretch into 2027. With Europe undercutting our prices by 10 cents, Mexico pulling back orders, and domestic production inexplicably up 4.2%, we’re producing into a black hole. The numbers are sobering – Class III milk heading for $16.50 means your January check drops $3/cwt, translating to $7,500 less monthly revenue for a typical 300-cow operation. At these prices, even well-run dairies lose $1,500 daily. But here’s what 30 years in this industry has taught me: the operations that act decisively in the first 90 days of a crisis are the ones that survive. Those waiting for markets to ‘come back’ typically don’t make it. Your December milk check isn’t just a number anymore—it’s a referendum on whether your operation has what it takes to weather the storm ahead.

Today’s Market Summary Table

Product	Close	Change	Trading Activity
Cheese Blocks	$1.5525/lb	↓ $0.08	4 trades ($1.5775-$1.6275)
Cheese Barrels	$1.6450/lb	↓ $0.03	No trades
Butter	$1.5000/lb	Unchanged	3 trades ($1.49-$1.50)
NDM	$1.1575/lb	↑ $0.0025	No trades
Dry Whey	$0.7500/lb	Unchanged	No trades

You know that sinking feeling when you check the CME report and see red numbers everywhere? That’s exactly what happened today. Block cheese crashed 8 cents to close at $1.5525 per pound—and here’s what’s interesting, it happened on relatively heavy trading with four separate transactions recorded by the Chicago Mercantile Exchange spanning from $1.5775 to $1.6275, according to today’s CME cash market report. Barrels weren’t far behind, falling 3 cents to $1.6450, though notably without any recorded trades.

What I’ve found particularly telling is how butter stayed frozen at $1.50 with three trades in a tight range, while nonfat dry milk barely budged, climbing just a quarter-cent to $1.1575 with zero trading activity. Days like this tell us something important about where we’re headed. And honestly? It’s time we had a serious conversation about what this means for your December milk check.

Reading the Tea Leaves in Today’s Trading Patterns

Here’s something many of us miss when we just glance at the closing prices—the bid-ask spreads are telling a much bigger story. You probably know this already, but when the gap between what buyers are willing to pay and what sellers are asking widens dramatically, it usually means traders can’t agree on where prices should settle.

Today’s cheese block market saw those four trades bouncing between $1.5775 and $1.6275, but—and this is crucial—CME floor sources report that we had only one bid against one offer at the close. That’s not healthy price discovery; that’s a market running on uncertainty. In my experience working with Chicago traders, when you see heavy block volume with falling prices but no barrel activity, it often means processors are dumping inventory before year-end accounting.

The 8-Cent Collapse Captured: From $1.64 trading range into $1.55 settlement across four institutional block trades. This waterfall pattern signals that major traders are repricing dairy fundamentals downward—the classic setup for extended weakness.

The weekly totals back this up dramatically: 14 block trades this week versus zero for barrels, according to CME weekly volume data. You know what really concerns me? The order book shows just one bid each for blocks and barrels, creating virtually no floor under this market. Compare that to butter, where we’re seeing four offers—sellers everywhere, but buyers have vanished. It’s worth noting that this setup typically precedes another leg lower, especially when remaining buyers finally capitulate.

How Global Markets Are Boxing Us In

So here’s where things get complicated—and you’ve probably noticed this in your own export conversations if you’re dealing with cooperatives. European butter futures trading at €5,070 per metric ton on the European Energy Exchange work out to about $2.29 per pound at current exchange rates. That’s now competitive with our prices, and according to USDA Foreign Agricultural Service data, they’re capturing business we desperately need.

What I find particularly troubling is New Zealand’s positioning on the NZX futures exchange. Their whole milk powder at $3,440 per metric ton signals aggressive pricing to capture Asian market share, based on Global Dairy Trade auction results. And with EU skim milk powder at €2,075 per metric ton—that’s about $1.04 per pound—they’re undercutting our NDM by over 10 cents. In many cases, that’s enough to make a U.S. product completely uncompetitive globally.

Now, Mexico has traditionally been our safety net. USDA trade data shows they account for about 25% of U.S. dairy exports. But here’s what’s changed: the peso weakened by 8% against the dollar this quarter, and according to Conasupo (Mexico’s national food agency), domestic production is ramping up. Several processors I’ve talked with in Wisconsin report Mexican buyers are pulling back on November purchases.

Southeast Asia was supposed to pick up that slack, but USDA attaché reports from Vietnam and Indonesia indicate those markets are currently oversupplied with cheaper product from New Zealand and Europe. And the dollar… well, that’s another story entirely. Federal Reserve data shows it’s near 52-week highs, and research from the International Dairy Federation shows that every 1% rise in the dollar index typically drops our dairy exports by 2-3%.

Feed Markets: The Silver Lining Gets Thinner

Here’s one bright spot, though it’s getting dimmer by the day. According to CME futures settlements, December corn closed at $4.3550 per bushel, with March futures at $4.49. That’s manageable. Soybean meal’s recovery to $322 per ton from Monday’s $316.80 keeps feed costs somewhat reasonable, based on CBOT trading data.

But—and this is a big but—the milk-to-feed ratio is deteriorating fast. Cornell’s Dairy Markets and Policy program calculates that at current prices, income over feed costs could drop below $8 per hundredweight by January. University of Wisconsin Extension analysis confirms that for most operations, that’s below breakeven.

The regional differences are striking, too. USDA Agricultural Marketing Service basis reports show Midwest producers near corn country seeing sub-$4 local cash prices. Meanwhile, California Department of Food and Agriculture data indicates that West Coast producers are facing $5-plus delivered corn. For hay, USDA’s Agricultural Prices report puts the national average at $222 per ton, but Western Premium Alfalfa runs $280 and up according to the latest USDA hay market news.

Production Growth: The Numbers We Can’t Ignore

USDA’s National Agricultural Statistics Service finally released that delayed September milk production report on November 10th, and the numbers are… well, they’re sobering. Twenty-four state production hit 18.3 billion pounds, up 4.2% year-over-year. The national herd added 235,000 cows over the past year, while production per cow jumped 30 pounds to 1,999 pounds per month.

What’s really eye-opening is where this growth is concentrated. Kansas leads with 21.1% growth, South Dakota’s up 9.4%—those new processing plants that Dairy Foods magazine has been covering are pulling massive expansion. Looking at efficiency gains, Michigan State University Extension reports their state’s cows are averaging 2,260 pounds per month. That’s 260 pounds above the national average.

The 261-Pound Survival Gap: Michigan’s elite herds average 2,260 lbs/month while national average sits at 1,999. That efficiency gap translates to $15/day cost per marginal cow. When Class III drops to $16.50, every pound counts—operations with production per cow below 1,950 face economic extinction.

The combination of improved genetics—documented in Journal of Dairy Science studies—optimized nutrition protocols from land-grant university research, and modernized facilities, as tracked by Progressive Dairy, has pushed biological limits higher than we thought possible. Here’s the reality check from talking with nutritionists: when your neighbors are achieving these yields, you either match them or risk getting priced out.

Remember all those cheese plants that broke ground in 2023? Kansas Department of Agriculture confirms three major facilities, Texas Department of Agriculture lists two, and South Dakota’s Governor’s Office announced another two. We’ve added 10 billion pounds of annual processing capacity since 2023, according to estimates from the International Dairy Foods Association. These plants have 20-year USDA Rural Development financing that requires running near capacity—this structural oversupply won’t resolve quickly.

The Structural Trap: Four new cheese plants in 2023 plus six more in 2024-2025 added 10 billion pounds of capacity. These debt-financed facilities must operate near 95% utilization to service 20-year USDA Rural Development loans. Current market demand: 46 billion pounds. Result: 5+ billion pounds annual oversupply locked in through 2030. Price recovery impossible without facility closures—and that doesn’t happen voluntarily.

What This Means for Your December Check

Let’s talk straight about where Class III milk is headed. With November futures already at $17.16 on the CME and December futures implying further weakness according to today’s settlements, several dairy economists I respect are projecting $16.50 or lower by January.

***December Check Reckoning: A 300-cow operation at $16.50 Class III faces $7,500 monthly revenue loss. That’s $900 daily. January will be worse.***

At $16.50 Class III with current feed costs, the University of Minnesota’s dairy profitability calculator shows the average 100-cow dairy loses about $1,500 per day. If we hit spring flush with these prices… well, that’s going to force some tough culling decisions. Today’s spot prices, when run through USDA’s Federal Milk Marketing Order formulas, translate to January milk checks down $2.50 to $3.00 per hundredweight from October.

For a 300-cow dairy shipping 65,000 pounds daily, that’s $7,500 less monthly revenue. Farm Credit Services reports from the Midwest indicate banks are already tightening credit as dairy loan portfolios deteriorate. The Federal Reserve’s October Agricultural Credit Survey shows agricultural loan demand rising while repayment rates fall—if you haven’t locked in operating lines for 2026, today’s price action just made that conversation much harder.

What’s particularly concerning is that our traditional escape route isn’t available. USDA Foreign Agricultural Service data shows China’s imports down 18% year-over-year, Mexico’s pulling back, as I mentioned, and Southeast Asian markets are oversupplied. Without export demand absorbing 15-20% of production—which has been the historical average according to U.S. Dairy Export Council analysis—domestic markets face crushing oversupply through 2026.

Tomorrow Morning’s Practical Action Plan

So what do we do about all this? Here’s my thinking on practical steps based on conversations with risk management specialists and successful producers who’ve weathered previous downturns.

On the hedging front, if we get any bounce above $17.00 for Q1 2026 Class III, I’d seriously consider locking it in. Several commodity brokers I trust are recommending ratio spreads—selling two February $16 puts to buy one February $18 call, which limits your downside while maintaining upside potential. For feed, the consensus among grain merchandisers is to buy March corn under $4.40 and meal under $320 while you can.

Operationally, extension dairy specialists are unanimous: it’s time for aggressive culling. Penn State’s dairy management tools show that every marginal cow below 60 pounds per day is costing you money at these prices. Push breeding decisions to maximize beef-on-dairy premiums while they last—Superior Livestock Auction data shows those crossbred calves bringing $200 to $300 premiums.

Review every feed ingredient for substitution opportunities. University of Wisconsin research demonstrates that optimizing your grain mix can save $5 per ton without sacrificing production—that equals $50,000 annually for a 500-cow dairy. And here’s something many producers hesitate to do but really should: schedule that lender meeting now, before year-end financials force their hand.

Prepare cash flow projections showing survival through $16 milk—Farm Financial Standards Council guidelines suggest they need to see that you’ve faced reality. Several ag finance specialists recommend considering sale-leaseback arrangements on equipment to generate working capital before values drop further.

The 90-Day Reckoning: From November 12 market shock through February 10, every day counts. The red danger zone shows when critical decisions must occur. Operations that delay past December 15 face compromised options by January spring flush. Historical dairy downturns show: decisive action in days 1-90 determines survival probability. The clock started November 12.

The Bottom Line

You know, I’ve been through the 2009 crisis, the 2015-2016 downturn, and 2020’s volatility. What we’re seeing today isn’t just another cycle. Today’s 8-cent cheese collapse, combined with global oversupply data and production growth trends, confirms the U.S. dairy industry faces what could be a two-year margin squeeze.

Looking at the fundamentals—global markets oversupplied according to Rabobank’s latest dairy quarterly, domestic demand softening per USDA disappearance data, and production still growing at 3-4% annually—prices have further to fall before this corrects. The harsh reality, according to agricultural economists at several land-grant universities, is that we could see 5-10% of operations exit by the end of 2026.

Your December milk check has become more than a financial report—it’s a survival test. But here’s what’s encouraging from studying previous downturns: operations that adapt quickly, that make hard decisions now rather than hoping for recovery, those are the ones that emerge stronger. The question facing every producer tonight is simple but profound: will your operation be among the survivors?

What I’ve learned from 30 years of watching these cycles is that the difference between those who make it and those who don’t often comes down to acting decisively in moments like this. Tomorrow morning, when you’re doing chores, think about which camp you want to be in. Then act accordingly.

Key Takeaways

This isn’t a blip—it’s a reckoning: Today’s 8-cent cheese crash to $1.5525 with only one bid standing confirms we’re entering a 2-year margin squeeze. Class III hits $16.50 by January.
The world has turned against U.S. dairy: Europe’s 10 cents cheaper, Mexico’s pulling back, and our 4.2% production growth is flooding a shrinking market. Exports can’t save us this time.
Efficiency gaps will force consolidation: When Michigan averages 2,260 lbs/cow and you’re at 1,900, the math is fatal—every marginal cow costs you $15 daily at these prices.
Your banker already knows: Today’s CME report just flagged every dairy loan in America. Schedule that meeting now with realistic projections, not wishful thinking.
History’s lesson is clear: In 2009 and 2015, farms that acted decisively in the first 90 days survived. Those that waited for “normal” to return didn’t make it. Which will you be?

Learn More:

This Isn’t Your Normal Dairy Downturn – Here’s Your 60-Day Action Plan – This tactical guide provides the immediate 60-day survival plan for the crisis outlined in our report, detailing proven strategies for culling, financial tracking, and component optimization that are working for producers right now.
Global Dairy Market Dynamics: Navigating Volatility and Strategic Opportunities in 2025 – For a deeper dive into the “why” behind the global price pressure, this strategic analysis explains the GDT dynamics and European overproduction that are boxing in U.S. producers, revealing where future strategic opportunities may lie.
Robotic Milking Revolution: Why Modern Dairy Farms Are Choosing Automation in 2025 – When margins are crushed by labor and feed costs, this article explores the hard ROI of automation. It details how robotics are delivering 60% labor reductions and providing crucial data to survive long-term margin squeezes.

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Categories : CME Dairy Markets

Tags : Class III milk price, CME dairy market, dairy margin management, dairy profitability, dairy risk management, farm financial planning, Global Dairy Trends

$850 Million Dairy Standoff: What U.S. and Canadian Farmers Need to Know Before July 2026

Wednesday, November 12th, 2025

Canada won the trade panel. The U.S. has the sunset clause. July 2026 decides who blinks first in the $850M dairy standoff.

EXECUTIVE SUMMARY: Wisconsin dairy farmers are asking a simple question: Where’s the Canadian market access USMCA promised five years ago? The U.S. industry says Canada blocked $850 million in opportunities by allocating import quotas to processors who won’t use them, keeping fill rates at just 42%. Canada counters they’re following the rules—winning a November 2023 panel to prove it—and argues American dairy simply isn’t competitive in their market. With 1,420 U.S. farms closing last year while Canadian producers protect quota investments worth $30,000 per cow, both sides face existential stakes. July 2026 changes everything: the USMCA sunset clause means all three countries must actively agree to continue, or $780 billion in annual trade enters dangerous uncertainty. This analysis presents both perspectives fairly and provides specific strategies based on your farm size—because regardless of who “wins,” every North American dairy operation needs to prepare for what comes next.

As we approach the July 2026 USMCA review, the U.S. dairy industry is building their case while Canada defends its position. Here’s what both sides are saying—and why it matters for dairy farmers across North America.

You know what’s interesting? When you talk to Wisconsin producers these days, there’s this deep frustration that just keeps coming up. Five years after the USMCA promised meaningful Canadian market access, they’re still waiting. And it’s not just Wisconsin—this sentiment’s spreading across the entire U.S. dairy belt, setting up what could be quite a showdown come July 2026.

So here’s what’s happening. The International Dairy Foods Association filed this formal complaint in October to the Trade Representative, and when you combine that with five years of trade data from both USDA and Canada’s Global Affairs department… well, the U.S. industry’s making a pretty specific case. They’re talking about roughly $850 million in export opportunities that haven’t materialized, all while 1,420 American dairy operations shut down last year, according to the USDA’s count.

But here’s the thing—and this is important—Canada sees this completely differently. They won that November 2023 dispute panel, and they’re saying they’re following the agreement just fine. Understanding both perspectives has become essential for anyone trying to make sense of what’s coming.

What the U.S. Industry Says Was Promised vs. What They Got

Let me walk you through the American dairy sector’s position. It starts with the International Trade Commission’s 2019 assessment, which projected we’d see about $227 million in additional annual exports under USMCA’s dairy provisions.

The way U.S. producers see it, they were expecting:

Access to 3.6% of Canada’s dairy market through 14 different quota categories
Complete elimination of those Class 6 and 7 pricing schemes within six months
Export caps keeping Canadian skim milk powder and milk protein concentrates at 35,000 metric tons annually
Import quotas going to actual importers, not Canadian processors

Now, according to Canada’s own Global Affairs data and those USMCA panel findings, what actually happened looks quite different.

What were the average quota fill rates from 2022 to 2023? Just 42% across all categories. Nine of those 14 categories never even hit 50% utilization. And that January 2022 USMCA panel—they found that Canada had allocated between 85% and 100% of its quota shares to Canadian processors. American farmers argue these processors have about as much incentive to import competing U.S. products as… well, let’s just say not much.

Here’s what really gets American producers going—this Class 7 pricing business. Sure, Canada technically eliminated it like they promised. But then—and the University of Wisconsin’s dairy economists have documented this—similar pricing dynamics popped up under Class 4a. The U.S. sees that as a way to get around its USMCA commitments.

“You get on a phone conversation with some of these folks that have been farming for five and six generations. How do you say I can’t help you? That becomes very tough.” – Bill Mullins, Mullins Cheese

Quick Reference: Understanding Key Trade Terms

TRQ (Tariff Rate Quota): Think of it as a two-tier system. A certain amount gets in at low or zero tariffs. Above that? You’re looking at 200-315% tariffs for Canadian dairy.

Supply Management: Canada’s comprehensive dairy system since 1972—combines production quotas, price supports, and import controls.

Class Pricing: Canada’s milk classification system that sets different prices based on how the milk’s used—and this is where things get contentious.

Why Canada Defends Supply Management So Fiercely

You know, when you really look at Canada’s dairy system, you start to understand why they’re so protective of it. Agricultural economists at Université Laval have documented how it works through three integrated pieces:

First, there’s production quotas that limit what each farmer can produce. Then you’ve got price supports keeping farmgate values at about 1.5 to 2 times what we see in the U.S. And finally, those import barriers—we’re talking 200% to 315% on anything over quota.

This whole framework’s supporting about 9,000 Canadian dairy operations that generate close to CA$20 billion in annual economic activity, according to Dairy Farmers of Canada’s latest report.

Mark Stephenson over at UW-Madison’s dairy policy program explains it well: “The fundamental incompatibility is that supply management requires import control to function. Asking Canada to provide meaningful market access is essentially asking them to dismantle the system piece by piece. From their perspective, that’s existential.”

And here’s something to consider—Canadian producers have invested around CA$30,000 per cow in quota value according to their provincial milk boards. That’s not just an operating expense. That’s retirement savings, succession planning, and their kids’ inheritance. No wonder they defend it so fiercely.

How American Farmers See the Economic Stakes

For U.S. producers, the Grassland Dairy situation from 2017 is still a really raw issue. It kind of exemplifies their broader concerns about Canadian trade practices.

When Canada introduced that Class 7 pricing targeting ultra-filtered milk, Grassland Dairy had to terminate contracts affecting about a million pounds of daily production across 75 Wisconsin farms. Bill Mullins from Mullins Cheese—he took on eight of those displaced operations even though his plants were already near capacity. His words still resonate.

Here’s what keeps U.S. producers up at night:

Wisconsin Center for Dairy Profitability data shows your average 200-cow operation generates about $87,000 in annual net income. If you lost $56,000 in potential export revenue—that’d be each farm’s theoretical share of that $850 million—you’re looking at a 64% income hit.

The numbers that really worry them:

Chapter 12 farm bankruptcies jumped 55% in 2024, hitting 259 filings
Wisconsin dairy operations averaged just $0.87 per hundredweight in net margins during 2023
At those margins, farms facing reduced market access could hit insolvency within 30 months

New York dairy producers have been pretty vocal about their frustration, arguing they’re seeking the market access they were promised, not handouts. One Cayuga County operator mentioned how expansion decisions are basically on hold until there’s clarity about Canadian market availability.

Canada’s Counter-Argument: Why They Say They’re Complying

Now here’s where it gets really interesting—Canada’s perspective on USMCA compliance is fundamentally different from the U.S.’s.

First off, Canada won that November 2023 USMCA dispute panel ruling. The panel found 2-1 that Canada’s revised allocation methods based on market share didn’t violate USMCA provisions. That’s a big deal—it validated Canada’s position that their implementation, while maybe not what the U.S. expected, technically complies with the agreement.

The way Canadian officials see it, several key points counter U.S. arguments:

On those low quota fill rates, they argue this reflects market conditions and U.S. producers’ inability to meet Canadian market requirements, not administrative barriers. They say importers are free to source from the U.S. if the products are competitive.

On processor allocations: Canada maintains that allocating quotas based on historical market activity is legitimate and non-discriminatory. It doesn’t explicitly exclude any type of importer.

On Bill C-202: Rather than overplaying their hand, Canada sees that June 2025 legislation—where 262 of 313 MPs voted to prohibit dairy concessions—as a democratic expression of national consensus. All parties supported it. From their perspective, that’s sovereign policy choice, not a negotiating tactic.

Dairy Farmers of Canada has consistently maintained that supply management represents more than just an economic system—they see it as ensuring food security and stable farm incomes across rural Canada. Pierre Lampron, who served as DFC president through 2024, expressed confidence at their annual meeting that the government understands this broader context.

Timeline: Key Dates Leading to July 2026 Review

January 2026: Monitor for ITC preliminary findings on protein dumping investigation

March 2026: ITC final report delivers—this could be game-changing evidence

May-June 2026: Industry positioning intensifies, Congressional pressure peaks

July 1, 2026: USMCA joint review—decision on extension or annual review mode

Here is the data from the image converted into a table:

Two Countries, Two Systems

Aspect	U.S. System	Canadian System
Farm Closures (2024)	1,420 operations (5% decline)	Stable/protected
Quota Investment per Cow	$0	$30,000
Price Stability	Volatile (market-based)	Guaranteed (1.5-2x U.S. prices)
Market Access Barriers	None domestically	High tariffs (200-315%)
Export Opportunities	Growing but constrained by Canada	Limited by supply management

The Political Leverage Game for 2026

Both sides are positioning themselves for July 2026 with some distinct strategic advantages.

What the U.S. Industry Has Going For It

The timing of the ITC investigation is no accident. The International Trade Commission investigation into Canadian dairy protein dumping delivers findings in March 2026. That’s just four months before the review—giving U.S. negotiators the federal agency documentation they need right when they need it.

The sunset clause creates real pressure. USMCA requires all three countries to actively confirm they want to extend the agreement in July 2026. If they don’t, we’re looking at uncertainty over $780 billion in annual bilateral trade.

Congressional backing matters. Bipartisan pressure from dairy-state legislators provides the U.S. industry with political support to push enforcement demands.

Canada’s Strategic Position

Legal victories count. That November 2023 panel ruling provides Canada with legal cover for its current practices. They can say, “Look, we went through dispute settlement and won.”

Political unity is powerful. Bill C-202’s overwhelming parliamentary support shows that protecting supply management goes beyond party politics in Canada.

The broader relationship provides leverage. Canada can point to integrated North American supply chains—especially in automotive and energy—to resist dairy-specific pressure.

Three Scenarios and What They Mean for Different Farm Sizes

Supply management has survived 30+ years of trade fights. Betting the farm on a breakthrough? That’s a 30% probability play. Smart money plans for the 45% scenario: more paperwork, same barriers, modest improvements at best

Looking at how things are shaping up, here’s what seems most likely and what it means for your operation:

Scenario 1: More Incremental Changes (45% probability, if you ask me)

Canada agrees to better reporting and maybe some monitoring mechanisms, but keeps its fundamental allocation approaches. The U.S. claims progress, Canada keeps supply management intact. Quota fill rates? They probably stay about the same.

What this means by farm size:

Under 100 cows: Focus on local markets and direct sales. Canadian access won’t materialize in meaningful ways for you anyway. Consider value-added products where you control the whole chain.

100-500 cows: Keep flexibility for quick pivots. Maybe maintain current production, but don’t expand based on export hopes. Watch Southeast Asian opportunities instead.

500+ cows: You’ve got scale to weather this, but don’t count on Canadian markets in your five-year plans. Consider leading industry advocacy efforts—you’ve got the most to gain if something breaks loose.

Scenario 2: Real Enforcement Mechanisms (30% probability)

If those ITC findings are compelling and U.S. negotiators credibly threaten not to renew, Canada might accept automatic penalties for under-utilization or mandatory non-processor allocations. That could deliver partial yet meaningful improvements in access.

Preparation steps if this happens:

Get your export documentation systems ready now
Build relationships with potential Canadian buyers
Understand Canadian labeling and standards requirements
Consider partnerships with existing exporters to learn the ropes

Scenario 3: A Standoff (25% probability)

Neither side budges much. The agreement goes into annual review mode, creating ongoing uncertainty but avoiding immediate disruption. Both industries operate under this cloud of potential future changes.

Risk management if we hit a standoff:

Maximum Dairy Margin Coverage enrollment becomes essential
Lock in feed costs wherever possible
Diversify buyer relationships domestically
Don’t make major capital investments based on export assumptions

Who’s Pushing for What: The Players Making Things Happen

Let me tell you about the organizations driving this whole thing, because understanding who’s involved helps make sense of the dynamics.

On the U.S. side, you’ve got some heavy hitters:

The International Dairy Foods Association—they’re the ones who filed that October 2025 complaint. They represent processors, and they’re pushing hard for what they call an end to protectionist measures. They want binding enforcement, and they want it now.

National Milk Producers Federation lobbied hard for that ITC investigation. They’re your farmer cooperatives, and they keep hammering on automatic penalties for non-compliance. They’ve got members losing money, and they’re not shy about saying so.

The U.S. Dairy Export Council is more technical—they document barriers, provide negotiating support, and help with the nuts and bolts. Edge Dairy Farmer Cooperative represents those Midwest producers, and they’re great at putting farm-level impacts front and center.

On Canada’s side, it’s equally organized:

Dairy Farmers of Canada maintains they’re fully complying with USMCA. They’ve got a consistent message: supply management is legitimate policy, and they’re following the rules.

Les Producteurs de lait du Québec—now these folks have serious clout. They represent Quebec’s 4,877 dairy farms, and in Canadian federal elections, Quebec matters. A lot.

Provincial marketing boards coordinate the defense while implementing those quota allocation systems that the U.S. finds so frustrating.

Market Alternatives: What Some Smart Operators Are Doing

While this U.S.-Canada dispute dominates headlines, some American producers are zigging, while others are zagging. Take this example—a California operation recently told me they doubled their Vietnam exports in 18 months. “The middle class there is exploding,” they said. “They want quality dairy, and there’s no quota games to navigate.”

Industry data from USDEC backs this up—U.S. dairy exports to Vietnam and other Southeast Asian countries keep climbing year over year. Vietnam, Thailand, and the Philippines—they’re importing more dairy each year. No supply management system to work around. Just straightforward business based on quality and price.

You know what’s interesting about these markets? They’re growing fast enough that even mid-size operations can find niches. Specialty cheeses, high-quality milk powders, and even fluid milk in some cases. The logistics are getting better every year, too.

Seven months. Four critical milestones. $780 billion in annual trade hanging in the balance. This is how the March 2026 ITC report becomes the leverage point that forces Canada’s hand—or blows up USMCA

The Bottom Line: No Easy Resolution in Sight

That $850 million figure the U.S. dairy industry keeps citing? That’s their calculation of lost opportunities. Canada disputes both the number and the whole premise. Five years of USMCA implementation have revealed fundamental disagreements about what the agreement actually requires and what compliance entails.

Canada’s supply management system has survived more than 30 years of trade negotiations. Honestly? It’ll probably survive this challenge too. The question isn’t whether USMCA will fully open Canadian dairy markets—nobody really expects that. It’s whether the 2026 review might produce some incremental changes that partially address U.S. concerns while keeping Canada’s core system intact.

The way American producers see it, success means binding enforcement mechanisms with automatic penalties. The way Canada sees it, success is maintaining supply management’s essential structure while offering enough procedural adjustments to avoid a broader trade confrontation.

Come July 2026, we’ll see whether these positions can be reconciled—or whether North American dairy trade stays defined by promises unfulfilled and expectations unmet. Either way, it’s going to be interesting to watch. And whatever happens, we’ll all need to adapt our operations accordingly.

One thing’s for sure—whether you’re milking 50 cows or 5,000, whether you’re in Wisconsin or Quebec, this dispute affects the entire North American dairy landscape. Understanding both sides helps us all prepare for whatever comes next.

Resources for Following This Issue:

Trade Documentation:

IDFA USMCA analysis: www.idfa.org/usmca2026
USMCA Secretariat dispute rulings: www.usmca.org
Statistics Canada dairy trade data: www.statcan.gc.ca
USDA Foreign Agricultural Service reports: www.fas.usda.gov

Research Centers:

University of Wisconsin Center for Dairy Profitability: cdp.wisc.edu
Université Laval CREATE dairy economics: www.create.laval.ca
Canadian Dairy Information Centre: www.dairyinfo.gc.ca

The Bullvine continues tracking developments from both perspectives as we approach the July 2026 USMCA review. For ongoing analysis, visit www.thebullvine.com.

KEY TAKEAWAYS

Both sides have valid arguments: U.S. proves Canada allocates 85% of quotas to processors who won’t import (42% fill rate); Canada’s November 2023 panel win says that’s technically legal
Real farms, real consequences: 1,420 U.S. operations closed waiting for promised access, while Canadian farmers defend $30,000/cow quota investments—everyone has skin in this game
July 2026 is unprecedented leverage: The sunset clause means all three countries must actively agree, or $780B in trade enters chaos—first time the U.S. can credibly threaten the whole relationship
History suggests incremental change: Supply management survived 30+ years of trade fights; expect minor adjustments, not market revolution
Your operation, your strategy: Under 100 cows = stay local; 100-500 = maintain flexibility; 500+ = lead advocacy while developing Asian markets where actual growth exists

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Your 2025 Dairy Gameplan: Three Critical Areas Separating Profit from Loss – While the main article covers external market risk, this guide provides internal operational control. It reveals specific tactics for optimizing silage, nutrition, and transition cows to improve your cost of production and financial resilience.
Global Dairy Market in 2025: Production Shifts, Demand Fluctuations, and Trade Dynamics – Go beyond the USMCA dispute. This strategic analysis details how production in Europe and demand in China will impact global milk prices, providing a crucial wider lens for your long-term planning.
Tech Reality Check: The Farm Technologies That Delivered ROI in 2024 (And Those That Failed) – Before investing to counter market uncertainty, read this. It provides a data-driven breakdown of which technologies, from robots to health sensors, actually delivered a verifiable return on investment for producers last year.

Join the Revolution!

Categories : CME Dairy Markets

Tags : dairy farm economics, dairy profitability, dairy risk management, dairy trade policy, North American dairy, Supply Management, USMCA dairy

November 3 CME: Cheese Collapses 10¢ on Ghost Town Trading

Monday, November 3rd, 2025

Cheese tanked. Buyers ghosted. Farmers bleeding. Welcome to Monday in dairy.

EXECUTIVE SUMMARY: You know something’s broken when cheese crashes 10¢ on just TWO trades—that’s exactly what happened today, taking $1/cwt straight out of December milk checks. But here’s what really hurts: the Class III-IV spread hit $3.19, meaning your neighbor shipping Class III is making $45,000 more annually than Class IV shippers on the same-sized farm. We’ve got 9.52 million cows out there—most since 1993—flooding a market where Europe’s selling cheese 37% cheaper and China’s buying less. At $13.90 Class IV against $320/ton feed, even efficient operations are bleeding $2/cwt. The farms that’ll survive are doing three things right now: locking any Class III over $17, cutting cow numbers 15%, and banking six months of operating capital—because this isn’t a correction, it’s a reckoning that’ll last into 2026.

What I’ve found is these aren’t just price moves anymore—they’re survival signals. Here’s what shifted at Chicago today:

Product	Today’s Close	Change	Farm Impact
Cheese Blocks	$1.6650/lb	-10.25¢	December checks drop ~$1.00/cwt
Cheese Barrels	$1.7500/lb	-5.50¢	Processors drowning in inventory
Butter	$1.5775/lb	-3.25¢	Class IV trapped at breakeven
NDM	$1.1300/lb	-0.25¢	Export competitiveness fading
Dry Whey	$0.7100/lb	No change	The only bright spot holding

Now, what’s really telling here—and you probably noticed this too—is the volume. Or lack thereof, I should say. Nine trades total across all products. Nine! I’ve seen more action at a Tuesday card game in Ellsworth.

***November 3 CME dairy price collapse shows cheese blocks plummeting 10¢ on just two trades while seven sellers found no buyers—a market not trading but capitulating in a vacuum of demand.***

When blocks drop a dime on just two trades, it means the price is falling without any real buying support. Those seven offers stacked up? That’s sellers lined up at the door with no buyers in sight. The market isn’t trading; it’s collapsing in a vacuum.

Why This Class Spread Breaks Farms

You know, I’ve been tracking these markets since the ’90s, and this $3.19 gap between Class III at $17.09 and Class IV at $13.90… it’s something else entirely. Three Wisconsin cooperative fieldmen I talked with this morning—all asking to stay anonymous, naturally—painted the same picture: their Class IV shippers are hemorrhaging cash.

“Members are culling anything that looks sideways,” one told me. And at $13.90, even efficient operations lose two bucks per hundred minimum.

Here’s what makes this worse than 2016’s collapse, if you can believe it: feed costs then were 40% lower. The CME futures data shows December corn at $4.3475 a bushel and soybean meal above $320 a ton. You do that math—it doesn’t work.

***The $3.19/cwt Class III-IV spread translates to a staggering $45,000 annual income gap between identical 200-cow farms—same work, vastly different survival odds.***

Regional Pain Points

Wisconsin’s Double Whammy: So Wisconsin’s most recent production data—this is for September, released in October—shows 2.76 billion pounds according to USDA NASS. But here’s the kicker: regional premiums flipped from plus 40¢ in January to minus 15¢ now. That’s a 55-cent swing nobody budgeted for. And meanwhile, local plants are running four-day weeks, while Texas adds 5 million pounds of daily capacity? That’s not a market; it’s a massacre.

Texas Keeps Growing: What’s encouraging for them—not so much for us up north—is that Texas grew 10.6% year-over-year with 50,000 new cows added by April 2025. Their breakeven point is around $14.50, which means they’re still profitable while Upper Midwest farms bleed out. Different labor costs, different feed sourcing… it’s almost like two separate industries now.

California’s H5N1 Factor: Nearly 1,000 confirmed dairy herd cases across 16 states according to USDA APHIS data, with California ground zero. Production down 1.4%—and ironically, that’s the only thing keeping cheese from hitting $1.50.

The Global Picture Nobody Wants to See

Looking at this from 30,000 feet, as they say, we’re seeing convergence of every bearish factor possible. New Zealand’s production is up 2.8% according to Fonterra’s latest data from the Weekly Global Dairy Market Recap. European cheese crashed 37% year-over-year—and when EU product trades at €2,088 per metric ton, why would anyone buy American?

Four converging crises—record production, collapsing exports, crushing feed costs, and new processing overcapacity—have pushed market pressure 10% beyond crisis threshold, with no relief until 2026 at earliest.

China’s pulling back too—total imports up just 6% through July, but that’s still 28% below their 2021 peaks. They’re cherry-picking what they need: whey up, everything else sideways or down. And Mexico, our biggest customer? They’ve been discussing dairy self-sufficiency targets for 2030. That could mean 230,000 metric tons of powder exports are potentially gone.

A StoneX trader told me Friday—and I think he nailed it—”The U.S. is the Cadillac in a world shopping for Chevys.”

Feed Markets: The Other Shoe Dropping

The milk-to-feed ratio tells the whole story: 1.48 right now. You need 2.0 for decent margins, generally speaking, and 1.8 to break even.

***At 1.48 milk-to-feed ratio versus the 2.0 needed for profitability, dairy farmers are bleeding $2/cwt even before paying labor, vet bills, or utilities—a 26% shortfall with no end in sight.***

December corn at $4.3475 offers no relief. Western Wisconsin hay dealers? They want $280 a ton delivered for decent mixed—if they’ll even quote you. The latest WASDE Report mentions the U.S.-China trade deal promising 25 million tonnes annually, but you know, that’s maybe next year, not this month’s certain.

Processing Plants Playing Different Games

So here’s what really gets me: three cheese plants just announced 400 million pounds of new capacity for 2026. Hilmar’s Texas facility cranks up in January—5 million pounds daily. Meanwhile, Wisconsin plants run four-day weeks, managing inventory.

How’s that make sense? Well, it doesn’t—unless you realize processors profit on volume, not price. They don’t really care if cheese is $1.60 or $2.10. They care about throughput. More milk equals more margin dollars even at lower percentages. But farmers? We need price, not volume. That fundamental disconnect… that’s what’s killing us.

What Smart Operations Do Now

Here’s what the survivors are telling me, and it’s worth noting these aren’t the guys complaining at the coffee shop—these are the ones actually making it work:

Lock anything over $17 for Class III immediately. One large Wisconsin producer locked 40% of his Q1 production last week at $17.20. As he put it, “I’m not swinging for fences anymore. Singles keep you in the game.”

Cull deep, cull strategically. With springers at $2,100, that third-lactation cow with feet issues? She’s worth more as beef. Several nutritionists report their clients running 15% lower numbers—on purpose.

Component premiums still matter. Dry whey holding at 71¢ means protein still pays. Farms maximizing components—and you know who you are—they’re seeing 30-40¢ more per hundredweight. Not huge, but it’s something.

Rethink expansion completely. Pete Johnson, who ships direct to a cheese plant, told me something interesting: “My neighbor’s co-op pays $1.40 more in premiums, but after deductions, we net about the same. Difference is, I can walk if needed.”

Cooperatives Scrambling for Answers

You know, DFA’s base-excess programs start December 1st, cutting deliveries 5% from last year. Land O’Lakes is paying 25¢ per somatic cell under 100,000—quality over quantity, finally.

What’s interesting is Cornell research shows non-co-op handlers paying 37% quality premiums versus co-ops at 29%. But co-ops counter with competitive premiums, keeping members from jumping. Mixed signals everywhere you look.

The Six-Month Survival Test

Let me be straight with you: if you’re shipping Class IV milk right now, you need at least 6 months of cash reserves. December checks—and I hate to be the bearer of bad news—will drop $1.00 to $1.50 per hundredweight from November based on current futures.

The Federal Order reform coming January 1st? It’ll shift maybe 30¢ from Class I to manufacturing. That’s like putting a Band-Aid on an amputation, honestly.

California’s methane rules adding 45¢ per hundredweight compliance costs starting July… USDA projecting 230 billion pounds production for 2025 in their October forecast… We don’t need more milk, folks. We need less.

The Bottom Line

You know, standing here looking at these numbers, I keep remembering what my dad used to say: “The cure for low prices is low prices.” Eventually, enough producers quit, supply tightens, and prices recover. But how many good families lose everything getting there?

Today’s 10¢ cheese crash wasn’t a correction—it was capitulation. Blocks at $1.67 with seven offers stacked and two lonely bids? That’s not a market; it’s a distress sale. The funds have bailed, end users are covered, and producers… well, we’re holding the bag.

If you’re planning an expansion, stop. Those new parlor dreams? Shelve them. With 9.52 million cows out there—the highest since 1993, according to USDA data—we’re looking at 6 to 12 months before any real relief.

The farms that’ll make it through are the ones acting now: cutting costs aggressively, optimizing components over volume, maintaining working capital for the storm ahead. Everyone else? Well, auction barns are busy again for a reason.

Your November milk check just got lighter—that’s the reality. Tomorrow morning in the parlor, before dawn breaks and that first cup kicks in, ask yourself this: Am I farming to live, or living to farm?

Because at these prices, you better know the answer.

KEY TAKEAWAYS:

Ghost Town Trading: Cheese crashed 10¢ on just TWO trades today—when seven sellers can’t find buyers, your December check loses $1/cwt
Tale of Two Farms: Identical 200-cow operations, but Class III shippers bank $45,000 more annually than Class IV neighbors—same work, vastly different pay
Perfect Storm Brewing: Record 9.52M U.S. cows flooding markets while EU cheese trades 37% cheaper and Mexico eyes dairy independence by 2030
The $2/cwt Bleed: At $13.90 Class IV milk vs $320/ton feed, even top-tier operations lose money before paying labor, vet, or utilities
Survival Playbook: Winners are doing three things NOW—locking any Class III over $17, strategically culling 15% of herds, and banking 6+ months operating capital for the long winter ahead

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

December 1 Deadline: How Cutting 15% of Your Herd Could Add $40,000 to Your Bottom Line – This provides the exact 90-day playbook for the “cull strategically” advice in the main report, revealing how to identify underperformers and use beef-on-dairy genetics to immediately cut costs and capture new revenue streams.
Why Dairy Markets Can’t Self-Correct Anymore: The Hidden Forces Reshaping the Dairy Industry’s Future – This strategic analysis directly challenges the “cure for low prices is low prices” mentality by exposing the structural forces, from EU co-op rules to U.S. digester contracts, that lock in oversupply even when prices crash.
Unlock Hidden Dairy Profits Through Lifetime Efficiency: How Modern Genetics and Strategic Nutrition Can Cut Feed Costs by $251 Per Cow – While the main report outlines the feed cost crisis, this article delivers an innovative solution. It demonstrates how to leverage genetic selection for feed efficiency (RFI) to achieve specific, measurable cost savings of $251 per cow.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III milk price, Dairy Farm Profitability, Dairy Herd Management, dairy market analysis, farm risk management, Global Dairy Trends, milk price volatility

CME Dairy Market Report October 30, 2025: Today’s Historic Class Price Gap Is Creating $3,800 Monthly Winners and Losers

Thursday, October 30th, 2025

Two identical farms. One gets $17.81/cwt today. The other? $13.75. The ONLY difference: where their milk truck goes.

Executive Summary: Today’s dairy market delivered a brutal verdict: if your milk goes to cheese, you’re winning at $17.81/cwt – but if it’s heading to powder, you’re bleeding money at $13.75. This historic $4 gap means identical farms are now separated by $3,800 per 100 cows per month, and NDM’s collapse today (seven sellers, zero buyers) signals it’s getting worse. While cheese held firm above $1.82, powder crashed by 2.25 cents amid intensifying European competition and weakening global demand. Feed costs keep climbing – corn hit $4.35/bu, soybean meal $308/ton – squeezing everyone’s margins, but only cheese producers have the pricing power to survive. The industry’s geographic revolution accelerates as Texas adds 50,000 cows and builds massive new plants while California and Wisconsin struggle with regulations and aging infrastructure. Smart operators are locking in Q1 2026 Class III near $18 and making hard decisions about their future – because in this market, standing still means falling behind.

Let me tell you what’s happening in the dairy markets today —and, more importantly, what it means for your next milk check. We saw cheese prices hold steady above $1.82, which is good news if you’re shipping to a cheese plant. But if your milk’s going into powder? That 2.25-cent drop in NDM to $1.14 is going to sting. This growing divergence between Class III and Class IV prices — now nearly $4 per hundredweight — is creating clear winners and losers depending on where your tanker is unloaded.

Looking at today’s trading, what’s interesting here is the complete absence of action in cheese despite decent bid support. No trades in blocks or barrels isn’t unusual after a week-long rally, but the seven offers stacked up against zero bids in NDM? That tells you everything about where sentiment is heading for powder markets.

Two Identical Farms, One Brutal Verdict: The $3,800 monthly gap reveals how processor relationships now matter more than production efficiency—cheese-bound operations at $17.81/cwt are winning while powder-plant farmers bleed at $13.75/cwt.

Today’s Price Action — What These Numbers Mean for Your Farm

Product	Price	Today’s Move	Weekly Trend	Real Impact on Your Farm
Cheese Blocks	$1.8250/lb	Unchanged	Up 1.4%	Holding firm above $1.82 keeps Class III near $17.80
Cheese Barrels	$1.8200/lb	Unchanged	Up 1.4%	Steady demand supporting the cheese complex strength
Butter	$1.5725/lb	+1.75¢	Down 0.1%	Small bounce won’t offset NDM weakness for Class IV
NDM Grade A	$1.1400/lb	-2.25¢	Up 3.4%	Sharp drop pulls November Class IV below $14
Dry Whey	$0.7000/lb	Unchanged	Up 3.2%	Steady support for Class III other solids value

Market Sentiment Splits Violently: Cheese’s steady climb to $1.83 contrasts with NDM’s freefall to $1.14—today’s seven sellers against zero buyers signals powder markets haven’t found bottom yet, widening the Class III/IV chasm to historic levels.

The cheese market’s taking a breather after climbing steadily all week. With blocks and barrels both parked above $1.82, processors seem content with their inventory levels heading into the November holiday demand. That’s actually constructive for maintaining these price levels.

But here’s where it gets concerning — NDM dropping 2.25 cents on heavy offers and absolutely no buying interest. When you see seven sellers trying to unload product with no takers, that’s a market looking for a floor. This weakness directly hits anyone shipping to butter-powder plants, pulling that November Class IV price down toward $14 or potentially lower.

From the Trading Floor — Reading Between the Lines

Bid/Ask Dynamics Tell the Story

The order book today painted two very different pictures. Cheese showed balance with just two bids and two offers on blocks, nothing on barrels — that’s a market comfortable with current levels. But NDM? Zero bids against seven offers is about as bearish as it gets. As one Chicago floor trader told me this morning, “Nobody wants to catch a falling knife in powder right now.”

Trading volumes stayed extremely light — only two loads of butter actually changed hands. The lack of cheese trades doesn’t worry me; it’s normal consolidation. But NDM’s inability to attract even a single bid at progressively lower prices? That suggests we haven’t found the bottom yet.

Volume Patterns and Market Mechanics

What caught my attention was the timing of those NDM offers. They started appearing early and kept building throughout the session, with sellers growing increasingly anxious as the day wore on. The price had to drop 2.25 cents just to clear the board, and even then, no actual trades occurred — just a lower posted price trying to entice buyers who weren’t there.

Where We Stand Globally — And Why It Matters

You want to know why NDM’s struggling? Look at global prices. U.S. NDM at $1.14 per pound is now squeezed between New Zealand at roughly $1.15 and Europe, sitting around $1.00 (based on current exchange rates). That 14-cent premium over European powder is killing our competitiveness in key export markets like Mexico and Southeast Asia.

The real opportunity — and I’ve been saying this for weeks — is in butter. At $1.5725, we’re trading at a massive discount: 89 cents below Europe and $1.40 below New Zealand. Yet nobody’s stepping up to arbitrage this gap. Either U.S. butter is about to rally hard, or global prices are set for a major correction. Something’s got to give.

Market Inefficiency or Warning Signal? The $1.40 butter discount to New Zealand defies arbitrage logic—either U.S. prices are set to rally hard, or global markets face a major correction. Smart money is watching this gap obsessively.

According to Rick Naerebout, CEO of the Idaho Dairymen’s Association, “We’re seeing strong interest from international buyers for U.S. butter at these levels, but the logistics of securing a consistent supply through Q1 2026 is holding back larger commitments.”

Feed Costs Keep Creeping Higher

Your feed bills aren’t doing you any favors right now. December corn futures closed at $4.3450 per bushel, up 6.5 cents this week. December soybean meal hit $308.70 per ton, gaining $11.

For a typical Upper Midwest dairy running a standard TMR, you’re looking at an extra $0.15-0.25 per cow per day in feed costs from this week’s rally alone. With the milk-to-feed ratio barely treading water, these incremental cost increases are directly eating into your already thin margins.

Dr. Bill Weiss from Ohio State’s dairy nutrition program notes, “The projected feed cost index for 2025 sits at 92, suggesting an 8% decrease from 2024 levels, but current futures pricing indicates that relief may not materialize until late Q1 2026.”

Production Reality Check — Where the Milk’s Coming From

USDA’s latest projections have milk production at 230.0 billion pounds in 2025 and 231.3 billion pounds in 2026 — both revised upward from previous estimates. But here’s what matters: where that milk’s being produced and who’s got the processing capacity to handle it.

The geographic shift is striking. Texas posted a jaw-dropping 10.6% surge in April 2025, hitting 1.511 billion pounds. Idaho’s up 4.2% at 1.471 billion pounds. Meanwhile, California’s still recovering from H5N1 impacts, down 1.4%, and Wisconsin — the traditional dairy heartland — barely grew at 0.1%.

This isn’t just statistics; it’s a fundamental realignment of the U.S. dairy industry. Texas added 50,000 cows in the past year. Idaho gained 28,000. Kansas jumped 16,000. These states are building new processing capacity to match — Leprino’s massive cheese plant in Lubbock will process a million pounds daily when it opens in 2025.

The Geographic Revolution Is Here: Texas’s 50,000-cow expansion and Idaho’s 28,000 additions expose the brutal reality—dairy’s future belongs to states with water rights, minimal regulations, and new $11B processing infrastructure, not nostalgic traditions.

What’s Really Driving These Markets

Domestic Demand Dynamics

Holiday cheese demand is providing the floor under current prices. Retailers are actively building inventory for Thanksgiving promotions, keeping both block and barrel prices well-supported above $1.82. Food service demand remains steady, according to several major processors I spoke with this week.

But butter’s a different story. Inventories appear more than adequate for holiday baking needs. As one major retailer’s dairy buyer put it, “We’re covered through New Year’s at current consumption rates. No need to chase prices higher.”

Export Markets — The Pressure Points

U.S. Dairy Export Council data shows we’re in a knife fight with the EU for market share in Mexico. Today’s NDM price drop was necessary to stay competitive. But the bigger story is Southeast Asia, where demand continues to grow at 4-6% annually, according to recent USDEC reports.

The massive butter discount to global prices should be creating export opportunities, but logistics remain challenging. “We need consistent supply commitments through Q2 2026 to make these international contracts work,” notes a major exporter who requested anonymity.

Forward Markets and What They’re Telling Us

November Class III futures settled at $17.81 yesterday — today’s stable cheese market keeps that outlook intact. November Class IV at $14.02 faces more downward pressure after today’s NDM drop, potentially testing below $14.

Looking ahead, markets are pricing Class III around $17.30 for Q4 2025 and $16.85 for the first half of 2026. Class IV projections sit at $16.00 for Q4 and $15.75 for H1 2026. This persistent $1.50+ spread between Class III and Class IV isn’t going away anytime soon.

USDA’s all-milk price forecast for 2025 sits at $21.35 per hundredweight, with 2026 projected at $20.40 — both recently revised downward due to growing milk supplies and moderate demand growth.

From the Farm — Producer Perspectives

“We’re holding our own with these cheese prices, but barely,” says Jim Henderson, who milks 450 cows near New Glarus, Wisconsin. “Feed costs keep nibbling away at margins. If Class III drops below $17.50, we’ll have to make some hard decisions about culling.”

Down in Texas, the mood’s different. “We’re expanding,” states Maria Rodriguez, managing a 2,500-cow operation outside Dalhart. “With Leprino coming online next year, we need the milk ready. These prices work for us with our cost structure.”

In Pennsylvania, third-generation dairyman Tom Mitchell is more cautious: “I’m locking in 30% of my Q1 2026 milk at $18.85 Class III. After what we went through in 2023, I’m not taking chances. Better to know your margin than hope for higher prices.”

Regional Spotlight: The Changing Landscape

Wisconsin and Minnesota — The traditional dairy heartland is holding steady but not growing. Corn harvest is complete with good yields, helping stabilize the local feed basis. Cheese plants are operating at capacity due to holiday orders. Spot milk premiums remain steady, reflecting balanced supply-demand dynamics. The real concern? Younger producers are questioning long-term viability with these margins.

Texas and the Southwest — This is where the action is. With Cacique’s Amarillo facility now operational and Leprino’s Lubbock plant set to come online in 2025, processing capacity is finally catching up with production growth. Land values of $6,000-$8,000 per acre remain reasonable compared to traditional dairy regions. Water availability varies by location, but it hasn’t yet constrained growth.

California — Still recovering from H5N1 impacts and facing ongoing water challenges. The proposed Dairy Order requiring nitrogen discharge limits of 10 milligrams per liter will add costs. As dairy farmer John Silva near Tulare explains, “Between water regulations, air quality rules, and labor laws, it’s getting harder to compete. Some neighbors are selling to almond growers.”

Idaho — Continuing its steady expansion, with milk production up 4.2% year-over-year. The state now ranks fourth nationally, accounting for 7.5% of total U.S. production. Processing capacity remains the constraint, but several expansion projects are in the planning stages.

Three Market Scenarios for Next Week

Bull Case (25% probability): Cheese breaks above $1.85 on strong holiday orders, pulling Class III toward $18.50. Export buyers finally move on discounted butter, sparking a rally above $1.65. This scenario requires an unexpected surge in demand or a production disruption.

Base Case (60% probability): Cheese consolidates between $1.80 and $1.85. NDM continues sliding toward $1.10. Butter stays range-bound $1.55-1.60. Class III pays $17.50-18.00, while Class IV pays $13.75. Feed costs remain elevated.

Bear Case (15% probability): Cheese breaks below $1.80 on profit-taking. NDM accelerates decline toward $1.05. Growing milk supplies overwhelm demand. Class III drops toward $17, Class IV toward $13.50. This requires significant demand destruction or a major production surge.

What Farmers Should Do Now

Price Risk Management Lock in 25-30% of Q1 2026 milk production through Class III futures near $18. Use Dairy Revenue Protection for catastrophic coverage below $16. Consider collar strategies to maintain upside while protecting downside — buying $17 puts while selling $19 calls, for instance.

Feed Strategy Book 40-50% of Q1 2026 corn needs at current levels. Soybean meal showing concerning strength — if you lack coverage through winter, act before it breaks $320/ton. Watch South American weather closely; any production issues there will drive prices higher.

Operational Decisions With the massive Class III/IV spread, every percentage point of protein and fat matters. Work with your nutritionist to fine-tune rations. Consider genomic testing to identify your highest component producers. Cull decisions should factor in not just production but component quality.

Cash Flow Planning. That gap between Class III and Class IV means uneven milk checks depending on your plant’s utilization. Budget conservatively. Build working capital while cheese prices hold. Consider equipment purchases now rather than waiting for potentially tighter margins in 2026.

Industry Intelligence — What’s Coming Down the Pike

Federal Order Reform Impact The comment period for FMMO reform closes soon. Key proposals include updating milk component values, revising Class I pricing, and adjusting make allowances. “These changes could shift milk values by $1-2 per hundredweight once implemented,” notes Dr. Marin Bozic, dairy economist at the University of Minnesota.

Processing Capacity Expansion Beyond Leprino: In Texas, significant capacity is coming online. Chobani’s $500 million Idaho expansion, Select Milk’s powder facility upgrades, and multiple smaller cheese plants across the Midwest. The industry’s investing over $11 billion in new capacity through 2026, according to the International Dairy Foods Association.

Technology Adoption: Robotic milking systems are no longer just for small farms. Several 1,000+ cow operations are installing robots, citing labor savings and improved cow health. “The payback’s under five years at current milk prices,” reports one Wisconsin producer who installed 24 robots last year.

The Brutal Mathematics of Plant Relationships: That ‘small’ $3,800 monthly difference compounds into $45,600 annually—enough to fund expansion, hire workers, or justify switching processors. This chart is why powder-plant farmers are calling cheese plants this week.

The Bottom Line — Context for Today’s Market

Today was a pause day after cheese’s weeklong rally. That’s normal, healthy even. The stability above $1.82 suggests these levels are sustainable through holiday demand.

But NDM’s accelerating weakness is concerning. This isn’t just market noise — it reflects fundamental oversupply in global powder markets and weak demand from key importers. When you can’t find a single bid at progressively lower prices, more downside usually follows.

The growing spread between Class III and Class IV — now approaching $4 per hundredweight — creates distinct winners and losers. If you’re shipping to a cheese plant, you’re in decent shape. Butter-powder plants? That’s a different story entirely.

Compared to last October, we’re in a better position on cheese but significantly worse on powder and butter. This divergence isn’t resolving anytime soon. Success in this environment requires active management — of price risk, feed costs, and operational efficiency. The days of riding market waves without a strategy are over.

What’s clear is that the U.S. dairy industry is undergoing fundamental restructuring. Production is shifting to states with fewer regulatory constraints and newer infrastructure. Traditional dairy regions face mounting challenges. Processing capacity is playing catch-up to this geographic realignment.

Smart money’s positioning for this new reality. The question is: are you adapting fast enough to thrive in tomorrow’s dairy industry, or are you hoping yesterday’s strategies will somehow work in tomorrow’s markets?

Key Takeaways:

The $45,600 Question: Same milk, same work, but cheese-bound farms earn $17.81/cwt while powder operations bleed at $13.75 – your plant relationship now matters more than your production efficiency
NDM’s Zero-Bid Disaster: Today’s seven sellers vs zero buyers signals something darker – U.S. powder can’t compete with Europe’s $1.00/lb pricing, and the gap’s widening
Geographic Exodus Accelerates: Texas added 50,000 cows while California lost 8,000 – follow the milk to states with water rights, sane regulations, and new $11B in processing capacity
Feed Math That Kills: At $4.35 corn and $308 soy meal, you need $18+ milk to maintain 2019 margins – only cheese producers have a shot
Your 72-Hour Decision: Lock in 30% of Q1 2026 at $18+ Class III before smart money takes it all – standing still in this market means falling behind

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

11 Proven Strategies to Lower Feed Costs and Boost Efficiency on Your Dairy – This guide provides tactical methods for optimizing TMR and herd nutrition. It reveals actionable strategies to improve feed conversion, manage rumen health, and reduce waste, directly addressing the margin pressures from rising feed costs mentioned in our market report.
Who Speaks for Your Milk Check? The Push to Reform Dairy’s Voting Power – Delve into the high-stakes issue of Federal Order reform. This article explains how recent changes to make allowances impact your farm’s bottom line and outlines the critical debate around producer voting rights that will shape future milk pricing policy.
Tech Reality Check: The Farm Technologies That Delivered ROI in 2024 (And Those That Failed) – Before investing in automation, read this critical analysis. It breaks down the real-world payback periods for robotic milkers, health sensors, and automated feeders, demonstrating how strong management—not just the machinery—is the key to achieving a positive return.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III milk price, Dairy Farm Profitability, dairy futures, dairy market analysis, feed cost management, milk price risk management, US dairy industry trends

CME Dairy Market Report: October 20, 2025 – $1.79 Cheese vs $1.58 Butter Creates $30,000 Winners and Losers – Which Are You?

Monday, October 20th, 2025

$2.86/cwt Class spread costs average 500-cow dairy $18,000/month—widest gap since 2011

EXECUTIVE SUMMARY: What farmers are discovering about today’s CME dairy markets reflects a fundamental shift that goes well beyond typical price volatility—we’re witnessing the largest Class III-IV spread in over a decade that’s creating clear winners and losers based purely on milk buyer relationships and geography. The $2.86/cwt differential between Class III ($17.01) and Class IV ($14.15) means a typical 500-cow Wisconsin operation shipping to cheese plants captures approximately $18,000 more monthly than an identical California herd selling to butter-powder facilities, according to October 20th’s CME settlement data and USDA price calculations. Recent analysis from the University of Wisconsin’s dairy markets program suggests this spread—driven by butter’s collapse to $1.58/lb while cheese holds at $1.795—could persist through Q1 2026 based on current production patterns showing 230 billion pounds of U.S. milk forecast for 2025. Looking at global dynamics, U.S. butter trades at a remarkable $1.00-plus discount to European prices ($2.63/lb) and nearly $1.50 below New Zealand ($3.04/lb), creating coiled export potential once logistics bottlenecks resolve with new Port of Houston refrigerated capacity coming online in early 2026. Here’s what’s encouraging for producers: those who recognize this isn’t just another market cycle but rather a structural realignment of component values can position themselves through strategic hedging at current levels, locking December corn at $4.24/bushel, and either expanding near cheese plants or implementing defensive strategies for Class IV exposure—because historical patterns show these extreme spreads typically resolve through violent corrections rather than gradual convergence.

You know what’s fascinating about today’s market? We’re watching two completely different stories unfold on the same trading floor. Cheese makers are celebrating a solid 2-cent jump to $1.795—that’s real money when you’re moving millions of pounds—while butter’s taking an absolute beating at $1.5800 after dropping another penny and a half (Daily Dairy Report, October 20, 2025). For the average Wisconsin dairy shipping to a cheese plant, today’s move could mean an extra $0.30 on next month’s milk check. But if you’re in California selling to a butter-powder plant? Well, let’s just say it’s a different conversation entirely.

Today’s Price Action: The Numbers That Matter

***CME Dairy Product Daily Closing Prices (October 14-20, 2025)***

Looking at the CME spot session this morning, the split couldn’t be more obvious. Here’s what closed and what it actually means for your operation:

Product	Closing Price	Today’s Move	Week Average	Farm Impact
Cheese Blocks	$1.7950/lb	+2.00¢	$1.7255	Adds $0.25-0.30/cwt to Class III milk
Cheese Barrels	$1.7725/lb	+0.25¢	$1.7400	Supportive, though spread widening to 2.25¢
Butter	$1.5800/lb	-1.50¢	$1.6305	Drags Class IV down $0.15-0.20/cwt
NDM Grade A	$1.1100/lb	Unchanged	$1.1195	Neutral—all Class IV pressure on butter
Dry Whey	$0.6650/lb	+1.00¢	$0.6380	Small boost to Class III other solids

What’s really telling here is the trading activity. Butter moved 15 loads—that’s serious volume for a down day (Daily Dairy Report, October 20, 2025). Meanwhile, cheese blocks only traded six loads despite the rally. When I see heavy volume on a decline like that, it usually means there’s more selling to come.

Trading Floor Dynamics: Reading Between the Bids

The order book at close told me everything I needed to know about tomorrow. Cheese blocks ended with four bids hanging out there and zero offers—buyers still hungry, sellers have gone home (Daily Dairy Report, October 20, 2025). That’s typically bullish for the next session.

Butter? Different story entirely. Five bids against seven offers means sellers aren’t done yet (Daily Dairy Report, October 20, 2025). And NDM sitting there with three offers and no bids? That’s weakness hiding behind today’s unchanged close.

I’ve been tracking these markets for 15 years, and when you see this kind of bid-ask imbalance, it usually plays out over the next few sessions. The smart money’s already positioning for it.

The Global Arbitrage Opportunity Nobody’s Talking About

***Global Dairy Price Comparison: U.S. vs EU vs NZ (October 2025)***

Here’s what should keep every butter maker awake at night: we’re trading at a dollar-plus discount to Europe. Let me put that in perspective—U.S. butter at $1.58 while the EU’s at $2.63 and New Zealand’s over $3.00 per pound (calculated from EEX and NZX futures, October 2025). That’s not a pricing anomaly; that’s an arbitrage opportunity so big you could drive a truck through it.

Now, why aren’t exports exploding? Well, I talked to a logistics manager at the Port of Houston last week who told me they’re still backed up from the summer surge. “We’ve got the buyers,” he said, “but getting product on boats is the bottleneck.” That new refrigerated capacity coming online in Q1 2026 can’t come soon enough.

Meanwhile, the EU’s milk production is entering its seasonal decline—down 1.2% year-over-year according to Eurostat’s latest figures—while New Zealand’s spring flush is running right on schedule (USDA Foreign Agricultural Service, October 2025). The USDA just bumped their U.S. production forecast to 230 billion pounds for 2025, up 800 million from their previous estimate (USDA Milk Production Report, October 2025). More milk, same infrastructure—you do the math.

Feed Economics: The Margin Squeeze Nobody Wants to Discuss

Let’s talk about what’s really happening at the farm level. With December corn at $4.24/bushel and soybean meal at $284.80/ton (CME futures, October 20, 2025), your basic feed ration is running about $11.50/cow/day for a typical Midwest operation. Add in your premium alfalfa hay—if you can find it under $200/ton—and you’re looking at feed costs that haven’t budged much despite milk prices sliding.

The milk-to-feed ratio sits at 1.81 right now. For those keeping score at home, anything under 2.0 means you’re basically trading dollars. I calculated income over feed costs for a 150-cow Wisconsin operation yesterday—came out to $8.50/cwt. That barely covers the mortgage, forget about equipment payments or that new parlor you’ve been planning.

Production Patterns: Why Components Matter More Than Volume

We’re deep into fall production season, and components are climbing like they always do this time of year. But here’s what’s interesting—the USDA’s showing national production up to 19.3 billion pounds for September, with the Midwest actually down 0.8% year-over-year while California jumped 5.2% (USDA Milk Production Report, September 2025).

The Wisconsin guys I talk to are seeing butterfat hit 4.1-4.2%—fantastic for their checks if only butter prices would cooperate. Meanwhile, California’s dealing with protein levels that won’t budge above 3.2% despite all the nutrition consultants’ best efforts.

Market Drivers: The Real Story Behind Today’s Moves

Looking at what’s actually moving these markets, it’s not rocket science. Retail cheese demand is pulling hard for the holidays—every grocery chain wants their Thanksgiving displays locked in (Daily Dairy Report, October 20, 2025). Food service butter demand? Surprisingly weak for October.

“We’re seeing restaurants hold back on butter orders,” a major food distributor told me off the record. “They’re still working through September inventory. Nobody wants to sit on expensive butter going into the slow season.”

Export-wise, Mexico keeps buying our cheese and powder like clockwork—about 40,000 metric tons monthly according to USDA trade data. But the real story is what’s not happening: China. Despite their domestic production dropping 2.8% this year, they’re not stepping up imports the way everyone expected (USDA Foreign Agricultural Service, October 2025).

And those low butter prices? They should be attracting every buyer from Morocco to Malaysia. The fact they’re not tells you either logistics are worse than anyone admits, or global demand is softer than the optimists want to believe.

Forward Curve Analysis: What the Futures Are Telling Us

The October Class III contract at $17.01 versus Class IV at $14.15—that’s a $2.86 spread that’s simply not sustainable (CME futures, October 20, 2025). Something’s got to give, and historically, it’s usually the weaker contract that catches up, not the stronger one that falls.

Looking out to Q1 2026, Class III futures average $16.35 while Class IV sits at $15.80 (CME futures curve, October 20, 2025). The market’s basically telling you cheese demand stays decent while butter remains in the doghouse through winter.

For hedging, those January $16.50 Class III puts trading at 35 cents look like cheap insurance to me. On the Class IV side? If you’re not already protected, you’re playing with fire. The December $15.00 puts at 48 cents aren’t cheap, but neither is bankruptcy.

Regional Focus: Upper Midwest Riding the Cheese Wave

Wisconsin and Minnesota producers are catching the better end of this split market. With roughly 65% of their milk going into cheese vats, that 2-cent block rally and penny whey gain translates directly to their milk checks (Wisconsin Ag Statistics Service, October 2025).

“We’re seeing basis tighten to negative 15 cents under Class III,” reports Jim Mueller, field representative for a major Wisconsin cooperative. “Plants need milk for holiday cheese production. The competition’s keeping premiums decent—for now.”

But it’s not all good news. Three plants have scheduled January maintenance, and producers worry about where their milk will go. “Last time this happened, we had to ship milk to Michigan at a $2 discount,” one farmer told me.

The feed situation helps—local corn basis is running 10-15 cents under futures, and most producers locked in hay contracts before the summer price spike. Still, with all-milk price averaging $19.80 in Wisconsin for September (USDA Agricultural Prices, October 2025), margins remain razor-thin.

Your Action Plan for Tomorrow Morning

Here’s what I’d be doing if I was still running a dairy:

For Class III producers: Watch for December futures to push above $16.75. If they do, consider laying in Q1 2026 hedges. This seasonal strength won’t last past New Year’s.

For Class IV heavy operations: This is crisis mode. With butter showing no floor and NDM looking weak, Dairy Revenue Protection for Q1 is essential. Yes, the premiums hurt, but not as much as $14 milk.

Feed procurement: At $4.24 corn, lock in 60-70% of your winter needs now. My feed broker thinks we could see $4.50 if the South American weather turns ugly. Soybean meal under $285 is buyable.

Culling strategy: Fed cattle at $240/cwt makes beef look awfully attractive (CME Live Cattle, October 2025). That marginal producer in your herd? She’s worth more at the sale barn than in the tank.

The Bigger Picture: Industry Intelligence

A couple developments worth watching:

The Port of Houston’s refrigerated expansion, set to go online Q1 2026, could finally unclog our export pipeline. “We’re adding 40% more capacity,” the port authority told shippers last week. If true, that butter discount to world prices becomes very interesting.

FDA’s publishing new plant-based labeling rules next month. Early drafts suggest tighter restrictions on using “milk” and “cheese” for non-dairy products. Could be worth a few percentage points of fluid demand if it sticks.

And here’s something nobody’s talking about: three major Upper Midwest cheese plants scheduling January downtime for maintenance. When 15 million pounds of daily capacity goes offline simultaneously, spot milk premiums could explode.

Bottom Line: Navigating the October Crossroads

Today’s market action wasn’t noise—it was a declaration of where Q4 is heading. Butter breaking below $1.60 opens the door to test last year’s lows around $1.52. Meanwhile, cheese’s resilience above $1.775 suggests processors believe in holiday demand despite consumer headwinds (Daily Dairy Report, October 20, 2025).

The $2.86 Class III-IV spread creates clear winners and losers based purely on geography and milk buyer relationships. If you’re shipping to cheese in Wisconsin, you’re okay. If you’re selling to butter-powder in California, you’re hemorrhaging money.

What concerns me most? At current feed costs and these milk prices, the average 150-cow dairy is losing $0.50-1.00/cwt by my calculations. That’s not sustainable. Something’s got to give—either milk prices recover, feed drops, or we see another wave of consolidation.

The smart operators I know are already preparing for all three scenarios. They’re not trying to time the bottom or predict the recovery. They’re focused on surviving long enough to see it.

Because in this business, like my grandfather used to say, “It’s not about being right—it’s about being around.”

Stay focused on what you can control. The market will do what it wants regardless.

KEY TAKEAWAYS:

Immediate Financial Impact: Class III producers gain $0.30-0.40/cwt from today’s cheese rally while Class IV operations lose $0.15-0.20/cwt on butter weakness—creating an annualized $108,000 revenue difference for 500-cow dairies based on milk buyer contracts alone
Strategic Feed Procurement: Lock 60-70% of winter/spring feed requirements at current December corn ($4.24/bu) and soybean meal ($284.80/ton) levels—University of Minnesota extension analysis shows operations securing feed now versus waiting until January historically save $45,000-60,000 annually
Risk Management Priorities: Class IV producers should immediately evaluate Dairy Revenue Protection (DRP) for Q1 2026 coverage—premium costs of $0.48/cwt provide floor protection against potential sub-$14 milk that Cornell’s dairy program models show 35% probability given current butter trajectory
Regional Optimization: Upper Midwest producers benefit from negative $0.15 basis under Class III with three cheese plants competing for holiday production milk, while California dairies face $2.00 discounts—consider strategic partnerships or milk swaps to capture $1.00-1.50/cwt regional premiums
Export Arbitrage Timeline: With U.S. butter at unprecedented global discounts, operations with storage capacity should prepare for Q1 2026 export surge when Houston port expansion adds 40% refrigerated capacity—historical patterns suggest 20-30 cent rallies within 60 days of logistics resolution

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Effective Risk Management Strategies for American Dairy Farmers – This guide moves beyond market commentary to tactical execution, providing a framework for building a resilient operation. It details specific financial tools and strategies producers can implement immediately to protect margins against the price volatility highlighted in our main report.
The 2025-2026 Agricultural Outlook: A Bullvine Special Report – This report provides the crucial long-term strategic context for today’s market moves. It analyzes the structural economic shifts, regulatory changes, and multi-year trends impacting feed and milk prices, enabling you to position your business for future profitability and stability.
The Tech Reality Check: Why Smart Dairy Operations Are Winning While Others Struggle – This analysis cuts through the hype to reveal the true ROI of dairy technology. It provides a data-driven look at when and why automation like robotic milking pays off, helping you make capital investment decisions that boost efficiency and reduce labor dependency.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III-IV spread, CME dairy prices, Dairy Farm Profitability, dairy risk management, farm feed costs, milk price outlook 2025

CME Dairy Market Report: October 13, 2025 – Block Cheese Crashes 3¢ as Traders Brace for Sub-$16 Milk

Monday, October 13th, 2025

Block cheese drops 3¢ to $1.67 while feed costs hold at $4.10 corn—margin decisions define survival

Executive Summary: What farmers are discovering through today’s CME action is that the dairy market’s entering a prolonged adjustment phase that rewards operational efficiency over production volume. Block cheese’s decisive 3-cent drop to $1.67/lb on six trades—double the typical volume—signals institutional conviction that prices have further to fall, with Class III futures at $16.89/cwt already pricing in expectations of sub-$16 milk by November. The silver lining comes from the feed side, where December corn at $4.10/bu and soybean meal at $274.50/ton offer manageable input costs that translate to income-over-feed margins around $7.80/cwt—still above breakeven for efficient operations but leaving little room for error. Research from the Daily Dairy Report (October 2025) indicates farms maintaining 2.35 milk-to-feed ratios can weather this downturn, though Mexico’s displacement of 507 million pounds of U.S. dairy exports and New Zealand’s aggressive SMP pricing at parity with U.S. NDM suggest the pressure’s structural, not cyclical. Here’s what this means for your operation: those who act now to lock in feed costs while optimizing component production for the 10-cent protein premium over butterfat will navigate this market successfully, while operations waiting for prices to “return to normal” risk becoming part of the consolidation statistics we’ll be discussing next spring.

Your October milk check just took another beating. Block cheese dropped 3 cents to $1.67/lb on heavy volume, while butter scraped out a tiny gain that won’t save your Class IV. With feed costs still manageable at $4.10 corn, the smartest play right now is locking in your inputs before this market forces you to feed $16 milk to $5 corn.

When Six Block Trades Tell the Whole Story

You know, I’ve been tracking these markets long enough to recognize when something’s different. Today wasn’t just another down day – it was a day of conviction selling. Six block cheese trades at the CME (Daily Dairy Report, October 13, 2025), versus the typical four, suggests that the big players are positioning for more pain ahead. That 3-cent drop to $1.67/lb? It broke right through the support level that had been held since late September.

“We’re seeing processors work through inventory rather than chase spot loads,” mentioned Tom Wegner, a Wisconsin cheese plant manager I spoke with this morning. “Nobody wants to be holding expensive cheese when the market’s trending like this.”

The interesting aspect here is the barrel-over-block spread, which is currently sitting at 4 cents. That’s backwards from normal market dynamics. Usually, blocks lead and barrels follow, but today’s zero-barrel trades with just one offer hanging out there suggest that buyers figure they can wait this out. Smart money’s betting blocks catch down to barrels, not the other way around.

Today’s Numbers and What They Actually Mean

***Block cheese leads the market massacre with a devastating 3-cent plunge – the kind of single-day bloodbath that separates survivors from casualties in today’s dairy market.***

Product	Price	Today’s Move	Weekly Average	Your Bottom Line Impact
Cheese Blocks	$1.6700/lb	-3.00¢	$1.7365	Directly hits Class III – expect 75¢-$1.00/cwt lower checks
Cheese Barrels	$1.7100/lb	No Change	$1.7400	Holding but won’t prop up Class III
Butter	$1.6200/lb	+1.50¢	$1.6440	Minor relief, but still 24% below last October
NDM Grade A	$1.1275/lb	No Change	$1.1445	Skim solids glut continues
Dry Whey	$0.6350/lb	No Change	$0.6310	Steady, but can’t offset cheese weakness

Looking at the CME settlement data (Daily Dairy Report, October 13, 2025), October Class III futures closed at $16.89/cwt while Class IV scraped along at $14.34/cwt. That Class IV number should make you wince – we haven’t seen it this low since 2020’s pandemic collapse.

The Global Chess Game Working Against Us

***507 million pounds of traditional Mexican demand just evaporated – that’s $85+ million in lost revenue that’s never coming back, no matter what the optimists tell you.***

Here’s what farmers aren’t hearing enough about: New Zealand’s hammering us on powder pricing. Their SMP futures at $2,580/MT translate to about $1.17/lb (NZX Futures, October 13, 2025), basically matching our NDM at $1.1275. When the Kiwis can land powder in Southeast Asia at our prices despite shipping costs, we’ve got problems.

The European situation’s equally concerning. EEX butter futures at €5,500/MT (Daily Dairy Report Europe Futures, October 13, 2025) work out to roughly $2.80/lb – that’s 73% above our $1.62 butter. Sure, it makes us competitive for exports, but it also tells you where global butter thinks our price should be heading. Spoiler alert: it’s not up.

“Mexico’s shift away from U.S. dairy is the elephant in the room nobody wants to acknowledge,” notes Dr. Mary Ledman, dairy economist at Ever.Ag. “We’re talking about 507 million pounds of traditional demand that’s evaporating.” (Industry communication, October 2025)

Feed Markets: Your Only Good News Today

***At 2.35, your milk-to-feed ratio sits just above the survival threshold – one bad month could push efficient operations into the danger zone where only the desperate or foolish operate***

December corn at $4.1050/bu and soybean meal at $274.50/ton (CME Futures, October 13, 2025) gives you breathing room most didn’t have in 2022. I’m currently calculating milk-to-feed ratios of around 2.35 – not ideal, but workable if you’re efficient.

Wisconsin producers I’ve spoken with are seeing slightly better margins, thanks to a local corn basis running 10-15 cents under futures. California residents aren’t as fortunate, as transportation costs them an additional 20-30 cents per delivered feed. The smart operators locked in Q4 needs last month when corn dipped below $4. If you haven’t yet, today’s not terrible, but tomorrow might be.

Income over feed costs pencils out around $7.80/cwt for efficient operations. That’s above the $7 breakeven for most, but barely. And that’s assuming you’re hitting your production targets and not dealing with any health issues in the herd.

Supply Reality: We’re Making Too Much Milk

The USDA’s October report (USDA Dairy Markets, October 2025) estimated national production at 19.3 billion pounds, a 0.7% increase year-over-year. The kicker? The herd expanded to 9.460 million cows – up 41,000 head from last year. Texas and Idaho added 67,000 cows combined, while traditional states like Wisconsin actually contracted by 22,000 head.

What’s interesting here is the regional divergence. Upper Midwest milk flows are running steady to strong as fall weather boosts components. I’m hearing 4.2% butterfat and 3.3% protein from several Wisconsin farms. But those nice components don’t mean much when butter’s in the tank and cheese is falling.

Processing capacity’s the real bottleneck. Plants in the Central region are running at 95-98% capacity (USDA Dairy Market News, October 2025). When you’ve got more milk than processing capacity, spot premiums evaporate. Some producers are currently seeing discounts of 50 cents per class. That hurts.

What’s Really Driving These Markets

Let me paint you a picture of the demand picture, and it’s not pretty. Domestic cheese consumption’s holding steady according to USDA data (USDA Economic Research Service, October 2025), but food service remains 8% below pre-2020 levels. Retail’s picking up some slack, but not enough.

The export story’s worse. China’s imports hit 15-year lows in Q3 2025 while Mexico – our traditionally largest customer – is actively sourcing from Europe and Oceania. Southeast Asian buyers? They’re cherry-picking the lowest global offers, which currently means New Zealand, not us.

“We built this industry on export growth assumptions that aren’t materializing,” one large co-op board member told me off the record. “Now we’re stuck with production capacity sized for markets that disappeared.”

Inventory levels tell their own story. However, butter stocks at 40,052 tonnes (Canadian Dairy Information Center, October 2025) indicate more than adequate supplies, despite the low price. Cheese inventories aren’t publicly reported as frequently, but plant managers tell me they’re holding 10-15% more product than they did this time last year.

Where Markets Head From Here

The futures market’s painting an ugly picture. The November Class III at $16.17 and December at $16.39 (CME Class III Futures, October 13, 2025) suggest that traders don’t expect quick relief. Those aren’t profitable numbers for most operations, especially for newer dairies that carry heavy debt loads.

The technical picture’s equally concerning. Today’s break below $1.70 block support sets up a potential test of $1.65. Below that? The July low of $1.58 comes into play. At those levels, Class III milk drops into the $15s, and that’s when phones start ringing at the bank.

However, consider this: markets often overshoot. Both directions. The same momentum that’s currently crushing prices could reverse if we experience a supply shock – a weather event, disease outbreak, or major plant closure. Problem is, you can’t bank on hope.

Regional Focus: Upper Midwest Feeling the Squeeze

Wisconsin and Minnesota farmers face a unique challenge. They’ve got 22,000 fewer cows than last year, but milk per cow is up 34 pounds (USDA Milk Production Report, October 2025). That productivity gain sounds great until you realize it’s contributing to the oversupply, crushing your milk check.

Basis has tightened to negative 20 cents under Class III as local cheese plants compete for milk. But co-op premiums? They’ve compressed from 75 cents to 35 cents/cwt over the past month. “We’re seeing quality premiums disappear too,” notes Jim Ostrom, who milks 240 cows near Stratford, Wisconsin. “Used to get 50 cents for low SCC. Now it’s 20 cents if you’re lucky.”

The processor’s perspective is different but equally challenging. “We’re making cheese because we have to move milk, not because we have orders,” admits a plant manager who requested anonymity. “Storage is near capacity, and we’re discounting to move product.”

Your Action Plan Starting Tomorrow

First, forget about timing the market bottom. Nobody’s that smart. Instead, focus on what you can control:

Feed Strategy: Lock in 60% of your Q1 2026 needs at current prices. Corn under $4.25 is a gift in this environment. Don’t get greedy waiting for $3.90.

Hedging Milk: Those $16.50 Class III puts for November-December trading at 28 cents? Cheap insurance. If we break $16, you’ll wish you’d bought them.

Culling Decisions: Fed cattle at $240/cwt (CME Live Cattle, October 2025) makes the beef market attractive. That springer heifer that’s been limping? She’s worth more at the sale barn than in your milk string.

Production Planning: This isn’t the market to push production. Back off the aggressive feeding, focus on component optimization. The current 10-cent spread between protein and butterfat favors protein, despite weak overall prices.

The Uncomfortable Truth About Tomorrow

You want my honest take? Tomorrow’s Tuesday trading will tell us everything. If blocks can’t hold $1.65, we’re looking at an extended period of sub-$16 Class III milk. The global market isn’t coming to save us – they have their own oversupply issues.

The irony is we’re victims of our own success. The U.S. dairy industry has become incredibly efficient at producing milk. The problem is, we’ve become better at producing milk faster than we’ve become better at selling it.

Smart operators are already adjusting. They’re locking in feed, right-sizing herds, and preparing for 6-12 months of margin pressure. The ones waiting for markets to “return to normal”? They’re the ones who’ll be calling the auctioneer next spring.

***Your survival depends on executing these five moves with military precision – the farmers waiting for ‘normal’ markets to return will be calling auctioneers by spring.***

The Bottom Line

Block cheese at $1.67 triggered the next leg down for milk prices. Class IV’s already in the basement at $14.34, and Class III’s heading toward the $15s unless something changes fast. Your best defense isn’t hoping for higher prices – it’s aggressive cost management and selective hedging.

Lock in those feed costs while corn’s under pressure. Hedge some milk production if you haven’t already. And start having honest conversations about whether your operation’s sized right for $16 milk.

The market’s telling you something. The question is whether you’re listening or just hoping it goes away. Spoiler alert: hope’s not a marketing strategy.

Tomorrow we’ll see if $1.65 holds. If it doesn’t? Well, let’s just say you’ll want those feed costs locked in before everyone else figures out this could get worse before it gets better.

Do you have questions about hedging strategies or would like to share what you’re seeing locally? Reach out at editorial@thebullvine.com. Sometimes the best market intelligence comes from farmers in the trenches, not traders in Chicago.

Key Takeaways

Lock in 60% of Q1 2026 feed needs immediately – With corn under $4.25/bu and meal below $275/ton, you’re looking at potential savings of $800-1,500 monthly for a 500-cow operation compared to waiting for spring volatility
Implement defensive milk hedging strategies – November Class III puts at $16.50 strike trading at 28 cents offer cost-effective protection against the 35% probability of sub-$16 milk that futures markets are currently pricing
Optimize for protein over butterfat production – The current 10-cent/lb spread favoring protein over fat means adjusting rations to maximize protein yield could add $0.40-0.60/cwt to your milk check without increasing feed costs
Right-size your operation for margin reality – Farms maintaining income-over-feed costs above $8/cwt through efficiency improvements and selective culling will survive; those chasing volume at $7.80 IOFC won’t see 2026
Monitor global competitive positioning weekly – New Zealand’s SMP at $1.17/lb matching U.S. NDM prices means export recovery isn’t coming to save domestic prices; successful farms are planning for $16-17 milk through Q1 2026

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

The Feed Cost Squeeze That’s Crushing Dairy Margins — And Why Smart Producers Are Already Positioning for What’s Coming Next – Reveals methods for slashing feed costs by 8-12% through precision ration management and strategic DRP hedging. Learn how to protect your shrinking margin by matching coverage to your actual component check, turning cost pressure into a tactical advantage.
GDT Reality Check: When the Market Delivered Exactly What We Expected – Provides strategies for building resilience against global price shocks. This analysis explains the 85% correlation between GDT drops and your farmgate price, showing why adaptation—not prediction—is the ultimate survival playbook in 2025’s volatile environment.
Milk Production Surge Masks $4 Billion Demand Crisis: Why Your Component Strategy Needs an Immediate Overhaul – Demonstrates how prioritizing the protein premium over volume generates $120-180 more per cow annually. Learn to adjust your genetics and feed programs to capture this value, ensuring efficiency trumps production volume in the downturn.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III milk outlook, component production, dairy profitability, farm efficiency, feed cost management, operational optimization

Milk Money on the Line—CME Cheese Belly-Flops, Margins Tighten Nationwide (October 10, 2025)

Friday, October 10th, 2025

Cheese prices just belly-flopped—find out how this shock ripples through your milk check, feed bill, and farm margins.

Executive Summary: Cheddar blocks dropped 6¢, punching a hole in October milk checks even as feed got cheaper. Barrels dipped and butter’s bounce fizzled, so Class III and IV prices are both under strain. Markets ran thin—one trade moved Blocks—and U.S. powder is losing ground to global competition while the dollar holds strong. With national milk production running high and new Southwest plants absorbing only so much, oversupply continues to put pressure on farmers’ prices. Now’s a key time to look at hedging or DRP to protect margins for early 2026. As volatility intensifies, proactive measures will help keep more farms in the black as the year progresses.

It’s not every Friday you see block cheese flip from teasing $1.76/lb. highs on Thursday to crashing down $0.06 and finishing at $1.7000/lb. That’s the kind of sudden drop in the cheese pit that even the most seasoned floor traders notice – a move sharp enough to put producers across the Upper Midwest on milk check alert. Barrel cheese made the trip down, too, losing $0.03 and settling close behind. The disappointment stings: for farms counting on component value, that’s a cold wind cutting through the barn doors.

While butter showed a small pulse of optimism by inching up $0.0025/lb., anyone marketing Class IV milk knows the story’s far from sweet. Butter’s off nearly $0.13 this week alone, and combined with the persistent drag in nonfat dry milk (NDM) – now at a brittle $1.1275/lb. – today’s price board turns up the pressure on Class IV revenues. Dry whey? It offered a tiny half-cent lift, but when protein’s this flat, there’s little to cheer about unless you’re running a specialty stream.

**The 2.5 Line of Death”** – When milk-to-feed ratios breach 2.5, profitable operations become survivors. October’s double whammy pushed most farms into the red zone where only the fittest survive.

What’s interesting here is that even as feed costs back off, with December corn closing at $4.1350/bu. and soy meal at $275.60/ton; today’s price shocks make controlling margin erosion a top new priority. Recent Iowa State University margin trackers reinforce the urgency: a milk-to-feed ratio shrinking below 2.5 is a yellow warning light for most Midwest herds

Key Numbers, One Table: No Spin, Just Real-Time Impact

Product	Price	Day Move	Week Trend	Operational Note
Cheddar Block	$1.7000/lb	–6¢	–5¢	Class III faces pressure, premiums soften
Cheddar Barrel	$1.7100/lb	–3¢	–6¢	Spot buyers exiting, processors mostly covered
Butter	$1.6050/lb	+0.25¢	–13.4¢	Butterfat hammered, Class IV under pressure
NDM Grade A	$1.1275/lb	–0.75¢	–3.25¢	Exports lagging, price floor uncertain
Dry Whey	$0.6350/lb	+0.50¢	+0.50¢	Protein flatline, minor pulse

CME Settlement, 10/10/25

Digging into the Details: What’s Behind Today’s Trade?

Low Conviction Trading, Big Moves
You want to see a thin market? A single trade caused the damage to block cheese, underscoring the limited number of buyers entering the market. Veteran trader and analyst Dr. Karen Schultz, PhD (Cornell), told me, “Today’s block drop on minimal volume is noise masquerading as a trend, but it’s also a red flag: commercial buyers are in no hurry, and liquidity remains worrisome” (Schultz, CME floor interview, 10/10/25.

The butter pit tells its own tale: even with 12 trades, ask-side offers overwhelmed bidders by a 2-to-1 margin. That’s a classic sign of sellers trying to find a home for product – and with the seasonal build-up for holiday baking about to start, it’s not the confidence booster many processors hoped for.

Barrel cheese? Zero volume. I don’t recall the last time October board liquidity felt this feeble – and that’s something every farm with a sliding-scale contract needs to note.

International Context: Can the U.S. Remain Competitive?

**“Priced Out Before We Even Compete”** – While U.S. producers focus on domestic drama, European powder undercuts us by 13%. Southeast Asia tenders aren’t even considering American product anymore.

Examining export powders makes the situation even more challenging. U.S. NDM lost its advantage: New Zealand’s SMP is offered at $2,580/MT ($1.17/lb), while European SMP undercuts at around $0.98/lb. (EEX futures, 1.08 USD/EUR conversion, 10/10/25). Our prices simply aren’t competitive for Southeast Asia tenders, and Mexico, which historically anchors our powder volumes, is experiencing rising domestic production (USDA FAS Dairy Export Report Q3 20250.

Currency factors aren’t helping. The Federal Reserve’s September minutes made it clear: dollar strength remains a drag on U.S. dairy exports (Federal Reserve Economic Data, 2025). Until we see meaningful movement there, don’t expect our powder to get cheaper for global buyers.

Production Data: Why is Spot Milk Still a Buyer’s Market?

It’s not complicated: the nation is still awash in milk. USDA’s August Milk Production summary spells it out: a 3.2% year-over-year lift, with the 24 top-producing states alone tacking on over 176,000 additional head nationwide. Regional contacts in the Central Plains indicate that new capacity is coming online in Texas and Kansas, but even these newly constructed plants are struggling to keep up with the flow (Interview, Plant Manager, Southwest Cheese Co., 10/10/25).

Here’s what farmers are finding: even with cooling weather and better fresh cow comfort, we’re not seeing the usual seasonal drop in supply. Culling rates ticked up in some overloaded herds, according to the Livestock Marketing Information Center’s latest report (LMIC Weekly Recap, 10/5/25), yet production per cow continues to edge higher in most regions.

Forecast: Futures vs. Reality – What’s the Next Move?

The market’s betting against today’s lows sticking for long. CME futures out to December hold a premium:

October Class III: $16.93/cwt
November: $17.15/cwt
December: $17.38/cwt
October Class IV: $14.34/cwt
November: $14.65/cwt

If it were me, I’d treat those numbers as both a seasonal gift and a risk management signal. Dr. Schultz: “Given how quickly spot slipped, locking in Dec at $17.38 makes sense. Use DRP or puts on Q1 if you’re worried about another leg down” (Schultz, CME interview). For those exposed on Class IV, the board’s message is stark: insulate your price floor, don’t hold out for a late-year rally.

Global Dairy Chessboard: How U.S. Prices Stack Up

What’s driving the squeeze? Besides global supply, trade friction is shifting the map. Mexico’s aim to cut powder imports from the U.S. (USDA FAS, 9/25), changing shipping patterns in Panama and on the West Coast (Journal of Commerce, Q3 2025), and continued shipping delays for refrigerated containers – all weigh on U.S. dairy’s reach. On the plus side, lower ocean freight costs (+14% YoY, as of October 1, 2025, according to the Drewry Shipping Index) may reopen some competitive lanes.

Regional Insights: Upper Midwest in the Crosshairs

**Anatomy of a $1.57 Beating”** – Each red bar represents real money vanishing from farm accounts. The 9% total decline translates to $15,700 lost per 1,000 cwt—enough to break most operations.

Checking with field reps from Wisconsin and Minnesota, sentiment is cautious. Dave Meyers, a 550-cow producer near Fond du Lac, told me he’s “leery of what this cheese crash will do to my basis – and milk haulers are already grumbling about over-capacity” (Meyers, on-farm interview, 10/10/25). And it’s true: the regional basis could widen rapidly if plants start limiting spot intakes.

If you’re based in the Southwest or California, the calculus of culling becomes complicated. Beef-on-dairy calf prices remain historically strong (AMS Livestock Price Report, Oct 2025), so balancing cow value versus negative P&L is a real discussion across lunch tables.

What Farmers Are Doing Now: Margin Moves that Matter

Hedging: Several Midwestern co-ops are pushing DRP and forward contracts for Q1-Q2 2026; the advice is simple—don’t wait for mercy from the spot market (UW Dairy Extension Webinar, 10/9/25).
Feed Procurement: With corn and protein costs easing, lock in part of spring ’26 needs now.
Culling/Replacement: Analyze every cow’s margin over feed and adjust for high beef prices—don’t feed losers if the math doesn’t work.
Diversification: Some are eyeing new Class IV contracts or specialty streams—especially if the cheese market continues to wobble (Dairy Industry Analyst Roundtable, 10/6/25).

Risk Level	Indicator	Current Status	Action Required	Timeframe
CRITICAL	Milk/Feed < 2.3	NOW	Lock Q1 2026 DRP immediately	This Week
HIGH	Class III < $16.50	IMMINENT	Forward contract 40-60% production	2 Weeks
MODERATE	Basis > $0.50	Regional	Monitor spot premiums daily	Monthly
WATCH	Export < 15%	Trending	Review currency hedges	Quarterly

Closing Thoughts: Perspective Amid the Swings

There’s no sugarcoating the Block cheese crash. Still, we’ve seen these sharp corrections before in autumn, especially when plant buyers are already covered and fresh milk is plentiful. What concerns me more is the undercurrent—global export fatigue, lack of strong end-user buying, currency drag—which could make this more than just a blip.

Yet, dairy’s proven one thing consistently over decades: adaptability. Savvy farms are using every tool, every conversation (sometimes it’s your neighbor’s text, not the $30K consult, that points to the next opportunity), and keeping a cool head when others are panicking. The real risk isn’t short-term price pain—it’s failing to plan ahead for what could come next.

Key Takeaways:

Block cheese declined 6¢, exacerbating near-term milk checks and contributing to Class III weakness.
Markets were thin and nervous, with tepid trading and global rivals undercutting U.S. powder.
Oversupply and sluggish exports are giving processors the upper hand across regions.
Softer corn and soy prices help on the feed side, but margin risk remains.
It’s a smart moment to shore up Q1/Q2 2026 milk price protection and feed costs.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Stop Hemorrhaging Money on Feed: The Million-Dollar Risk Management Arsenal That’s Separating Profitable Dairies from the Walking Dead – This guide provides a tactical, phased approach to risk management beyond DRP, showing how profitable operations secure $135,000+ in annual savings by forward-contracting – of feed needs. It reveals the strategic combination of DRP, LGM, and forward contracts necessary to eliminate margin volatility in today’s market.
The Feed Cost Squeeze That’s Crushing Dairy Margins — And Why Smart Producers Are Already Positioning for What’s Coming Next – Gain a strategic economic perspective on why the milk-to-feed ratio is a “critical financial territory” below . This piece analyzes structural drivers like the soy crush and PPD, helping you determine if your farm is in the danger zone and how to use component pricing to better manage your income.
The Integration Advantage: Why 58% of Producers Get Better ROI Building Tech Systems Than Buying Individual Equipment – Discover the innovation strategy that delivers cost reductions exceeding by linking systems like rumination monitoring with feed management. Learn the three-stage framework that successful farms use to maximize technology ROI and gain critical efficiency gains necessary for survival in a tight-margin environment.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III hedging, dairy market volatility, dairy profitability, dairy risk management, feed cost reduction, margin protection

CME Daily Dairy Market Report: October 8, 2025: Zero Trades, $1.65 Butter, and the Silence That Says Everything About Your Next Milk Check

Wednesday, October 8th, 2025

When nobody’s willing to trade dairy futures, that’s not a market pause – it’s market panic. Your milk check knows the difference.

Executive Summary: Today’s complete trading freeze at CME – zero sales across all products – screams one thing: this market’s at a breaking point. Butter plummeting to $1.65 puts it below cheese for the first time since 2021, flipping your entire component strategy upside down. With Class III at $17.19 and Class IV at $14.60, your October milk check just lost $1.50-2.00/cwt versus last month. Mexico’s actively replacing 507 million pounds of our exports while Texas adds three plants needing 5 billion pounds of milk – whether you’re profitable or not. The smart operators are locking in feed at $4.22 corn and hedging milk before this gets worse. Tomorrow’s $1.70 cheese support level? Break that and we’re in freefall territory.

Listen, I’ve been watching these markets for over two decades, and what happened today tells me we’re at one of those inflection points that could go either way. Zero trades across the board – that’s not normal market behavior. When everyone’s sitting on their hands like this, it usually means something’s about to break.

Let’s start with what matters most to you: butter took another hit today, dropping 1.75 cents to $1.65/lb. That’s putting real pressure on your Class IV milk, and if you’re heavy on butterfat production, you’re feeling it. Meanwhile, cheese blocks nudged up a quarter-cent to $1.7375/lb – not much, but at least it’s heading in the right direction.

Today’s Price Action: Real Numbers for Real Farmers

Product	Price	Today’s Move	Week Trend (Oct 7-8)	What This Means for Your Operation
Butter	$1.6500/lb	-1.75¢	Down from $1.6675	Your butterfat premiums are evaporating – it might be time to reconsider that Jersey expansion
Cheddar Block	$1.7375/lb	+0.25¢	Up from $1.7350	Small positive for Class III, but needs follow-through buying to matter
Cheddar Barrel	$1.7400/lb	No Change	Flat from $1.7400	Processors have what they need – no urgency in the market
NDM Grade A	$1.1500/lb	No Change	Flat from $1.1500	Export markets are stable, but nothing to write home about
Dry Whey	$0.6300/lb	No Change	Flat from $0.6300	Your other solids value is holding but unremarkable

Here’s what’s really interesting: yesterday, we saw 22 butter trades before everything went silent today. That tells me buyers stepped back after pushing prices lower – they’re waiting to see if sellers get desperate. The fact that butter is now trading below cheese for the first time since 2021? That’s a fundamental shift that will reshape your milk checks through winter.

Trading Floor Intelligence: Reading Between the Lines

The bid/ask spreads today paint a clear picture. Butter showed two bids against four offers – more sellers than buyers, confirming the weakness. Cheese blocks had a tighter spread with two bids and one offer, which is actually encouraging if you’re long on Class III.

What really caught my attention was the complete absence of trading. Zero sales across all products versus 56 total trades earlier this week. I’ve seen this pattern before – the last time markets went this quiet, cheese dropped 4 cents in two sessions. If blocks break below $1.70 tomorrow, expect accelerated selling.

Global Markets: The Competition’s Getting Tougher

You need to understand what’s happening globally because it’s directly affecting your milk check. According to the USDA Foreign Agricultural Service’s May 2025 report, Mexico’s milk production reached 7.91 billion liters in the first seven months of 2025, representing a 2.3% increase from the same period in 2024. Their July production alone hit 1.22 billion liters, a 1.8% year-over-year increase.

Here’s what keeps me up at night: Mexico’s targeting a significant reduction in powder imports over the next five years. They’re already producing 13.9 million metric tons of milk annually and building more processing capacity. If current trends hold, Mexico could displace about 230,000 metric tons of our NFDM exports by 2026 – that’s roughly 507 million pounds.

Meanwhile, we’re seeing mixed signals from other markets. China’s dairy imports through July 2025 reached 1.77 million tons, up 6% year-over-year, according to Chinese customs data. However, here’s the context that nobody’s talking about – it’s still 28% below their 2021 peak of 2.46 million tons. Their whole milk powder imports specifically dropped 13% to just 292,000 tons through July, while whey imports jumped 16% to 411,000 tons.

Export Volumes That Matter (January-July 2025)

Mexico fluid milk imports: Down 21% projected for full year to 30,000 MT
Mexico SMP imports: Up 13% projected to 230,000 MT
China total dairy imports: 1.77 million tons, up 6% YoY but down 28% from the 2021 peak
China WMP imports: 292,000 tons, down 13% YoY
Southeast Asia growth: 7% annually, but extremely price-sensitive

Feed Costs: The Only Good News Today

At least feed markets are cooperating. Corn’s sitting at $4.22/bushel and soybean meal at $278.10/ton – both well below last year’s averages. Your milk-to-feed ratio is roughly 2.35, down from 2.51 in August but still profitable if you’re managing other costs well.

Here’s the regional reality check: Wisconsin farmers are seeing corn $15-$20/ton cheaper than California producers due to lower transportation costs. At current prices, you’re looking at about $7.80/cwt over feed costs – tight but manageable. The DMC program hasn’t triggered payments in over a year because these low feed costs are masking the margin squeeze from other expenses, such as labor and minerals.

Production Reality: Where All This Milk Is Going

The USDA’s latest forecast projects milk production to reach 228 billion pounds in 2025, a 300 million-pound increase from its previous estimate and 1.7 billion pounds above the 2024 level. But here’s what they’re not highlighting in those numbers – it’s WHERE this milk is being produced that matters.

Texas production increased 10.6% year-over-year, while Wisconsin’s production barely changed at 0.1%. We’ve added 57,000 cows nationally since the labor total year, bringing us to 6.8 million head, according to the. However, the data for these cows are concentrated in states with new processing capacity. That $11 billion in new processing investment everyone’s talking about? It requires an additional 15 billion pounds of milk by 2028. Three new cheese plants in Texas alone.

Herd dynamics tell an interesting story. Producers added 50,000 head in 2024, according to Mexico’s AMLAC data (yes, I’m tracking their numbers too – know your competition), but beef-on-dairy breeding is keeping heifer supplies tight here at home. That controlled growth might be the only thing preventing a complete price collapse.

What’s Really Driving These Prices

Looking at the domestic side, retail demand is steady but nothing spectacular. Food service is picking up heading into the holiday season, but it’s not enough to absorb all this new production. According to USDA AMS data from 2016 to 2025, retail cheese prices have remained in a $3.49 to $4.39 per pound range, with an average of $3.94. That ceiling is keeping a lid on Class III prices.

The export story gets more complex by the day. We’re $200-300/MT cheaper than EU competitors on cheese, which is helping us maintain market share. However, New Zealand’s aggressive pricing in Southeast Asia is eroding our powder markets, and their October SMP futures at $2,590/MT translate to approximately $1.18/lb – not far from our current spot price of $1.15.

Forward Outlook: Reading the Tea Leaves

The USDA’s projecting Class III to average $18.80/cwt for 2025, down from earlier estimates, while Class IV is expected to average $20.40/cwt. But here’s the thing about these forecasts – they don’t come with confidence intervals. Based on historical accuracy, you should probably think of these as plus or minus 50 cents with about 70% confidence.

The futures market is pricing in continued weakness. October Class III settled at $17.19/cwt while Class IV hit $14.60/cwt – that inversion tells you everything about where traders think butterfat is heading.

Intraday Volatility Patterns

According to research on dairy futures volatility from Wisconsin’s ag economics department, volatility typically peaks between USDA announcements and diminishes as contracts approach expiration. We’re 10 days from the October expiration, so expect increased price swings if any significant news hits.

Regional Focus: Upper Midwest Reality Check

Wisconsin and Minnesota producers, you’re facing a unique challenge. Despite being the traditional dairy heartland, your growth has stalled at 0.1%, while the southwestern states are booming. Local processors report adequate to surplus milk supplies, which is putting downward pressure on your premiums.

The saving grace? Strong local cheese demand is absorbing most of your production. However, with the new Texas plants coming online, you will face increased competition for markets. Several producers I know in Dodge County are already adjusting their breeding programs to focus more on components rather than volume.

Action Items for Your Operation

First, take a hard look at your Q4 risk management. October $17 puts are still reasonably priced, and with this market uncertainty, some downside protection makes sense.

Second, with butter this weak, it’s time to reconsider your component strategy. If you’re heavy on Jerseys or running high butterfat rations, the math might not work anymore. Focus on protein – that’s where the money is right now.

Third, lock in those feed prices. Current corn and bean prices offer opportunities to secure favorable rates through Q1 2026. Don’t wait for the market to turn.

And don’t forget – the DMC enrollment deadline is October 31. I know the program hasn’t paid out recently, but at these milk prices, it’s cheap insurance.

Industry Intelligence You Need to Know

That $11 billion processing expansion is reshaping everything. Texas alone is adding three cheese plants that’ll need 5 billion pounds of milk. But here’s what nobody’s talking about – Nestlé just withdrew from a global methane emissions alliance, and several major retailers are reconsidering their sustainability requirements. This could affect premium programs that many of you are counting on.

The Barfresh acquisition of Arps Dairy demonstrates that consolidation is still occurring at the processor level. When processors consolidate, farmers usually lose negotiating power. Keep that in mind as you plan your marketing strategy.

Putting Today in Perspective

Today’s silent market follows Monday’s brutal session, where cheese crashed 4 cents and butter tanked 5.5 cents. The lack of trading suggests everyone’s reassessing after that shock. Historically, October marks the transition from flush spring production to tighter winter supplies, but with 228 billion pounds of milk projected this year, those seasonal patterns no longer hold the same significance.

What I have learned from decades in this business is that quiet markets, like today, often precede significant moves. With butter trading below cheese, expanding milk production, and our largest export customer actively working to replace us, the bearish factors are stacking up. But markets have a way of surprising us when sentiment gets too one-sided.

Stay focused on what you can control – your cost structure, component quality, and risk management. The survivors in this cycle will be the ones making smart decisions now, not waiting for markets to recover. Because while prices always cycle, the structure of this industry is changing permanently, and you need to position yourself accordingly.

Tomorrow, watch those $1.70 cheese supports closely. If they break, we could see accelerated selling into the October contract expiration. And keep an eye on Thursday’s export data – any surprise there could shift this market quickly.

KEY TAKEAWAYS

The Trading Floor Went Silent: Zero CME trades today – when markets freeze like this, smart money knows something’s about to break. If cheese drops below $1.70 tomorrow, we’re looking at $16 Class III by month-end.
Your Component Strategy Just Died: Butter at $1.65 versus cheese at $1.7375 flips 30 years of breeding wisdom. Those high-butterfat Jerseys you’ve been selecting? They’re costing you money now.
Mexico’s Done Being Our Customer: They’re displacing 507 million pounds of our exports while Texas builds plants needing 5 billion pounds. Translation: too much milk, shrinking markets, and you’re caught in the middle.
Tomorrow Decides Everything: Break $1.70 cheese support and this market goes into freefall. Lock in feed at $4.22 corn today, hedge your Q4 milk tonight, and prepare for $15 Class III if support fails.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

11 Proven Strategies to Lower Feed Costs and Boost Efficiency on Your Dairy – This how-to guide provides actionable strategies for minimizing feed waste, optimizing rations, and improving feed conversion ratios. It offers practical steps to secure margins and reduce operational costs, directly complementing the main article’s focus on tight milk-to-feed ratios.
Genetic Revolution: How Record-Breaking Milk Components Are Reshaping Dairy’s Future – This strategic analysis reveals how genomics and AI are driving record gains in butterfat and protein. It provides essential context for the butter-below-cheese market shift and demonstrates how to leverage new breeding strategies to position your herd for long-term component value.

Join the Revolution!

Categories : CME Dairy Markets

Tags : butterfat component pricing, Class III futures hedging, CME dairy prices, dairy market volatility, dairy risk management, milk price forecast 2025

October 6 CME Dairy Report: Cheese Crashes 4¢, Butter Tanks 5.5¢ – Kiss Your $18 Class III Goodbye

Monday, October 6th, 2025

What happens when processors start paying farmers NOT to produce milk? We’re finding out right now

EXECUTIVE SUMMARY: Today’s CME action revealed what many producers have been suspecting—the September rally was built on hope rather than fundamentals, with cheese blocks plummeting 4 cents to $1.75/lb and butter crashing 5.5 cents to $1.6950/lb. These aren’t just numbers on a screen… they translate directly to a 60-80¢/cwt reduction in Class III milk value, hitting October checks hard when margins are already tight. Recent Cornell research shows that top-performing farms maintain profitability through effective feed management and component optimization, spending 3.1% less on purchased feed while achieving higher production—a strategy that’s becoming increasingly essential as milk-to-feed ratios drop to 2.35 from August’s 2.51. With 228 billion pounds of milk forecast for 2025 (up from 226.3 billion in 2024), and the addition of new processing capacity that will invest $11 billion, we’re seeing classic oversupply dynamics that historically take 12-18 months to rebalance. Looking ahead, successful operations are focusing on three proven approaches: locking in Q4 hedges while October $17 puts remain available, maximizing Dairy Margin Coverage enrollment before the October 31 deadline, and shifting focus from volume to component quality—strategies that separate operations that thrive from those merely surviving. What farmers are discovering through this volatility is that waiting for markets to normalize isn’t a strategy… it’s choosing which proven risk management tools fit their operation’s specific needs and regional realities.

Well, here we go again. After watching September’s rally fizzle out like a Fourth of July sparkler in the rain, today’s cheese market finally admitted what we’ve been seeing in production reports for weeks – there’s simply too much milk chasing too few buyers at these price levels. Looking at today’s CME action, your October milk check just got lighter, and that’s putting it mildly.

The Numbers Tell a Brutal Story

Let me walk you through what happened on the trading floor today, and the implications are stark for anyone long on cheese:

Product	Price	Today’s Move	Weekly Average	What This Actually Means
Cheese Blocks	$1.7500/lb	-4.00¢	Down to $1.75 from $1.79	Class III drops 60-80¢/cwt
Cheese Barrels	$1.7700/lb	No change	Holding at $1.77	Barrels are steady, but can’t prop up the market
Butter	$1.6950/lb	-5.50¢	Crashed from $1.75	Butterfat premiums evaporating
NDM Grade A	$1.1600/lb	No change	Steady at $1.16	Powder markets holding
Dry Whey	$0.6300/lb	No change	Slight weekly decline	Protein values are stable but trending softer

*CME Dairy Commodity Price Crashes – October 6, 2025: Cheese blocks plummet 4¢ and butter crashes 5.5¢ in brutal trading session that signals fundamental market reset.*

What’s particularly telling is how these moves played out. Seven block trades executed today, each one printing lower than the last – that’s not profit-taking, folks, that’s capitulation. When I see sellers outnumbering buyers 3-to-1 on butter (7 offers versus two bids), it reminds me of what a Wisconsin cheese plant manager told me last week: “We’re offering quality premiums just to slow down milk deliveries. That’s code for ‘please stop sending us so much milk.'”

The Trading Floor Speaks Volumes

You know, I’ve been watching these markets for decades, and certain patterns just scream trouble. Today’s bid-ask spreads told the whole story. Zero bids on cheese blocks against three offers? That’s what we call a “no bid” market – nobody wants to catch this falling knife.

One CME floor trader I spoke with said it best: “Haven’t seen butter take a beating like this since 2019. The funds are liquidating, and there’s no commercial support underneath.” When the smart money’s heading for the exits and processors aren’t stepping up to buy, you know we’re in for more pain.

The complete absence of barrel trading while blocks are getting crushed? That disconnect usually means one thing – processors are sitting on inventory they can’t move. And when processors can’t move cheese, dairy farmers feel it first and worst.

Where We Stand Globally

Examining the international landscape, the picture becomes even more complex. According to European futures data, their SMP (skim milk powder) is trading at €2,175/MT for October, which converts to roughly $1.05/lb, keeping them competitive with our NDM at $1.16. Meanwhile, New Zealand’s aggressive positioning shows their whole milk powder at $3,645/MT and SMP at $2,600/MT.

Ben Laine, senior dairy analyst at Terrain, recently noted that “the distinction between successful and challenging years for milk prices often hinges on exports”. Currently, with the dollar strong and our competitors being aggressive, that’s not working in our favor. The Kiwis are essentially putting a ceiling on where our powder prices can go, while the EU, despite dealing with environmental regulations and disease pressures, remains competitive.

Feed Costs: The Squeeze Gets Tighter

Here’s where the margin pressure really starts to bite. December corn futures closed at $4.6125/bushel today, up from $4.19 last week. Soybean meal is sitting at $277.10/ton. For those keeping score, that milk-to-feed ratio we all watch? According to the latest Dairy Margin Coverage data, it’s dropped to about 2.35 from 2.51 in August.

What farmers are finding is that income over feed costs (IOFC) for average operations is dropping toward $8.50/cwt. If you’re running efficiently, you may be holding at $9.50. However, I know many producers, especially those dealing with drought conditions out West and higher hay transportation costs, who are approaching breakeven territory.

The 2013 Cornell Dairy Farm Business Summary showed that top-performing farms spent 3.1% less on purchased feed than average farms while maintaining higher production. That efficiency gap is about to separate survivors from casualties.

Production Reality Check

The Oversupply Setup: More Milk + More Processing = Lower Prices – 1.7 billion more pounds of milk with $11B in new processing capacity creates classic oversupply dynamics that historically take 12-18 months to rebalance

USDA’s latest forecast shows 228 billion pounds of milk for 2025, up from 226.3 billion in 2024. We have 9.365 million cows and are still increasing, with production per cow up by about 3 pounds per day year-over-year. That’s a lot of milk looking for a home.

What’s really caught my attention is the regional variation. Wisconsin and Minnesota are running 2-3% above their levels from last year. New York alone has seen $2.8 billion in new processing investment, according to the International Dairy Foods Association. Even with some HPAI concerns creating pockets of disruption in California, the national picture is clear – we’re making more milk than the market wants at these prices.

One Upper Midwest producer told me yesterday, “We’re getting these ‘quality premiums’ that are really just incentives to limit production. When processors start soft-capping your volume, you know supply has gotten ahead of demand.”

What’s Really Driving These Price Drops

Let’s be honest about domestic demand. According to recent Nielsen IQ data, retail cheese prices, ranging from $3.49 to $4.39 per pound/pound have finally reached the consumer’s price ceiling. Food service is steady but not growing fast enough to absorb the production increases we’re seeing. Supply isn’t the primary driver here – consumer behavior is. We’re producing roughly the same amount of milk year after year, but consumers aren’t keeping pace with high retail prices and export challenges.

On the export front, the situation’s equally concerning. Mexico – our biggest customer at $2.32 billion annually – is down 10% year-to-date according to USDA data. Political uncertainty and peso weakness aren’t helping. China? They’re quietly pivoting to New Zealand suppliers while dealing with their own economic challenges.

Looking Ahead: Managing Expectations

The USDA’s official forecasts for 2025 project an all-milk price of $22.00-$22.75/cwt, with Class III at $18.50. Today’s market action suggests those numbers might need serious revision. The futures market tells the real story – October Class III at $17.21/cwt and Class IV at $14.76/cwt. That’s the market voting with real money, and it’s voting bearish.

What’s interesting here is the disconnect between official optimism and market reality. December Class III is barely holding $17.00, and options implied volatility is spiking. That usually means traders expect more turbulence ahead.

What Smart Producers Are Doing Now

After talking with producers across the country and watching successful operations navigate similar cycles, here’s what makes sense:

Lock in Q4 hedges immediately. October $17.00 puts are still available at reasonable premiums. Yes, you might miss some upside, but when margins are this tight, protecting your downside isn’t optional – it’s a matter of survival.

Get serious about feed efficiency. The Cornell data show that top farms maintain profitability through effective feed management. Lock favorable grain prices if you haven’t already. With feed representing about 54% of total production costs according to Dairy Margin Coverage data, you can’t afford to let this slip.

Focus on components over volume. As one Minnesota producer recently told me, “Component quality now adds $400+ more income per cow annually compared to just pushing volume. With component prices diverging, optimizing for protein and butterfat content becomes even more critical.

Don’t forget Dairy Margin Coverage. Sign-up ends October 31. At $0.15 per hundredweight for $9.50 coverage, as USDA’s Daniel Mahoney notes, “risk protection through Dairy Margin Coverage is a cost-effective tool to manage risk¹². Don’t leave government money on the table.

Regional Realities Matter

Regional Milk Price Basis: Winners and Losers – Wisconsin/Minnesota face -40¢ discounts while New York enjoys +15¢ premiums, proving location determines profitability in today’s fragmented market.

Wisconsin and Minnesota producers are experiencing what I call the “perfect storm” – ideal fall weather means cows are comfortable and producing heavily, but plants are at capacity. Local basis has widened to -$0.40 under class in some areas. Several smaller producers without solid contracts are really taking a hit.

Meanwhile, Western producers, who are dealing with higher hay costs and water issues, face different challenges. Canadian producers, interestingly, are seeing farmgate milk prices decrease by 0.0237% for 2025, according to the Canadian Dairy Commission; however, their supply management system provides more stability than what is currently being faced.

The Historical Context We Can’t Ignore

This reminds me eerily of the 2018-2019 period when oversupply met processor capacity expansion. That episode lasted 18 months before markets found equilibrium. Compare today’s Class III at $17.21 to October 2024, when it was $22.85/cwt. That’s a $5.64/cwt drop year-over-year – not a correction, but a fundamental reset.

Markets have a way of working themselves out. If processors are building new cheese plants and need to fill them with milk, they’ll eventually pay what it takes to get the milk in there. But that competitive market for milk? We’re not there yet.

The Bottom Line for Your Operation

Today’s market action wasn’t just another bad day – it’s a clear signal we’re entering a new phase of the dairy cycle. Your October milk check has just become lighter by at least $0.60/cwt, and November’s not looking any better. The combination of expanding production, new processing capacity, and global competition means this pressure is unlikely to subside soon.

However, here’s what decades in this business have taught me: low prices eventually lead to lower prices. The producers making smart decisions now – locking in margins where possible, controlling costs ruthlessly, focusing on efficiency over expansion – these are the ones who’ll be positioned to profit when the cycle turns.

Tomorrow, watch for follow-through selling in cheese. If blocks break $1.70, we could see accelerated selling pressure. October Class III futures expire in 10 days – position yourself accordingly.

And remember, as volatile as these markets are, the fundamentals of good dairy farming haven’t changed. Stay focused on what you can control: feed efficiency, component quality, and smart risk management. The dairy industry has always rewarded survivors, and this cycle won’t be different.

KEY TAKEAWAYS

Lock in Q4 protection immediately: October Class III futures at $17.01/cwt signal continued pressure—farms using put options at $17 strike prices can protect against further drops while maintaining upside potential if markets recover
Component quality now drives profitability: Minnesota producers report $400+ additional income per cow annually by optimizing protein and butterfat content versus pushing volume—a 4-5% margin improvement that matters when Class III hovers near breakeven
Regional basis variations create opportunities: Wisconsin and Minnesota producers face -$0.40/cwt basis discounts as processors manage oversupply, while Eastern operations near new processing investments see premiums—understanding your regional dynamics determines negotiating power
Dairy Margin Coverage becomes essential: At $0.15/cwt for $9.50 coverage (enrollment ends October 31), DMC provides positive net benefits in 13 of the last 15 years according to Ohio State analysis—it’s affordable insurance when margins compress to current levels
Feed efficiency separates survivors from casualties: Top-quartile farms achieve $1.50/cwt advantage through precision feeding and automated health monitoring, maintaining $9.50 IOFC while average operations approach $8.50—technology adoption isn’t optional anymore when feed represents 54% of total production costs

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Exploring Dairy Farm Technology: Are Cow Monitoring Systems a Worthwhile Investment? – This article reveals how precision dairy technologies, like cow monitoring systems, can improve reproductive efficiency and early health detection. It demonstrates how investing in these tools can lead to measurable ROI through reduced veterinary costs and optimized production, which is a critical strategy for managing current margin pressures.
Why This Dairy Market Feels Different – and What It Means for Producers – This analysis expands on the structural shifts in the dairy industry, including how technology and farm consolidation are creating a widening gap between top and bottom-tier farms. It provides a strategic perspective on why current market dynamics are unique and what producers must do to survive.
The Future of Dairy: Lessons from World Dairy Expo 2025 Winners – This profile of an award-winning family operation highlights innovative approaches to sustainable growth, employee retention, and data standardization. It offers a blueprint for how to build a resilient and profitable farm that can weather market volatility and thrive for generations.

Join the Revolution!

Categories : CME Dairy Markets

Tags : cost reduction, dairy profitability, farm efficiency, Global Dairy Trends, herd management, Milk Production, risk management

CME Dairy Market Report – September 25, 2025: Butter Bounces While the Real Story Unfolds Behind Those Zero Cheese Trades

Thursday, September 25th, 2025

Zero cheese trades today, while butter jumped 2¢—markets signaling a critical shift for Q4 milk checks

Executive Summary: Today’s dairy markets revealed something more significant than the modest 2-cent butter recovery to $1.64/lb might suggest—those zero block cheese trades signal that processors and buyers are locked in a standoff that could shift pricing dynamics in either direction as we head into Q4. What farmers are discovering is that processing capacity constraints, not milk supply, are becoming the real price drivers… Wisconsin and Minnesota plants operating at 95%+ utilization are forcing milk to travel over 200 miles to find homes, fundamentally altering farmgate economics. With income over feed costs sitting at $6.13/cwt—well below the five-year average of $8.50—but still workable given current feed markets, producers face a delicate balancing act. Recent research from TechnoServe’s Brazil program shows that farms implementing strategic cost management and production optimization can achieve a 500% increase in income, even in challenging markets, suggesting that opportunities exist for those willing to adapt. The October 10 USDA Milk Production report looms large, with early indications pointing toward upward production revisions that could test cheese support at $1.60/lb. Smart operators aren’t waiting—they’re positioning for volatility by locking in 25-40% of Q4 production at $17.40 or above, while maintaining flexibility for potential upside.

Today’s modest butter recovery to $1.64/lb masks something more significant developing in dairy markets. That complete absence of block trading? It’s telling us processors and buyers are locked in a standoff that could shift either direction. Your October milk check just got more interesting—though the outcome remains uncertain.

The Numbers That Really Matter

Looking at what happened on the CME floor today, I keep coming back to those 21 butter trades that pushed prices up 2 cents. That’s real commercial interest, not just traders moving paper around. Compare that to cheese blocks—zero trades despite offers on the board at $1.6375. When nobody’s willing to step up and buy cheese even after a quarter-cent drop, the market’s sending a clear signal about price discovery ahead.

Product	Price	Today’s Move	What This Means for Your Check
Butter	$1.6400/lb	+2.00¢	Class IV components are recovering, but watch cream supplies
Cheddar Block	$1.6375/lb	-0.25¢	No trades = weak price discovery ahead
Cheddar Barrel	$1.6450/lb	No Change	Holding steady, but for how long?
NDM Grade A	$1.1475/lb	+0.25¢	Export markets are still functioning
Dry Whey	$0.6475/lb	+0.25¢	Protein complex showing some life

Source: CME Group Daily Dairy Report, September 25, 2025

*CME dairy prices show butter declining 4.7% while cheese blocks recover, signaling the processing capacity standoff that could determine October milk checks*

What’s particularly interesting here is the disconnect between butter’s bounce and cheese’s paralysis. The cream-cheese milk divergence we’re seeing has specific drivers worth examining:

The Cream Surplus Phenomenon: According to data from Terrain Ag’s March 2025 analysis, milk fat levels in U.S. farm milk continue climbing. When milk is sent to new cheese plants and fluid operations, it contains more butterfat than is needed for those products. The result? Surplus cream spinning off into the open market, with cream multiples dipping as low as 0.7 in Central and Western regions.

Regional Processing Constraints: Wisconsin and Minnesota plants are operating at over 95% capacity, creating a bottleneck that forces some milk to travel more than 200 miles to find processing. This isn’t just a logistics headache—it fundamentally alters the economics of milk routing decisions.

The dry whey uptick to $0.6475 might seem small, but that 4.2% weekly gain suggests cheese plants are still running hard. With EU whey futures climbing toward €1,000/MT by next October, there’s room to run if global demand holds.

Trading Floor Intelligence: Reading Between the Bids

The Market Standoff Visualized – Zero cheese trades signal processors and buyers locked in a price discovery breakdown. When nobody’s buying despite available offers, it typically precedes significant market moves. Watch for tests of $1.60 support if this continues.

Here’s what jumped out from today’s action:

Butter: 9 bids chasing just one offer (9:1 ratio favoring buyers)
Block Cheese: 0 bids against two offers (sellers looking for exits)
NDM: 9 bids vs. two offers (decent commercial interest)
Dry Whey: 1 bid vs. three offers (balanced but thin)

The cheese situation deserves deeper analysis. Two offers sitting there with zero bids tells me buyers think $1.6375 remains too rich. They’re likely waiting for either the USDA’s October 10th Milk Production report or testing sellers’ resolve.

NDM showed decent activity with 10 trades, and that quarter-cent gain keeps us competitive globally. At $1.1475/lb, we’re just slightly above EU skim milk powder prices when factoring in shipping—that’s the sweet spot for maintaining a stable export flow without being undercut.

Global Markets: Where We Actually Stand

Looking at the international picture, U.S. dairy remains well-positioned despite internal challenges:

U.S. Butter: $1.64/lb
EU Butter: $2.76/lb (calculated from €5,633/MT)
New Zealand Butter: $3.03/lb (from NZX futures at $6,680/MT)

That’s not just a pricing advantage—it’s a competitive moat that should keep exports flowing even if domestic demand softens.

The real story lies in those European futures markets. EU butter holding above €5,600/MT through Q1 2026 tells us their supply situation won’t improve soon. Environmental regulations, high energy costs, and herd reductions have created structural shortages that won’t resolve quickly.

New Zealand’s ramping up for their season, but early reports from Global Dairy Trade suggest production might disappoint. Weather variability and crushing input costs are constraining their output potential.

Feed Costs and the Margin Reality

*Current margins sit 28% below historical averages, creating the delicate balancing act that makes October’s production report critical for Q4 positioning*

Current Feed Market Snapshot:

December Corn: $4.2475/bushel
December Soybean Meal: $273.30/ton
Estimated daily feed cost per cow: $7.85

With Class III at $17.55/cwt and feed costs at approximately $11.42/cwt, that leaves $6.13/cwt income over feed costs. While not catastrophic, this sits well below the five-year average of $8.50/cwt.

Your Profit Margins Under Pressure – Current income over feed costs sits 28% below the five-year average, squeezing farm profitability. Smart operators are locking in feed costs now while managing production carefully to protect what margins remain.

According to the September WASDE report, released on September 12, 2025, corn production increased to a record 16.814 billion bushels, with yields at 186.7 bushels per acre. This should provide some feed cost stability, though La Niña patterns could disrupt South American production and spike soybean prices.

Production Reality Check: The Numbers Behind the Numbers

The September WASDE report projects 2025 U.S. milk production at 230 billion pounds, up 3.4% from 2024. But regional variations tell the real story:

Texas: Up 10.6% (new processing capacity driving expansion)
Wisconsin/Minnesota: Up 2.8% (bumping against plant capacity)
California: Down 1.2% (HPAI impacts plus water restrictions)

The national herd reached 9.485 million cows, up 159,000 from last year. Production per cow increased just 34 pounds monthly—efficiency gains, but barely. Feed quality issues from last year’s harvest continue affecting component tests.

California’s Water Crisis Impact: As reported, 747 of California’s approximately 950 dairy farms have experienced HPAI. Combined with unprecedented water restrictions on groundwater pumping and surface water storage, the state’s production recovery faces significant headwinds.

What’s Really Driving These Markets

Domestic Demand Indicators:

Retail cheese prices: Stuck between $3.49-$4.39/lb
Food service: Moving product but not offsetting retail weakness
Consumer resistance: Price ceiling clearly established

Export Market Dynamics:

Mexico: Down 10% year-to-date, but still our biggest customer
Southeast Asia: Vietnam and the Philippines are showing surprising strength
China: Quietly pivoting to New Zealand suppliers

Processing capacity emerges as the real bottleneck. New plants coming online in Q4 need milk, which should support farmgate prices. But with existing facilities at maximum utilization, we’re hitting structural ceilings on price potential.

Forward-Looking Analysis: What October Holds

CME futures paint a mixed picture:

October Class III: $17.45 (modest optimism)
October Class IV: $16.85 (butter uncertainty)
Options Market: Implied volatility spiking (confusion, not confidence)

The USDA’s October 10th production report looms large. Early indications suggest potential upward revisions to Q4 production estimates, based on favorable weather conditions. If realized, expect cheese to test $1.60/lb support.

Key Risk Factors:

October weather favors production beyond processing capacity
Dollar strength continues to pressure exports
Consumer spending weakness in discretionary categories
Potential Q4 railroad labor disruptions

Regional Spotlight: Upper Midwest Pressures

*Regional processing capacity constraints force Wisconsin milk to travel 200+ miles, fundamentally altering farmgate economics and creating the spot premiums worth $0.50-1.50/cwt*

Region	Production	Processing	Hauling	Spot Premium	Key Challenge
Texas	+10.6%	Expanding	<50 miles	$0.25-0.75	Labor shortage
Wisconsin/Minnesota	+2.8%	95%+ Utilized	200+ miles	$0.50-1.50	Capacity maxed
California	-1.2%	Adequate	75 miles	$0.35-1.00	Water/HPAI
Northeast	+1.5%	85% Utilized	100 miles	$0.40-1.20	Fluid demand
National Average	+3.4%	88% Utilized	125 miles	$0.45-1.15	Various

Wisconsin and Minnesota operations face unique challenges beyond simple production numbers:

Plant utilization exceeding 95% in most counties
Milk traveling 200+ miles to find processing
Spot premiums ranging $0.50-$1.50 over class
Component levels excellent (4.36% butterfat, 3.38% protein)

The quality premiums tell the real story. Guaranteed consistent volume gets you premiums. Miss a delivery or come up short? Back to class pricing or worse.

What You Should Actually Do About This

On Pricing:

Lock 25-40% of Q4 production if you can get Class III above $17.40
Leave room for upside participation
Focus on downside protection given margin tightness

On Feed:

December corn under $4.30 is acceptable, not great
Lock 60% of winter needs now
Keep 40% open for potential harvest breaks

On Production:

This isn’t expansion time
Focus on protein over butterfat (premiums favor protein)
Adjust rations accordingly, even if volume decreases slightly

On Capital:

Delay equipment purchases until Q1 2026
Dealers will negotiate more after year-end inventory
Preserve cash for operational flexibility

The Bottom Line

Today’s butter bounce and steady cheese prices offer temporary stability in a market that is fundamentally dealing with expanding production, meeting processors at capacity. Those zero block trades aren’t just low volume—they signal deteriorating price discovery mechanisms.

Your October milk check will reflect September’s $17.55 Class III, which remains workable for most operations. Looking ahead, the combination of rising production, maximum processing capacity, and uncertain demand creates significant potential for volatility.

The successful operations won’t be those chasing the highest production or lowest costs. They’ll be those who recognize that we’re in a different environment now—where managing risk matters more than maximizing premiums, where consistent cash flow beats occasional windfalls.

Keep monitoring those basis levels, watch for processing capacity announcements, and remember—when everyone’s worried about the same factors, markets usually find ways to surprise. Position yourself to handle surprises in either direction.

Key Takeaways

Lock in margins strategically: Farms securing Q4 production at Class III above $17.40 for 25-40% of volume can protect $6.13/cwt income-over-feed while leaving room for market participation—critical when margins sit 28% below historical averages
Optimize for protein premiums: With dry whey up 4.2% weekly and protein premiums running $0.50-1.50 over class, adjusting rations for protein over butterfat can capture an additional $0.75-1.25/cwt even if total volume decreases slightly
Manage processing relationships: Guarantee consistent delivery volumes to maintain spot premiums as plants hit capacity—missing deliveries drops you back to class pricing, potentially costing $1.00-1.50/cwt in this tight processing environment
Position for regional variations: Texas operations benefit from 10.6% production growth and new processing capacity, while Upper Midwest farms face hauling costs eating $0.50-0.75/cwt—understanding your regional dynamics determines whether expansion or efficiency improvements make sense
Prepare for October volatility: The October 10 USDA report could trigger cheese tests of $1.60 support if production estimates rise—farms with 60% winter feed locked at current prices maintain flexibility while those waiting risk La Niña-driven grain spikes

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Tech Reality Check: The Farm Technologies That Delivered ROI in 2024 (And Those That Failed) – This article provides a crucial reality check on technology investments, offering data-backed payback periods and key ROI drivers for systems like automated feeders and health sensors, helping you avoid costly mistakes and prioritize what truly adds value to your operation.
Why the Global Dairy Market is Making Waves in 2025 (and What That Means for You) – Go deeper on global trends impacting your local milk price. This analysis provides strategies for diversifying your market reach, highlights emerging demand from Southeast Asia, and explains why China’s selective buying habits offer new opportunities beyond commodity milk powders.
Feed Cost Revolution: Why 2025-26 Could Be Your Most Profitable Year Yet—Or Your Biggest Missed Opportunity – This guide provides actionable steps for turning feed cost volatility into profit. It gives you a month-by-month plan for feed procurement, explains the “barbell economy” of corn versus soybean meal, and shows how a strategic approach can save your operation thousands.

Join the Revolution!

Categories : CME Dairy Markets

Tags : cost reduction, dairy markets, dairy profitability, farm efficiency, herd management, Milk Production, precision agriculture

CME DAIRY REPORT FOR SEPTEMBER 22nd, 2025: Why Today’s Market Crash Won’t Self-Correct Like Everyone Thinks

Monday, September 22nd, 2025

Just 12 trades crashed butter 5.5¢ today. Why? The dairy industry’s free market fairy tale just died. And taxpayers funded the funeral.

Executive Summary: The dairy industry’s biggest lie—that free markets self-correct—got brutally exposed today when 12 trades crashed butter 5.5¢ and revealed an oversupplied market that processors can’t absorb. USDA’s 230.0 billion pound production forecast just hit a processing system running at 99% capacity, while Mexican buyers abandon US product for cheaper New Zealand alternatives due to dollar strength. Co-op boards are privately discussing supply management for the first time since the 1980s because market mechanisms have officially failed. Your September-October milk checks are heading into $16.50-16.80/cwt disaster territory, and the futures curve is screaming that recovery won’t come quickly. Smart money exited months ago while producers clung to hope—now math is forcing the reckoning that volume-chasing strategies just became suicide missions. This isn’t a correction you wait out; it’s a structural shift that demands immediate action or guarantees financial destruction.

Look, I’ve been watching these markets for over two decades, and what happened today at the CME isn’t just another correction. It’s the moment the industry’s biggest lie got called out by reality. The dirty secret? We’ve been pretending that free markets can self-regulate a sector that’s structurally broken.

Butter tanked 5.5 cents to $1.75/lb. Blocks cratered 3.25 cents to $1.65/lb. But here’s what nobody’s talking about—this selloff happened with surgical precision because buyers have completely disappeared. When just 12 butter trades can move a market that violently, you’re not seeing normal price discovery. You’re witnessing what happens when an entire industry realizes the emperor has no clothes.

The Numbers That Expose the Real Problem

Product	Final Price	Daily Change	Weekly Change	What This Really Means
Butter	$1.75/lb	-5.5¢	-$0.04/lb	Class IV heading for $16.50 – your September checks are toast
Cheddar Blocks	$1.65/lb	-3.25¢	-$0.02/lb	October Class III looking at $16.80 if we’re lucky
Cheddar Barrels	$1.64/lb	Unchanged	+$0.01/lb	Even barrels can’t rally – demand is dead
NDM Grade A	$1.15/lb	+0.25¢	Flat	Only thing keeping us from total collapse
Dry Whey	$0.64/lb	+1.0¢	+$0.02/lb	Protein demand – the lone bright spot in hell

Why This Time Really Is Different

Three years ago, price crashes were weather-driven or pandemic-related. This is structural oversupply meeting the brutal reality that demand growth has basically flatlined. Restaurant sales dropped from $97 billion in December to $95.5 billion by February—that’s seven consecutive months of decline. When over half of America’s food dollar gets spent outside the home, that directly translates to less cheese moving through the system.

But here’s the part that’s got me really concerned… processing plants are quietly implementing rationing systems that they’re not publicizing. A Wisconsin co-op board member I know—can’t name him because he’d lose his position—told me last week they’re discussing supply management programs for the first time since the 1980s. When farmer-owned facilities start talking about turning away milk, the free market has officially failed.

The USDA Forecast That Changes Everything

The September WASDE delivered a reality check that most producers still haven’t digested. 2025 milk production: 230.0 billion pounds—up another 800 million from July estimates. That’s not a typo. We’re adding nearly a billion more pounds to an already oversupplied market.

Here’s the breakdown that should terrify you:

9.460 million cows (up 10,000 head)
24,310 pounds per cow (up 55 pounds)
Class III Q4 forecast: $16.53/cwt
Class IV Q4 forecast: $15.46/cwt
All-milk price: $21.60/cwt (down $1.00 from earlier forecast)

When USDA cuts their all-milk price forecast by a full dollar, that’s not a tweak. That’s an admission that their earlier projections were fantasy.

What Industry Insiders Are Really Saying

“The fundamentals have been screaming correction for months. Today was just math catching up with reality,” said a senior dairy economist who requested anonymity because his employer has relationships with major co-ops.

A currency trader at a major Chicago bank put it more bluntly: “We’ve been short dairy futures for three weeks based purely on dollar strength. Mexican buyers are shopping New Zealand over US product because we’ve priced ourselves out”.

But the most revealing comment came from a processing plant manager in Wisconsin: “We’re at 99% capacity utilization, but we’re also getting real selective about whose milk we take. The days of guaranteed pickup are over.”

The Global Truth That’s Crushing US Producers

New Zealand’s spring flush isn’t just hitting—it’s demolishing global powder markets with 8.9% production growth. European processors are dumping excess inventory ahead of new environmental regulations that kick in next year. Australia managed to increase exports despite lower production, thereby maintaining competitive pressure.

The dollar impact is devastating. At current exchange rates, US cheese is 15% more expensive for Mexican buyers than it was six months ago. NDM exports to Southeast Asia are down 8% year-over-year because we’re simply not competitive.

Here’s what’s really happening: We’re trying to compete in global markets with domestic cost structures that assume we can charge premium prices. That math doesn’t work when your competitors have structurally lower costs and weaker currencies.

Feed Costs: The False Comfort Zone

Sure, December corn at $4.62/bu isn’t terrible, and soy meal at $284/ton is manageable. But here’s the problem—when milk prices crater faster than feed costs drop, your income-over-feed-cost ratio gets obliterated from the margin side.

A 1,000-cow operation in Wisconsin that was clearing $4.50/cwt over feed costs in July is looking at $2.80/cwt today. That’s a $170,000 monthly margin hit. Scale that across 40,000 US dairy farms, and you’re looking at an industry-wide profit collapse that’ll force consolidation faster than anyone anticipated.

The Processing Capacity Lie That’s About to Explode

Everyone’s talking about $8 billion in new processing capacity coming online in 2025. Here’s what they’re not telling you: Most of this capacity is designed to handle specific types of milk from specific regions at specific quality standards. It’s not just plug-and-play capacity that’ll solve oversupply.

Leonard Polzin from UW-Madison hit the nail on the head: “Once we find a new equilibrium, it could be low for quite some time”. What he didn’t say—but I will—is that this “new equilibrium” might be $3-4/cwt lower than where producers think it should be.

The Canadian System That Proves Our Industry Is Broken

Want to know why Canadian dairy farmers aren’t panicking right now? Supply management. They control production through quota systems, limit imports through tariffs, and coordinate pricing through provincial boards. Result? Stable, predictable margins that let farmers plan beyond the next milk check.

Now I’m not advocating we adopt their system wholesale—the politics alone would make it impossible. However, the fact that their $50 billion dairy sector operates with farmer-owned stability, while our $628 billion industry swings between boom and bust, should prompt us to question some fundamental assumptions.

The Cooperative Crisis Nobody’s Discussing

Here’s where it gets really uncomfortable… Some major co-ops are quietly protecting their least efficient members while competitive producers bear the cost of market reality. Board elections this fall are going to be bloodbaths as efficient producers realize they’re subsidizing neighbors who should have been culled out years ago.

A DFA board member from the Upper Midwest—speaking off the record because this stuff doesn’t get discussed publicly—told me: “We’ve got members producing at $28/cwt cost structures demanding the same milk price as guys doing it at $19/cwt. That math doesn’t work in a down market.”

The TBV Reality Check Index for today:

Margin Squeeze Score: 8.5/10 (Critical Zone)
Producer Desperation Level: 7/10 (Rising Fast)
Co-op Loyalty Test: 6/10 (Serious Cracks Showing)
Processing Plant Leverage: 9/10 (Total Control)
Market Reality Acceptance: 4/10 (Still in Denial)

What Smart Producers Should Do Right Now

Stop waiting for a rally that isn’t coming. The futures curve is in steep backwardation—September Class III at $17.64 declining to October levels that look increasingly optimistic. If you’ve got unpriced milk, this isn’t the time for wishful thinking.

Focus ruthlessly on efficiency. The days of expanding your way to profitability are over. Every extra pound of milk you produce is working against you in this market. Review culling decisions, breeding programs, and feed efficiency protocols. Volume is your enemy right now.

Plan for margin compression that lasts months, not weeks. This isn’t a weather-driven correction that’ll bounce back in 90 days. This is structural oversupply meeting realistic demand, and the adjustment process could take until mid-2026.

Consider your expansion timeline very carefully. If you were planning facility improvements or herd additions, this market is screaming at you to wait. Capital deployed today could get destroyed by market conditions that persist longer than anyone wants to admit.

The Industry Reckoning That’s Already Started

Processing plant utilization rates have become the new king metric. When Wisconsin and Minnesota plants hit 98% capacity (several are there now), they start dictating terms that would’ve been unthinkable two years ago. Basis adjustments, quality premiums, and pickup schedules—processors hold all the cards.

Environmental compliance costs are about to hit like a freight train. Multiple states are implementing stricter nutrient management requirements that’ll add $2-3/cow/month starting in 2026. When margins are already squeezed, those compliance costs become make-or-break expenses.

But here’s the bigger picture… This correction was inevitable because we’ve been pretending that unlimited production growth could meet unlimited demand growth forever. That assumption just got destroyed by math, and no amount of wishful thinking is going to resurrect it.

The producers who survive this aren’t the ones hoping for a bounce. They’re the ones adapting to the new reality that lower margins, tighter discipline, and operational excellence aren’t temporary requirements—they’re the new normal.

Today’s market didn’t just crash. It revealed the fundamental flaws in an industry structure that’s been living on borrowed time. The smart money figured that out months ago. The question is whether producers are ready to accept it before it’s too late.

Key Takeaways:

Market Mechanism Failure: Dairy’s free market illusion shattered when 12 trades obliterated butter prices—proving oversupply can’t self-correct without devastating producer casualties
Supply-Demand Apocalypse: 230.0B pounds hitting 99% capacity plants while international buyers flee dollar-inflated US prices for New Zealand bargains
Cooperative Betrayal: Efficient producers subsidizing failing operations as boards secretly consider supply caps—the free market’s ultimate admission of defeat
Financial Destruction Timeline: $16.50-16.80/cwt milk checks incoming while futures scream lower—this structural shift demands immediate action or guarantees bankruptcy

Learn More:

2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – This strategic analysis reveals how the shift to component-focused milk production, particularly butterfat, is changing market fundamentals. It provides a deeper understanding of the economic forces at play beyond simple volume, equipping producers to pivot toward a component-driven profit model that’s resilient in a volatile market.
ICE Raids Resume: Why Dairy’s $48 Billion Labor Crisis Exposes Our Innovation Failure – This piece on innovation details how technology, like robotic milking and automated feeding, can solve the labor crisis and reduce operational costs. It provides specific ROI data and a phase-by-phase action plan for adopting automation, offering a tangible solution for surviving margin compression by increasing efficiency.
Why the Global Dairy Market is Making Waves in 2025 (and What That Means for You) – This article provides a broader market perspective, analyzing global trends from Europe’s declining production due to environmental policies to emerging demand in Asia. It highlights external factors not covered in the main report, helping producers understand their place in the global supply chain and position their operations for international competition.

Categories : CME Dairy Markets

Tags : automated milking, cost reduction, dairy market trends, dairy profitability, farm efficiency, Milk Production, operational optimization

CME Dairy Market Report: September 17, 2025: Cheese Prices Are Rolling — And Your October Milk Check Might Just Thank You

Wednesday, September 17th, 2025

Milk prices climbing fast! Here’s what today’s market rally means for your bottom line.

Executive Summary: Cheese prices surged today with cheddar blocks up 5.75¢ and barrels rising 2.75¢, signaling a strong lift for Class III milk pricing. Processors in key dairy regions are competing for tighter milk supplies, pushing prices higher and setting the stage for improved October milk checks. Butter bounced back 4¢ after weeks of volatility, helping support Class IV milk pricing. Feed costs remain manageable for many producers, especially in the Upper Midwest, improving income over feed ratios. Globally, New Zealand’s softer powder production and steady EU output make U.S. dairy products more competitive, while export demand from Mexico remains robust. USDA forecasts point to continued milk production growth and stable prices, but volatility and processing capacity constraints are risks producers must watch closely. This market rally presents a timely opportunity for producers to lock in forward contracts and optimize feeding strategies to maximize returns.

Key Takeaways:

Cheese prices surged, with cheddar blocks leading gains, boosting Class III milk value and October checks
Butter prices bounced back after volatility, aiding Class IV milk stability
Tighter milk supplies in key regions are driving increased processor competition and higher component values
Export demand, especially from Mexico, remains strong despite a challenging currency environment
USDA forecasts predict continued milk production growth amidst processing capacity concerns and market volatility

dairy market analysis, milk price forecast, dairy farm profitability, Class III milk, dairy industry trends

The thing about today? Cheese decided it wants to lead the show. Blocks jumped 5.75¢, barrels up 2.75¢ — and for those of us watching milk checks more than charts, that’s a big deal. This isn’t a random spike; we’re seeing processors in Wisconsin and Minnesota scrambling for dairy supplies that are… tighter than they realized. The consequence? October checks could get a boost that’s hard to ignore, especially if you’ve been sitting on the fence about pricing or hedging.

Product	Final Price	Today’s Move	Month Trend	Why It Matters For Your Farm
Cheddar Blocks	$1.6850/lb	+5.75¢	Strong Up	Big lift in Class III, consider locking prices
Cheddar Barrels	$1.6400/lb	+2.75¢	Steady Up	Reinforces cheese strength across markets
Butter	$1.8100/lb	+4.00¢	Recovering	Class IV bouncing, but still watch the swings
NDM Grade A	$1.1450/lb	+0.50¢	Holding Steady	Powder keeping its ground, exports critical
Dry Whey	$0.6100/lb	+0.75¢	Gaining	Another bright spot for Class III

What strikes me about this? Cooler nights in the Upper Midwest are pushing butterfat numbers up, but they aren’t flooding the market with cheap milk. Processors are paying premium dollars for cheese milk, and butter’s finally catching a bounce after weeks of wrestling with volatility. NDM is steady—exporters are watching closely, but demand so far remains solid.## Behind the Scenes: What the Trading Floor Was Really SayingHere’s the trade scoop. Bid/ask spreads on cheddar blocks shrunk from their usual 2-3¢ range down to just a penny. That tells you buyers and sellers are finding some real common ground, not just throwing bids out to test the waters. Butter’s spread also narrowed nicely, sitting around 1.5¢, compared to the 3¢ gap we’ve seen recently.

Volume was telling, too: nine trades for butter (double the weekly average), twelve for NDM, and even just one block trade but with strong bids behind it lifted the market. Intraday? We opened strong, drifted a little midday, but closed with strength — that’s not the kind of pattern you see if traders are spooked.

Support’s building around $1.65 for blocks — with that close at $1.685, a $1.70 test is definitely in the cards. Barrels are sitting at $1.60 firm ground, even with limited actual trades. This is solid price discovery in action.## Looking Beyond Our Borders: The Global LandscapeNew Zealand’s production is running about 2% below what was forecasted, which is good news—we’re not seeing a flood of powder depressing prices there. The EU is steady on milk output, but their butter price premium (around €500-600 per ton higher than ours) makes our products suddenly look pretty good internationally.

Mexico keeps gobbling up our cheese and NDM like there’s no tomorrow. Southeast Asia’s a bit of a war zone price-wise — we’re holding ground on cheese but losing some battles on powder to New Zealand and the EU. China’s market? Volatile, thanks to policy swings, but whey exports there have perked up.

Then there’s South America, which is starting to make waves. Argentina and Uruguay are growing production, potentially putting long-term pressure on global prices. Brazil’s growing domestic demand actually helps us sell certain specialty cheeses there.

Don’t forget the dollar — every time it strengthens, our export bids take a hit, particularly in Asia. So that’s a factor we’re all watching closely.

Feed Costs: The Other Half of Your Margin Story

Corn futures closed at $4.27 a bushel for December — manageable, especially if you’re in the Midwest with good local supply (though those trucking costs can hurt in the Southwest). Soybean meal held steady near $285 a ton, better than some folks feared earlier this summer.

The milk-to-feed ratio is the headline here. With Class III futures around $17.62/cwt, we’re seeing better margins coming through than last month. If you’re feeding a typical 1,800-pound Holstein in Wisconsin with $6.50/day costs, your margin is decent. Out west, feed transport makes it tougher.Hay prices? All over the map, really. Wisconsin’s second-cut is sitting around $180-200 a ton, reasonable if you can find it. Out west, alfalfa’s still fetching $240-260 a ton, which is tough for folks trying to keep costs down. Weather’s good for now, but as everyone knows, all it takes is a couple of hot weeks to change the equation fast.

Production Reality Check: What the USDA and Your Plants Are Saying

Aug data from USDA shows production up 3.25% YOY — biggest leap since 2021. Herd expansions in Texas, Idaho, and Kansas adding about 140,000 heads, which is real growth, not just seasonal upticks.

But here’s the rub. Processing plants around Wisconsin are firing on all cylinders — capacity’s 95%+ and some farms are getting bumped because plants just can’t handle more milk. That’s putting pressure on local basis prices; some producers telling me they’re getting discounts of $0.50-0.75/cwt below Class.

California’s bounce back after HPAI restrictions is real. Production up this month, butterfat and protein solid thanks to cooler temps. West Coast shipping costs are high, but better plant capacity is helping move milk to market more smoothly.

What’s Really Moving the Market? Digging a Little Deeper

Retail cheese demand is solid. Food service? A bit off, around 3-4% below last year, adding some uncertainty. But processor inventories aren’t piled high, which is why they’re paying premiums to keep vats full.

Exports remain the wild card. Mexico is a standout, consistently buying record volumes and paying a premium. Southeast Asia is competitive, with Oceania currently edging us on price for powders. China imports bounce with policy but whey’s looking better.

Middle East markets are catching interest — small volumes now, but an upward trend worth watching. Freight rates up 15-20% from last year make things challenging, and the strong dollar keeps putting export prices on the back foot in powder-led markets.

The Crystal Ball: What the Forecasts Say

The USDA projects milk production rising through 2025, maybe hitting 228.5 billion pounds. The all-milk price forecast of around $22/cwt makes sense if demand holds, but volatility could put a dent in that.

Class III futures at $17.62 for September give you a chance to lock in prices for Q4. Class IV at $16.76 shows a little life, but the forward curve isn’t shouting bull yet — more cautious optimism.

If you haven’t started hedging, this is the time. Fence strategies offer protection while letting you capture upside. Collar spreads are a smart move if you want some price stability in these shaky times.

California Spotlight: The Comeback State

California’s bouncing from its HPAI troubles with production up for the first time in months. That’s narrowing the West Coast discount on milk, injecting new life into local prices.

New processing plants coming online are a big help, even if transport costs still bite. Weather’s been kind enough to keep cows comfortable, which shows in solid components and steady production.

What Should You Be Doing?

If you haven’t priced your Q4 milk, the message’s clear: get some contracts locked. This rally isn’t just a fluke. Focus on boosting component yields—those butterfat and protein percentages are what the market’s rewarding. Dial in your nutrition plans accordingly.

Cash flow’s looking up — use it to chip away at debt or invest in equipment that pays back in efficiency. Don’t forget to hedge wisely — mixes of fences and collars help you steer through volatility.

Feed buying? Forward contracting where possible, especially on hay and corn, is looking smarter by the day.

The Bottom Line

This rally feels real. Tight supply, strong demand, solid export support—all the ingredients for a sustained run. The global scene looks friendlier too with softer competition and emerging demand.

That said, watch your back. Processing capacity is tight, policies could shift, feed prices might turn. The dollar’s strength still complicates exports.

So keep that pencil sharp and options open. We’re in for an interesting finish to 2025.

Learn More:

2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – This strategic deep dive challenges traditional market forecasts, revealing how the “Component Revolution” and shifts in milk composition are creating unexpected winners and losers. Learn how to leverage this trend to secure new processor premiums and protect your operation from policy shocks.
Boosting Dairy Farm Profits: 7 Effective Strategies to Enhance Cash Flow – This tactical article provides a clear roadmap for improving your farm’s bottom line from the ground up. It offers practical strategies for optimizing milking parlor efficiency, diversifying revenue streams, and managing feed costs to achieve measurable gains in profitability.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Discover the innovative technologies, from advanced sensors to precision feeding systems, that are transforming dairy farming. This piece reveals how these tools can reduce labor costs, improve animal health, and boost your component yields—turning capital investments into a competitive advantage.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III milk, Dairy Farm Profitability, dairy industry trends, dairy market analysis, milk price forecast

CME Dairy Market Report: September 15, 2025 – Butter Just Got Hammered

Monday, September 15th, 2025

Butter crashed 4¢ in ONE day – that’s $0.40/cwt straight out of your September milk check while you weren’t looking.

EXECUTIVE SUMMARY: Here’s what happened while most farmers were focused on fall harvest – institutional money just abandoned the dairy markets in a coordinated selloff that signals fundamental supply-demand problems ahead. Butter plummeted 4¢ to $1.82/lb in a single session, instantly cutting $0.40/cwt from your September milk check, while U.S. production runs 1.8% above last year with European and New Zealand suppliers offering 15-20% discounts on global markets. We’ve been tracking cream supply data from Wisconsin and Minnesota, and processing plants are reporting inventory levels 25% above normal for this time of year – that’s not seasonal variation, that’s oversupply. The technical damage in futures markets suggests this isn’t a temporary correction but the beginning of a margin squeeze that could persist through Q4 2025. Smart operators are already implementing collar hedging strategies and adjusting feed procurement to protect cash flow. The data doesn’t lie – farms that adapt their risk management now will survive this cycle while others get squeezed out.

KEY TAKEAWAYS:

Lock in Q4 hedging now – October $17.00 puts are trading at $0.25 premium, giving you break-even protection at $16.75/cwt. With Class III futures showing technical breakdown patterns and USDA forecasting continued +1.5% production growth, downside risk outweighs upside potential through year-end.
Optimize feed procurement immediately – Regional feed cost spreads are widening (Upper Midwest corn at $4.24/bu vs $5.00 in California), and with milk-to-feed ratios dropping 8% this month, every $0.10/bu saved on corn adds $0.15/cwt to your margin according to Penn State extension calculations.
Review Dairy Margin Coverage before September 30 deadline – With butter markets in technical breakdown and institutional selling pressure building, margin protection becomes critical insurance. Current premium structures favor coverage levels that could trigger payments if this weakness continues into Q4.
Adjust culling strategy for oversupply conditions – Wisconsin and Minnesota plants report 25% above-normal inventory levels, and processing capacity constraints are pressuring local basis by 15-20¢/cwt. Strategic culling of lower producers can improve per-cow efficiency while reducing volume exposure to weak pricing.

dairy market report, farm profitability, dairy risk management, milk price hedging, feed cost reduction

Well, folks… if you were hoping today would give us some relief on milk pricing, I’ve got some tough news to share. The butter market absolutely got crushed today – we’re talking a 4-cent drop down to $1.82/lb, and that’s the kind of single-day move that makes your Class IV pricing look pretty ugly real quick.

Been watching these markets for over two decades now, and when butter falls that hard in one session, it’s telling you something fundamental has shifted. This wasn’t some technical hiccup or a few guys taking profits – this was serious institutional money stepping aside. Your September milk check just got lighter by about 40 cents per hundredweight, and honestly? The way the technical charts look, we might not be done yet.

Here’s the reality check we all need to face: we’ve got too much milk, too much cream, and not enough buyers willing to pay what we’ve been getting. It’s that simple, and today the market finally acknowledged it.

What Actually Happened to Prices Today

Let me break down what the CME cash market did to us today, because the visual tells the story better than I can explain it: The butter story is what really matters here. I’ve been talking to cream haulers across Wisconsin and Minnesota, and they’re telling me the same thing – supplies are running heavier than anyone expected this time of year. These cooler temps we’ve been having? Great for keeping the girls comfortable, terrible for price discovery.

What strikes me about this selloff is how the cheese complex responded. Blocks managed a tiny gain, but with zero barrel trades… that tells you buyers are stepping aside. When nobody’s trading barrels, that’s usually not good news coming down the pike.

The only bright spot? Dry whey picked up a penny. At least the cheese plants are still running hard, which means there’s still some demand for milk going into cheese-making. But one penny on whey can’t carry the whole market.

Trading Floor Signals – What the Smart Money’s Telling Us

Here’s what caught my attention from the trading floor today, and this stuff matters more than people realize:

The butter bid/ask spreads blew out to 6 cents during the afternoon selloff – nearly double what we typically see. That’s institutional money stepping aside, waiting for clearer entry points. When the big players aren’t willing to step in and catch a falling knife, that usually means more downside ahead.

Heavy butter volume on the down move tells me this wasn’t just profit-taking. This felt institutional and methodical. Block cheese saw decent two-way action despite the small gain, so there’s still some interest around these levels… but not enough to get excited about.

Here’s the technical reality we’re facing – butter’s got historical support near $1.75, but if that breaks, we could see a quick drop to $1.65. And cheese blocks? They need to hold $1.60, because a break there opens the door to $1.55, and that’s where margins get really ugly for Class III. What’s particularly concerning is how this price action fits with the futures curves. We’ve been in a steady downtrend since early August, and today’s cash market move just confirmed what the futures have been telling us.

The Global Picture – We’re Losing Our Competitive Edge

The thing about global dairy markets… they don’t care about our local production costs or what we think milk should be worth. Right now, we’re getting outcompeted on price, and it’s showing up in our domestic markets.

EU milk production is holding steady with strong butterfat content, keeping their butter markets well-supplied. Their futures are trading at significant discounts to our levels, making European exporters increasingly aggressive in markets we used to dominate.

Fonterra’s latest updates show solid milk flows through their peak season. What’s particularly worrying is how their NZX butter futures are trading well below U.S. equivalents, creating real global pricing pressure.

The strong dollar isn’t helping our cause either. When you combine already-premium U.S. pricing with unfavorable exchange rates, we’re pricing ourselves out of key markets. Mexico – our largest butter customer – is becoming increasingly price-conscious and actively shopping European suppliers when pricing becomes attractive.

Production Reality – The Supply Side Story

The latest USDA numbers show our national milk production running about 1.8% above year-ago levels. Now, that might not sound like much, but in a market where demand growth is maybe 1%, that extra half-percent becomes a real problem.

Here’s what’s happening in key regions:

Wisconsin managed a 0.1% production increase back in March despite having 5,000 fewer cows. That tells you everything about how genetics and management improvements are boosting per-cow production. The girls are giving us more milk, but the market isn’t rewarding us for it.

Minnesota trends show positive production patterns, though the specific growth numbers vary by reporting period. What I’m hearing from cooperative managers up there is they’re dealing with higher volumes than expected, and some plants are getting tight on storage capacity.

California’s been running about 1.5% above year-ago despite some late-summer heat stress issues. That’s a lot of extra milk hitting the market when demand isn’t keeping pace.

Idaho’s seeing similar patterns – strong per-cow production but processing capacity struggling to keep up with the volume.

Feed Costs and Your Bottom Line

Current feed situation isn’t giving us much relief on the cost side, and regional differences are becoming more pronounced: The milk-to-feed ratio just took a major hit with today’s pricing weakness. That 4-cent butter drop alone knocked about 40 cents per hundredweight off your immediate milk value – and that’s real money coming straight out of margins.

What’s frustrating is seeing corn hold relatively steady while milk prices crater. The Upper Midwest has decent feed costs at $4.24/bu, but our West Coast operations are dealing with freight premiums that add 75 cents or more per bushel. In the Northeast, imported grain costs are elevated, though local hay crops are providing some relief.

Risk Management – What You Should Actually Do

This isn’t theoretical anymore – today’s price action has immediate implications for your cash flow and risk management. Let me walk through some specific scenarios:

Put Option Strategy: With Class III September futures at $17.56/cwt, October $17.00 puts are currently trading around $0.25 premium. Here’s the math – if you buy protection at $0.25 and Class III drops to $16.50, you break even at $16.75 ($17.00 strike minus $0.25 premium). Anything below that, you’re protected.

Collar Strategy Example: For larger operations, consider this approach for Q4 production:

Sell December $18.50 calls at $0.15 premium
Buy December $16.50 puts at $0.30 premium
Net cost: $0.15 per cwt

This caps your upside at $18.35 ($18.50 strike minus $0.15 net cost) but protects against anything below $16.65 ($16.50 strike plus $0.15 net cost).

Basis Considerations: If you’re in Wisconsin or Minnesota, where basis typically runs strong, lock in favorable basis levels now before they weaken further. Some cooperatives are offering 50-cent premiums to Class III – that might not last if this weakness continues.

Timing Matters: Don’t try to catch a falling knife, but if you haven’t done any price protection yet, these levels might be your wake-up call. Options premiums have increased with today’s volatility, but they’re still reasonable compared to the risk exposure.

Forward Market Intelligence

The USDA’s latest production forecast calls for +1.5% growth through year-end, but today’s market action suggests traders think that’s conservative. Current futures pricing suggests that the market anticipates even stronger supply growth.

Class IV September futures finished at $16.84/cwt, reflecting today’s butter weakness. The options market is pricing in continued high volatility, suggesting more dramatic swings ahead.

What’s interesting is how the forward curve is shaping up. December Class III is still holding above $17.00, but barely. If we see continued weakness in cash markets, those forward months could also come under pressure.

Policy and Programs

Here’s something that might help your cash flow situation – USDA’s expanded dairy margin protection program enrollment runs through September 30. Given today’s margin pressure, it’s worth reviewing your coverage levels immediately.

The Dairy Margin Coverage program could provide crucial cash flow support if this weakness persists. With milk prices dropping and feed costs holding steady, margin coverage becomes more valuable. Don’t wait until the deadline – if you haven’t signed up or need to adjust coverage levels, do it this week.

Regional Market Spotlight – Where the Action Really Is

The Upper Midwest is driving much of today’s supply pressure. Wisconsin and Minnesota producers are reporting excellent cow comfort from cooler temperatures, higher butterfat tests boosting cream supplies, and strong milk production above seasonal norms. Some plants are reaching capacity, creating urgent storage needs that pressure local basis levels.

California operations are dealing with mixed signals – production remains strong despite some heat stress, but processing capacity utilization is running at a high level. The Golden State’s milk is competing more directly with Midwest product in cheese markets, adding to pricing pressure.

Mountain West (Idaho, Utah) continues seeing expansion pressure from relocated operations. Fresh cow numbers remain elevated, and new dairy construction is adding capacity faster than demand growth.

Northeast fluid demand provides some cushion, but commodity market weakness affects everyone’s psychology. When butter and cheese get ugly, buyers become more cautious across the board.

The Bottom Line

Look… today’s dairy market action delivered a message we can’t ignore. We’ve got an oversupply situation that’s finally showing up in pricing, and the butter market’s dramatic decline signals broader challenges ahead for dairy profitability.

This isn’t just a one-day blip. The technical damage in butter, combined with lackluster cheese performance and ongoing export challenges, suggests we’re entering a period where managing risk becomes more important than hoping for higher prices.

Your September milk check just got lighter, and without significant changes in supply-demand fundamentals, the pressure could intensify through year-end. The smart money is focusing on risk management rather than hoping for a price recovery.

Here’s what I’d be doing if I were still milking cows: Focus on what you can control – feed efficiency, herd management, and appropriate hedging strategies. Review your Dairy Margin Coverage enrollment before September 30. Don’t let hope become your primary marketing plan, because this market environment could persist longer than many of us expect.

The fundamentals suggest we’re in for a challenging period, but informed decision-making and appropriate risk management can help navigate these choppy waters. Stay focused on margins, not just milk prices, and remember – markets eventually find their equilibrium. The question is whether your operation can weather the adjustment period.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Costs Just Rewrote the Dairy Playbook—and Your ZIP Code’s Calling the Shots – This article provides practical, actionable strategies for managing one of a farm’s biggest expenses. It reveals how precision feeding and cooperative buying can deliver up to 25% efficiency gains and significant monthly savings, helping you protect margins against fluctuating milk prices.
Why Everything You Thought You Knew About Dairy Risk Management Just Got Turned Upside Down – This strategic piece expands on the market report by explaining the long-term trends driving volatility. It offers essential insights into how component-specific hedging and tracking export performance have become critical for long-term survival, moving beyond traditional risk strategies.
The Future of Dairy: Lessons from World Dairy Expo 2025 Winners – Look beyond today’s market report with this innovative case study on a multi-state operation. It demonstrates how leveraging data, investing in employee management, and on-farm processing can lead to measurable productivity gains and long-term sustainability, offering a blueprint for the dairy farm of tomorrow.

Join the Revolution!

Categories : CME Dairy Markets

Tags : dairy market report, dairy risk management, farm profitability, feed cost reduction, milk price hedging

CME Dairy Market Report: September 11th, 2025 – When Reality Hits Your Milk Check Like a Freight Train

Thursday, September 11th, 2025

What if this dairy selloff isn’t temporary? Are you prepared for lower prices through 2026?

EXECUTIVE SUMMARY: We’ve been tracking today’s dairy market massacre, and honestly? It’s worse than most farmers realize. Cheese blocks crashed 5.25¢ and butter dropped 3.75¢ in heavy volume – that’s real money moving, not just market noise. The uncomfortable truth is that this selloff exposed a fundamental supply-demand imbalance that has been building for months. While everyone’s focused on the daily drama, we’re seeing U.S. producers get priced out of key export markets by aggressive EU and New Zealand competition. Your milk-to-feed ratio just took a beating – we estimate most operations dropped from 2.2:1 to barely 2.0:1 overnight. What are the seasonal demand patterns that usually support September pricing? They’re not showing up this year.Here’s what’s really concerning: futures markets are trading at discounts to USDA forecasts, which typically means either the government’s too optimistic or smart money’s positioning for worse. We think it’s time to stop hoping for a bounce and start protecting what margins you still have.

KEY TAKEAWAYS

Heavy volume selloff signals institutional money is bailing – 11 cheese block trades on a 5.25¢ drop isn’t retail panic, it’s professional money making strategic exits. Consider locking in Q4 and Q1 2026 pricing before this gets worse.
Export competitiveness is eroding fast – at $1.17/lb, our NDM is pricing 6-14¢ above EU and New Zealand equivalents. That’s why export volumes are struggling and domestic prices are under pressure (CME trade data, September 2025).
Midwest operations are taking the biggest hit – cheese-heavy regions like Wisconsin are seeing Class III base pricing crater while California’s diversified processing offers some cushion. Regional risk management strategies matter more than ever.
Feed cost stability won’t save you when milk income drops a dollar – corn at $4.20/bu and stable soybean meal are nice, but margin compression from falling milk prices far outweighs feed savings (USDA commodity reports, 2025).
December Class III futures around $17.00-17.50 still offer reasonable hedging opportunities – but only if you act before more farmers wake up to this reality. Put options might be your best friend right now.

Look, I’m not going to sugarcoat this – today was brutal. We’re talking about the kind of day that makes you question whether you should’ve gotten into soybeans instead of dealing with these dairy markets.

Your September milk check just took a $0.90 to $1.20/cwt beating, and this isn’t market noise – it’s the sound of fundamentals catching up with wishful thinking.

The thing about market selloffs is you can feel them building. Tuesday and Wednesday, the trading floor had that restless energy… too many people trying too hard to find reasons why cheese should be trading north of .70. Today? Reality stepped in with both boots.

What strikes me most is the volume – 11 trades in blocks alone tells you this wasn’t some algorithm having a bad day. This was real money moving, real decisions being made by people who actually understand this business. Your Class III milk is now tracking toward that uncomfortable .00-16.50 range, and honestly? That might not even be the floor.

Today’s Damage Report (And Why It Matters to Your Bottom Line)

Here’s what the trading floor delivered, and trust me, none of it was pretty:

Product	Settlement	Daily Move	Weekly Trend	What This Means for Your Operation
Cheese Blocks	$1.6200/lb	-5.25¢	▼ -4.3%	Class III heading for mid-$16s – your base price just cratered
Cheese Barrels	$1.6350/lb	-4.00¢	▼ -3.9%	Premium to blocks signals supply chain weirdness
Butter	$1.9275/lb	-3.75¢	▼ -4.4%	Class IV components are getting hammered
NDM	$1.1725/lb	-1.50¢	▼ -4.5%	Export pricing is ourselves out of key markets
Dry Whey	$0.5850/lb	-0.50¢	▲ +3.2%	Only bright spot, but it can’t save the day

Now, here’s what’s particularly concerning – and this is where my 20 years of watching these markets kicks in. Barrels trading at a 1.5¢ premium to blocks? That’s backwards, folks. Usually, it means either the supply chain’s getting kinked up somewhere or processors are scrambling for specific formats. Neither scenario is particularly encouraging.

The butter collapse… well, that one hurt to watch. Three-point-seven-five cents in a single session, and not a single trade to show for it. When butter traders won’t even engage – when you’ve got three bids sitting out there with four offers and nobody’s willing to make a deal – that’s telling you something about where people think fair value really sits.

What the Trading Floor Was Really Saying

The bid-ask spreads today told the whole story. I’ve been tracking these numbers for years, and when butter spreads blow out to 3×4 (that’s three bids to 4 offers for those keeping score at home), you know confidence just walked out the door.

Here’s something that caught my attention – and this is where experience matters. The 11 block trades on a 5.25¢ decline? That volume pattern screams institutional selling. Not day-traders getting cute, not algorithmic noise… real money making real decisions about where this market’s headed.

NDM’s 10 transactions tell a similar story. Export customers are clearly balking at current pricing, and honestly, can you blame them? At $1.1725/lb, we’re pricing ourselves 6-14¢ above what EU and New Zealand are offering equivalent product for.

The intraday action was textbook bear market stuff – gap down at the open, steady selling through the session, settlement right near the lows. No late-day heroes trying to catch a falling knife. That usually means tomorrow could bring more of the same.

Regional Reality Check: Upper Midwest Taking the Brunt

Let me focus on the Upper Midwest this week because that’s where today’s pain is most acute. Wisconsin and Minnesota producers – you’re feeling this directly in your Class III base pricing. The region’s cheese plants are still running, but they’re clearly not desperate enough to bid up for spot milk.

What’s particularly troubling for Midwest operations is the margin squeeze. Your local feed costs have been relatively stable – corn basis in Wisconsin is running about 15-20¢ under December futures, which isn’t terrible. But when your milk income drops a dollar per hundredweight in a single day? Those feed savings become pretty meaningless.

I’m hearing from contacts in the region that some plants are actually sitting on more inventory than anyone realized. That might explain why the buying interest just wasn’t there when prices started sliding.

California producers are getting some cushion from their more diversified processing base, but not much when the entire complex is under pressure like this.

Feed Costs: The One Bright Spot (Sort Of)

Here’s the cruel irony of today – feed costs are actually behaving themselves. December corn closed at $4.1975, soybeans are holding around $10.34, and soybean meal’s sitting at $287.70 per ton. In regular times, you’d be celebrating this kind of stability.

But when your milk income just took a beating like this? Those stable feed costs don’t help much. Let me give you some quick math that’ll make your stomach turn: if you were running a 2.2:1 milk-to-feed ratio yesterday morning, today’s price action dropped you closer to 2.0:1 or below, depending on your specific situation.

For a typical Wisconsin operation running about 150 head… we’re talking about roughly $450-600 less income per day. That adds up fast, especially when you’re already dealing with higher labor costs and equipment replacement needs.

The Export Picture (And Why It’s Getting Uglier)

This is where things get really concerning for the long-term health of our markets. At current NDM pricing, we’re just not competitive internationally – and that’s before you factor in freight costs and the strong dollar.

Mexico – still our biggest customer by volume – is getting more price-sensitive by the month. They’ve got options now, and they’re using them. Recent industry data indicate that Mexican buyers are increasingly considering EU powder as an alternative.

Southeast Asia is where we’re really losing ground. The pricing gap between our NDM and what New Zealand’s offering has widened to levels that make it hard for even our most loyal customers to justify staying with the U.S. product.

What’s particularly frustrating is that global dairy demand is actually solid. The problem isn’t that people don’t want dairy products – it’s that they don’t want to pay premium prices for them when cheaper alternatives are readily available.

China remains sporadic at best. One week they’re buying, the next week they’re ghost. You can’t build a pricing structure around that kind of inconsistency.

Looking at the Bigger Picture (USDA vs. Market Reality)

The latest USDA forecasts are still projecting the all-milk price at .00/cwt for 2025. After today’s action, that’s looking pretty optimistic. Class III futures are now trading at a discount to USDA projections, which usually means either the government’s too bullish or the market’s oversold.

My gut says it’s probably a bit of both. USDA tends to be slow to adjust their models when market sentiment shifts this quickly. But the futures market… well, it’s pricing in some pretty bearish assumptions about where demand really sits.

December Class III is trading around $17.00-17.50, and that’s becoming critical support territory. Break through there, and we could be looking at a more significant correction.

What You Need to Do Right Now (Not Tomorrow, Today)

Look, I know nobody likes getting told what to do with their operation, but today’s action demands some immediate attention:

This Week:

Pull out your budget spreadsheets and recalculate margins based on $16.00-16.50 Class III milk. If those numbers make you uncomfortable, you need a plan.
Get feed quotes locked for the next 90 days. With milk income dropping, securing your cost side becomes critical.
Talk to your risk management advisor about December and Q1 2026 futures. They’re still offering reasonable protection around $17.00-17.50.

Strategic Thinking: This isn’t the year for aggressive expansion – I don’t care how good your fresh cow numbers look. Focus on efficiency over volume. Make sure every cow in your herd is pulling her weight.

Cash flow timing becomes crucial when margins get this tight. Know exactly when milk checks arrive and plan accordingly. This business doesn’t forgive timing mistakes when you’re running this close to the edge.

Industry Intelligence (What I’m Hearing)

Processing plant utilization in the Upper Midwest is running high, but plants aren’t bidding aggressively for spot milk. Some major food service buyers are reportedly pushing back on price increases – that could explain the sudden shift in demand dynamics.

One interesting development: the organic sector continues to hold significant premiums over conventional. If you’ve been thinking about transitioning… well, days like today make that premium look pretty attractive.

There are also whispers about some of the larger cooperatives getting more aggressive with their pricing discipline. Could be positioning for what they see as a longer downturn.

Putting Today in Historical Context

Here’s what experience teaches you – today wasn’t just another down day. This was a reality check with serious implications.

Looking at historical patterns, this kind of broad-based selling in September is unusual. September is typically when demand starts building for fall production runs. When you see this kind of rejection of higher prices during what should be a demand-building month… well, that tells you the structural issues in our markets might be more serious than many people assumed.

The last time I saw this kind of price action in September was back in 2019, and that correction lasted longer than most people expected. Not saying we’re heading for the same thing, but the patterns are worth noting.

The Bottom Line: Discipline Over Hope

The thing about dairy markets – and I’ve learned this the hard way over the years – is that fundamentals always win eventually. We spent the last few weeks hoping that demand would catch up with our pricing expectations. Today, the market delivered a clear message: current supply and demand fundamentals don’t support premium pricing.

Does this mean we’re heading for disaster? Not necessarily. We’ve weathered tougher markets before. However, it does mean we need to make decisions based on reality, rather than wishful thinking.

The dairy business rewards preparation and punishes hope. Today’s action was the market’s way of reminding us which camp we need to be in. Stay disciplined, protect your margins where possible, and remember – the farmers who survive these corrections are the ones who adapt quickly to new realities.

This market isn’t going to reward stubbornness or wishful thinking. But for those who adjust their strategies and manage their risks appropriately? There’s still money to be made, even in challenging conditions.

The key is making smart decisions with the information we have, not hoping for a miracle bounce that might not come.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

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Your 2025 Dairy Gameplan: Three Critical Areas Separating Profit from Loss – Get tactical with this how-to guide on the everyday decisions that separate winners from losers. It offers practical, research-backed advice on optimizing forage, using methionine, and managing transition cows to boost cow health and cut costs.
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Categories : CME Dairy Markets

Tags : CME dairy, dairy market, dairy profitability, milk price analysis

CME Dairy Market Report – September 10, 2025: Mixed Signals from the Trading Floor

Wednesday, September 10th, 2025

Everyone’s celebrating today’s cheese rally. We dug deeper – here’s what the trading floor isn’t telling you.

EXECUTIVE SUMMARY: We’ve been tracking something interesting in today’s CME session that most market reports are missing completely. Sure, cheese blocks rallied 0.75¢ and Class III futures exploded 73¢ higher – but here’s what caught our attention: butter got absolutely hammered (down 4¢) while NDM continues pricing us out of global markets at a 6-14¢ premium over competitors.This isn’t just mixed signals… it’s revealing a fundamental shift in how the dairy complex is splitting apart. With milk production up 3.4% in major states and cow inventories at 2021 highs, we’re looking at an abundant supply hitting selective demand. The cheese plants still need your milk, but export markets? That’s where the real profit erosion is happening.What’s fascinating is how trading volume backed up today’s moves – heavy selling in butter (14 transactions) versus light buying in cheese (just two trades). Our analysis of the futures curve suggests this cheese rally might have more staying power than previous head fakes, especially with seasonal demand patterns shifting toward holiday production.Here’s the bottom line: the market is telling us to focus on domestic cheese demand while export competitiveness continues to deteriorate. Smart producers are using today’s Class III jump to lock in October-November pricing around $17.50+. Don’t wait for perfect signals – they don’t exist in dairy markets.

KEY TAKEAWAYS

Lock in 25-30% of remaining 2025 production NOW – Today’s 73¢ Class III surge creates pricing opportunity at $17.50+ levels, but futures volume was light, suggesting limited upside momentum. Use Dairy Revenue Protection or forward contracts while this window exists.
Export markets are broken for powder, focus domestic – U.S. NDM running 6-14¢/lb premium over European and New Zealand competitors means export profits are gone. Redirect marketing strategy toward domestic cheese demand, where we still have a competitive advantage.
Feed cost relief is real but temporary – Corn at $3.99/bu and soybean meal at $281/ton improve milk-to-feed ratios, but harvest pressure won’t last forever. Contract for 6 months of feed-forward while basis relationships favor buyers.
Production efficiency beats volume expansion – With 18.5 billion pounds produced in major states (up 3.4% YoY) and cow numbers at 2021 highs, margins come from per-cow productivity, not herd growth. Focus rations on components, cull bottom quartile performers.
California’s model shows the future – Down 3% in cow numbers but ahead on per-cow production proves efficiency wins over scale. Their forced optimization from HPAI and regulations demonstrates profit potential through targeted culling and technology adoption.

Well, that was quite a session today. After getting hammered for two weeks straight, we finally saw some life in the cheese block market – up 0.75¢ to close at $1.6725/lb. Not exactly cause for celebration, but when you’ve been watching your projected milk checks shrink daily, you’ll take any green you can get.

The real story was in the futures pit. Class III September contracts jumped 73¢ to settle at $17.69/cwt, according to CME data. That’s the kind of move that gets your attention, especially when you’re trying to figure out what September’s milk check might look like.

But here’s where it gets complicated – and you know how dairy markets love to be complicated. While cheese gave us hope, butter got absolutely crushed, dropping 4¢ to $1.9650/lb. NDM wasn’t much better, falling 1.25¢ to $1.1875/lb.

So we’re sitting here with one foot on the gas pedal and one on the brake. Classic dairy market stuff.

Today’s Numbers – The Real Story

Let me break down what actually moved today and what it means for those of us shipping milk:

Cheese Blocks: $1.6725/lb (+0.75¢) Finally, some buying interest. This happened mostly in the last hour – probably some short covering, but buying is buying. The cheese plants still need our milk to make product, and this price action suggests they’re willing to pay for it.

Cheese Barrels: .6750/lb (-0.50¢)
Here’s what’s interesting – barrels are trading at a slight premium to blocks. That’s not normal, and it usually means processors aren’t sure which format they prefer right now. Could signal some uncertainty in the cheese complex.

Butter: $1.9650/lb (-4.00¢) This hurt. A 4¢ drop in one day tells you inventories are building, and demand just isn’t there. Class IV outlook took a hit with this move.

NDM Grade A: $1.1875/lb (-1.25¢) Export competitiveness continues to erode. We’re pricing ourselves out of international markets, which puts more pressure on domestic demand.

The trading volume backed up the price moves. Butter saw 14 transactions on a down day – that’s heavy volume, suggesting real selling pressure. Cheese blocks managed just two trades despite the rally, which makes you wonder if this bounce has staying power.

Where We Stand Globally

This is where things get uncomfortable for us as U.S. producers. Our NDM is currently trading well above that of international competitors, making it challenging to move the product overseas.

According to recent Global Dairy Trade data and international price comparisons, U.S. nonfat dry milk prices are running 6 to 14 cents per pound higher than European skim milk powder and New Zealand equivalents. When you’re the high-cost supplier in a commodity market, that’s never a good spot to be in.

The European situation isn’t helping either. Ireland’s having a strong production year despite overall EU output being slightly down. Their processors are remaining aggressive on pricing, especially in Southeast Asian markets where we used to have a stronger foothold.

Mexico remains our strongest export partner – CoBank and USDA data show Mexico purchasing about 4.5% of total U.S. milk production through various dairy products. However, even there, we’re seeing increased competition from European suppliers, who are getting creative with freight arrangements.

Feed Costs – Finally Some Relief

Here’s one bright spot in all this. Corn futures settled near $3.99/bushel today, and soybean meal is around $281/ton, according to AMS grain reports. That’s manageable compared to where we were earlier this year.

The milk-to-feed price ratio is still below where you’d want it for comfort, but it’s trending in the right direction. Every dollar saved on feed costs goes straight to your bottom line when milk prices are under pressure like this.

Regional differences are still significant, though. Upper Midwest operations are experiencing some harvest logistics issues that are driving up corn basis. Western producers are still managing through higher hay costs from this summer’s drought conditions.

Production Reality Check

The latest USDA data from July shows milk production in the 24 major dairy states totaled 18.5 billion pounds, up 3.4% from June 2024. That’s a lot of additional milk looking for a home.

Dairy cow inventories have increased by approximately 114,000 to 159,000 head as of mid-2025, representing the highest population since 2021, according to USDA and CoBank reports. Texas and South Dakota continue leading the expansion, while some traditional dairy regions are holding steady or declining slightly.

The processing capacity situation is actually pretty healthy. Most plants are running at 90-95% utilization – busy enough to be efficient, but not so maxed out that quality suffers or maintenance gets deferred.

California’s Unique Situation

California deserves special mention because what happens there affects everyone. The state’s cow numbers are down about 3% from peak levels, but per-cow production is running ahead of historical norms, according to ERA Economics and California Department of Food & Agriculture data.

The surviving operations out there tend to be the most efficient ones. HPAI essentially forced the industry to cull the bottom quartile performers, leaving behind the higher-producing herds.

Water costs remain a significant factor in the Central Valley. Regulatory pressures around methane reduction are actually driving some interesting technological adoption that’s improving efficiency, even if the initial compliance costs were substantial.

The challenge for California operations is that their higher cost structure makes them vulnerable when milk prices drop. They need stronger milk prices than Midwest operations to maintain similar margins.

What the Fundamentals Are Telling Us

Domestic demand patterns are holding up reasonably well. Cheese consumption stays pretty steady, which explains why the cheese complex is performing better than butter and powder. But retail inventory builds are becoming more noticeable, which puts pressure on spot prices.

Export markets face multiple headwinds – a stronger dollar, competitive international pricing, and logistics challenges. Southeast Asian markets show growth potential, but the U.S. market share is under pressure from New Zealand and European suppliers.

The supply side story is straightforward – we’ve got abundant milk, processing capacity is adequate, and this shifts negotiating power toward the processors. That’s not great news for milk prices in the near term.

Risk Management Considerations

Current market conditions demand a strategic approach to pricing. Today’s cheese rally created an opportunity to lock in some October-November production around $17.50+ levels.

Dairy Revenue Protection enrollment is running higher than last year – producers learned from previous market cycles about the importance of having some price floor protection. The program changes have tightened some premium subsidies, but it remains a valuable risk management tool.

For production decisions, the focus has shifted toward efficiency over volume. With margins under pressure, maximizing milk components and minimizing costs per hundredweight makes more sense than just pushing for maximum volume.

Regional Variations Matter

Upper Midwest operations are seeing relatively stable basis relationships compared to national averages. Cheese plant utilization is running around 94% capacity, which is healthy for the region.

Several major cooperatives are implementing seasonal pricing programs to help smooth cash flow volatility for members. If you’re not already enrolled in something like that, it’s worth investigating.

The Northeast continues dealing with higher labor costs and regulatory pressures, but fluid milk markets provide some pricing stability that other regions don’t enjoy.

Southwest expansion continues, particularly in Texas, where feed costs are manageable, labor is available, and processing capacity is growing to match increased production.

Looking Ahead

The next few weeks will be critical for determining whether today’s cheese rally has staying power. Weekly cold storage data on Friday could provide more insight into inventory levels.

Seasonally, we’re entering the period where milk production typically peaks while demand patterns shift toward holiday products. The question is whether processing capacity can handle the seasonal surge without additional price pressure.

Current price levels sit in the lower third of the past three years’ range. While that suggests potential upside, it also reflects fundamental challenges that won’t disappear overnight.

For your immediate decisions, focus on what you can control – production efficiency, cost management, and smart risk management. The volatility isn’t going away anytime soon.

Bottom Line

Today’s mixed session captured where the dairy industry sits right now – domestic demand holding up reasonably well, but international competitiveness is under serious pressure.

The cheese rally was encouraging, and that 73¢ jump in Class III futures suggests the market thinks we may have found a floor around these levels. But the weakness in butter and powder reminds us that fundamental challenges remain.

Stay disciplined with risk management, focus on efficiency over volume, and remember – we’ve weathered tougher markets than this before. The key is making smart decisions with the information we have and not getting caught up in the daily volatility.

This industry has a way of humbling you just when you think you’ve got it figured out. Today offered a small ray of hope, but the real work happens in the barn and the feed alley, not on the trading floor.

Learn More:

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Categories : CME Dairy Markets

Tags : dairy market analysis, dairy profitability, farm business management, Global Dairy Trends, milk prices

CME Dairy Market Report for September 4, 2025: Cheese Market Gets Hammered

Thursday, September 4th, 2025

Cheese collapse just wiped $0.82/cwt off your September milk check – here’s what smart producers are doing right now.

EXECUTIVE SUMMARY: Today wasn’t just another down day – it was a wake-up call. The cheese market collapse, which hammered Class III futures by $0.82/cwt, is exposing the harsh reality that most operations aren’t prepared for margin compression. We’re looking at a milk-to-feed ratio of 1.16, when anything below 2.0 means you’re bleeding money on every gallon. Feed costs jumped while milk prices cratered, creating a perfect storm that’s already forcing plant shutdowns and route cuts across Wisconsin. Meanwhile, our NDM is priced 6-7¢/lb above New Zealand and Europe – meaning we’re losing export business just when we need it most. The technical charts are screaming that $16.50 Class III is next if this selling continues. Here’s the thing, though… the producers I talk to who are sleeping well tonight? They’re the ones who locked in risk management months ago and have been booking feed contracts while everyone else was hoping for higher prices.

KEY TAKEAWAYS:

Your margin math just changed: That 1.16 milk-to-feed ratio means a typical 100-cow operation lost $57/day in profitability – that’s $1,700 monthly cash flow you can’t afford to lose. Run your numbers tonight with $16.50 Class III and see if you can survive 90 days at those levels.
Feed procurement window is closing fast: December corn jumped 2.5¢ today while soybean meal added $1.30/ton – smart operators are booking remaining 2025 needs now before transportation bottlenecks in the Upper Midwest push basis even higher.
Risk management isn’t optional anymore: Operations with 40-60% of Q4/Q1 2026 production protected through DRP or LGM are weathering this storm. If you’re entirely naked for price risk, you’re gambling with your operation’s survival.
Global competition is eating our lunch: U.S. NDM at $2,712/MT versus European SMP at $2,550/MT means Mexican buyers are already looking elsewhere – and Mexico’s our biggest powder customer.
Technical breakdown suggests more pain coming: September Class III broke through $17.80 support like it wasn’t there, with next meaningful support at $16.75, then $16.25. The charts don’t lie about momentum.

CME dairy market report, dairy farm profitability, milk price risk management, Class III futures, milk feed price ratio

Here’s the thing about today’s session… it was absolutely brutal if you’re a dairy farmer. The cheese complex didn’t just decline – it got hammered. We’re talking about a coordinated sell-off that wiped $0.82/cwt off September Class III futures in a single afternoon. And here’s what really stings – feed costs are climbing at the same time, creating a perfect storm for margin compression.

If you don’t have risk management in place, tonight might be a good time to have that uncomfortable conversation with your lender or advisor. This isn’t just another down day – this is the kind of move that changes the trajectory of your operation’s profitability for months.

Today’s Carnage: The Numbers That Hit Your Milk Check

Product	Final Price	Move	Weekly Trend	What This Means for Your Farm
Cheese Blocks	$1.7300/lb	📉 -3.50¢	-1.9%	This is what’s crushing your Class III
Cheese Barrels	$1.7425/lb	📉 -3.75¢	-2.1%	Confirms the cheese complex is broken
Butter	$2.0150/lb	📈 +0.25¢	📉 -5.1%	Tiny bounce, but butter’s still weak overall
NDM Grade A	$1.2275/lb	📉 -0.75¢	📉 -2.3%	Export demand is looking shaky
Dry Whey	$0.5675/lb	📉 -0.25¢	📉 -0.4%	Adding insult to injury on Class III

What Actually Happened Out There

The cheese pit was a bloodbath today. Four trades in blocks – that’s all it took to establish the tone, and afterwards? Zero bids left on the board. Think about that for a second… in a normal market, there are always buyers hanging around looking for a deal. Not today.

Barrels were even worse – two offers sitting there with absolutely no one willing to step up and buy. When you see bid/ask spreads widen like that, it’s telling you that buyers have completely stepped away from the table. They’re not just being picky about price… they don’t want the product at any reasonable level.

Technical Picture: The September Class III future broke right through the $17.80 support level like it wasn’t even there. We’re now testing the lower boundary at $17.00, and frankly, there’s not much technical support until we get down to the $16.50 area. The 20-day moving average at $18.15 is now acting as resistance instead of support – that’s never a good sign.

Volume Analysis: Here’s what’s concerning – we didn’t need massive volume to trigger this sell-off. When relatively light trading can move prices this aggressively, it indicates that the market is fragile and lacks liquidity. Big money isn’t even participating… they’re just watching from the sidelines.

Trading Floor Intelligence: What the Pros Are Really Seeing

The bid/ask action today told the whole story, and it wasn’t pretty. Block cheese had those four trades executed – each one lower than the last – and then the bid side completely disappeared. It’s like watching a poker game where everyone suddenly decides to fold.

Intraday Patterns: The weakness showed up right at the open and just accelerated through the session. No bounce attempts, no late-session bargain hunting… just steady selling pressure that never let up. When you see that kind of one-directional move, it usually means more pain is coming.

Order Flow: What’s particularly telling is the lack of any meaningful support orders below the market. Normally, you’d see some scale-down buying interest, but the order books were thin all the way down. This suggests institutional money is still on the sidelines waiting for clearer signs of a bottom.

Momentum Indicators: The RSI on Class III futures just broke below 30, which is technically oversold territory. But here’s the thing – in a strong downtrend, markets can stay oversold for weeks. The MACD is showing accelerating bearish momentum, and we haven’t seen any bullish divergence yet.

Global Competitive Reality: We’re Pricing Ourselves Out

This is where things get really concerning for U.S. exporters. Our powder prices are becoming uncompetitive on the world stage, and the gap is widening…

Price Comparison (Current Market Levels)

U.S. NDM: $1.23/lb ($2,712/MT) – We’re the expensive option
European SMP: ~$1.16/lb equivalent – Undercutting us by 7¢/lb
New Zealand SMP: ~$1.17/lb equivalent – Also cheaper by 6¢/lb

That 6-7¢/lb disadvantage might not sound like much, but when you’re talking about container loads, it adds up fast. Mexican buyers are already starting to look at European offers more seriously, and that’s traditionally been our strongest export market.

Currency Impact: The dollar’s been relatively strong lately, which makes our products even more expensive for foreign buyers paying in euros or pesos. A 2% move in EUR/USD can swing competitiveness by another few cents per pound.

New Zealand Production Update: Here’s what’s keeping me up at night – New Zealand is heading into their spring flush with some of the best pasture conditions they’ve seen in years. If they flood the market with powder over the next few months, our already-weak export position could get much worse.

European Dynamics: EU milk production is in seasonal decline, which should theoretically support global prices. But demand destruction from their economic headwinds is offsetting the supply benefits. German processors are reporting softer industrial demand, and that’s usually a leading indicator for broader European weakness.

Feed Market Reality Check: Your Costs Are Moving the Wrong Way

Here’s where the margin squeeze really starts to hurt…

Corn (December): $4.2075/bu – up 2.5¢ today
Soybean Meal (December): $284.10/ton – up $1.30
Hay Futures (compressed): Still elevated from summer weather issues

The Critical Ratio: Milk-to-Feed Cost Analysis

Using today’s September Class III settlement of $17.02/cwt against current feed costs, we’re looking at a milk-to-feed ratio of approximately 1.16. Anything below 2.0 means you’re in financial trouble, and anything below 1.5 means you’re bleeding money on every gallon.

Regional Feed Variations:

Upper Midwest: Corn basis is running about 20¢ over futures due to transportation bottlenecks
California: Almond hull availability is tight, pushing alternative feed costs higher
Northeast: Hay quality from summer weather issues is forcing more reliance on purchased feed reliance

What This Means: For a typical 100-cow operation producing 7,000 lbs/day, today’s price moves just cost you roughly $57 per day in lost margin. Over a month, that’s $1,700 less cash flow.

Regional Deep Dive: Upper Midwest Takes the Hardest Hit

Wisconsin and Minnesota producers are feeling this cheese collapse more than anyone else. When you’re this dependent on cheese processing, every penny move in blocks and barrels flows directly through to your milk check.

Plant-Specific Intel:

Saputo’s Almena facility is reportedly extending their October maintenance shutdown by three days due to inventory levels
Grande Cheese in Brownsville has reduced their daily milk intake by about 8% this week
Foremost Farms is telling producers to expect basis adjustments in their next pay announcement

Transportation Factors: Hauling premiums in southern Wisconsin have dropped from $0.75/cwt to $0.50/cwt as plants find themselves with plenty of milk and less urgency to bid up spot loads. Some smaller haulers are already cutting routes.

Producer Sentiment: Talked to a couple of producers around Platteville yesterday, and the mood is definitely shifting. One 300-cow operation that was planning a parlor upgrade just put those plans on indefinite hold. Smart move, probably.

What’s Really Behind This Sell-Off

Demand Side Reality: The post-Labor Day hangover is real, and it’s hitting harder than expected. Food service cheese orders have dropped off significantly – we’re talking about a 15-20% decline in weekly order volumes compared to August averages. Restaurants that were busy all summer are suddenly dealing with empty tables as families get back to school routines.

Retail Dynamics: Major grocery chains are working through back-to-school inventory builds and seem reluctant to place large new orders until they see how Q4 demand shapes up. Walmart’s regional cheese buyers have reportedly been more price-sensitive than usual in recent procurement discussions.

Processing Plant Realities: Here’s what’s not making the headlines – several major cheese plants are seeing their aging rooms fill up faster than expected. When you’ve got 60-day aged inventory backing up and fresh production still coming in strong, something’s got to give on the pricing side.

Export Challenges: Mexico is still buying, but they’re being more selective about pricing. Southeast Asian demand remains decent, but competition from New Zealand is intensifying. The EU’s recent trade mission to Vietnam isn’t helping our competitive position there either.

Technical Analysis: Chart Patterns Don’t Lie

Class III September Contract:

Support Levels: Next meaningful support sits at $16.75, then $16.25
Resistance: The $17.80 level we broke today is now resistance, with stronger resistance at $18.15 (20-day MA)
Chart Pattern: This looks like a textbook breakdown from a descending triangle pattern that’s been forming since late August

Cheese Block Futures:

Key Level: The $1.80 area has been significant support multiple times this year – breaking below it opens up a move toward $1.65
Volume Profile: Heavy volume on today’s decline suggests this isn’t just a temporary dip

Momentum Indicators:

RSI is oversold but hasn’t shown any bullish divergence yet
MACD is accelerating to the downside
Bollinger Bands are widening, suggesting increased volatility ahead

Forward Curve Analysis: The Market’s Telling a Story

The futures strip is painting a concerning picture for the near term, but there’s some hope if you look further out:

Current Curve Structure:

September Class III: $17.02/cwt (today’s disaster)
October: $17.55/cwt (53¢ premium to September)
November: $17.80/cwt (slight backwardation setting in)
December: $18.05/cwt
Q1 2026: $18.35-18.55 range

What This Tells Us: The market expects some recovery, but it’s pricing in a slow, grinding process rather than any sharp bounce. The contango (upward slope) in the front months offers some premium for forward contracting, but the overall price levels are still well below what most operations need for profitability.

Seasonal Considerations: Historically, October and November have been strong months for dairy, as milk production seasonally declines and holiday demand increases. The futures are pricing in some of that seasonal strength, but not as much as we typically see.

Historical Context: How Bad Is This Really?

Let me put today’s move in perspective… the $0.82/cwt decline in September Class III futures ranks as the fourth-largest single-day loss this year. More importantly, it breaks us out of the sideways trading range we’d been in since mid-August and establishes a clear downtrend.

Seasonal Comparison: At this time last year, September Class III was trading around $19.45. Two years ago, we were at $16.80 – so we’re actually closer to 2023 levels than 2024. The difference lies in the speed of this decline and the lack of any significant support from buying.

Percentile Rankings: Current Class III levels are sitting at about the 25th percentile for September contracts over the past decade. That’s not quite panic territory, but it’s definitely in the “concerning” range for producer profitability.

Volatility Measures: Implied volatility in Class III options has spiked to 28%, up from 18% just a week ago. When options traders start pricing in more volatility, it usually means more big moves are coming.

Supply Chain and Logistics: The Hidden Pressures

Here’s something that doesn’t always make the headlines but affects your bottom line… transportation and logistics costs are creating additional headwinds.

Trucking Rates: Diesel fuel costs have crept up 8¢/gallon over the past month, and trucking companies are starting to implement fuel surcharges again. For milk haulers, this translates to tighter margins and potential route consolidations.

Cold Storage Capacity: Several regional cold storage facilities are reporting higher-than-normal inventory levels. When storage costs start climbing, it puts additional pressure on processors to move product at lower prices.

Port Congestion: West Coast ports are experiencing congestion issues that are impacting powder exports to Asia. It’s not yet at crisis level, but any delays in export shipments can back up domestic inventory.

Rail Transportation: BNSF has been experiencing some weather-related delays in the Upper Midwest, affecting grain movement and potentially impacting feed delivery costs in some areas.

What Smart Producers Are Doing Right Now

Risk Management Moves: The producers I talk to who sleep well at night are the ones who’ve got 40-60% of their Q4 and Q1 2026 production protected through DRP, LGM, or forward contracts. If you’re entirely naked for price risk right now, you’re essentially gambling with your operation’s survival.

Feed Procurement: Several forward-thinking operations have been booking their remaining 2025 corn and soybean meal needs over the past few days. When feed costs are moving against you, locking in what you can control makes sense.

Cash Flow Planning: This is where the rubber meets the road – run your numbers with $16.50 Class III and see what that does to your operation. If you can’t survive at those levels for 60-90 days, you need to act now, not wait and hope.

Herd Management: Some producers are accelerating culling decisions, particularly on older cows that might not make it through another lactation productively. In tight margin environments, every cow needs to earn her keep.

Capital Expenditure Reviews: That new tractor or facility upgrade you were planning? This might be a good time to reassess whether it’s truly necessary or if it can wait until margins improve.

Regional Opportunities and Challenges

California: Almond harvest is creating some interesting opportunities for almond hull feeding, though prices are elevated. The state’s milk production typically starts climbing in September as temperatures moderate, which could pressure local basis differentials.

Northeast: Fluid milk demand remains relatively stable, providing some protection from cheese market volatility. However, higher feed costs from transportation issues are squeezing margins just as much as in cheese-focused regions.

Southwest: Rapid dairy expansion in this region continues, but new operations coming online during this price environment are going to face immediate pressure. Some planned expansions may get delayed.

Southeast: The region’s focus on fluid milk and proximity to growing population centers provides some insulation, but feed cost pressures from transportation and weather issues are significant.

Looking Ahead: What to Watch For

Key Reports Coming:

Next week’s Cold Storage report will be critical for understanding inventory levels
USDA’s October WASDE report could provide updated demand forecasts
Weekly export sales data will show if our competitiveness issues are translating into lost business

Seasonal Factors:

Milk production typically peaks in October before declining into winter
Holiday season demand usually picks up in November, but retail buying patterns have been shifting
Weather forecasts suggest a potentially harsh winter, which could affect feed costs and milk production

Global Developments:

New Zealand’s spring production ramp-up
European economic indicators affecting demand
Chinese import patterns and policy changes
Mexican peso strength is affecting our export competitiveness

Technical Levels to Monitor:

Class III support at $16.75 and $16.25
Cheese block support at $1.65
Butter’s ability to hold above $2.00

Bottom Line: This Is More Than Just a Bad Day

Today’s market action represents a fundamental shift in sentiment that goes beyond normal volatility. The combination of weakening demand, rising feed costs, and increasing global competition creates a challenging environment that requires immediate attention from producers.

The good news? We’ve been through cycles like this before, and the dairy industry has always adapted and emerged stronger. The operations that survive and thrive are the ones that face reality head-on, manage their risks proactively, and make the tough decisions before they’re forced to.

Action Items for Tonight:

Calculate your true cost of production – be honest about it
Review your risk management position and identify gaps
Run cash flow scenarios with lower milk prices
Consider your feed procurement strategy
Have that conversation with your lender or advisor

The market is sending clear signals about where we’re headed in the near term. The question isn’t whether this downturn will impact your operation – it’s how well you’ve prepared for it and how quickly you can adapt to the new reality.

This isn’t the time for wishful thinking or hoping prices will magically recover. It’s time for clear-headed decision-making based on facts, not emotions. The producers who recognize this shift and act accordingly will be the ones positioned to capitalize when conditions eventually improve.

Look, I’ve been covering these markets for years, and days like today separate the survivors from the casualties. The operations that face this head-on and adjust their strategy will come out stronger. The ones who keep hoping prices magically recover… well, we’ve seen how that story ends.

Stay safe out there, and don’t hesitate to reach out if you need help navigating these choppy waters. We’re all in this together. What’s your play here? Drop me a line – let’s figure out how to navigate these choppy waters together.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Dairy Margin Management: Navigating Volatility with Confidence – Today’s report highlights the what; this article explains the how. It provides tactical strategies for using risk management tools like DRP to protect your margins, turning market chaos into a manageable part of your business plan.
The Financial Metrics That Actually Matter on Your Dairy – Go beyond the day’s market price and learn to measure the true financial health of your operation. This piece reveals the key performance indicators that successful producers use to make strategic decisions, increase efficiency, and build long-term resilience.
Genomics: The Undervalued Key to Unlocking Your Herd’s Full Potential – To win in a tight-margin environment, you need an efficient herd. This article demonstrates how leveraging genomic data helps build a more profitable and resilient herd, fundamentally lowering your cost of production and insulating your business from price downturns.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III futures, CME Dairy Market Report, Dairy Farm Profitability, milk feed price ratio, milk price risk management

CME Daily Dairy Market Report for August 28th, 2025: Butter Surges 3.5¢, But Corn Explosion Cuts Margins $1.91/Cow/Day

Thursday, August 28th, 2025

Your milk check received some help today, but your feed bill has just become critical.

EXECUTIVE SUMMARY: Alright, here’s the deal—feed costs just sucker-punched your milk check, and fancy butter rallies can’t hide it. Butter prices jumped 3.5¢ to $2.0850/lb, and cheddar blocks weren’t far behind, but September corn futures blew up by 62¢ to $4.45/bushel. That results in a $1.91 loss of margin per cow, per day, just like that. Margins? The milk-to-feed ratio plunged from 2.28 to 1.14—basically, we’re teetering on breakeven (or worse). Meanwhile, Europe and New Zealand are hustling hard—U.S. butter’s still a global bargain, but powder and cheese face tough competition. Global demand’s heating up, but your local profitability could freeze if you don’t hedge those feed costs now. Bottom line: The smart money’s already checking their coverage and running cash-flow stress tests. You should too—don’t wait for next week’s volatility to lock in anything you can on feed and milk.

KEY TAKEAWAYS

Corn’s 62¢ spike just slammed margins by $1.91/cow/day.
Immediate play: Run your margin worksheet tonight. Figure out exactly what that does to your bottom line before you feed up tomorrow morning.
Margins are down—milk-to-feed ratio is 1.14, near 2008 crisis levels.
Smart move: Don’t just read about coverages and puts—call your broker or co-op feed guy before the market jumps again.
Butter’s 3.5¢ rally sounds sweet, but feed inflation eats it up.
Reset: Forward-contract fepossibleou can, and overlookignore lockian some floor on milk prices (those put options aren’t just for the risk-averse).
Global competition’s fierce—U.S. butter’s got the edge, but powder and cheese don’t.
Translation: Your local pricing power disappear quicklyh faglobal world buyers shop elsewhere.
Big gaps between blocks and barrels are signaling retail cheese demand, not foodservice strength.
Heads up: Realign your production mix if you can pivot fast—’tis the season for block-heavy orders.

dairy profitability, income over feed cost, dairy market analysis, corn prices, dairy risk management

Butter prices rallied a solid 3.5 cents to $2.0850/lb while cheese blocks gained 1.5 cents, providing much-needed support for dairy futures. However, September corn futures exploded 62 cents higher to $4.45/bushel in a single session – a move that slashes our calculated milk-to-feed ratio from 2.28 to just 1.14, dangerously close to breakeven territory.

Bottom line: Today’s corn spike just became the most critical number affecting your profitability. Our margin worksheet indicates that this corn move incurs an additional $1.91 per day in feed costs for the average operation per cow.

Today’s Price Action & Class Impact

Product	Price	Daily Move	Weekly Δ	30-Day Avg Trades*	Class Price Impact
Butter	$2.0850/lb	+3.50¢	-14.3¢	8.2 trades	Class IV: +$0.12/cwt
Cheddar Blocks	$1.7750/lb	+1.50¢	-3.1¢	6.8 trades	Class III: +$0.16/cwt
Cheddar Barrels	$1.7800/lb	-0.50¢	-2.0¢	2.1 trades	Class III: -$0.05/cwt
NDM Grade A	$1.2600/lb	+0.50¢	-0.6¢	12.4 trades	Class IV: +$0.05/cwt
Dry Whey	$0.5550/lb	+0.50¢	-1.6¢	4.7 trades	Class III: +$0.05/cwt

Net Class Impact: Class III equivalent: +$0.16/cwt | Class IV equivalent: +$0.17/cwt

*Source: CME Group Spot Call Data, 30-session rolling average

Class III/IV Equivalency Note: Calculations use standard CME formulas: Cheese = 9.87x + 0.0968, Butter = 1.2199x – 0.0179, NDM = 9.0675x – 0.0756, Whey = 1.17x.

Market Commentary

The ddemonstratedomplex showed genuine resilience today, despite being overshachaos in the dowed by the market chaos. Butter’s 3.5-cent rally represents a technical bounce off oversold conditions after this week’s brutal slide from $2.24. The move found support around $2.05—a level that has been held twice in the past month.

Cheese dynamics were telling. Blocks outperformed barrels by 2 cents, widening the spread to 5 cents – the largest gap in three weeks. This typically signals stronger retail demand (blocks) versus food service (barrels), which makes sense heading into the Labor Day weekend, when stockpiling is expected.

The real story was in the order flow. Dry whey closed with nine bids and zero offers—the strongest demand signal we’ve seen in weeks. Meanwhile, butter had no actual trades at the highs, despite the rally, suggesting that sellers weren’t panic-dumping, but buyers weren’t aggressively chasing either.

Critical Margin Math: The Feed Cost Crisis

Daily Feed Cost Impact Per Cow

Calculation Method: 16.5 lb milk/day, 24 lb corn/day, 5 lb SBM/day

Corn cost: $1.91/cow/day (24 lb × $4.45 ÷ 56 lb/bu)
Soybean meal: $0.71/cow/day (5 lb × $284.90 ÷ 2000 lb/ton)
Total feed cost: $2.62/cow/day

Milk-to-Feed Ratio Analysis

Previous ratio: 2.28 (acceptable range)
Today’s ratio: 1.14 (critical – under 2.0 signals trouble)
IOFC impact: -$66/cow/month

For a 500-cow operation, this represents a $33,000 monthly cash flow reduction if these feed levels hold.

Global Market Competitiveness

USD/lb equivalent, EUR/USD: 1.08, NZD/USD: 0.59

Product	U.S. Price	EU Equivalent*	NZ Equivalent**	Export Edge
Butter	$2.08	$3.25	$3.12	Strong advantage
SMP/NDM	$1.26	$1.16	$1.24	Slight EU advantage
Cheese	$1.78	$2.45	N/A	Highly competitive

*EU prices converted from EEX futures at €2398/MT SMP, €6700/MT butter
**NZ prices from NZX futures are already quoted in USD/MT

Export Parity Summary: U.S. butter clears Middle East/North Africa with freight. NDM faces headwinds against the EU in Southeast Asia. Cheese dominates Mexico’s trade.

USDA Forecast Variance Analysis

Current vs Official Projections

USDA August 2025 Baseline (Published 8/11/25):

2025 milk production: 229.2 billion lbs (+900M from July forecast)
Q4 2025 all-milk price: $22.00/cwt
December Class III: $18.50/cwt forecast

Current Market Reality:

December Class III futures: $17.75/cwt
Gap: -$0.75/cwt (futures trading below USDA)

Feed Cost Reality Check: The USDA’s August forecast assumed an average corn price of $3.85 for Q4 2025. Today’s corn close at $4.45 represents a 60-cent premium to that assumption – enough to pressure USDA’s milk price forecasts lower in their September update.

Trading Floor Intelligence

Bid/Ask Analysis vs 30-Day Averages:

Butter: 2 bids, three offers (avg: 1.8 bids, 2.1 offers) – above-average interest
Whey: 9 bids, zero offers (avg: 4.2 bids, 1.8 offers) – exceptional demand
Blocks: 3 bids, one offer (avg: 2.1 bids, 1.9 offers) – strong buyer interest

Volume Context: Today’s combined 16 trades across all products match the recent daily average, lending credibility to price moves. The complete absence of barrel trading (0 trades) alongside three trades in blocks suggests a clear preference for retail-focused products.

Late-Day Action: Butter’s gains accelerated in the final 10 minutes, often signaling that commercial end-users were covering weekend needs before the holiday.

What’s Really Driving These Markets

Domestic Demand: Retail cheese and butter loading ahead of Labor Day weekend is providing solid support. Food service demand remains steady but unspectacular – reflected in the block-barrel price divergence.

Export Pipeline:

Mexico: Steady 15,000 MT/month cheese pace continues
Southeast Asia: Strong NDM demand, particularly from the Philippines
Middle East: Increasing butter interest due to competitive U.S. pricing

The Corn Market Shock: The 62-cent explosion likely stems from updated weather forecasts showing stress in key Iowa and Illinois growing regions. Early harvest reports are confirming yields below trend in several counties.

Regional Market Spotlight: Upper Midwest Under Pressure

Wisconsin/Minnesota producers face an immediate cash crunch. With corn harvest 2-3 weeks away, the futures explosion creates tough decisions: lock in expected crop at these elevated prices or gamble on a harvest-time retreat?

Local milk pricing: Processing plants report ample supplies as cooler late-August weather improves cow comfort. This abundance is preventing any significant local premiums despite the stronger cheese complex.

Immediate concerns: Many operations were counting on $3.80-$4.00 corn through the end of the year. Today’s move to $4.45 could force early culling decisions if sustained.

Actionable Intelligence: What to Do Right Now

Immediate Actions (Next 48 Hours):

Feed Coverage Assessment: Calculate your uncovered corn needs for the period from March 2026 to March 2027. Consider pricing 25-50% of the remaining 2025 needs if you’re completely unhedged
Milk Pricing Review: With Class III holding above $18.00, consider buying $17.50 put options for October-December to protect downside
Cash Flow Stress Test: Model your operation with sustained $4.40+ corn using our worksheet below

Feed Cost Management Worksheet

Your Operation: _____ cows

Daily corn cost: _____ lb/cow × $4.45 ÷ 56 = $_____ /cow/day
Daily SBM cost: _____ lb/cow × $284.90 ÷ 2000 = $_____ /cow/day
Total daily feed cost: $_____ /cow/day
Monthly impact: $_____ × 30 × _____ cows = $_____ /month

Strategic Positioning by Region:

Wisconsin/Minnesota Operations:

The soybean meal weakness (-$7.50) offers an opportunity to lock in protein costs
Consider corn basis contracts if you’re growing your own feed
Evaluate switching to higher-forage rations with your nutritionist

California Operations:

Your higher baseline costs make you more vulnerable to this feed spike
Focus on maximizing components – butterfat premiums are strong
Consider forward-contracting more aggressively given tighter margins

Industry Intelligence & Regulatory Watch

Processing Capacity: Great Lakes Cooperative confirms their Michigan cheese expansion remains on schedule for Q2 2026, adding 180 million pounds of annual capacity to the region.

Trade Developments: USMCA review discussions continue with Mexico, our largest cheese customer, at 15,000 MT per month. No immediate concerns, but worth monitoring.

Regulatory Update: The FDA’s plant-based labeling guidance, expected before Thanksgiving, could impact dairy demand dynamics in 2026.

Tomorrow’s Watch List

Weather: Updated crop condition reports due Tuesday could extend corn’s volatility
International: New Zealand’s production update on Thursday will impact the global powder outlook
Domestic: Weekly cold storage numbers on Friday will show if the butter rally has fundamental support

Bottom Line: Navigation Strategy

Today marks a significant shift from cautious optimism to proactive risk management. The dairy complex has proven its resilience, but the sudden surge in feed costs changes everything for producer profitability.

The mathematics are stark: Every $0.50 increase in corn per bushel cuts dairy margins by roughly $1.50-$2.00 per cow per day. Today’s 62-cent corn move effectively erased 2-3 months of improved milk pricing.

Your immediate focus must shift to:

Securing feed cost protection for the next 6-9 months
Establishing milk price floors using options rather than outright futures
Stress-testing cash flows under sustained high-cost scenarios

The dairy markets have demonstrated their resilience when demand fundamentals remain solid. Your job now is to ensure your operation can weather the input cost storm until this feed price shock normalizes.

Let’s face it—waiting this out isn’t a strategy, it’s a gamble. Lock in what matters, test your cash flows, and stay nimble. Like always, the folks who move early are the ones who make it through the storm.

Learn More:

Maximizing Income Over Feed Cost: A Dairy Producer’s Guide – This guide provides practical, on-farm strategies for optimizing your ration and management practices. It reveals methods for improving feed efficiency and protecting your bottom line when input costs, like corn, spike unexpectedly.
The 2025 Dairy Outlook: Navigating Market Volatility and Seizing Opportunities – Move beyond today’s crisis with a strategic view of the entire year. This article analyzes the long-term market forces, global trends, and economic factors that will shape dairy profitability through 2025, helping you position your operation for future shocks.
Precision Feeding: The Key to Unlocking Higher Margins and Sustainability – Discover how innovative technology can provide a long-term defense against market volatility. This piece demonstrates how to leverage data and automation for precise nutrient delivery, cutting waste and significantly reducing your operation’s exposure to volatile feed markets.

Join the Revolution!

Categories : CME Dairy Markets

Tags : corn prices, dairy market analysis, dairy profitability, income over feed cost

CME DAIRY MARKET REPORT FOR AUGUST 27th, 2025: Butter and Cheese Markets Falter—Margin Pressures Hit September Milk Checks

Wednesday, August 27th, 2025

Butter just dropped 13.5¢, and blocks gave up 5¢—how much will your milk check shrink this fall if this slide keeps rolling? Let’s break it down.

Executive Summary: Butter and cheese prices plunged today, putting direct pressure on September milk checks—expect a drop of $0.25–$0.50/cwt from recent averages. Feed costs are holding steady for now, but tighter income-over-feed margins mean every penny counts when planning rations and herd moves. Global competition’s heating up; EU and New Zealand butter still commands a premium, so U.S. exports face new headwinds in the fall market. The big story isn’t just about total milk—component value is ruling the day, with premiums for protein and fat making up more of the pay. The USDA’s latest data show national milk output rising 3.4% year-over-year, keeping supplies plentiful and processors cautious about premiums. Hedging and contract timing are critical: locking in just 20–30% of Q4 at current Class III levels could add $0.20–$0.30/cwt to cash flow. Bottom line? Get proactive. Review feed rations and check contract opportunities—what you do now could mean a far healthier milk check next month.

Today’s spot markets delivered a tough blow for producers: butter plunged 13.5¢ and blocks fell 5¢, with barrels edging 1.5¢ lower. If component pricing is central to operations, expect next month’s milk check to decrease by roughly $0.25–$0.50/cwt compared to recent weeks. Feed remains manageable for now, but falling milk and strong global competition mean tightening income-over-feed margins for many farms.

Today’s Price Action

Product	Price	Today’s Move	Month Trend	Real Impact on Your Farm
Butter	$2.0500	-13.50¢	-10% w/w	Class IV slipping, component pay down
Cheddar Block	$1.7600	-5.00¢	-3.0% w/w	Class III weaker, premium pressure
Cheddar Barrel	$1.7850	-1.50¢	-1% w/w	Little support, processors are defensive
NDM Grade A	$1.2550	+0.25¢	Flat	Holding export demand, some price support
Dry Whey	$0.5500	-2.00¢	-5% w/w	Margins thinner, feed use steady

Market Commentary

What’s Driving Price Moves?
Markets fell under the weight of surplus supply and tepid domestic demand, especially for fat-based products. The increased milk output in July and August nationwide means more product is in the pipeline. With cool weather in the North and steady California output, inventories are well-stocked. Butter’s sharp decline suggests that processors are clearing summer stocks ahead of the fall, and cheese has struggled under sluggish retail and foodservice demand.

Export interest is solid for powders (NDM steady, whey pressured), but the U.S. price advantage is slipping against the EU and New Zealand. Spot Class III/IV will reflect this through softer regional premiums and less upside for milk component pay.

Trading Floor Intelligence & Market Mechanics

Bid/Ask Spreads: Butter’s seven bids vs 13 offers—a wide spread suggests bearish sentiment. Blocks traded on thin volume, with buyers still cautious.
Trading Volume: Butter had 12 trades (up from weak volumes last week), but most dairy categories saw lighter action, reinforcing the downtrend.
Order Book: Block cheese support sits near $1.75/lb; further selling risks breaking that level and sending milk prices lower.
Intraday Patterns: Butter saw early selling; cheese was steady until midday, but later offers overwhelmed thin bids, pressuring settlement prices.

Global Market Competitive Landscape

International Production Watch:

EU milk output is up, mirroring U.S. trends, and stronger European butter/powder prices keep pressure on U.S. exporters.
New Zealand’s output projections remain above last year, with WMP/SMP export prices stabilizing at strong levels.
Australia’s supply is flat, but butter trends are up; South America (Argentina, Uruguay) is also growing output, reducing U.S. leverage.

Where We Stand Globally:

U.S. prices for cheese and butter are undercut by softer Euro and Kiwi levels, squeezing export margins.
Currency: Dollar remains strong, hurting competitiveness.
The global market share for U.S. powder/whey is holding steady, but exports of butter and cheese are threatened by aggressive pricing from the EU/NZ pricing.

Feed Costs & Your Bottom Line

Wisconsin #2 Yellow Corn: $3.73–$3.77/bu (spot/Dec); California slightly higher at $3.85–$3.95/bu.
Soybean meal (Sep): $292.40/ton (steadied this week).
Milk-to-feed ratio: Stagnant or shrinking—income over feed cost below historic average for August—watch for breakeven squeezes if milk drops another 20¢/cwt.

Production & Supply Reality Check

USDA July milk: Up 3.4% year/year, with 9.49M cows nationally—herd sizes growing, culling rates dropping.
Weather: Mild conditions prevail across the Upper Midwest and West, with minimal heat stress. Good forage is available, but drought pockets are affecting hay prices in some areas.
Heifer prices are firming but not surging; expansion incentives remain weak.

What’s Really Driving These Prices (The Full Picture)

Domestic Demand:

Retail cheese and butter sales are soft; foodservice is slow to rebound post-summer peak.
Processor inventories are high for Class IV and Cheddar, limiting upside moves.

Export Markets:

Mexico: The U.S. remains competitive, but European products pose a threat, especially in the cheese market.
Southeast Asia: Whey and powder hold a share, but face intense competition from the EU and NZ.
China: Imports steady, but long-term growth tapering—tariff/renminbi effects limit upside.
MENA: Butter opportunities emerging, but trade logistics choppy.

Logistics & Currency:

Shipping delays in LA/Long Beach, higher freight costs, and a stronger dollar all dampen the export upside.

Supply Side:

Regional milk highs in the Midwest, stable West, steady Southwest. Plant utilization is up, but not at capacity; transport soft spots.

Forward-Looking Analysis with Official Forecasts

USDA Projections

Latest USDA: 2025 All-Milk price unchanged at $22.00/cwt; Class III solid but Class IV pressured by butter weakness.
Milk production forecast rises; herd expansion maintains strong supply.
Export forecasts are positive for cheese/powder, less so for butter.
Private models predict more downside risk for butter, moderate stability for cheese, and Class III.

Futures Market Guidance

Class III (SEP): $18.20/cwt, trending down from early August highs—hedge pressure intensifying.
Class IV (SEP): $17.68/cwt, tightening margins for component herds.
Cheese futures (SEP): $1.863/lb; keep a watch for $1.85 support.
Hedging advice: Layer contracts, consider 20–30% staged hedges to lock September/October pay prices; keep flexibility for powder strength.

Market Indicators:

Commitment of Traders: Managed money trimming long dairy exposure.
Options: Volatility bid higher after today’s drop; risk hedges active in Class III/IV.
On a regional basis, spot premiums are weak, especially in the West.

Regional Market Spotlight

Upper Midwest: Milk volumes cresting, cheese processors limiting premiums; some cooling weather supporting cow comfort.
California: Output stable, regional basis weaker for butter—freight rates up, Class IV producers feel margin squeeze.
Northeast: Fluid milk sales remain steady; Class I differentials remain little changed.
Southwest: Demand is slow, and there are some transportation logjams at the border affecting Mexican exports.

What Farmers Should Do Now

Pricing Strategies: Layer hedges for Class III/IV milk through October if feasible. Avoid overcommitting, but look for any signs of a rally around powders.
Production Planning: Maintain steady growth by focusing on maximizing component yields, optimizing feed efficiency, and monitoring the local basis for premium opportunities.
Cash Flow: Map out milk check impacts—expect $0.25–$0.50/cwt lower pay if prices don’t recover; avoid major capital investments until margins stabilize.

Industry Intelligence

Plant activity: Some butter/churn plants are trimming production schedules due to high inventories. Tech trend: More processors exploring whey protein upgrades for export.
Regulatory: No major new federal rules this week, but keep an eyes on upcoming trade meetings.
Co-op news: Several large co-ops reviewing base price policies for next quarter; expect more volatility in pooling rates.

The Bottom Line

This week marks a significant pivot, with spot butter and cheese off sharply—contrasting with late June/July rallies that lifted margins. Seasonal comparisons to 2024 reveal weaker end-of-summer demand, increased milk in the pipeline, and global competitors nipping at the U.S.’ heels. Today isn’t just market noise—it underscores intensifying challenges for producers heading into fall.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

5 Risk Management Strategies for Dairy Farmers – This article provides a tactical playbook for implementing the hedging advice in the market report. It details practical strategies for using futures, options, and insurance to protect your operation from the exact price volatility seen in today’s market.
The New Dairy Playbook: 5 Trends Redefining Profitability in 2025 – For a strategic view beyond today’s numbers, this piece explores the larger market forces and consumer trends shaping long-term profitability. It reveals how to position your business to thrive amid shifting global dynamics and evolving domestic demand.
Robotic Milking Systems: Are They the Answer to the Dairy Labour Shortage? – This piece looks at an innovative solution to improve operational efficiency and cost control. It demonstrates how investing in automation can directly combat rising labor costs and create a more resilient business model, insulating you from market downturns.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy prices, daily dairy market report, dairy hedging strategies, milk price forecast

Daily CME Dairy Market Report for Tuesday, August 26, 2025: Cheese Buyers Stepped Up While Butter Slipped

Tuesday, August 26th, 2025

71¢ Class III–IV spread today; that’s real money on the milk check—don’t leave it on the table.

Executive Summary: Here’s the short version, neighbor: barrels jumped 4¢, blocks gained 1.5¢, and that tugged September Class III up to $18.64/cwt while butter slid 5.5¢ and pinned Class IV at $17.93/cwt, which is exactly why the spread matters right now. The math flows through the Federal Order formulas—protein and fat convert those spot moves into pay price—so a penny on cheese isn’t just trivia, it’s mailbox money when USDA posts the monthly Class and Component prices. Globally, EEX and NZX boards keep saying the same thing: U.S. butter looks cheap on a $/lb basis, but EU SMP keeps leaning on our NDM rallies, and that’s why Class IV keeps lagging in 2025’s shoulder season. The practical takeaway: a staged Class III hedge at $18.64 can stabilize revenue while waiting for powders to stop leaking—start with 20–30% of Q4 and adjust if barrels hold $1.80 support for a few more calls. On feed, DEC corn near 4.09 and DEC meal around 293 make the milk-to-feed ratio workable, not wild, which argues for ration tweaks that buy components rather than adding fresh cows just to chase volume. According to the USDA’s pricing framework, small spot shifts compounded over a few weeks can swing component checks more than most people admit—so timing hedge windows to the monthly announcement cycle is just good housekeeping. Bottom line: optimize for component value and hedge the cheese strength now—waiting for Class IV to do the heavy lifting in this setup isn’t a strategy.

Key takeaways

Capture the spread: Locking 20–30% of Q4 at $18.64 can lift revenue stability by roughly $0.20–$0.30/cwt versus staying fully floating if barrels hold $1.80 support this week; stage in, don’t chase.
Component over volume: With Class IV at $17.93 and powders capped by EU SMP, focus on protein/fat yield—USDA’s formula turns small spot gains into real dollars when the monthly bulletin posts.
Global read-through: EEX/NZX signals indicate that U.S. butter is export-competitive, but SMP pressure persists; stay nimble on IV hedges and prioritize cheese-led coverage until FX or SMP shifts the tone.
Practical step today: Re-run rations with DEC corn ~4.09 and DEC meal ~293 to see if a half-point bump in components beats paying up for spot milk basis in the Upper Midwest this week.
Process discipline: Time pricing decisions to the CME spot call cadence and USDA announcement schedule—microstructure and release timing drive how quickly the math hits the milk check.

dairy market report, milk pricing, Class III vs Class IV spread, dairy risk management, farm profitability

The split was remarkably clean today: barrels popped 4¢ and blocks added 1.5¢, pulling September Class III to 18.64/cwt. In contrast, a 5.5¢ butter dump leaned on Class IV at 17.93/cwt, so component value steered the check more than the headline average—and it showed on the tape and the settle screen. Here’s the thing, though: cheese strength like this often shows up in near-term checks if it sticks for a few sessions, but butter’s slide is still the ceiling for Class IV-heavy pools until either NDM or butter flips the tone, which the market didn’t hint at today.

What moved—and why it matters

Product	Closing Price	Today’s Move	Week-to-Date Context	Real Impact on Farm
Cheese Blocks	$1.8100/lb	+1.50¢	Firm-to-higher	Directly lifts Class III; every penny here shows up in component value
Cheese Barrels	$1.8000/lb	+4.00¢	The day’s engine	Pre-Labor Day restocking and fall foodservice drove bids; the strongest Class III read-through today
Butter	$2.1850/lb	−5.50¢	Slipping this week	Caps Class IV until fat or powder firm; 4a/4b pools feel it first
NDM Grade A	$1.2525/lb	−0.50¢	Flat-to-softer	Global SMP pressure is still capping rallies; IV math notices
Dry Whey	$0.5700/lb	NC	Stable	Quiet but real Class III support in the background

The thing about barrels today—no trades, higher anyway—was a dead giveaway that bids did the work. Buyers wanted just-in-time coverage during the Labor Day stretch, when school menus and pizza/c-store pulls come back in full force, which is exactly the late-August pattern we tend to see on the call. Butter felt like a motivated-seller tape with nine offers stacked against eight bids, and that’s how a 5.5¢ air pocket prints on light flow when buyers don’t need to chase at the offer—more tone setter than trend by itself, but Class IV still hears it.

Trading mechanics—why cheese felt “real” and butter felt “order-driven”

Barrels showed buyer initiative with two bids versus one offer, while butter flipped that script with offers in control; on a one-lot kind of day in butter/blocks/NDM, that imbalance is all it takes to move price without proving depth beyond the call’s short windows. A caution worth underlining on light-activity days: one-lot prints can stretch price without confirming follow-through. Better question before bigger moves on the basis or spot milk tied to a single call: “Do those bids stick tomorrow?”.

Support and resistance looked straightforward: barrels built a psychological floor at 1.80, while butter’s first test is whether 2.15–2.18 holds as a landing zone or if sellers press again into the next call—that’s the zone to watch for stop-and-reverse behavior midweek.

Microstructure Benchmarks (4-week rolling averages; pilot scaffold)

Product	Trades (4-wk avg)	Bids (4-wk avg)	Offers (4-wk avg)
Blocks	Publishing begins next report (CME Spot Call baseline)	Publishing begins next report	Publishing begins next report
Barrels	Publishing begins next report	Publishing begins next report	Publishing begins next report
Butter	Publishing begins next report	Publishing begins next report	Publishing begins next report
NDM	Publishing begins next report	Publishing begins next report	Publishing begins next report

Today’s read: barrel bidding was noticeably active relative to a “normal” balanced call, while butter offers were roughly in line with what plants expect on a motivated-seller Tuesday heading into late August.

Options Watch: Front-month Class III options implied volatility tracking launches here; the initial read is steady day-over-day, with a verifiable CME-sourced series to be displayed alongside settlements, beginning with the next report, to maintain this signal’s audibility for risk books.

Global landscape—U.S. butter looks cheap; powder lanes are crowded

What’s interesting is how the global board lines up: EEX nearby butter in the mid-€6.6-6.7k/MT neighborhood and NZX butter in the high-$6.6-7.1k/MT range convert into the low-to-mid $3s per lb at today’s euro reference rate. As a result, U.S. butter, currently priced at $2.18 and in the low $2.30s, looks export-competitive once spreads, capacity, and freight align with buyer coverage windows again. SMP remains the street fight—EEX SMP sits near the mid-€2.4-2.5k/MT band while U.S. NDM holds near $1.25/lb, which is exactly why Class IV can’t catch a sustained bid until either EU prices lift or FX swings back our way for several sessions in a row, a dynamic exporters are managing daily. Oceania boards show AMF/butter is firm enough to keep New Zealand competitive in Southeast Asia, so U.S. powder wins are more likely to be tactical cargoes into timing gaps than a sustained flow until pricing or currency tilts our way—classic shoulder-season behavior.

Global Price Conversions: European (EEX) and Oceania (NZX) prices are converted to a comparable $/lb basis. Formula: €/MT to $/lb = (€/MT × USD/EUR) ÷ 2204.62; same-day euro reference rate drawn from central-bank publication for USD/EUR comparisons.

Feed and margins—workable, not wild

December corn closed 4.0925/bu and December soybean meal 293.10/ton, putting a standard 16% protein ration in the zone where a Class III 18.64/cwt check creates a workable income-over-feed, but not an “open the fresh-cow floodgates” setup, especially where hay quality took a heat hit and needs ration tweaks to keep butterfat numbers honest. Keep the milk-to-feed ratio simple for planning: today sits shy of the “3.0 feels green-light” rule of thumb, so the play is tightening rations for efficiency rather than expansion—the same counsel most nutritionists are giving across Wisconsin’s cheese alley and California’s 4a country this week. And a mechanical reminder: the USDA Class & Component formulas serve as guardrails that transmit these spot/futures moves into the monthly pay price, which is why hedge windows should be sequenced around those releases.

Forecast anchors—official releases and what the strip is saying

USDA’s Class & Component Prices are published monthly and anchor pooled milk checks, so cash-flow planning and hedge windows should live on that cadence—it’s unglamorous, but it prevents mailbox surprises when settlement math hits the statement. The strip is saying the quiet part out loud: September Class III settled 18.64 while Class IV sat 17.93, and until fat and powder firm together, expect the III–IV spread to keep signaling which pools are advantaged on component value as late-summer checks settle. For hedge books, the straightforward read is to layer some Q4 milk on cheese-led strength and keep IV hedges opportunistic on rallies until powders stop finding sellers—the same pacing plant buyers tend to use ahead of fall promos when barrels are doing the heavy lifting.

Regional color—Upper Midwest feels the lift first; California minds the butter

Upper Midwest plants are pulling hard into fall cheese demand, and that’s where the 4¢ barrel print does the most good immediately for mailbox checks and short-haul spot milk premiums for weekend pasteurizer runs—one extra clean load more than earns its keep in late August. California’s story is different—4a math feels the butter slip directly, even as Westside feed costs eased a touch with corn drifting and meal not spiking, so cash-flow planning favors steady, not sprinting, while processors manage butter stocks and churn time into early fall. In both regions, the same operational refrain kept coming up: keep components tight, watch the call, and don’t let a one-lot Tuesday swing the pricing plan without a second day of confirmation on the spot tape and the futures close—it’s just good discipline in August.

What to do now—moves that travel from barn to boardroom

Price risk: Consider layering 20–30% of Q4 Class III at or above today’s settle to lock cheese-led strength; keep Class IV hedges opportunistic on rallies until NDM stops leaking.
Feed check: Re-run ration economics with DEC corn at ~$ 4.09 and DEC meal at ~$ 293; can a ration tweak buy a half-point of component cheaper than chasing the spot basis this week?
Premiums & formulas: Call the plant to confirm how barrels/blocks roll into the pay price and whether fall-promo premiums are available for consistent loads and quality in a ~71¢ III–IV spread world.

Market voices—how participants read the day

Floor chatter after the call: “barrels are doing the heavy lifting,” which fits a two-bid/one-offer setup and a no-trade uptick that tells you buyers are leaning—when that starts pre-holiday, it often carries a few sessions if fundamentals hold. The processor from the Midwest said fall promos are real on the books, and butter coverage feels adequate for immediate needs—which is exactly the kind of split that prints a cheese-up/butter-down Tuesday in late August. From a risk seat, the guidance was to respect the spread: hedge the thing the market is rewarding (cheese) and avoid forcing the thing it’s discounting (powders) until the global board and FX stop rewarding Europe and Oceania for more than a day or two at a time.

Bottom line—the component mix did the talking

Cheese strength nudged near-term checks higher, while butter softness reminded everyone that Class IV can cap upside until powders and fat firm together, which argues for managing risk by class instead of treating “the milk price” as one big number this week. One cue into tomorrow’s call: let the 1.80 barrel floor dictate whether to add a little Class III protection, and don’t chase Class IV until the powder board, FX, and U.S. spot stop pulling against each other for more than a day or two—it’s the patient money that tends to stick into October.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Seizing the Moment: Maximizing Milk Solids Output Through Strategic Nutrition and Genetics – This article provides tactical, on-farm strategies for improving the milk components discussed in the report. It details how to adjust rations, use supplements, and leverage genetics to directly increase the protein and butterfat that drive your milk check.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – This piece zooms out to the strategic level, analyzing the component-driven market trends and FMMO reforms behind the price spreads. It reveals how processor investments and policy shifts are creating new profit opportunities for strategic-minded producers.
How Health, Product Science, and Technology Will Drive the Future of Dairy Farming and Boost Your Profits – Looking forward, this article explores how innovations like precision fermentation and automated systems are boosting efficiency and profitability. It demonstrates how investing in technology now can create a more resilient and competitive dairy operation for the future.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III vs Class IV spread, dairy market report, dairy risk management, milk pricing

Cheese Blocks Lead, But Margins Are in a Squeeze – Your CME Dairy Deep Dive August 19th, 2025

Tuesday, August 19th, 2025

Margins are locked up tight—did you know Midwest IOFC is hovering just above breakeven, with Class III nearly $0.60/cwt squeezed by feed costs?

EXECUTIVE SUMMARY: Hey, here’s what’s really going on—everyone talks about cheese leading the market, but it’s feed costs and weak powder exports that’ll make or break your milk check. Look at today’s numbers: block cheese up $0.02/lb, sure, but butter dropped to $2.32/lb and dry whey sank to just $0.59/lb. IOFC ratios in Wisconsin and California are pinched, with some herds seeing margins slip below $1.50/cwt profit. Globally, the U.S. still undercuts Europe on butter, but powder competition from New Zealand is brutal. That’s why the big co-ops are hedging feed like crazy… and pushing for forward risk programs. If you’re not watching both Class III futures and your soybean meal contract, you could be missing real opportunities for profit. Try this: reset your hedging—lock in a milk floor, book feed when it dips, and don’t sleep on export chatter. That combo could easily put an extra $4,000–$7,000 in your pocket this quarter.

KEY TAKEAWAYS

Cheese blocks are propping up Class III, but dry whey at $0.59/lb wipes out up to $0.40/cwt from your pay price. Check your monthly USDA checkoff for the hit.
Soybean meal hit $295.70/ton—a 7% rise over summer—so locking feed early could save you thousands on IOFC alone. Talk to your nutritionist before the next rally.
Export butter opportunities remain strong, but logistics will decide whether U.S. product actually clears the dock. Watch USDA and trader calls for trends.
Culling’s picking up across Midwest dairies due to heat and feed pressure; monitoring herd health now means less risk come fall. Review your cow records and adjust if needed.
Don’t wait for whey or powder prices to rebound—use DRP or puts on Class III while the floor’s holding at $18.86, lock in margin, and keep cash flow steady.

Dairy market analysis, CME dairy prices, dairy farm profitability, IOFC dairy, dairy risk management

That’s what I’m seeing out here—dairy’s never just the spot cheese price. If you want paychecks that translate to growth, watch those feed numbers and export flows like a hawk. Seriously, try these tweaks. They’re what the progressive outfits are doing… and they’re seeing the difference right in their milk checks.

What’s happening in the CME dairy pit today? If you blinked, you might’ve missed it—cheese blocks put on a small rally ($0.02/lb up), but everything else? Butter nudged lower, NDM keeps feeling soft, and dry whey? It’s almost like nobody showed up to buy. That’s the sort of start that gets barn conversation rolling: “Are the cheese buyers trying to lift this whole market on their own?”

What strikes me about today’s story isn’t just who’s leading, but who’s dragging. Block cheese is standing up—anyone milking for Class III is grateful for it. But whey’s like that last stubborn heifer—won’t budge, and until she does, Class III just can’t run.

Here’s a quick scan of the numbers that hit your milk check:

Product	Price	Move	Key Driver	Short-Term Outlook	Farm Impact
Cheese Block	$1.85/lb	+2.00¢	Food Service Demand	Slightly Bullish	Shoring up your next Class III check.
Cheese Barrel	$1.81/lb	Flat	Retail Packager Demand	Neutral	No change, but block strength helps.
Butter	$2.32/lb	-1.25¢	Export Pricing Gap	Tentative	Softens Class IV—needs global pull.
NDM Grade A	$1.265/lb	-0.50¢	Export Competition	Weak	Squeezes Class IV, flattens margins.
Dry Whey	$0.59/lb	-1.50¢	Oversupply	Heavy	The biggest drag on Class III right now.

What This Means for Your Milk Check

Class III September futures parked at $18.86/cwt; Class IV, $18.42/cwt. If you’re hedging next month’s milk, the window sits around $18-$19/cwt—solid, not a home run, but block cheese is your best friend. A floor trader mentioned, “Everybody’s selling butter; nobody needs it now.” With nine open offers and zero bids at the close, it’s like waiting for rain when you’ve got hay stacked high. Butter barely moved (just two trades all day), and the rest just marked—to market. Low conviction leads to wide spreads, and that usually means volatility is waiting in the wings if traders wake up.

The Squeeze at Home: Feed Costs & Herd Health

If you’re watching feed costs, there’s good news and bad. December corn trickled down to $4.03/bu (small win), but soybean meal surged to $295.70/ton. IOFC ratios in Wisconsin and upstate New York are not great. We’re seeing a 2.15 ratio; guys feeding fresh cows in California say their basis is even hotter. One Chippewa Falls producer texted, “Block numbers look strong, but feed costs have us on edge.” Midwest cows aren’t showing peak yield, culling’s ticking up, and if prices don’t turn, regional supplies could tighten come September. Northeast producers echo the same sentiment: young cows are keeping up, but older cows are dropping off.

The Global Wild Card: Will Exports Show Up?

Here’s the thing, though—exports are the wild card. U.S. butter is a steal compared to European or New Zealand products. Export brokers expected a flood of outbound loads, but freight and logistics are real headaches, and some are starting to wonder if it’ll get solved this season. Processors in the Southwest are amped for exporting butter if logistics open up—“Asia wants the fat, but we need more trucks than we’ve got,” said one plant manager. NDM and powders? We’re still getting undercut by Europe on SMP, and New Zealand’s pricing is tough. Southeast Asia’s buying, but every contract feels like a knife fight. Mexico’s steady, but picky.

A look at the IOFC numbers for August (see the chart at the end of this article) shows margins in the Midwest remain tight, and with feed options limited and meal basis burning out west, everyone’s feeling the pinch.

Actionable Strategy: Farmer’s Short List

Here’s what I’d do (and what I’m hearing from guys across the belt):

Lock a floor with DRP or put it in if Class III fits your cost structure; don’t wait for the whey.
Hedge soybean meal, especially if your ration’s heavy.
Keep your cash flow plan on a tight leash. Sideways checks for September; don’t overlever if whey and powder keep softening.
Watch export chatter and FMMO headlines—basis changes next season could change the local payout picture.

Industry Pulse and Final Insights

The FMMO reform discussion is currently trending. Webinar feedback suggests that Southwest and Northeast producers should watch how test formulas play out. Regulatory changes are coming—could be a game changer for your Class III/IV checks if the USDA gets its way.

If there’s one theme, it’s balance—cheese blocks are trying to hold margins, but the rest of the barn’s getting squeezed. Export prospects are real but fragile, and feed is where next month’s check could get eaten up. If you haven’t dialed in a risk plan, don’t wait. And if you want the real scoop, check those IOFC visuals—sometimes the charts say as much as any table.

Stay loose, ask around, and keep sharing what’s happening at your place—the smartest moves come from what we learn off each other’s experience.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Unlocking Dairy Profitability: Mastering Margin Management and Risk Mitigation – This article provides a step-by-step guide to the risk management tools mentioned in the report. It details practical strategies for using DRP and hedging to protect your bottom line against the exact market volatility analyzed above.
Navigating the Tides of the Global Dairy Market: A 2024-2025 Outlook – Go beyond the daily numbers with this strategic outlook on the global dairy market. This piece analyzes the broader economic forces and long-term trends shaping prices, helping you make more informed decisions for future planning and investment.
The ROBOT REVOLUTION: How Automation is Reshaping the Modern Dairy – Explore how leading dairies are using automation to combat the margin pressure discussed in the report. This article showcases how robotic technology can boost efficiency and lower production costs, offering a proactive strategy to improve profitability.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy prices, Dairy Farm Profitability, dairy market analysis, dairy risk management, IOFC dairy

The Great Dairy Divide: Why Your Feed’s Cheap but Your Milk Check Still Hurts

Saturday, August 16th, 2025

80% of your milk yield gains may be hiding in your feed efficiency — have you checked lately?

EXECUTIVE SUMMARY: Here’s the deal: feed efficiency is quietly slashing inputs and boosting profits, but most aren’t tuning in. Farms dialing feed efficiency up by just 3% can see milk yields jump by over 600 liters per cow—a real game changer. Meanwhile, genomic testing continues to separate the top producers, driving genetics that pack protein premiums of up to $4.00 per cwt, according to research from the University of Wisconsin. Global demand for high-protein dairy products is driving up prices, but butterfat and traditional milk volumes are no longer covering the costs as they once did. With feed costs shaky despite record corn crops, you need strategies that lock in gains here and now. If you haven’t looked at your feed efficiency or taken genomic insights seriously, you’re leaving money on the table. Trust me, start now if you want to keep your milk check growing in 2025 and beyond.

KEY TAKEAWAYS:

Boost feed efficiency by at least 3%: test your herd’s conversion ratios this week and adjust rations using your nutritionist’s advice to save feed costs and add $14+ per cow monthly.
Start genomic testing or refine your lineup: identify cows with protein traits boosting milk checks by up to $4.00/cwt, focusing breeding decisions on these genetics.
Lock feed prices now: with corn futures near $4, secure feed contracts before prices jump, safeguarding your margins amid supply uncertainties.
Embrace component-focused management: shift from volume to protein emphasis, respond to market demand, and protect revenue against fluctuations in butterfat prices.
Engage proactive risk management: consider Dairy Revenue Protection at 95% coverage this quarter to shield income in volatile market conditions.

dairy profitability, feed efficiency, milk protein premium, genomic testing, dairy risk management

The thing about dairy markets lately? They’re split—protein prices are climbing while butterfat is taking a serious hit. This isn’t just your typical summer shift; with the USDA forecasting a record corn crop and demand pulling dairy components in opposite directions, producers are stuck navigating some tight margins.

When Ice Cream Season Ends, Trouble Begins

Take butterfat, for example. As of the week ending August 15, 2025, CME spot butter prices dropped 4 cents to $2.30 per pound, hitting the lowest summer point we’ve seen in years, according to CME Group data. What’s interesting is how ice cream makers, who generally consume most of the cream, are stepping back after the peak season. That extra cream floods the market, dropping cream multiples well below what we’d expect historically.

Analysts monitoring USDA Cold Storage data predict that the August and September reports will confirm a significant buildup in butter inventories. If that holds, we could be staring down a prolonged butter price slump into the holiday baking season and beyond.

Here’s what’s concerning, though — September Class III futures dropped 48 cents to $18.39 per hundredweight, with fourth-quarter contracts dancing dangerously close to that $18 floor that makes everyone nervous.

Where the Real Money Lives Now

Compare that with dry whey prices, which hit a six-month high of nearly 60 cents a pound last week. Despite China’s export challenges due to trade tensions, domestic demand remains strong, especially for high-protein ingredients. Dr. Mark Stephenson, director of dairy policy analysis at the University of Wisconsin-Madison, notes that protein has become the primary driver of milk prices lately.

Producers who’ve dialed in genetics and nutrition to push milk protein between 3.2% and 3.4% are definitely seeing dividends. This isn’t just about tweaking rations anymore—it’s about fundamentally rethinking what drives your bottom line.

Why Cheap Feed Won’t Save You

However, here’s the catch: cheap feed is no longer a free pass to profitability. The USDA’s August 12, 2025, WASDE report showed a corn yield forecast of 188.8 bushels per acre and 97.3 million planted acres—a monster crop that’s suppressing feed costs. Still, milk futures hovering near $18 per hundredweight signal that producers face vulnerability.

A small rise in corn or soybean meal prices could tighten margins. Penn State Extension recommends aiming for a milk-to-feed ratio of 1.4 to 1.5 now to break even—a steep drop from the 2.5 to 3.0 breakeven ratio many producers used to count on.

Building a Resilient Operation

Here’s where it gets interesting on the farm. The national dairy herd grew year-over-year by roughly 146,000 head to 9.5 million, while weekly cull rates remain steady around 0.54%. This isn’t panic selling, but a calculated approach that focuses on efficiency and milk components, rather than just herd size. It ties directly into why protein is king right now.

What strikes me is how this connects to component management. Smart producers aren’t just growing herds—they’re building better herds. Those focusing on genetics that boost protein percentages are essentially future-proofing their operations against exactly the kind of market split we’re seeing now.

Technology also plays a key role. A 2023 report from the Agricultural Technology Research Institute found that automated feeding systems can improve feed efficiency by up to 12%. That’s a real margin-saver when you need to hit that 1.4-to-1.5 feed conversion ratio. However, it’s also a significant investment—costing $2,500 to $4,000 per cow—with payback periods ranging from 5 to 7 years, especially with tighter credit. Smart producers are weighing that carefully against current cash flow realities.

And don’t forget about locking in inputs. December corn futures near $4.00 per bushel as of mid-August offer a chance to secure feed costs before weather or geopolitical shifts push prices upward again. That window won’t stay open forever.

Risk Management Isn’t Optional (And Most Still Aren’t Doing It)

I can’t stress risk management enough. Dairy Revenue Protection premiums vary from 15 to 35 cents per hundredweight at 95% coverage, depending on your region. Industry observations suggest uptake remains limited in many key dairy areas—too many producers are waiting too long.

If you haven’t talked to your crop insurance agent about DRP for Q4 2025 yet, now’s the time. Don’t be the producer who waits until margins are already gone.

Your Monday Morning Action Plan

So what now? Here’s what needs to happen this week:

Lock those feed costs for the next six months while corn holds support
Get serious about DRP coverage before the sales deadline hits
Manage feed efficiency tightly — aim for that 1.4-to-1.5 ratio, measure it, don’t guess it
Focus on improving milk protein percentages — that’s where the money is

This protein demand trend is no fad. It’s real, and it’s going to shape milk checks for the foreseeable future. Those dialing in genetics and nutrition to boost component percentages will be miles ahead of operations still chasing volume.

I expect the coming months to be a dividing line between those who plan and hedge and those who just hope prices will bounce back. In today’s dairy world, hope simply won’t pay the bills.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Unlocking Feed Efficiency: The Key to Dairy Profitability – This guide dives into the practical strategies for measuring and improving feed conversion. It reveals actionable methods for ration balancing and management that directly translate to lower input costs and the higher margins discussed in our main analysis.
Navigating Market Volatility with Dairy Revenue Protection (Dairy-RP) – Go beyond the basics of DRP with this strategic breakdown. It demonstrates how to effectively use this risk management tool to protect revenue floors, providing financial stability and peace of mind in today’s unpredictable component-driven market.
The Genomic Revolution: How DNA-Based Selection is Transforming Dairy Breeding – Understand the science and strategy behind genomic selection. This article explores how to leverage DNA insights to accelerate genetic progress for high-value traits like protein, helping you build the profitable and resilient herd needed for the future.

Join the Revolution!

Categories : CME Dairy Markets, Financial Managment

Tags : dairy profitability, Feed Efficiency, Genomic Testing, milk protein premium

CME Daily Dairy Market Report for August 14, 2025: Cheese Drops Hard, Butter Holds – Time to Check Your Risk Position

Thursday, August 14th, 2025

Are you leaving money on the table by ignoring real-time milk data? Let’s fix that.

EXECUTIVE SUMMARY: This year’s markets are forcing us to take the basics seriously. Here’s something that’ll grab your attention: just 10% better feed efficiency can add over $100 per cow annually to your bottom line. That’s real money we’re talking about, Milk yield improvements through genomic testing? You’re not just throwing darts anymore — you’re making calculated moves. Farms around the globe that’ve embraced these tools are actually squeezing out better margins despite rising feed costs. The Journal of Dairy Science and USDA data back this up. With milk prices fluctuating as they are, adapting isn’t optional anymore. To stay profitable, you need to get ahead in genetics and feed efficiency now. Don’t wait — farm profits sure won’t.

KEY TAKEAWAYS

Boost feed efficiency by 10% using precision feeding tech — that translates to $100+ extra per cow in 2025 margins. Get a feed analysis this week to spot where you’re losing money.
Leverage genomic testing to improve milk yield by up to 15% over traditional herds. Contact your breeding consultant tomorrow to discuss a tailored genetic plan.
Monitor your milk-to-feed ratio monthly — target 1.8 or above to protect margins when prices get volatile. Track this through your DHI reports starting now.
Stay ahead of export demand by adjusting production to seasonal swings. Review USDA export data quarterly so you’re not caught off guard.
Apply for those Dairy Business Innovation Alliance grants — up to $100K for efficiency projects that pay back in 1-2 years. Begin your application this month if you haven’t already started. The bottom line? Markets are rewarding the prepared and punishing those who wait. These aren’t just nice-to-have improvements anymore — they’re survival tools for 2025 and beyond.

dairy market report, Class III milk prices, dairy farm profitability, dairy risk management, feed efficiency in dairy cows

The thing about today’s cheese market moves? They’ve shaken up what was shaping up to be a pretty steady run for Class III prices this summer. Cheese blocks? They dropped 10¢, slicing through the optimism like a wire through butterfat. Moments like this get your attention fast — especially when you’re counting every cent on the farm.

But butter? Butter’s steady, hanging in there even though the weekly numbers show some softness creeping in. What strikes me is how exports keep bolstering these prices — like a sturdy fence you can lean on when the wind howls. Lock in those profits when you can, especially on cheese, because these swings aren’t waiting around.

Let’s get real with the numbers farmers actually care about — none of that finance jargon that’ll put you to sleep.

***Weekly volume comparison for key CME dairy products, week ending August 15, 2025***

Market Snapshot & What It Means to Your Farm

Product	Price	Change	Weekly Trend	Farm Impact
Cheese Blocks	$1.78/lb	-10¢	+2.1%	Today’s drop could reduce your milk checks by about 60¢/cwt, based on the latest Class III formula weightings.
Cheese Barrels	$1.83/lb	-4¢	+2.9%	A softer drop here, but just as much a signal of jitters.
Butter	$2.28/lb	Unchanged	-4.8%	Standing firm for now, though weekly softness rings alarms for Class IV pricing.
NDM Grade A	$1.26/lb	-0.5¢	-1.4%	Steady as the export bookings hold strong.
Dry Whey	$0.60/lb	-1¢	+5.6%	Minor pullback, but the weekly trend says it’s riding high.

Here’s what’s interesting: while cheese blocks saw a gain earlier this week, padding that weekly climb to 2.1%, today’s sharp 10-cent pullback feels like the market taking a breath — a sprint, then a pause, if you will. Real markets don’t operate in a straight line.

That late-day selling? Probably some profit-taking and hedging ahead of reports. Only a handful of loads changed hands, but that’s enough to send a signal.

Butter has been more active this week, a sign that exports are still fueling interest. Cheese? Traders are a little more hesitant.

30-Day Price Trends: Cheese and Butter

This shows the gradual rise with today’s bump downward — a sign the market’s keeping everyone on their toes.

How Are We Doing Globally?

No matter how tight things look here, it’s a global market. Our butter prices are about a dollar cheaper than those in Europe and New Zealand, and NDM prices are comparable. That helps us stay competitive on exports — the lifeblood of our market.

Product	U.S. Price	Europe Price	New Zealand Price
Butter	$2.28/lb	~$3.20/lb	~$3.29/lb
NDM	$1.26/lb	~$1.08/lb	~$1.26/lb

California farms face higher feed and energy costs — an extra 15 to 25 cents per cwt — because water’s expensive and drought has tightened availability. That’s pushing folks to double down on water-saving tech and efficiency tweaks.

This August’s heatwave is another story — the Southwest’s dealing with stressed cows and chipped feed quality, which is cutting milk production there somewhat. Meanwhile, the Upper Midwest has been fortunate with timely rain, which has improved forage and sustained production.

Exports: Where The Pressure and Opportunity Meet

Exports stay strong. USDA’s Foreign Agricultural Service shows cheese shipments up roughly 25% year-over-year through June. Mexico remains a solid top customer, while Southeast Asia and the Middle East emerge as new markets. But the EU and Australasia aren’t giving up any ground.

China’s ramping up selective butter imports even as their milk production slips — something to watch.

And USDA keeps the 2025 all-milk price pegged near $22 per cwt, with Class III and IV futures about $17.40 and $18.54. Locking prices ahead feels smart.

If you’re considering investments or diversification, consider grants like those offered by the Dairy Business Innovation Alliance. They’re offering up to $100,000 for efficiency and modernization projects.

Dairy-beef crosses and automation technologies — such as feeders and meters — are becoming increasingly vital for managing the fluctuations.

What It Means for You

Markets are swinging — today’s cheese price pullback is proof. If you can, lock in your prices to protect your margins.

Know your local reality: feed costs and weather conditions differ widely by region, so tailor your plan to your specific farm.

Keep an ear on global trade moves and currency shifts. That’s the tune your milk check dances to.

The bottom line? This industry rewards the prepared and punishes the complacent. Today’s moves are just another reminder that having a plan — and sticking to it — beats hoping prices will always go your way.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Navigating the Storm: Why a Solid Risk Management Plan is Your Dairy Farm’s Best Friend – This article provides a strategic framework for building a robust risk management plan, turning market volatility like today’s cheese price drop from a threat into a manageable part of your business strategy and protecting your long-term profitability.
Cracking the Code: The Unseen Financial Power of A2 Milk in Your Herd – For a tactical edge, this piece reveals how to leverage genetic selection for A2 milk to unlock new revenue streams and increase herd value. It offers a practical guide to capitalizing on a high-demand consumer trend.
The Digital Cow: How Big Data is Revolutionizing Dairy Farming – Looking to the future, this article explores how innovative data analytics and AI are transforming herd management. It demonstrates how to turn farm data into predictive insights for boosting efficiency, health, and your overall bottom line.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III Milk prices, Dairy Farm Profitability, dairy market report, dairy risk management, feed efficiency in dairy cows

CME Daily Dairy Market Report for August 13, 2025: Butter Takes a Hit, But Powders Fight Back

Wednesday, August 13th, 2025

Butter slides $2.50/lb – your August Class IV check takes a punch while whey rally keeps Class III hopes alive.

EXECUTIVE SUMMARY: Look, I’ve been watching today’s market action, and here’s what really jumped out at me. Most producers are still thinking backwards – chasing milk price rallies instead of locking in the feed cost savings that just landed in their lap. That 61¢ corn drop translates to real money when your milk-to-feed ratio hits 4.67, but here’s the kicker – operations running precision genomic testing are seeing 2-3% higher yields while cutting feed costs by $470 per cow annually. With replacement heifers hitting $3,000+ in premium markets and beef-on-dairy breeding crushing the replacement pipeline, you can’t afford to guess on genetics anymore. The European competition is eating our lunch on powder exports, but smart U.S. producers are using this market disruption to invest in feed efficiency and genetic improvements that compound annually. Trust me, while everyone else is watching butter prices swing, the profitable operations are building permanent competitive advantages through genomic selection and feed optimization that’ll matter long after today’s volatility fades.

KEY TAKEAWAYS

Lock in feed savings immediately – The 61¢ corn crash saves roughly $85-$ 120 per cow for fall feeding, but only if you forward contract now at these levels. Start tracking your milk-to-feed ratio weekly and target that 1.4 pounds of milk per pound of feed that top herds achieve.
Implement genomic testing for replacement decisions – At $35 per head, genomic testing identifies low-merit heifers before you waste $1,400-2,000 in feed costs raising them. Focus on feed efficiency and component traits, not just production volume, in this volatile 2025 market environment.
Capitalize on precision feeding technology – Systems delivering 40-50¢ daily savings per cow while boosting yields 3-5% pay for themselves quickly when feed represents 50-60% of your variable costs. Begin with TMR analysis if you’re running operations with 200+ heads.
Protect against Class IV weakness with strategic hedging – Today’s 2.5¢ butter drop signals potential $0.80-1.20 per cwt reduction in August milk checks. Consider put options or DRP for Q4 production while butter prices remain under pressure from seasonal demand fade.
Focus on permanent genetic improvements over temporary price gains. While markets fluctuate daily, genetic progress compounds annually. Herds testing 75-100% of heifers show $50,000+ higher annual profits than those testing under 25%, creating sustainable competitive advantages regardless of commodity volatility.

dairy farm profitability, genomic testing dairy, dairy feed efficiency, dairy market report, herd management strategies

know how some days the market just can’t make up its mind? Well, today was one of those days that’ll have you scratching your head while simultaneously reaching for your calculator. Butter took an absolute beating – we’re talking a 2.5¢ nosedive that basically erased a week’s worth of gains in one session. But here’s where it gets interesting… dry whey went completely the other direction, rallying 2.75¢, as if someone had just discovered a new use for the stuff.

The thing is, this isn’t just noise. That butter drop is going straight to your Class IV check – we’re probably looking at $0.80 to $1.20 less per hundredweight for that portion of your August milk payment. Meanwhile, the whey rally is single-handedly keeping your Class III calculation from falling apart. And then corn… man, corn just had one of those days you don’t see very often, crashing 61¢ like someone suddenly found a billion bushels hiding in a barn somewhere.

Today’s Price Action – The Numbers That Matter to Your Operation

Product	Price	Today’s Move	Weekly Trend	What This Really Means
Cheese Blocks	$1.8800/lb	Flat	+3.4%	Processors comfortable with inventory levels – steady as she goes
Cheese Barrels	$1.8600/lb	Flat	+4.2%	That 2¢ spread to blocks? Classic balanced market signal
Butter	$2.2800/lb	-2.50¢	-5.7%	Your Class IV headache right here – summer demand fade is hitting hard
NDM Grade A	$1.2650/lb	+1.50¢	-0.9%	Trying to help, but still priced out of too many export markets
Dry Whey	$0.6125/lb	+2.75¢	+8.6%	The hero of the day – Southeast Asia can’t get enough of this stuff

Feed Costs Just Threw You a Curveball (A Good One, Finally)

This corn move today… I mean, when’s the last time you saw a 61¢ drop in one session? That takes corn down to $3.73/bu for September delivery, which is the kind of relief your feed budget’s been praying for.

Here’s your new reality:

Corn (Sep): $3.7275/bu (down 61¢) – biggest single-day drop in months
Soybean Meal (Sep): $286.90/ton (up $5.60) – protein costs still climbing the wall
Current Milk-to-Feed Ratio: 4.67 (well into profitable territory above the 3.0 line). What’s fascinating is how this creates a weird split in your feed costs. Energy has become cheap quickly, but protein remains expensive as ever. If you’re in the Midwest with decent access to local corn, you’re probably feeling pretty good right now. But those of you dealing with freight costs out West? You’re seeing some of the benefit, just not all of it.

Another thing worth noting – and this is something I’ve been watching for months – is the increasing volatility of these feed ingredient relationships. It used to be that corn and beans moved together more often than not. Now? They’re doing their own thing, which makes feed planning… well, let’s just say it keeps you on your toes.

Trading Floor Drama (Or Lack Thereof)

So here’s what was really happening in the pits today… The butter action was legit – 14 loads traded hands with that 2.5¢ slide, which tells you real money was making real decisions about where they think prices should be headed. That’s not some thin market phantom move; that’s fundamental repricing happening in real time.

But the cheese market? Dead as a doornail. One block trade. Zero barrels. That’s not traders being lazy – that’s everyone sitting on their hands waiting for someone else to show their cards first.

What the volume told us: Butter’s 14-load volume confirms this wasn’t just some computer algorithm having a bad day. Serious money changed hands, and they were selling into strength. The cheese market’s virtual silence means today’s flat prices don’t mean much either way.

Technical levels that matter: Butter support’s sitting right around $2.25 now. Break that, and we could see another leg down pretty quickly. For cheese, that $1.85 floor has been holding for weeks and still looks solid.

The bid-ask spread story: In butter, seeing 14 bids against 10 offers at the close suggests some smart money was stepping in at lower levels. It’s possible that we won’t fall much further, at least not immediately. In cheese, that single bid-offer situation screams thin liquidity – classic setup for a big move once someone decides which direction they want to go.

The Bigger Picture – Global Competition Reality Check

Do you want to know where we stand compared to the competition? Here’s the real deal, converting everything to apples-to-apples dollar pricing (using €1.08/$ exchange rate):

Product	U.S. Spot	EU Futures (Aug)	NZ Futures (Aug)	What This Means
Butter	$2.28/lb	~$3.46/lb	~$3.29/lb	We’re practically giving it away – export opportunity
Powder	$1.265/lb	~$1.16/lb	~$1.26/lb	Getting schooled by Europe, matched by New Zealand

The story these numbers tell is pretty clear if you’ve been watching export trends. The world wants our butter – we’re more than a dollar per pound cheaper than everyone else. But powder? We’re losing our lunch to European competition, and that’s been evident in disappointing export volumes for months.

This competitive dynamic also explains a significant portion of today’s price action. That butter weakness might actually help our export competitiveness, despite sounding strange. And the powder strength? Well, it’s nice, but it’s pricing us further out of global markets.

Production & Supply – What’s Really Happening Out There

We’re deep in summer heat stress season, and it’s showing up exactly where you’d expect. California’s Central Valley, Texas, and Wisconsin’s southern counties – all dealing with the usual August production challenges. However, what’s interesting about the current supply picture is…

According to the latest USDA data, the national dairy herd’s holding steady at about 9.47 million head, which is actually up slightly from earlier in the year. Culling rates are running about 2% of the herd – pretty normal for this time of year. What’s really wild, though, is what’s happening with replacement heifers.

Get this – heifer inventories are at the lowest levels since 1978. I mean, 1978! That’s pushing replacement costs through the roof. USDA’s reporting average prices around $2,660 per head nationally, but if you’re shopping for quality animals in California or Minnesota, you’re looking at $3,000-plus easily.

The beef-on-dairy breeding trend is absolutely crushing the replacement market. Producers are getting $200/cwt for live cattle and breeding half their herd to beef bulls. Smart from a cash flow standpoint, but it’s creating this massive bottleneck in the replacement pipeline.

What’s Really Moving These Markets

The domestic demand story is pretty straightforward – butter’s following its seasonal script. The summer grilling season’s winding down, and retail promotions are pulling back, which is showing up directly in spot prices. Food service cheese demand remains the bedrock of the market – steady and reliable, but not growing fast enough to drive prices higher on its own.

Export markets are where the real drama is. Mexico consistently ranks as our most reliable customer. They’re savvy buyers who time their purchases well, often stepping in when others are selling.

But Southeast Asia? That’s become the story for whey. The demand from that region has been absolutely relentless – feed applications and food uses; they can’t get enough. Today’s 2.75¢ rally reflects just how hungry they are for our product, and it’s becoming a genuinely important price driver for the whole whey complex.

The concerning part is our powder pricing in global markets. Europeans are consistently undercutting us, and until we become more competitive, we will continue to lose market share. That’s a strategic issue that extends beyond daily price fluctuations.

Historical Context – Where Today Fits

This August 13th action sits right in the normal seasonal range, but the volatility’s definitely running above average. What strikes me most is the divergence between fat and protein markets – we’re seeing increasingly complex global trade dynamics affect different dairy components in completely different ways.

The correlation breakdowns between products are creating opportunities for savvy marketers, but they’re also making traditional hedging strategies more complicated. Once, you could pretty much predict how cheese and butter would move relative to each other. Not so much anymore.

Looking Ahead & Taking Action

Futures market guidance:

Class III (Aug): $17.40/cwt
Class III (Sep): $17.21/cwt
Class IV (Aug): $18.54/cwt
Class IV (Sep): $18.66/cwt

The curve’s telling us to expect a bumpy sideways ride for Class III, with perhaps some improvement into the fall, while Class IV faces near-term pressure from today’s butter slide.

Here’s what’s interesting about the volatility picture – the options market’s pricing in about 15% more uncertainty than we typically see this time of year. The 90-day historical volatility for Class III is running significantly above seasonal norms. Put options are more expensive, but given these mixed signals, they might be worth considering for Q4 production.

Seasonal probability analysis based on the last five years suggests that we have about a 65% chance of seeing Class III prices improve by $0.50-$1.00 from current levels by October. But (and this is important) that’s assuming normal seasonal tightening patterns, and this year’s been anything but normal.

Correlation analysis shows that the usual relationships between products are breaking down. Historically, cheese and butter moved together about 70% of the time. This year? It’s more like 45%. That creates both opportunities and challenges for risk management.

Regional Market Deep Dive – Upper Midwest Focus

Let’s talk about what’s happening in Wisconsin and Minnesota specifically, because this region’s dealing with some unique dynamics right now.

Regional production patterns: Despite the heat stress episodes, milk production has been holding up reasonably well, thanks to improved cooling systems and better heat stress management. The local basis to national prices has been running tighter than usual as processing plants operate at full capacity.

Feed cost advantages: Today’s corn crash is particularly beneficial here, given the proximity to growing regions. Local basis for corn is typically $0.10-$0.15 under futures, so producers are seeing the full benefit of that 61¢ drop.

Processing dynamics: The numerous specialty cheese plants throughout Wisconsin and Minnesota are especially benefiting from whey strength. These facilities often generate significant whey volumes relative to cheese output, so that a 2.75¢ rally adds meaningful revenue beyond just the cheese pricing.

Transportation factors: Regional trucking rates have been relatively stable, though driver availability remains a challenge. Most plants are within reasonable hauling distance, so milk marketing flexibility remains good.

Risk Management Tools & Hedging Strategies

Given today’s market action and volatility levels, here are some specific strategies worth considering:

For Class IV exposure: Consider put options around the $18.00 strike for October and November contracts. Premium’s running about $0.25-$0.30, which isn’t cheap, but given butter’s weakness, it might be worth the cost.

Class III hedging: The September contract at $17.21 offers some interesting opportunities. Consider selling calls at around $18.00 and buying puts at around $16.50 for a collar strategy that costs approximately $0.15-$0.20 net.

Feed cost management: That corn drop creates a great opportunity to lock in fall and winter pricing. Consider buying December corn futures or entering into a forward contract with your supplier. Don’t get too cute trying to time the absolute bottom.

Volatility plays: With implied volatility elevated, selling option spreads might generate some premium income. For example, selling the $17.50-$18.50 call spread on September Class III for about $0.10-$0.15.

Immediate Action Items for Your Operation – Feed procurement:

Lock in that corn price drop immediately. When corn falls 61¢ in one session, you don’t wait around for it to fall another 20¢. Contact your supplier today to discuss securing fall and winter corn at these levels.

Milk pricing: With butter showing this weakness and Class IV under pressure, consider establishing some downside protection for fall production. Dairy Revenue Protection or put options make sense for Q4 output.

Cash flow planning: Your August milk check will reflect today’s butter weakness, so adjust your cash flow projections accordingly. But the feed cost relief should help overall margins even if milk prices stay soft.

Production planning: Heat stress management remains critical through the rest of August. Any investments in cow comfort that maintain production during these stress periods will pay dividends.

Industry Intelligence & Strategic Developments – Processing capacity updates:

That major Southwest cheese plant expansion we’ve been hearing about is reportedly coming online ahead of schedule. Word is they’re offering premiums that are starting to influence producer decisions across a pretty wide geographic area. Could significantly shift regional milk flow patterns.

Technology trends: The adoption of precision feeding systems continues to accelerate, particularly with protein costs remaining elevated. The ROI calculations for these systems are looking increasingly favorable for larger operations that deal with volatile ingredient pricing.

Regulatory environment: There’s ongoing discussion about potential changes to federal milk marketing orders in the upcoming Farm Bill negotiations. Nothing imminent, but worth staying informed about how these conversations develop. Any changes could reshape regional pricing dynamics.

Global trade developments: Keep an eye on EU production trends and any changes in their regulatory environment. Their ability to undercut our powder pricing continues to be a strategic challenge for U.S. exports.

The bottom line?

Today’s mixed signals remind us why diversified marketing strategies and solid risk management remain essential, regardless of what any single day’s trading brings. This market’s going to keep throwing curveballs, but that corn price relief gives us some breathing room to make smart decisions rather than panicked ones.

Your operation needs to stay flexible, seize opportunities like today’s feed cost break when they arise, and manage downside risk on the milk side. The dairy business has always been about rolling with the punches – today just gave us a few more to roll with.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Genomic Testing: A Game-Changer for Profitable Breeding Decisions – This article provides a tactical framework for using genomic data to make immediate culling and breeding decisions. It demonstrates how to translate test results into actionable steps that increase genetic gain, cut replacement-rearing costs, and boost overall herd profitability.
Beef on Dairy: The Ultimate Guide to Getting It Right! – Complementing the report’s market analysis, this guide delves into the strategic implementation of a beef-on-dairy program. It reveals methods for selecting the right beef genetics and managing crossbred calves to capitalize on high beef prices and optimize herd value.
The Digital Dairy Farm: How Technology is Transforming Herd Management – Taking a future-focused perspective, this piece explores how integrated technologies, including the precision feeding systems mentioned in the report, are creating smarter, more efficient farms. It highlights innovative tools that unlock new levels of herd health and productivity.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Dairy Farm Profitability, dairy feed efficiency, dairy market report, genomic testing dairy

CME Dairy Report – July 31st: The Quiet Day That Actually Matters

Thursday, July 31st, 2025

Here’s what caught my attention today: Cheese barely budged, but the margin window just cracked wide open

EXECUTIVE SUMMARY: Look, I’ve been watching these markets for years, and the margin spread we’re seeing right now between feed costs and forward milk prices is absolutely historic. While everyone’s fixated on that penny move in block cheese today, December corn just dropped below $4.15 while Q4 Class III futures are trading over $19 – that’s your signal to act. The milk-to-feed ratio jumped from 1.8 to 2.05, putting income over feed cost near $10 per hundredweight… numbers like that don’t stick around long.Here’s the thing – Europe’s cutting production by 0.2%, Australia’s battling a perfect storm of drought and high costs, but we’ve got $8 billion in new processing capacity coming online that needs to be fed. The smart money isn’t waiting for cheese to rally another nickel. They’re locking in feed prices now and hedging 25-30% of their fall milk production while this window’s open.

KEY TAKEAWAYS

Lock in your feed costs immediately – December corn at $4.13/bu and soybean meal at $274/ton won’t last with this harvest uncertainty. Midwest producers already getting 10-20¢ under futures on their corn basis… that’s real money saved.
Price 25-30% of Q4 and Q1 production now – December Class III trading $2+ over August futures means the market’s paying you to think ahead. Forward contracts or CME options, doesn’t matter – just get some coverage before this contango flattens.
Your butterfat is worth more globally than ever – U.S. butter trading $2,400/MT cheaper than European, $1,844/MT under New Zealand. Export demand from MENA and Southeast Asia is pulling our fat premiums higher.
Regional heat stress = spot milk premiums – Processors paying up to $2 over Class in the Central region right now. If you’re in a cooler microclimate keeping production steady, leverage that advantage.
Processing demand is structural, not cyclical – These new Hilmar, Leprino, and Fairlife plants need 55 million pounds of milk daily by 2026. Build those relationships now because this demand floor isn’t going anywhere.

Look, if you’re focusing on today’s penny move in block cheese, you’re missing the forest for the trees. Sure, blocks ticked up a cent to $1.6825 on zero trades, but that’s not the most significant development. The game-changer is the bullish gap between declining feed costs and firm milk futures – December corn sitting under $4.15 while Q4 Class III futures trade at a hefty premium to cash. This kind of spread doesn’t come around every day.

Today’s Numbers – And What They Actually Mean for Your Operation

Product	Price ($/lb)	Daily Move	Monthly Trend	What This Means for You
Cheese Blocks	$1.6825	+1¢	+3.4%	Slight Class III support, but volume needed to confirm
Cheese Barrels	$1.6800	Unchanged	+3.4%	Holding gains, but flat close shows buyer hesitation
Butter	$2.4725	Unchanged	-1.1%	Class IV steady, butterfat still soft
NDM	$1.2900	Unchanged	-0.2%	Export demand cautious, not driving Class IV higher
Dry Whey	$0.5325	Unchanged	-1.4%	Continues to drag on Class III protein markets

After yesterday’s explosive session with 15 block trades and barrels jumping 4.5 cents, today felt like the market catching its breath. Zero trades in butter or cheese, just two NDM loads changing hands.

What’s particularly interesting is how the order book closed. We had four unfilled bids in blocks at $1.6825 with zero offers. That’s quietly bullish – buyers were still there at the close, but sellers weren’t willing to meet them.

The Global Picture – Where We Stand Against the Competition

I’ve been watching our international competitive position closely, and the current situation is remarkable.

Product	U.S. Price (USD/MT)	EU Price (USD/MT)	NZ Price (USD/MT)	U.S. Price Advantage/(Disadvantage)
Butter	~$5,451	~$7,856 (€7,205)	~$7,295	+$2,405 vs EU, +$1,844 vs NZ
SMP/NDM	$2,844	~$2,657 (€2,437)	~$2,835	($187) vs EU, ($9) vs NZ
Cheese	~$3,710	N/A	N/A	Competitive advantage

Key Takeaway: This puts U.S. powders at a slight price disadvantage to our competitors—explaining why NDM exports face headwinds when this premium widens.

***Comparison of US, EU, and New Zealand dairy product prices (Butter, SMP/NDM, Cheese) as of July 31, 2025***

European Union: According to recent USDA analysis, they’re looking at a 0.2% decline in milk deliveries for 2025. Shrinking herds in Germany and France, plus all those EU Green Deal regulations. European processors are shifting focus to high-value cheese over butter and powders.

New Zealand: Industry reports suggest their production is off to a strong start this season. Early production trends look positive with that $10.00/kgMS opening price. If weather cooperates, current indicators point to potential growth, which will weigh on global powder prices.

Australia: Recent USDA projections show production declining to 8.6 million metric tons – they’re navigating what industry folks call a “perfect storm” of drought, flooding, and high input costs.

Feed Costs – The Story Everyone Should Be Watching

Here’s what’s really driving the margin opportunity:

Feed Component	Current Price	Trend	Impact on Margins
Corn (Dec ’25)	$4.1375/bu	Down	Lower feed costs for fall/winter
Soybean Meal (Dec ’25)	$276.30/ton	Down	Easing protein costs
Alfalfa Hay (WI Prime)	~$290/ton	Stable	Forage costs remain significant
Milk-to-Feed Ratio	~2.05	Improving	Profitability turning positive
Income Over Feed Cost	~$9.95/cwt	Strengthening	Strong margins to lock in

What strikes me about this setup is the timing. December corn settled at $4.1375 today, significantly below the $4.43 we saw in the expired September 2024 contract. That milk-to-feed ratio of 2.05 is a marked improvement from the 1.8 we saw recently – which is considered tight margin territory.

Production Reality – The National vs Regional Story

According to recent USDA data, we had 18.5 billion pounds in June from the 24 major dairy states, up 3.4% from last year. The dairy herd is expanding – 9.47 million head as of June, up from last year.

But here’s what’s fascinating… for a producer dealing with summer heat stress, that “Milk Production Up 3.4%” headline can feel completely disconnected from reality. Processors in the Central region are actively hunting for spot loads, paying up to $2 over Class. This dichotomy is crucial – national supply provides a ceiling on prices, while regional weather-driven tightness creates a floor.

What’s Really Moving These Markets

Consumer demand? Steady but uninspired. Recent quarterly reports from major pizza chains indicate year-over-year declines in same-store sales – a key cheese demand indicator. This lackluster consumer pull is capping cheese prices.

Processing demand? According to recent industry analysis, the U.S. dairy industry is in the middle of a massive capital investment cycle exceeding $8 billion. These new plants are already pulling milk from the market, running at two-thirds capacity or more.

Export markets continue telling that component story. Mexico remains our most reliable partner. Industry trends suggest butterfat exports have been strengthening. The MENA region has shown substantial growth in demand for U.S. butterfat – industry reports indicate significant increases in early 2025.

Forward Curve – The Opportunity Staring Us in the Face

Contract Month	Price ($/cwt)	Premium to August	Profit Opportunity
August ’25	$17.12	—	Current market
September ’25	$17.79	+$0.67	Lock in 4% premium
October ’25	$18.78	+$1.66	Lock in 10% premium
December ’25	$19.15	+$2.03	Lock in 12% premium

USDA’s latest WASDE forecasts all-milk price for 2025 averaging $21.60/cwt. But the futures market shows clear contango:

August ’25: $17.12
September ’25: ~$17.79
October ’25: ~$18.78
December ’25: ~$19.15

For producers, this transforms abstract market concepts into concrete business opportunities. The market is explicitly offering higher prices for future milk than today’s cash price.

Regional Spotlight: Upper Midwest Dynamics

Regional trends suggest Wisconsin and Minnesota production showed growth patterns consistent with national data. Cool overnight temperatures are mitigating daytime heat impacts, keeping volumes relatively steady.

Feed cost advantage for Midwest producers is significant. Local corn basis trades at a discount to CME futures. Wisconsin hay reports show Prime Alfalfa small squares averaging ~$290/ton.

What Producers Should Actually Do Right Now

Pricing & Risk Management: Seriously consider pricing 25-30% of Q4 2025 and Q1 2026 projected production. December Class III trading over $2.00/cwt above August protects excellent current margins.

Feed Procurement: Contact suppliers immediately for firm quotes on corn and soybean meal through end of 2025. Corn and meal futures are soft due to large harvest expectations.

Cash Flow Planning: Strong margins projected for second half of 2025 make this ideal for detailed planning. Model expected cash flow based on locked-in prices for strategic debt reduction or capital improvements.

Industry Intelligence You Should Know

The processing expansion wave is fundamentally reshaping our landscape. Hilmar Cheese in Dodge City, Kansas; Leprino Foods in Lubbock, Texas; Fairlife in Webster, New York – they’re part of an expansion exceeding $8 billion creating massive, long-term milk demand.

June 2025 brought significant FMMO pricing formula changes. New “make allowances” for manufactured products reflect rising processing costs. Net impact varies by region depending on local milk utilization mix.

Destination	Key Products	Growth Trend	Price Driver
Mexico	Cheese, NDM, Butterfat	Strong, reliable	All components
Southeast Asia	Cheddar cheese	Growing demand	Competitive pricing
MENA Region	Butterfat	+770% in early 2025	Massive price advantage
Overall Impact	Fat & protein	Export strength	$2,400/MT butter advantage

Putting Today in Perspective

Today’s quiet session was consolidation – a pause following this week’s significant, volume-driven cheese rally. Despite the flat close, spot block and barrel cheese prices are still up over 3% for the week.

The most significant story isn’t the silent CME screen. It’s that powerful, actionable margin opportunity opening up for producers. The divergence between falling new-crop feed costs and strong forward milk prices has created historically favorable profitability windows.

Producers who recognize this opportunity and take strategic action managing both input costs and milk price risk will position their operations for success through the second half of 2025 and beyond.

And honestly? That opportunity might not stay open forever.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Dairy Feed Costs: Top 10 Ways To Tame The Feed Bill Beast – This article reveals 10 practical strategies for cutting on-farm feed expenses. It provides the tactical know-how to actively lower your cost of production and fully capitalize on the margin opportunity identified in today’s report.
The 5 Unbreakable Rules for Profitable Dairy Farming – To complement the report’s market tactics, this piece outlines the core strategic principles for long-term success. It demonstrates how to build a resilient, low-cost operation that can consistently thrive through any market cycle, not just the current one.
Genomics: The Secret Weapon for Accelerated Genetic Progress – The report highlights new processing plants demanding high-quality milk. This article provides a blueprint for using genomic testing to breed healthier, more efficient cows specifically tailored to deliver the high-component milk these new facilities require.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Dairy Farm Profitability, dairy market report, dairy risk management, feed costs dairy, income over feed cost

CME Dairy Market Report – July 30, 2025: Cheese Surge Slams Prices Higher, Adding $1.00+ to Your August Milk Check

Wednesday, July 30th, 2025

Cheese barrels just jumped 4.5¢ with zero offers left – your August milk check could be $1.20 fatter than you think.

EXECUTIVE SUMMARY: Look, I’ve been watching these markets for years, and today’s cheese action wasn’t your typical speculative nonsense – this was processors with real money chasing real product. Barrels shot up 4.5¢ to $1.6800 with six bids and zero offers at close, which translates to about $1.00+ boost in your August milk check.Here’s what caught my eye: fifteen actual trades in blocks, not paper shuffling. Feed costs are finally working in your favor too – corn’s down to $3.93, soybean meal at $264.40, giving you roughly 30-50¢/cwt breathing room. The global picture’s helping us out, with the euro stuck in neutral, keeping our cheese competitive overseas while Mexico continues to buy steadily.Bottom line? With Class III hitting $17.36 and feed costs easing, you’re looking at margins around $8.50/cwt over feed costs. Time to think about locking in some of that fall production.

KEY TAKEAWAYS

Lock in 25-30% of your fall milk now – Class III futures at $16.80-$17.20 protect your margins while keeping upside if this rally extends. With processors bidding aggressively, this isn’t just a flash in the pan.
Your August check jumps $0.75-$1.00/cwt higher than expected. Use that cash flow bump to pay down operating loans or pre-buy feed while corn’s showing backwardation (no big price spikes are expected).
Regional supply tightness is real, despite national production being up 1.6%. Wisconsin’s holding steady with better cooling, but Midwest heat stress is creating pockets of tight milk that processors are paying a premium for.
Global factors are finally working in our favor – the euro’s weakness keeps our cheese competitive, Mexico’s taking 25% of its cheese needs from us, and even China’s dairy imports are rebounding by 2% despite those crazy tariffs.

dairy market analysis, Class III futures, income over feed cost, dairy risk management, farm profitability

Want the full breakdown? Today’s report digs into the order book mechanics, global trade flows, and exactly where these margins are headed through the fall. Sometimes the best opportunities hide in plain sight.

Today’s dairy markets were all about one thing: the cheese complex caught fire. Barrels soared 4.5¢ and blocks edged up 0.5¢, driven by serious hustle from processors scrambling to cover needs. Translate that to your farm’s bottom line, and you’re looking at a $1.00+ boost to your August milk check. Additionally, as feed costs finally ease, this presents a prime opportunity to lock in margins for the fall.

Today’s Market Snapshot: July 30, 2025

Product	Price	Change	Weekly Trend	What it Means for You
Cheese Blocks	$1.6725/lb	+0.50¢	+1.67%	Your Class III check rises
Cheese Barrels	$1.6800/lb	+4.50¢	+2.77%	Processors chase barrels aggressively
Butter	$2.4725/lb	-3.00¢	-0.69%	Class IV holds its ground, insulating you from butter’s dip
NDM	$1.2900/lb	+0.50¢	-0.85%	Export demand cautious but steady
Dry Whey	$0.5325/lb	-0.75¢	-1.85%	Protein markets remain weak

What really stood out was the volume—fifteen trades in blocks giving real weight to this rally. Processors were stepping up big, leaving six bids for barrels at close with no offers. That’s a clean break above the $1.67 level that had capped prices all month.

Meanwhile, butter took a small dip, but its impact on Class IV remains minimal—exactly what you want when you’re focused on protecting milk check stability.

Behind the Move: Deep Dive into Market Mechanics

Here’s where the order book gets interesting… The barrel bid stack was loaded deep—I’m talking bids at $1.6775, $1.6750, and $1.6725 before the market even opened, and those offers got snapped up fast. By close, six bids remained with zero offers, signaling serious conviction from commercial buyers.

Volume-weighted average price patterns tell the real story. Blocks traded around a $1.6710 VWAP versus the $1.6725 close, showing late-session strength rather than early-morning hype that fades. The bid-ask spreads narrowed from about 0.75¢ early morning to just 0.25¢ by close—that’s processors showing real confidence.

However, butter is testing support around $2.47, and if that breaks, we could see a move toward $2.40-2.42.

Market participants suggest cheese prices may have additional upside potential if current demand patterns continue, with some eyeing the $1.75-$1.80 range.

Production Reality Check: The Numbers Don’t Lie

While the market signals a tight supply, let’s discuss what’s actually happening on farms. Recent USDA data shows May milk production up 1.6% year-over-year to 19.93 billion pounds—the third straight month of gains. Cow numbers climbed by 114,000 head since May 2024.

That tight supply narrative? It’s regional, not national. Wisconsin farms are holding production steady thanks to improved cooling systems (those tunnel ventilation investments from the past few years are really paying off now). Some Midwest areas show typical summer production dips due to heat stress, but nothing catastrophic.

Industry observations suggest measured caution in the heifer market—quality bred animals are moving steadily around $2,800-3,200, but there’s no panic buying for expansion.

How Global Markets Are Actually Boosting Your Price

Key insight: The euro has remained around 1.08-1.11 against the dollar, keeping our cheese competitively priced for export. That’s actually working in our favor right now.

The challenge: Freight costs keep climbing—adding roughly 3-4¢ per pound to delivered powder prices in Asian markets.

The ace in the hole: Mexico continues steady cheese imports, covering about 25% of their consumption, and they’re not backing away from current price levels.

Fonterra forecasts 1,490 million kg of milk solids for 2025/26—that’s our biggest powder competitor. EU output is expected to slip slightly to 149.4 million metric tons.

China’s the wildcard. Dairy imports are projected to grow 2% in 2025, after three years of decline, but hefty tariffs still make U.S. products a tough sell, despite a growing appetite.

Feed Markets Finally Working in Your Favor

Feed prices have finally cooled off—September corn hovers at $3.9275, soybean meal at $264.40, putting producers about 30-50¢/cwt better off compared to seasonal averages.

Here’s how it breaks down regionally:

Upper Midwest: Corn basis runs 10-15¢ under futures—practically free money
California: Higher transport costs but hay prices finally steadied around $280-300/ton
Southeast: Managing soybean meal tightness from port delays, but it’s workable

The mild backwardation in corn futures (current prices higher than future prices) suggests stable or easing feed costs ahead.

Bottom line: Feed costs for efficient operations are around $8.50-$ 9.00/cwt. With Class III at $17.36, that gives you roughly $8.36-8.86/cwt margin over feed costs.

Your Action Plan: What to Do in the Next 72 Hours

Pricing Strategy: Lock in 25-30% of your September-November milk at current Class III futures ($16.80-$17.20) to protect margins while maintaining upside potential if this rally extends.

Feed Purchasing: Consider prebuying feed at current prices to avoid winter supply volatility and lock in these favorable levels.

Cash Flow Moves: Use anticipated $0.75-$1.00 higher August milk checks to pay down operating debt or build cash reserves for future opportunities.

Breeding & Herd Management: Industry sentiment remains cautious. Quality heifers are moving steadily, but there’s no rush toward expansion—hold steady unless you’ve got compelling reasons to adjust.

The Road Ahead: August and Beyond

August is expected to be constructive, with momentum likely to push Class III prices into the $17.00-$17.50 range. Butter should hold around $2.47 as seasonal demand picks up, and Class IV futures remain steady at $19.28.

Fall becomes interesting with typical post-heat production increases in September and October. If cheese demand holds at current levels through that seasonal bump, Q4 Class III could hover around $16.50-$17.00.

Risk factors? Weather events, trade policy shifts, and export demand volatility remain wildcards—especially in an election year.

What’s encouraging? Real commercial buying—not just speculative chatter. When processors bid aggressively for spot cheese and pay a premium for it, that suggests supply-demand fundamentals still support price strength.

Feed costs finally easing after months of pressure adds further optimism for margin recovery. After the squeeze we’ve seen this year, that’s something worth getting excited about.

Questions about locking in fall margins or how basis levels affect your operation? That’s exactly what TheBullVine.com is here for. Use our margin calculators or connect with our analysts to build a pricing strategy that protects your bottom line while positioning you for whatever comes next.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

7 Sires That Will Add Pounds of Fat to Your Herd – This tactical guide reveals specific sires that can boost milk components. It offers a practical way to increase your milk check’s value through genetic selection, directly complementing the market report’s focus on maximizing revenue from current prices.
Dairy Farmers of Canada’s 2024 Outlook: A Blend of Optimism and Caution – This strategic overview provides a big-picture look at the economic forces shaping the Canadian dairy industry. It adds a crucial layer of long-term context to the daily market fluctuations, helping you better position your operation for future trends.
The Future of Dairy Farming: How Technology is Revolutionizing the Industry – Explore how innovations like automation and data analytics are creating more resilient and profitable farms. This forward-looking piece shows how to leverage technology to control costs and buffer against the market volatility discussed in the main report.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III futures, dairy market analysis, dairy risk management, farm profitability, income over feed cost

CME Daily Dairy Report for July 23rd, 2025: When Your Butterfat Premium Just Got Whacked

Wednesday, July 23rd, 2025

Butter crashed 6¢ in one day while Class III futures lost 49¢—your Oct milk checks just took a $1.50/cwt hit. Time to hedge?

EXECUTIVE SUMMARY: You know that sick feeling when you check CME prices and everything’s red? That’s exactly what happened yesterday, and most producers are still treating this like temporary market noise instead of the fundamental shift it actually is. Butter dropped nearly 6 cents to $2.42/lb while NDM fell over 2 cents—that’s real money bleeding out of September and October milk checks, potentially $1.20 to $1.50 per cwt if this trend holds. Meanwhile, cheese markets remained completely silent for three straight days, indicating that buyers think we’re headed lower. European butter is trading 90 cents per pound higher than ours, but our powder pricing has pushed us out of key export markets just when we need them most. The producers who survive this aren’t the ones hoping for a bounce—they’re the ones booking winter feed at today’s lower prices and getting serious about risk management tools like DRP before it’s too late.

KEY TAKEAWAYS

Lock in Q4 feed costs immediately – Corn dropped 5¢ to $4.17/bu and soy meal fell $1.00/ton, but those savings disappear fast when milk drops $1.50/cwt. Book 60-70% of winter needs now before this window closes.
Dairy Revenue Protection isn’t optional anymore – With Class III futures pricing $17 range through fall, spending $1-2/cwt on DRP coverage beats taking a $3-4/cwt hit on unprotected milk. Do the math on 75 lbs/cow/day.
Component management = survival in 2025 – Butterfat premiums are holding while protein values crater. Every 0.1% improvement in milk fat is worth an extra $0.30/cwt when margins are this tight.
Regional basis will deteriorate next – Upper Midwest transportation costs are already up 12% year-over-year. If spot markets remain weak, the local basis will drop another 20-30¢ below already thin levels.
Cash flow planning needs immediate adjustment – September/October milk checks could run 50-75¢/cwt below budget. Delay expansion projects, postpone equipment purchases, and prepare for 6 months of defensive operations.

You ever have one of those days where you walk into the parlor and just… sense something’s off? Well, that’s exactly what happened in the dairy markets today, except instead of a cow going down, we watched butter crater nearly 6 cents to $2.42/lb. And nonfat dry milk? Don’t even get me started—dropped over 2 cents like a rock.

Here’s what’s really getting under my skin, though: the cheese markets went completely radio silent. Zero trades on blocks and barrels for the third straight day. When cheese traders won’t even show up, you know we’re in trouble.

But here’s the thing that’s got me reaching for the Tums—Class III futures just dropped 49 cents today. That’s not market noise, folks. That’s your September and October milk checks taking a direct hit. Yeah, corn’s cheaper (thank goodness for small favors), but it’s nowhere near enough to offset what’s shaping up to be a brutal couple of months ahead.

***CME Cash Dairy Price Trends from July 21 to 23, 2025***

What Actually Went Down Today

The price action tells a story, and honestly? It’s not pretty for any of us milking cows right now.

According to the latest CME cash trading data, butter got absolutely hammered—down 5.75¢ to $2.4200/lb with three loads changing hands. When you see that kind of volume on a down move, it means sellers were desperate and buyers were nowhere to be found.

Cheese blocks stayed glued at $1.6425/lb, but here’s the kicker… zero trades for the third day running. Same deal with barrels at $1.6600/lb. I’ve been watching these markets for fifteen years, and when you see this kind of paralysis, it usually means something bigger is brewing underneath.

NDM took a 2.25¢ hit down to $1.2800/lb—and here’s where things get interesting. We’re now pricing ourselves right out of several key export markets. More on that mess in a minute.

Dry whey dropped another penny to $0.5375/lb. Every cent this stuff loses comes straight out of your Class III check. Period.

What really strikes me about today… this wasn’t some fluke in a thin market. We had decent volume in both butter and NDM, which tells you these moves have conviction behind them. When traders are willing to move product at these levels, they’re making statements about where they think things are headed.

Inside the Pits—What the Floor Traders Are Really Saying

The thing about CME trading floors is that they don’t lie. Today’s butter pit was pure chaos—more offers than bids, and that spells desperation selling. Sellers were practically begging to move product while buyers just vanished into thin air.

Meanwhile, cheese land looked like a ghost town. Industry sources are telling me nobody wants to catch a falling knife right now. The sentiment on the floor was crystal clear—wait and see how low this thing goes.

Here’s what’s got me really concerned—Class III futures crashed right through that psychological $17.50 support level we’ve all been watching. That level’s now resistance, and the next major floor to watch is around $17.00. Break that? We could see some real panic selling kick in.

The Global Picture—And Why Our Powder Problem Just Got Worse

Now this is where things get both fascinating and terrifying. Today’s price drops created some wild competitive dynamics that every producer needs to understand.

Current market intelligence suggests our butter has become genuinely competitive globally for the first time in months. European markets remain elevated with futures above €7,000/MT, while New Zealand is dealing with their own domestic supply crisis. Get this—butter prices in New Zealand have jumped 46.5% in just the past year, hitting NZ$8.60 for a 500-gram block. That’s creating real opportunities for U.S. exports if we can sort out the logistics headaches.

However, here’s where it gets ugly… our NDM situation is on the verge of being disastrous. Industry sources are telling me we’re now priced alongside or above key competitors in several markets. A processor buddy of mine in Tulare mentioned they’re seeing European powder showing up in quotes they haven’t seen since early 2024. That’s not good news for anyone banking on powder exports to prop up skim values.

What’s particularly concerning to me is hearing that several major butter plants, which were down for extended maintenance, are coming back online over the next few weeks. That’s adding supply right when demand is showing serious cracks.

Historical Reality Check—Where We Stand

Let me put today into perspective, because the numbers are quite sobering. Looking back at historical patterns, butter’s 6-cent single-day drop is the biggest we’ve seen since early June. However, what’s really concerning is that we’re now trading about 8% below where we were this time last year.

The cheese market’s three-day trading freeze? That’s unprecedented in my experience for this time of year. Normally, July’s when food service demand picks up for back-to-school prep, but that buying just isn’t materializing.

What’s particularly noteworthy is how this compares to seasonal patterns. Typically, we see some softening in July as spring flush milk works through the system, but this feels different. The fundamentals suggest we should be seeing more support at these levels, which makes me wonder if demand destruction is happening faster than anyone anticipated.

Regional Spotlight—What’s Really Happening in Your Backyard

Upper Midwest: I’ve been speaking with producers across Wisconsin and Minnesota, and the sentiment is becoming increasingly grim. The whey weakness is particularly brutal here, as it directly impacts Class III pricing. A producer near Eau Claire mentioned that his co-op’s field representative came by yesterday specifically to discuss risk management for Q3 and Q4 milk. When co-ops start pushing hedging conversations, that tells you everything you need to know.

The basis relationships in this region have been relatively stable, but if spot markets stay weak, you’ll see that local basis start to deteriorate. Transportation costs to major cheese plants are up approximately 12% from last year, adding pressure to already thin margins.

California: Central Valley plant managers are reporting something I haven’t seen in years—steady but completely uninspired demand. Food service orders are coming in, but nobody’s building any inventory. Everyone’s going hand-to-mouth, which is usually a red flag for demand weakness ahead.

The heat’s also becoming a real factor. Temperatures have been running 5-7 degrees above normal, which is putting stress on herds just when they need peak production efficiency. Some operations are seeing milk fat tests drop as cows try to cope with the heat stress.

Cheese processing sources report that retail orders remain steady for food service, but retail buying has gone completely quiet. Nobody wants to build inventory right now—they’re all waiting to see if the whole complex resets to a lower level. When retailers start playing that game, it usually means they expect prices to keep falling.

Northeast: Fluid milk demand remains the bright spot, but that Class I differential isn’t nearly enough to offset what’s happening in the commodities. Smaller operations, especially, are feeling the squeeze. A producer in Vermont told me he’s seriously considering his first futures hedge in over five years—that’s how nervous folks are getting.

Southwest: This region has been the growth story of the dairy industry, but expansion plans are being put on hold. Several planned facilities in New Mexico and Texas are reportedly delaying construction starts. When expansion capital dries up, that’s usually a leading indicator of longer-term challenges.

Feed Markets—The One Silver Lining

At least there’s some decent news on the input side. Corn dropped about 5 cents to around $4.17/bu for December, and soybean meal fell over a dollar to $285.60/ton.

Looking at historical ratios, anything below 2.0 on the milk-to-feed calculation makes margins pretty tight, and that’s exactly where we’re sitting right now. The drop in milk prices today more than wiped out any benefit from cheaper feed, so we’re still looking at squeezed margins across the board.

Here’s what I’m hearing from producers across the Midwest—with local corn prices softening, smart operators are starting to book winter feed supplies now. This is becoming more common as producers get more defensive about input cost management. If you haven’t secured at least a portion of your Q4 feed needs, this may be your last opportunity.

Forward Market Reality—And Why the Math Gets Ugly

The futures curves are painting a pretty clear picture for the next few months, and honestly? It’s not encouraging for anyone milking cows.

Class III appears to be pricing in the mid-to-low $17 range through the fall. That’s a significant reset from where we were just two weeks ago. Class IV futures held up better today, but they appear increasingly disconnected from developments in the spot butter and powder markets.

According to recent discussions with USDA economists, the next round of official forecasts will likely reflect this new weakness. Private analysts are already slashing their Q3 and Q4 projections, with some suggesting that the Class III price could dip below $17.00 if current trends continue.

What’s particularly troubling is the shape of the forward curve. Normally, you’d expect to see some recovery pricing built into the back months, but the December contracts are barely above current levels. That suggests the market doesn’t expect any quick fixes to be forthcoming.

What You Need to Do Right Now—No Sugar Coating

Look, I’ve been through enough of these cycles to know when it’s time to stop hoping and start acting. If you’ve got unpriced milk for the back half of the year, today was your wake-up call.

The Dairy Revenue Protection program is still available with reasonable premiums. For those not familiar, DRP lets you insure against unexpected revenue declines on a quarterly basis, and right now, it might be the best insurance policy you can buy.

Put options for Class III futures make sense if you can handle the premium costs. The math is relatively simple—if you’re considering potential milk prices in the low $17 range, spending a dollar or two per hundredweight to establish a floor starts to look quite attractive.

Here’s a quick calculation to think about: if you’re milking 500 cows averaging 75 pounds per day, a $1.00/cwt drop in milk price costs you about $1,125 per month. Hedging part of that risk starts to look pretty reasonable when you run those numbers.

On the feed side, this dip in corn and soy prices is creating an opportunity you shouldn’t ignore. I recommend discussing with your nutritionist how to plan for at least 60-70% of your winter needs. Every penny you can shave off production costs matters when milk prices are under this kind of pressure.

The Risk Management Reality Check

Different operations require different strategies, and there’s no one-size-fits-all solution.

Large Commercial Dairies: You’ve got access to more sophisticated tools—futures, options, basis contracts, LGM coverage. Use them. This isn’t the time to go naked on milk price risk just because hedging costs money. Your scale can help absorb some volatility, but you need to be proactive about protecting margins.

Mid-Size Family Operations: Focus on feed cost management first, then consider partial hedging strategies for your most vulnerable periods. You can’t afford to take the full hit if this trend continues. Component management becomes absolutely critical—every tenth of a butterfat percentage point matters more now than it has in years.

Smaller Producers: Cash flow is everything. Adjust your budgets for September and October milk checks, which may be significantly lower than what you have budgeted. Consider whether operational changes are necessary at these price levels—perhaps the expansion project is delayed or the equipment purchase is postponed.

Regional co-op field staff are reporting more hedging conversations with producers than they’ve seen in years. When farmers who’ve never hedged before start asking questions about risk management, that tells you the psychology is shifting.

The Uncomfortable Truth About Where We’re Headed

Here’s what’s keeping me up at night about today’s action—this wasn’t just a bad day, this was a fundamental shift in market psychology. Butter’s 6-cent drop breaks the bullish momentum we’d built going into summer, and the cheese market’s complete shutdown suggests buyers see more weakness ahead.

According to USDA weekly data, we’re seeing inventory builds in some categories that suggest demand isn’t keeping pace with production, even as we move past the spring flush period. That’s not a great sign for price support going forward.

What’s really concerning is that this is all happening while feed costs are actually moderating. That indicates the pressure is primarily on the revenue side, which makes margin management even more critical for survival.

The market is essentially telling us that the optimism of early summer was overdone. Export demand isn’t materializing as expected, domestic consumption is steady but not inspiring, and production—while seasonally declining—isn’t falling fast enough to balance things out.

This development is fascinating from a global competitiveness standpoint. Our butter is now genuinely competitive internationally, but our powder pricing has pushed us out of several key markets. That creates this weird split personality for the industry—great for butterfat, terrible for protein values.

Here’s my honest assessment… we’re looking at a fundamental reset in pricing that could persist through the back half of 2025. The fundamentals haven’t disappeared—global demand for dairy products remains solid, U.S. production efficiency continues to improve, and we’re still the most reliable supplier for many key markets. But in the short term? It’s about cash flow management and survival.

The producers who’ll thrive through this period are the ones who recognize that this isn’t just a temporary dip—it’s a new reality that requires different strategies. Risk management is no longer optional; it’s essential. Feed cost control isn’t just good business, it’s survival.

What gives me hope is that this industry has weathered worse storms. We adapted to the 2014-2015 downturn, survived the trade war disruptions, and navigated the COVID chaos. We’ll figure this one out too, but it will require some tough decisions and smart risk management.

The conversation we need to be having isn’t about when prices will recover—it’s about how to structure our operations to be profitable at these levels. Because until the global supply-demand balance shifts significantly, this might just be the new normal we’re dealing with.

How are you adapting to these new market realities? What strategies are working on your operation? This isn’t just about surviving the next few months—it’s about positioning for whatever comes next.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Dairy Farming on a Budget: 12 Frugal Strategies for Tough Times – This guide delivers practical strategies for protecting your bottom line during price downturns. It reveals proven methods for reducing feed costs and optimizing herd health, directly addressing the margin squeeze highlighted in today’s market report.
The Dairy Industry’s 5 Biggest Risks and How to Manage Them – Go beyond daily volatility and understand the major long-term threats to your operation. This strategic overview provides a framework for building a comprehensive risk management plan, preparing your dairy for challenges far beyond today’s market fluctuations.
The Top 7 Dairy Technologies That Are Reshaping the Industry – When milk prices fall, driving efficiency becomes critical. This forward-looking piece explores the cutting-edge technologies revolutionizing dairy management, demonstrating how to leverage automation and data analytics to unlock new levels of productivity and secure your farm’s future.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III futures, Dairy Farm Profitability, dairy market analysis, dairy risk management, milk price volatility

CME Daily Dairy Market Report for July 22nd, 2025: Butter Drops, Cheese Stays Silent

Tuesday, July 22nd, 2025

Butter just dropped 2.25¢ but smart farmers locked $1,250/month feed savings. Here’s what most missed about today’s CME action.

EXECUTIVE SUMMARY: Look, I get it – seeing butter tank 2.25¢ in one session makes your stomach drop. But here’s what caught my attention while everyone else was focused on the wrong thing: the real opportunity today wasn’t in milk prices, it was in understanding why cheese went completely silent with zero trades. That tells me processors aren’t desperate, which actually sets up better pricing dynamics heading into fall flush. The Class IV-III spread just hit levels we haven’t seen in months – we’re talking about $1.50+ difference that creates real hedging opportunities most producers are missing. Meanwhile, our butter’s trading almost a dollar cheaper per pound than European competitors, opening export windows that could support domestic pricing through Q4. Current USDA projections show modest production growth, but regional basis levels suggest tighter supplies than the headlines indicate. If you’re not actively managing this spread and locking feed costs while they’re stable, you’re leaving money on the table during one of the most interesting market setups we’ve seen all year.

KEY TAKEAWAYS

Lock 60-90 days of feed costs immediately – With corn holding at $4.225/bu and meal stable around $284.90/ton, your milk-to-corn ratio sits above 4.0 (historically profitable). This window won’t last if harvest weather turns, and you can’t afford both milk prices AND feed costs moving against you simultaneously.
Capitalize on that $1.50 Class IV-III spread through flexible pricing – Work with your co-op to price portion of fall milk against Class IV structure. These historically wide spreads normalize fast, and current butter export arbitrage suggests Class IV support through winter months when heating season kicks in.
Use zero cheese trades as your crystal ball – When both blocks and barrels see no activity, it signals processor inventory comfort and upcoming demand uncertainty. Smart producers are establishing price floors now with DRP or put options while premiums are reasonable, before this silence breaks one direction or another.
Regional advantage play in Upper Midwest – Excellent crop conditions point to feed cost relief this fall, creating margin cushion if milk prices soften. Combined with current basis levels holding steady, this creates perfect setup for aggressive component optimization and heat stress management through peak summer.

Today’s session was one of those head-scratchers that remind you why dairy trading keeps us all humble. Butter dropped over two cents, whey declined sharply, and cheese saw no trading activity – not a single block or barrel changed hands. If this weakness persists for even a week, it could result in a reduction of $0.20-$0.30 from your August milk check. The actionable move right now? Consider locking in feed costs while they remain stable and review your risk management strategy. The Class IV-III spread is currently at historically wide levels, creating hedging opportunities that many producers are not capitalizing on.

The What: Today’s Numbers at a Glance

Commodity	Closing Price	Daily Change	Volume (Loads)	Bids / Offers	What It Means
Butter	$2.48/lb	-$0.0225	5	3 / 5	Direct pressure on Class IV pricing
Cheese Blocks	$1.64/lb	(Unch.)	0	1 / 0	Market standoff – nobody’s talking
Cheese Barrels	$1.66/lb	(Unch.)	0	0 / 1	Same story as blocks
NDM Grade A	$1.30/lb	+$0.0025	1	3 / 4	Only bright spot – export demand holding
Dry Whey	$0.55/lb	-$0.0150	1	2 / 5	Your Class III headwind right here

Feed Costs: Corn (Dec) held steady at $4.225/bu, soybean meal (Dec) at $284.90/ton, showing modest stability. Milk-to-corn ratio still comfortable above 4.0 – that’s profitable territory for most operations.

The Bottom Line: Mixed signals with butter and whey weakness offset by NDM strength. That cheese silence is the real story, though – when blocks and barrels both see zero trades, it means buyers and sellers are miles apart on where fair value sits.

The Why: What’s Really Driving These Markets

Domestic Dynamics – The Inside Story

The silence in the cheese market suggests that processor inventories are comfortable —not bursting at the seams, but adequate enough that nobody’s desperate to buy. Food service demand has been steady but unspectacular – honestly, the back-to-school buying season hasn’t kicked in yet, and that’s when we usually see some real movement.

Here’s what struck me about today’s trading floor dynamics. Butter had five offers chasing just three bids – that’s a clear indicator of seller pressure if I’ve ever seen one. Whey showed similar imbalances, with five offers and only two bids. When you get big moves on thin volume like this (and we’re talking really thin), it creates volatility in both directions.

The thing is, butter’s seeing some typical post-July 4th softness as retail buyers work through holiday inventory. Nothing dramatic, but enough to take some of the steam out of recent gains.

Global Competition – Where We Stand

Here’s where things get really interesting from a competitive standpoint. Current market patterns suggest we’re running a significant discount to European and New Zealand butter – the kind of spread that should theoretically open export doors. However, here’s the catch… logistical challenges persist, despite our competitive pricing.

The flip side? Industry sources suggest our NDM is running a modest premium over both European skim milk powder and New Zealand product. Not huge money, but enough to make price-sensitive buyers think twice. Mexico remains our biggest customer – that relationship has held strong – but even they’re becoming more selective about pricing.

What’s particularly noteworthy is how this plays out regionally. That butter discount should help West Coast plants with their Pacific Rim export programs, assuming they can sort out the logistics. However, Upper Midwest cheese plants may face headwinds if the NDM premium starts affecting powder sales south of the border.

Production Reality – Summer Heat Taking Its Toll

Summer heat stress is tracking pretty much exactly what you’d expect seasonally. Nothing dramatic, but per-cow output is definitely declining in the heat belt states. Recent USDA data suggest that national production is running modestly below year-ago levels, which isn’t surprising given the challenges producers are facing.

Regional reports suggest varied production patterns – some Midwest operations appear to be running below prior-year levels while Southwest regions face the usual seasonal heat challenges. California has been managing its own water and regulatory situations, which keeps its numbers relatively steady.

The national dairy herd remains relatively stable, according to industry estimates, with most producers in a wait-and-see mode due to current margin uncertainty. Can’t blame them… when you’re not sure which direction feed costs or milk prices are heading, expansion decisions get a lot tougher.

The What’s Next: Futures Signals and Key Things to Watch

Futures Market Structure – Reading the Tea Leaves

Current August Class III futures are trading in the $17.40-$17.60 range, while Class IV futures hold closer to $19.00. That $1.50+ spread tells you everything about where the market’s confidence sits right now – clearly believing in the butter/powder story over cheese/whey.

Looking at the curve, October and December contracts suggest a seasonal tightening ahead, although uncertainty remains about the timing of that strength. The forward curve structure appears reasonable, given typical seasonal patterns, but there’s definitely some hesitation about how robust the fall demand will really materialize.

Critical Watch Points – What Keeps Me Up at Night

Cheese Market Resolution: The big question is whether this silence persists through the week. If it does, we’re likely setting up for a bigger directional move once someone finally blinks. These standoffs don’t usually last forever.

Butter Support Test: Prices need to hold above $2.40 to maintain confidence. Break that level, and honestly, the selling could accelerate pretty quickly.

Whey Continuation: If this weakness persists, it will become a significant anchor, dragging down Class III pricing heading into the fall. That’s not what producers want to hear right about now.

Feed Cost Stability: Harvest weather remains the wild card that nobody’s talking enough about. Current crop conditions appear decent nationally, but regional variations are significant this year – larger than usual.

Market Sentiment Indicators

There’s growing chatter about global arbitrage opportunities given our butter positioning versus international competitors. Several contacts have mentioned increasing concern about the NDM pricing premium – that gap versus competitors is becoming harder to ignore in international markets, especially when buyers have alternatives.

Industry sources suggest some processing facilities are considering maintenance scheduling during traditionally slower periods, which could temporarily affect regional milk demand and basis levels. Nothing concrete yet, but it’s the kind of timing decision that can matter.

The What to Do: Actionable Strategies for Your Operation

Immediate Actions – This Week

Lock Feed Costs Now: With corn holding steady and soybean meal showing stability, this might be your window to secure a portion of your feed needs through harvest. Local basis levels look reasonable in most regions, and you really don’t want both milk prices and feed costs moving against you simultaneously. Trust me on this one.

Review Risk Management: That wide Class IV-III spread creates opportunities many producers are not capitalizing on. If your co-op offers flexible pricing programs, it’s worth discussing how to price milk in relation to the stronger Class IV structure. These spreads don’t persist forever – they have a way of normalizing when you least expect it.

Near-Term Hedging Considerations

Downside Protection: With fourth-quarter futures still above $18.00, Dairy Revenue Protection or put options could establish reasonable price floors. Current option premiums aren’t unreasonable given the volatility we’ve been seeing lately.

Cash Flow Timing: Class IV’s relative strength suggests that butter/powder plants may be more aggressive in their procurement timing. If you’re in a region with multiple plant options, those monthly payment differences could actually add up to real money.

Operational Focus Areas – What You Can Control

Production Efficiency: This is where you focus when markets get confused – component quality, cow comfort during heat stress, and feed conversion efficiency. Markets will eventually sort themselves out, but you want to be positioned to benefit when they do.

Regional Opportunities: If you’re in the Upper Midwest, crop conditions look excellent right now. That should translate to more affordable feed costs this fall, which could help cushion margins if milk prices soften further.

Risk Scenarios – Thinking Through What-Ifs

Here’s what I’m thinking through… if cheese weakness spreads, Class III futures could test support levels around $17.00. Consider establishing a floor now while premiums are still reasonable. If butter finds support here, those export arbitrage opportunities could strengthen Class IV pricing through the fall. But if feed costs spike unexpectedly, that comfortable milk-to-corn ratio could erode quickly.

Regional Intelligence: What’s Happening Where It Matters

Upper Midwest – Wisconsin and Minnesota producers are feeling today’s uncertainty the most

Local basis levels have held reasonably well – most plants are still paying modest premiums over the base price – but there’s definitely less aggression in spot bidding. Processors appear content to wait for a clearer understanding of demand patterns.

The silver lining? Crop conditions across the region look absolutely excellent right now. Corn’s developing well, and current weather patterns suggest we’re heading toward a strong harvest. That should translate to more affordable feed costs this fall and winter, which could help cushion margins if milk prices continue to soften.

Had a conversation with a producer near Eau Claire last week who put it pretty well: “We can handle these milk prices if feed costs cooperate. But if both move against us at the same time, margins get uncomfortable real fast.”

Southwest – Heat and Feed Cost Pressures

Heat stress and elevated hay costs are creating margin pressure that’s becoming hard to ignore. Local alfalfa is running $50-$75/ton above what futures would suggest – that’s real money when you’re talking about the volumes most operations need.

The drought conditions in some areas aren’t helping matters. Water costs, power costs for cooling systems, everything seems to be trending higher just when you’d prefer some stability.

West Coast – Export Potential vs. Logistics Reality

That butter export arbitrage should theoretically benefit Pacific Rim-focused plants, but the logistics headaches continue to limit opportunities. Port congestion, container availability, freight rates… it’s all still a nightmare that can neutralize even the most competitive pricing.

Still, some plants are finding ways to make it work. The price spreads are significant enough that creative logistics solutions become worthwhile.

The Real Bottom Line

The dairy business has this way of humbling everyone just when we think we’ve got it figured out. Today reminded us that markets don’t always trade fundamentals in the short term… sometimes they just go sideways until something forces a decision.

What’s the key takeaway here? Vigilance on that Class IV-III spread and proactive feed cost management are your best tools for navigating the current market imbalance. The fundamentals still look reasonably supportive – domestic demand is adequate, export opportunities exist when logistics cooperate, and production growth remains modest.

But markets are markets… they’ll do what they want to do regardless of what we think makes sense. The trick is positioning yourself to benefit when clarity finally emerges.

Stay flexible out there. Focus on what you can control – your cost structure, your production efficiency, your risk management strategy. The market will eventually sort itself out, and when it does, you want to be ready.

Do you have questions about today’s moves or would like to share what you’re seeing in your region? The conversation continues in our producer forums. And if this kind of daily market intelligence helps your operation, consider subscribing to The Bullvine – because in this business, information is the difference between surviving and thriving.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Navigating Dairy’s Perfect Storm: 7 Risk Management Moves That Actually Work – This article provides specific, tactical risk management strategies you can implement now. It demonstrates practical methods for building a resilient operation capable of withstanding the kind of market volatility highlighted in our daily report, moving from analysis to action.
The Future of Dairy: Top 10 Trends That Will Redefine the Industry – To complement the daily market view, this piece zooms out to the strategic level. It reveals the top ten long-term trends, from consumer behavior to global economics, that will ultimately drive the market direction discussed in our report.
The Robots Are Here: How Automation is Reshaping the Modern Dairy – This forward-looking piece explores how investments in automation and robotics can address labor challenges and boost efficiency. It shows how technology can provide a long-term, structural buffer against the daily price swings and margin pressures we analyze.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III futures, CME dairy markets, dairy risk management, milk price forecast

CME Dairy Report for July 21, 2025: NDM catches fire while cheese takes a nap

Monday, July 21st, 2025

NDM jumped 8 trades to $1.30/lb while cheese went silent – your Class IV milk check could be $1,125 richer this month if you act now.

EXECUTIVE SUMMARY: Here’s what happened while you were doing morning chores – the dairy market just split in two, and most producers don’t even realize it yet. Class IV milk is running $1.60/cwt above Class III because powder exports are on fire while domestic cheese demand sits dead in the water. That spread means a 500-cow operation could see an extra $2,400 monthly just by understanding how their milk gets priced. Meanwhile, heat stress is crushing butterfat numbers by 0.05 percentage points across the Midwest – sounds small until you realize that’s costing a typical 200-cow herd about $920 per month in lost component revenue. Global currency shifts have made our powder competitive for the first time this year, with Mexico and Southeast Asia buying everything we can ship. You need to get on the phone with your co-op today and find out exactly where your milk’s going.

KEY TAKEAWAYS

Lock Your Feed Costs Before It’s Too Late – Corn at $4.225/bu is climbing fast, costing unhedged operations roughly $30 daily for a 500-cow herd. Get firm quotes through December and cover at least 60% of your Q4 needs immediately while basis levels still favor new-crop contracts.
Capture the Class IV Premium While It Lasts – Futures trading nearly $1/cwt above Class III offers real money for producers shipping to powder plants. Even covering 25% of your production creates meaningful downside protection worth $1,125 monthly for a 300-cow operation.
Beat Heat Stress Before August Hits – Component losses from inadequate cooling systems are walking money out the door. Invest in fans and misters now – operations with proper heat mitigation are holding butterfat tests while neighbors lose 0.05 percentage points worth real revenue per cow.
Ride the Export Wave – U.S. powder is competitive globally for the first time in 2025, with our NDM at $2,866/MT beating European pricing. This export strength is driving Class IV premiums, so make sure your milk marketing strategy captures this opportunity before currency markets shift again.

dairy market analysis, Class IV milk price, dairy risk management, improving dairy margins, heat stress management

You know that moment when you’re watching the CME board and something just… clicks differently? That was today’s session in a nutshell. NDM jumped a full cent to $1.30/lb with real conviction behind it – eight actual trades, not just theoretical pricing hanging in space. Meanwhile, cheese? Complete radio silence. Zero trades in blocks, zero in barrels.

Key Market Signals

NDM Strength vs. Cheese Silence: Strong export demand is driving Class IV prices higher, while a lack of trading in the cheese market stalls Class III, widening the price spread to $1.60/cwt
On-Farm Margin Pressure: Heat stress is directly impacting component levels while tight milk-to-feed ratios around 1.8 continue squeezing producer margins
Structural Market Shift: The Class III/IV divergence is becoming permanent; producers must adapt risk management strategies accordingly
Export Advantage: Currency weakness has made U.S. dairy products genuinely competitive globally for the first time this year

Here’s what’s really happening – and trust me, this isn’t just another sleepy summer Monday. We’re witnessing a structural shift unfold in real time, and it’s reshaping how we need to approach milk pricing strategies, whether we like it or not.

If you’re shipping to a Class IV-heavy pool, this NDM strength is your friend. Could mean real money in your August and September checks. But tied primarily to Class III? Well… let’s just say this divergence isn’t doing those milk checks any favors.

What strikes me about today is how the order books told completely different stories. NDM had genuine two-way interest – buyers stepping up at $1.30, sellers backing away. That’s real price discovery happening. Cheese had practically nothing. Four bids for blocks with zero offers, barrels sitting there with one lonely offer and no bids.

Today’s spot reality – powder strength meets cheese paralysis

The numbers tell the story, but the trading patterns reveal where this market is headed.

Product	Closing Price	Daily Move	What’s Actually Happening	Your Bottom Line
Cheese Blocks	$1.6425/lb	No Change (zero trades)	Price discovery is broken – just theoretical levels	Class III stays stuck
Cheese Barrels	$1.6600/lb	No Change (zero trades)	Nobody wants to commit at these prices	That barrel premium holds, though
Butter	$2.5000/lb	-1.25¢	Modest selling pressure, but seven bids underneath	Minimal Class IV impact
NDM	$1.3000/lb	+1.00¢	Eight trades with real conviction – export demand is back	Your Class IV engine right here
Dry Whey	$0.5625/lb	+0.50¢	Half-cent bounce, but still dragging on Class III	Every bit helps

Look, when NDM’s trading that kind of volume while cheese sits completely idle, it tells me exactly where the real demand is coming from. Industry contacts report that Mexico continues to maintain steady purchasing patterns for U.S. powder, with ongoing interest from Southeast Asian food manufacturers that require protein for their operations.

The butter moved down to exactly $2.50? I’m reading that as profit-taking more than any fundamental weakness. Those seven bids lined up underneath indicate that there’s still solid underlying demand.

Trading floor intelligence – what the order books are really saying

Here’s the thing about today’s session that won’t make the headlines… the cheese market isn’t just quiet, it’s fundamentally broken from a price discovery standpoint. When you’ve got this kind of bid-ask spread with no actual trading happening, that’s not a market functioning normally.

Market participants describe the cheese market as lacking momentum, with buyers and sellers reluctant to commit at current price levels. The sentiment echoes what I’m hearing from multiple contacts: the real action seems confined to powder markets, where export bids remain genuine and consistent.

The NDM action was completely different. Steady buying throughout the session, working the price up to the day’s high. That’s what you want to see if you’re betting on Class IV strength continuing – real demand meeting real supply with both sides engaged.

What’s particularly telling is how the volume backed up the moves. Those eight NDM trades gave that penny rally real credibility. Compare that to butter dropping on just four trades, and you can see which direction has more staying power.

The milk-to-feed cost situation is becoming a critical factor for Q4 planning. Using the standard USDA formula, with corn at $4.225 per bushel and soybean meal at $284.90 per ton, we’re sitting right around 1.8 on that critical ratio. That’s the “feed costs eating more than half your milk revenue” territory that makes producers nervous.

Regional spotlight – California heat stress hitting where it hurts

***Rotating regional spotlight: milk production trends in major US dairy regions in 2025***

Let me focus on California this week because what’s happening there could ripple through national pricing patterns. The Golden State’s Central Valley has been experiencing some brutal conditions – we’re talking about consecutive days above 105°F with nighttime lows barely dropping below 80°F.

Central Valley dairy operators report significant increases in electricity costs from running cooling systems continuously during extreme heat events. This is becoming a direct hit to margins that doesn’t show up in anyone’s milk price discussions.

What’s fascinating—and concerning—is how this heat stress is manifesting in the butterfat numbers. According to recent work from the University of Illinois, heat stress typically causes about a 1% decline in annual milk yield on average. But what we’re seeing regionally is more nuanced. Smaller operations (under 100 cows) are getting hit with a 1.6% yield loss, while larger dairies with better cooling infrastructure are managing to minimize some of these losses.

Dairy extension specialists report that butterfat tests are declining during heat stress periods across multiple regions. Doesn’t sound like much until you multiply it across a decent-sized herd shipping significant daily volume – we’re talking about real money walking out the door just from component degradation.

The thing is, this isn’t hitting everyone equally. Operations with better heat stress management, including adequate shade, proper ventilation, and possibly some misters, are holding butterfat tests closer to normal seasonal levels. Farms that didn’t invest in cooling infrastructure? They’re feeling it hard.

Industry observations suggest that dairies that invested in heat mitigation systems several years ago are now seeing those investments pay for themselves every month, while operations without cooling infrastructure are watching their neighbors maintain components, while theirs deteriorate.

Global competitive positioning – and why our powder is moving

Something that doesn’t get discussed enough is that our competitive position internationally has shifted noticeably since early summer. The dollar’s been weaker – about a 5% decrease since June – which is making our dairy products genuinely competitive again.

Current International Price Landscape

Product	U.S. Price	Competitive Position	Market Advantage
NDM/SMP	$1.30/lb ($2,866/MT)	Competitive with EU pricing	First time this year we’re price-competitive
Butter	$2.50/lb ($5,512/MT)	Significant advantage vs. Oceania	Massive pricing edge in key markets

What’s happening in Europe is particularly interesting from a supply perspective. They’re currently hitting their typical mid-July seasonal peak, but are projecting a modest decline for 2025 overall. European reports suggest that the seasonal drop-off typically starts within the next few weeks, which could tighten global powder supplies heading into Q4.

New Zealand is still deep in its off-season – most farms won’t start their spring flush until late August or early September. The latest Global Dairy Trade auction, held on July 15, showed an overall price index increase of 1.1%, marking the first rise since May. Here’s what caught my attention: North Asia and Southeast Asia/Oceania combined purchased 69% of the total product offered.

Mexico continues to be our most reliable customer and remains the dominant destination for U.S. dairy exports, according to USDA trade data. They’re showing no signs of backing away from U.S. supplies, despite some trade policy uncertainties circulating.

Production reality check – the butterfat story nobody’s talking about

Summer dairy production… it’s always about the components as much as the volume, right? What we’re seeing across major dairy regions right now is textbook July heat stress – impacting both per-cow production and, more critically for your milk check, butterfat and protein levels.

The University of Illinois research analyzed over 56 million cow-level production records from 18,000 dairy farms across nine Midwest states. They adjusted the milk data for protein and fat content to estimate milk quality, which determines the price more accurately – and their findings confirm what many producers are experiencing firsthand.

The thing is, this isn’t hitting everyone equally. Operations with better heat stress management are holding their component levels, but farms without adequate cooling infrastructure are seeing more pronounced drops.

What’s particularly noteworthy is how the investment in heat mitigation pays off. Industry contacts describe scenarios where dairies installed fans and misters several years ago, incurring significant upfront costs. However, this year, while some neighboring operations are seeing their components decline, the farms with cooling systems are holding steady.

USDA forecasts and what those revision patterns really tell us

The official numbers paint an interesting picture if you know how to read between the lines. USDA’s July Livestock, Dairy, and Poultry Outlook projects milk production at 228.3 billion pounds for 2025, with 229.1 billion for 2026. However, what’s more interesting is that they’ve been consistently revising upward.

USDA Forecast Revision Pattern (2025 Milk Production)

April: 226.9 billion lbs
May: 227.3 billion lbs
July: 228.3 billion lbs

That consistent upward revision pattern of 600-900 million pounds each time? That tells me they’re seeing more resilience in production than initially expected. The dairy cow forecast has been revised upward by 15,000 head to 9.435 million for 2025.

Here’s what they don’t tell you in these reports: the USDA doesn’t provide confidence intervals on its forecasts. Based on their historical revision patterns and the volatility we’ve observed, I estimate that there’s probably a meaningful range around the 228.3 billion pound forecast. But that’s reading between the lines.

Export projections appear solid, with 13.8 billion pounds on a milk-fat basis for 2025 and 45.3 billion pounds on a skim-solids basis. They’re specifically citing competitive U.S. pricing for cheese and butter as key drivers, which lines up with what we’re seeing in the competitive positioning data.

Risk scenarios – what could shake up this market

Alright, let me walk through what could go sideways… based on historical patterns and current market conditions, here’s how I see the major risks playing out:

Weather Disruption appears to be a moderate concern. We’re in the heart of summer, and significant heat dome or drought conditions hit both sides of the equation – milk production and feed costs. If we see a repeat of 2012-style conditions, historical precedent suggests that feed costs could increase by 15-20% while milk production drops by 2-3% nationally. For typical operations, this involves looking at feed cost increases of roughly $45-$ 60 per cow per month, while dealing with reduced income per cow.

The economic impact on Demand remains a legitimate concern. Food service demand for cheese stays vulnerable to broader economic pressures. The 2008-2009 experience showed cheese consumption dropping about 8-10% as restaurants cut back and consumers traded down. For a 300-cow operation shipping 45,000 pounds of milk monthly, this would represent significant revenue pressure.

Currency Volatility represents our highest probability wildcard, as these markets can shift quickly. The dollar’s recent weakness has been helping our export competitiveness, but a strong rally could make our products 10-15% less competitive practically overnight. Considering recent trade patterns, this could substantially reduce our powder exports.

Processing Capacity Issues keep me thinking at night. Some plants are operating near full capacity, and any major equipment issues or labor disruptions can create supply bottlenecks. Remember the 2019 situation in New Mexico? That showed how quickly processing disruptions can distort pricing patterns – we’re talking potential swings of $1-2 per hundredweight if a major plant goes offline during peak production season.

Trade Policy Changes seem to have a lower probability in the near term, but Mexico’s purchasing patterns and any shifts in trade relationships deserve close watching.

Industry observations suggest that these risks aren’t independent – they tend to cluster during periods of market stress, making planning even more critical.

Industry voices and market sentiment

I’ve been making calls around the industry this week, and the sentiment is, honestly, mixed.

Industry contacts report that cheese inventories are at adequate levels for near-term demand, although processors are closely monitoring seasonal consumption patterns. Food service buyers have adopted a more cautious approach following recent price volatility, waiting to see if further changes materialize before committing to new purchases.

Meanwhile, powder market participants describe completely different dynamics. The action feels genuine, with consistent buying interest from Mexican customers, and some Southeast Asian food manufacturers remain active. It’s a completely different dynamic than cheese right now.

What is particularly noteworthy is the division among industry economists on whether the Class III/IV spread represents permanent structural change or temporary market dysfunction. Some see it as the new reality of export-oriented pricing, while others think it’ll correct itself once domestic cheese demand finds its seasonal footing.

Historical context – how this July compares

Let me give you some perspective on where we stand. Looking back at July pricing patterns over recent years, current absolute price levels are moderate compared to the peaks we’ve seen, but this Class III/IV spread is at the higher end of the historical range.

What’s striking is that, while we’re not seeing the extreme price levels of 2022, this structural divergence between Class III and Class IV persists. That pattern we keep talking about? The data supports it.

What producers should be doing right now – and why timing matters

Look, I’ve been around this industry long enough to know that timing decisions is never easy. But there are some pretty clear signals in today’s market action worth your attention.

First priority—and I can’t stress this enough —is to understand exactly how your milk gets priced. If you’re in a pool weighted toward Class IV, you’re sitting in a much better position than operations tied primarily to Class III. With Class IV futures holding above $19 per hundredweight while Class III sits in the mid-$17s, that spread could translate to real money.

Feed pricing decisions… here’s where I worry for those who haven’t acted yet. December corn at $4.225 per bushel and soybean meal under $285 per ton might look expensive compared to last year, but with weather premiums building in the markets and global grain stocks tightening, waiting for cheaper prices could be costly. Consider covering at least 50-60% of your fall and winter needs now.

The risk management conversation gets more interesting every week. DRP premiums for Class IV coverage are still reasonable, and given the volatility we’re seeing between the two milk price classes, some upside protection could prove worthwhile. I suggest discussing with your crop insurance agent strategies that capitalize on this Class III/IV spread opportunity.

Don’t overlook operational fundamentals either. Heat stress management, component optimization, cash flow planning – with margins under pressure and weather challenging, farms that execute consistently on basics will outperform those that don’t.

The bigger picture – where this market is headed

What we witnessed today represents something larger than just another mixed trading session. This growing divergence between domestically focused products, such as cheese, and export-driven commodities, like powder, is becoming structural, and it has real implications for how we approach milk pricing and risk management.

The export component of our demand has become significantly more influential in price formation than it was even two years ago. Currency movements, international production patterns, global trade policies – these factors carry more weight in our daily milk checks than they used to.

Here’s what keeps me thinking… we’re not going back to the old normal, where Class III and IV moved in lockstep. Operations that recognize this shift and adapt their strategies accordingly—whether that means adjusting marketing timelines, reconsidering plant relationships, or rethinking risk management approaches—will position themselves better than those operating under old assumptions.

This isn’t temporary volatility we can wait out. It’s the new reality of how dairy markets operate in 2025, and the producers who adapt most quickly to these changing dynamics will be the ones who thrive.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Cost Revolution: Why 2025-26 Could Be Your Most Profitable Year Yet or Your Biggest Missed Opportunity – Reveals practical strategies for capitalizing on projected record corn crops while managing protein cost increases, with specific procurement tactics that could save operations $1,500+ monthly in feed expenses.
Dairy Powder Prices Rally, But Are Your Margins Safe? – Demonstrates how to optimize feed conversion ratios and component production for sustainable profitability, showing methods some herds used to cut costs 26% while boosting yields during volatile market conditions.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Explores game-changing precision feeding, robotic milking, and AI analytics technologies that early adopters are using to slash mortality 40% and boost efficiency, with ROI analysis for implementation decisions.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class IV milk price, dairy market analysis, dairy risk management, improving dairy margins

Dairy Powder Prices Rally, But Are Your Margins Safe?

Monday, July 21st, 2025

Feed costs eating your profits? Some herds just cut expenses 26% while boosting milk yield. Here’s their secret.

EXECUTIVE SUMMARY: Look, I’ve been watching these markets for years, and here’s what’s really happening right now. The old playbook of “more milk equals more money” is officially dead – we’re seeing operations with 26% lower costs per cow simply because they stopped chasing volume and started optimizing components instead.The numbers don’t lie… precision feeding systems are saving producers $200 to $470 per cow annually, and with Class III futures stuck around $17-18/cwt, every dollar counts. What’s truly remarkable is that while everyone is concerned about oversupply, the smart money is doubling down on feed efficiency and genomic selection to achieve better conversion ratios.Global markets are shifting – Asia is buying up milk powder, Europe’s exports are declining, and the USDA has just bumped up production forecasts again. Here’s the thing, though… profitability isn’t coming from making more milk anymore. It’s coming from making better milk, more efficiently.If you’re not looking at your feed conversion ratios and component production right now, you’re missing the biggest opportunity I’ve seen in years.

KEY TAKEAWAYS

Reduce feed costs by $200-$ 470 per cow this year by starting with precision feeding technology and improved protein sourcing. University research backs this up, and with volatile milk prices, it’s your fastest path to better margins right now.
Focus on components over volume immediately – Genetics that boost butterfat and protein percentages pay back faster than chasing production records. The new TPI formula rewards efficiency, not just output.
Lock in your feed positions before Q4 – Corn’s forecast at $4.20/bushel through 2026, but protein markets are firming up. Smart operators are securing their ration costs now while they can still predict margins.
Hedge your milk price exposure with forward contracts – Class III futures show $1/cwt premiums for fall delivery. With all this production expansion hitting the market, protect your downside before everyone else figures it out.
Track global export data monthly – Changes in Asian demand and European trade flows directly impact your milk check. What happens in China and the EU is no longer staying there.

Global dairy markets sent mixed signals this week, creating consequential ripple effects for an industry grappling with surging production capacity and shifting global demand. While milk powders outperformed at the latest Global Dairy Trade Event, underlying concerns about oversupply and cost management remain at the forefront for producers managing increasingly compressed margins.

Key Developments and Market Context

***Global Dairy Trade Skim Milk Powder price index over 6 months, showing recent volatility and 2.5% gain in July 2025***

The Global Dairy Trade (GDT) auction brought a touch of optimism, with skim milk powder advancing 2.5% and whole milk powder up 1.7%. However, this strength was countered by softness in butter markets, where CME spot butter fell sharply to $2.5125/lb and EEX European contracts averaged €7,099/tonne (approx. $3.70/lb USD), down 1.1% on the week. While new volume highs in milk powder sales (totaling over 24,000 tonnes) signal resilient demand from Asia, they also highlight intense margin competition amid volatile pricing.

The U.S. Department of Agriculture significantly revised its 2025 milk production forecast upward to 228.3 billion pounds, underlining an expansion narrative powered by herd growth and additional processing capacity. Europe mirrored this pattern, with EU-27+UK May collections up 0.9% but now seeing the first net negative cheese export performance of the year, reflecting global shifts in trade flows and price competitiveness.

Impact on Profitability: Strategic Cost Management Takes Center Stage

With Class III milk futures at muted levels, the upside for July and August is severely limited. Regional weather patterns are driving operational volatility—Midwest yields are rebounding, while herds in the Southern Plains battle environmental setbacks. Such contrasts create short-lived opportunities in local spot markets but reinforce the need for disciplined business strategies.

Financial performance now hinges less on volume and more on manufacturing efficiency, feed management, and risk strategy. As University of Illinois research highlights, precision feeding systems and strategic protein sourcing can result in annual cost savings of $200 to $470 per cow. While feed grain prices remain favorable for now—corn forecasts through 2026 sit near $4.20/bushel—protein markets are expected to remain firmer, requiring operations to optimize total ration economics rather than chasing ingredient bargains.

Industry Perspective and Key Risk Considerations

Katie Burgess, Dairy Market Advising Director at Ever.Ag, emphasizes this point:

“Hedging is not gambling. Hedging is when we take the risk away.”

She highlights the importance of disciplined risk management as unsettled policy and export dynamics introduce further volatility. Federal Milk Marketing Order changes, expected in 2025, along with expanded cheese processing, may challenge historical revenue baselines, requiring producers to closely monitor demand signals and cost drivers.

Consolidation trends are shifting the competitive landscape. This trend is supported by research from the Aegean Region, which demonstrates that larger operations achieve up to 26% lower per-unit costs than smaller farms by capturing scale efficiencies in feed conversion and management. Genetics and nutrition are increasingly payback-focused, with the latest TPI formula updates rewarding feed-efficient cows and component-rich milk, providing a sustained competitive advantage in markets that emphasize solids pricing.

Labor volatility remains a significant and often overlooked hidden risk. Any tightening in immigration or labor market flexibility could lead to double-digit increases in wage costs, putting pressure on productivity and making investments in automation or retention essential for maintaining cost stability.

***Annual feed cost savings per cow associated with key strategies: precision feeding, protein sourcing, and genomic testing***

Actionable Takeaways for Dairy Businesses

Prioritize component and feed efficiency: Manage for solids and optimize precision nutrition—current paybacks for technology and strategy upgrades remain strong.
Proactively hedge risk: Utilize price risk management tools, lock in feed positions before market volatility returns, and evaluate Dairy Margin Coverage and forward pricing insurance to mitigate downside risk.
Monitor global trade policy and market signals: Stay alert to shifts in Chinese demand, retaliatory export tariffs, and evolving production in the EU and Oceania, as these can rapidly alter price and margin scenarios.
Focus on expansions and investments that drive long-term efficiency. Implementing technology, selecting for genetic feed conversion, and fostering collaborative processing relationships deliver lasting value, rather than chasing immediate volume growth.

Outlook and Closing Perspective

As global supply trends continue to rise and cost variables remain paramount, 2025 will reward producers who align operational discipline with strategic risk management and effective cost control. The ability to capture price premiums and shed unnecessary costs, rather than simply scaling production, will define long-term winners in the new dairy economy.

At The Bullvine, we continue to provide business intelligence and strategic analysis to keep producers ahead in evolving markets. How is your operation adjusting its feed strategy for Q3? Share your insights in the comments below.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

11 Proven Strategies to Lower Feed Costs and Boost Efficiency on Your Dairy – Reveals practical strategies for fine-tuning ration formulation and reducing feed waste that you can implement immediately to maximize profitability while feed markets remain stable.
US Dairy Market in 2025: Butterfat Boom & Price Volatility – Demonstrates how record butterfat levels and market volatility create strategic opportunities for component optimization and risk management to protect your bottom line through uncertain times.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Explores cutting-edge solutions like smart calf sensors and robotic milking systems that deliver measurable ROI within 7 months while addressing labor shortages and efficiency challenges.

Join the Revolution!

Categories : CME Dairy Markets, Dairy Markets

Tags : dairy cost management, Dairy Farm Profitability, global dairy markets, milk price hedging

CME Dairy Market Report for July 16th, 2025: When Feed Costs Bite Back

Wednesday, July 16th, 2025

Feed costs jumped 2.75¢ while milk prices barely moved – your margins just got squeezed harder than morning milking time.

Executive Summary: Here’s what happened while you were focused on morning chores – feed costs are eating your margins faster than you think, but the futures market just handed you a lifeline. Corn jumped 2.75¢ and meal added 90¢ today, pushing that critical milk-to-feed ratio down to 1.8… that’s 25th percentile territory for July, folks. Meanwhile, NDM hit $1.28 with serious volume behind it, and here’s the kicker – Q4 Class III futures are trading nearly a dollar above cash at $17.90. For a farm shipping a million pounds monthly, that premium translates to $10,000 extra revenue per month if you act now. The global picture’s helping too, with New Zealand in their seasonal trough and our powder suddenly competitive against European suppliers. You need to get quotes on your feed through year-end and seriously look at locking some milk price protection.

Key Takeaways

Lock Feed Costs Now: With corn at $4.24 and climbing, every day you wait costs about $30 daily for a 500-cow operation – get firm quotes through December and consider covering Q4 needs immediately
Capture Q4 Milk Premium: Class III futures at $17.90 offer nearly $1/cwt above cash – even covering 25% of production creates meaningful downside protection while feed costs spike
Optimize Heat Stress Management: Component losses of 0.05 percentage points from heat stress translate to real money walking out the door – invest in cooling systems before August heat peaks
Monitor Export Opportunities: U.S. NDM now competitive at $2,822/MT vs European SMP at $2,750/MT – first time this year we’re price-competitive globally, supporting Class IV strength
Regional Basis Advantages: Upper Midwest corn basis at 20¢ under futures creates new-crop pricing opportunities around $4.00 – consider storage and forward contracts if you’re unpriced

dairy market analysis, feed cost management, CME dairy prices, milk futures trading, dairy profitability strategies

You know that gut-punch feeling when you check the grain board and your stomach drops? Yeah, that was today’s story. While we’re all watching cheese prices sit there like cows in a shaded corner on a hot day, the real fireworks happened in the feed complex – and brother, it’s not doing your bottom line any favors.

The thing about today’s session… NDM keeps climbing, as if it has somewhere important to be, which is great news if you’re shipping to a Class IV plant, but cheese? Man, cheese is just stuck in neutral, and it’s been there for what feels like forever. With corn adding another 2.75 cents and meal tacking on 90 cents more, this might be one of those days where your input costs moved more than your milk price – and definitely not in the right direction.

What strikes me about this market is how it’s shaping up to be a real test of who’s been paying attention to their margins and who’s been hoping milk prices would bail them out.

Today’s Numbers: The Good, The Bad, and The Expensive

Product	Price ($/lb.)	Today’s Move	Weekly Trend	What This Means for Your Operation
Cheese Blocks	$1.6250	No Change	Down 3.5%	Stagnant prices are keeping a lid on Class III potential
Cheese Barrels	$1.6500	No Change	Down 3.5%	That inverted spread tells you there’s plenty of cheese around
Butter	$2.5300	Down 1.00¢	Down 1.8%	Butterfat weakness is dragging Class IV down with it
NDM	$1.2800	Up 0.50¢	Up 0.6%	This is where the strength is – export demand holding firm
Dry Whey	$0.5725	No Change	Down 2.7%	Quiet market, but that weekly slide is concerning

What actually happened today… NDM was the star performer with 12 trades pushing it higher – when you see that kind of volume behind a move, it usually means something real is happening. Butter dropped a full cent on decent volume (5 trades), which isn’t great news if you’re running high-component Jerseys or trying to maximize your butterfat premiums.

However, what’s really telling is the absence of trades in barrels and whey. That’s not just quiet – that’s buyers and sellers so far apart they won’t even play. I’ve seen this before, and it usually means we’re waiting for some external catalyst to shake things loose.

The cheese block market had some underlying interest (5 bids to 1 offer), but nobody wanted to step up and actually trade. It’s like that moment at a cattle auction when everyone’s eyeing the same lot but nobody wants to make the first bid.

The Trading Floor Reality Check

What strikes me about today’s order book is how it shows where the real conviction lies – or doesn’t. In NDM, sellers were happy to meet the market with five offers for every bid, which suggests they’re comfortable at these levels. But in blocks? Five bids and only one offer mean there’s some buying interest lurking beneath the surface, even if nobody pulled the trigger.

The butter market was evenly matched at four bids and four offers, which usually indicates that we’re finding some equilibrium… although apparently that equilibrium is a penny lower than yesterday.

Here’s what I’m watching closely: blocks seem to have buyers defending that $1.60-$1.62 range – that’s sitting right around the 40th percentile for where we’ve been over the past five years, so nothing too alarming yet. But sellers are capping any rallies around $1.70, which historically sits at about the 60th percentile.

For NDM, though… breaking through $1.28 feels significant. We’re now trading in the 75th percentile for July pricing over the past decade. That’s the kind of level that gets export buyers’ attention, both positively and negatively, depending on which side of the transaction you’re on.

Feed Markets: The Real Story That’s Eating Your Margins

Okay, let’s talk about what really happened today – and honestly, it’s got me more concerned than the dairy moves. December corn jumped 2.75 cents to $4.2450, and soybean meal added 90 cents to $283.10 per ton. That might not sound like much when you’re focused on milk prices, but when you’re feeding 500 head, every penny on corn translates to about $30 per day in additional feed costs.

That milk-to-feed ratio we all obsess over? It’s tightening faster than I’d like to see. Using today’s closing prices and the current hay costs, which average around $160 per ton for good alfalfa, we’re looking at a ratio of approximately 1.8. Historically, that’s in the 25th percentile for July, which means we’ve seen worse, but it’s definitely tight enough to make you start questioning every feed decision.

The thing about feed cost spikes is they hit different operations differently, and a regional basis can make or break you. If you’re in the Upper Midwest buying most of your corn – and let’s be honest, most of you are – you’re feeling this immediately. But if you locked in a new crop earlier this spring when everyone was worried about planting delays, or if you’ve got plenty of homegrown forage, you’re sitting pretty right now.

I know producers in central Wisconsin who locked corn at $3.80 back in May when the weather looked sketchy, and they’re feeling pretty smart about that decision right now. Then again, I know others who held off thinking prices would come down after harvest… well, we’ll see how that plays out.

Production Patterns: Summer Heat Taking Its Toll

The summer production decline is playing out exactly as you’d expect – heat stress is hitting herds across the Corn Belt, and we’re seeing it show up in both volume and components. What’s concerning – and this is becoming increasingly common with the heat domes we keep experiencing – are reports about butterfat percentages dropping in several regions.

The Upper Midwest is seeing component tests down about 0.05 percentage points from June, which doesn’t sound like much until you multiply it across a 500-cow herd. That’s real money walking out the door, especially when you’re getting paid on component pricing.

Culling rates have been steady, but here’s the thing that has me watching closely: if margins continue to tighten due to these feed costs, expect to see more marginal cows heading to town. The math is pretty simple – when your income over feed cost drops below $6 per cow per day, you start looking real hard at which cows aren’t pulling their weight.

What’s interesting is that heifer prices are still holding firm – I’m hearing $1,800-$2,000 for bred heifers in most regions, which is actually up about $100 from spring. That tells me most producers are still thinking long-term and haven’t hit the panic button yet. However, today’s action in the feed complex is likely to test that confidence.

Heat abatement becomes critical here, not just for cow comfort, but for protecting those component levels that drive your milk check. Every tenth of a point of butterfat matters when margins are this tight.

The Complete Demand Picture: Global Forces and Local Realities

Here’s where things get really interesting from a global perspective… this seasonal tightness from New Zealand is becoming more apparent, and honestly, it’s helping us more than I expected when we started the year. They’re in their production trough right now – typically down about 15% from their May peak, which means their powder offerings are limited until their new season kicks in around September.

What’s particularly fascinating is how our pricing stacks up globally right now. At $1.28/lb (roughly $2,822/MT), our NDM is actually competitive with European SMP, which trades around €2,550/MT. That’s a complete reversal from earlier this year when we were essentially priced out of several key markets.

On the export front, the numbers are telling a story that’s worth paying attention to. Mexico continues to be our bread and butter customer – they took about 48 million pounds of NDM in the first five months of 2025, which is up 8% from last year. That’s consistent, reliable demand that’s been underpinning our Class IV strength.

Southeast Asia has also been steady, importing about 6% more powder year-over-year, although they’re definitely being more selective about pricing. The interesting development is that our market share in key Southeast Asian markets has actually grown to about 35%, up from 32% last year, partly because European suppliers have been focusing more on their domestic markets.

China remains the wildcard – they’re down 2% year-over-year in total imports, but when they do buy, they’re buying in size. Just last week, they took delivery of 15 million pounds in a single transaction, which shows they’re still willing to pay for quality when they need it.

Our butter situation is particularly intriguing. At $2.53/lb, we’re actually below most EU offers right now – I’m seeing European butter quoted at €4,900-5,200/MT, which translates to roughly $2.75-$2.95/lb. That spread could attract some international interest, especially as we head into the back half of the year when global butter supplies typically tighten.

Domestically, the picture is more nuanced than the headlines suggest. Food service cheese demand is holding up reasonably well with the summer travel season – the foodservice demand index is sitting at 95, which is close to the seasonal norm of 100. But here’s the thing… it’s not strong enough to work through these comfortable inventories that processors keep talking about.

Retail butter sales are typically soft during the season – Nielsen data shows unit sales down 4% from May to mid-July, which is a fairly typical trend. We’re past the spring baking rush and haven’t yet hit the holiday prep season that kicks in around Labor Day.

The wild card everyone’s watching is the return of school lunch programs in August. This typically adds about 12-15% to cheese demand almost overnight, but with some districts switching to more fresh options and others dealing with budget constraints, it’s unclear if we’ll see the traditional increase.

Forward Curves: Real Money Opportunities (And Some Risks)

According to the latest USDA WASDE report from earlier this month, they’re calling for Class III to average around $18.50 for 2025, with Class IV closer to $19.05. Today’s action fits that narrative pretty well – powder strength, cheese struggling to find direction.

But here’s where it gets interesting – and potentially profitable – for your operation. Q4 2025 Class III is trading near $17.90, and Class IV is sitting at $19.30. Let me put this in real dollars that matter to your operation…

That Q4 Class III price of $17.90 is trading at a premium of nearly a dollar to the current cash market. For a farm shipping 1 million pounds of milk a month, locking in that differential represents about $10,000 in additional revenue per month through the fourth quarter. Scale that up or down based on your volume, but even for a smaller operation shipping 500,000 pounds monthly, you’re looking at an extra $5,000 per month.

For Class IV producers, that 30-cent premium to cash translates to roughly $3,000 per month for every million pounds shipped. Not life-changing money, but in a tight margin environment, it’s the difference between breaking even and making a profit.

The risk management side of me says those kinds of premiums don’t last forever, especially with feed costs fluctuating as they are. Even if you only lock in 25% of your production, you’re creating a meaningful floor for your operation while still maintaining upside participation.

What particularly intrigues me is the shape of the curve beyond Q4. Q1 2026 Class III is trading at $18.25, and Class IV is at $19.50. That suggests the market thinks the current weakness in cheese is temporary, but the strength in powder has more staying power.

Voices from the Trenches: What People Are Really Saying

I’ve been speaking with individuals from around the industry, and the sentiment is fairly consistent, although there are some notable regional variations. Traders are telling me NDM is where the consistent bids are showing up – one CME regular mentioned that “the powder pit has been the only place with real conviction for the past two weeks.”

Cheese feels heavy, and nobody wants to be the hero buying blocks until we see some real inventory draws. A processor in Wisconsin told me they’re running full capacity, but their cheese caves are “comfortable” – industry speak for “we’re not hurting for storage space.”

The consensus seems to be that we need to see a real spark in fall food service demand to move these cheese prices meaningfully higher. School lunch programs ramping back up could provide that spark, but it’s still six weeks away.

What’s particularly noteworthy is what producers are saying about the heat and its impact on their operations. A California producer running 2,000 head mentioned that “cow comfort isn’t just welfare anymore – it’s directly tied to our milk check. Every tenth of a point of butterfat we lose to heat stress is money walking out the door.”

Upper Midwest producers are more focused on the feed cost situation. A Wisconsin dairyman with 800 cows told me, “I’m spending more time watching the corn board than the cheese market these days. My nutritionist and I are having daily conversations about ration adjustments.”

What strikes me about these conversations is how much more sophisticated producers have become about risk management. It’s not just about hoping for higher milk prices anymore – it’s about actively managing both sides of the margin equation.

Regional Spotlight: Where the Rubber Meets the Barn Floor

For folks in Wisconsin and Minnesota, today’s corn rally hits especially close to home. Local corn crops are progressing well – most areas are at or ahead of normal development, with pollination wrapping up under generally favorable conditions. But this board rally is creating some interesting dynamics in the cash market.

Basis levels are running about 20 cents under December futures, which is fairly typical for this time of year. However, what’s interesting is that elevators are starting to become more aggressive with new crop bids. I’m hearing stories of some facilities offering as little as 30 cents under for October delivery, which tells me they’re not overly concerned about harvest pressure.

If you’ve got unpriced new crop corn and storage capacity, this rally might be worth considering. I know it feels early, but $4.00 corn isn’t something you see every day, and with global weather concerns circulating, there’s potential for more upside.

On the milk side, processing capacity is abundant, but there’s always something to watch. I’m hearing whispers about planned maintenance at a major cheese facility in central Wisconsin scheduled for early August. Nothing dramatic, but it could briefly tighten local spot pricing for farms that aren’t locked into long-term contracts.

The California situation is different – they’re dealing with more heat stress but also have more flexibility in their feed sourcing. West Coast producers are paying a premium for feed, but they’re also getting premium prices for their components when they can maintain quality.

Supply Chain Reality: The Stuff Nobody Talks About

Here’s something that doesn’t make the headlines but affects your bottom line… transportation costs are creeping up again. Freight rates for hauling milk are up about 8% from last year, partly due to driver shortages and partly due to fuel costs. That might not sound like much, but for farms shipping long distances to processing plants, it’s another margin squeeze.

Processing plant utilization is running at about 85% capacity nationally, which is healthy but not stretched. That’s good news for milk pricing – when plants are scrambling for milk, farm-level prices tend to be stronger. However, it also means there’s room for increased throughput if demand increases.

What’s particularly interesting is the regional variation in processing capacity. The Upper Midwest is running closer to 90% utilization, while some facilities in the West are at 75-80%. That imbalance is creating some interesting pricing dynamics and transportation flows that most people don’t see.

What You Should Actually Do Right Now

Price your feed. I can’t stress this enough – today’s rally in grains is more than just daily noise. Get firm quotes for your feed needs through year-end, and if you’ve storage capacity and are comfortable with the basis, this might be the time to consider purchasing some coverage.

Here’s a specific strategy worth considering: if you typically buy corn quarterly, consider covering your Q4 needs now and maybe 25% of your Q1 2026 requirements. That provides some protection while still allowing you to participate if prices decrease after harvest.

Look hard at those Q4 2025 and Q1 2026 milk futures. They’re offering prices well above current cash markets, and with feed costs fluctuating as they’re, establishing some price floors makes sense. Even covering 25-30% of your expected production can create a meaningful safety net.

Options strategies might be worth considering too – buying put options can establish downside protection without capping your upside. With implied volatility relatively low right now, puts are reasonably priced.

With margins this tight, focus obsessively on what you can control. Work with your nutritionist on optimizing rations for income over feed cost, not just peak production. Every dollar you can save on feed costs is directly reflected in your bottom line.

Ensure that those heat abatement systems are operating at 100% efficiency. Protecting components isn’t just about cow comfort – it’s about protecting your milk check. Consider investing in additional cooling capacity if you’re consistently seeing component drops during hot weather.

Industry Intel Worth Knowing

Keep an eye on the Federal Milk Marketing Order pricing formula discussions. I know it’s bureaucratic stuff that makes your eyes glaze over, but any changes could have significant long-term impacts on your basis and milk checks. The comment period closes in September, so if you have any thoughts, now is the time to share them.

Technology-wise, I’m seeing more producers investing in precision feeding systems, and honestly, it makes sense when feed costs are this volatile. The payback period on these systems is getting shorter as margins tighten and feed price volatility increases.

There’s also an interesting development in the sustainability space – some processors are starting to offer premium payments for verified low-carbon milk. It’s still early, but it’s worth keeping an eye on, especially if you’re already doing things like methane capture or improved feed efficiency.

The Bottom Line: What This All Means Going Forward

Today’s quiet, mixed session is classic mid-summer trading – the kind of day where the fundamentals matter more than the headlines. However, beneath that calm surface, there are significant currents worth understanding.

We’re in a period where your margin management skills matter more than ever. The dairy fundamentals haven’t changed dramatically, but the cost structure underlying them has just become more challenging. The feed cost pressure isn’t going away anytime soon, and it will separate the producers who are actively managing their businesses from those who are just hoping for better milk prices.

The opportunity is there in the futures markets if you’re willing to take some action, but time has a way of making these decisions for you if you wait too long. Those Q4 premiums won’t last forever, especially if we encounter any significant weather concerns or unexpected demand surges.

What gives me confidence about the longer-term outlook is the global supply situation. New Zealand’s seasonal tightness, combined with European producers focusing more on their domestic markets, is creating opportunities for U.S. exports that we haven’t seen in years. That underlying demand support should provide a floor for our markets, even if domestic demand remains lackluster.

This is the kind of market environment where the basics matter most – cow comfort, feed efficiency, and active risk management. Not the most exciting stuff to talk about at the coffee shop, but it’s what’s going to determine who’s still profitable when we look back at 2025.

The producers who navigate this successfully will be those who treat their operations like the businesses they are – actively managing both revenue and costs, staying informed about market developments, and making decisions based on data rather than hope. It’s not glamorous work, but it’s what separates the survivors from the casualties when markets get challenging.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Cutting Costs Without Compromising Cows in 2025 – Demonstrates how to optimize rations and implement precision feeding strategies that reduce costs while maintaining production, with specific nutrient balancing techniques for tight-margin environments.
Feed Cost Reality Check: Bunge’s $34 Billion Viterra Buyout Just Rewrote the Rules for Every Dairy Operation – Reveals how industry consolidation creates $90,000 in additional annual feed costs for typical operations and provides advanced procurement strategies to mitigate these structural market changes.
Dairy’s Bold New Frontier: How Forward-Thinking Producers Are Redefining the Industry – Explores proven revenue diversification methods and technology adoption strategies that help producers reduce dependence on volatile milk prices while improving operational efficiency and profitability.

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Categories : CME Dairy Markets

Tags : CME dairy prices, dairy market analysis, dairy profitability strategies, feed cost management, milk futures trading

CME Dairy Report for July 15th, 2025: Cheese and Butter Take a Hit

Tuesday, July 15th, 2025

Texas dairies losing 15% milk yield this summer while some ops maintain 92% – the $10K daily difference that’s reshaping our industry

EXECUTIVE SUMMARY: Look, I’ve been watching these markets for decades, and what happened Tuesday tells us everything about where this industry’s headed. Cheese and butter got hammered – but the real story isn’t the 2¢ and 4¢ drops, it’s how smart producers are turning market chaos into profit opportunities. Your milk-to-feed ratio just hit 1.95… that’s below the 2.0 stress line where operations start making hard choices about cow numbers. But here’s what caught my attention – while Texas dairies are seeing 15% production drops from heat stress, operations with AI-driven cooling systems are maintaining 92% of peak production. That’s an $8,000-10,000 daily revenue difference on a 2,000-cow operation.The currency headwinds are brutal – EU cheese is 12-15% cheaper than ours in Asian markets. Meanwhile, Wisconsin co-ops are paying +$0.75 basis premiums because they need consistent supply. The gap between efficient operations and everyone else is widening fast, and 2025’s market conditions are rewarding those who adapt.You need to see exactly how the leaders are navigating this volatility.

KEY TAKEAWAYS

Heat stress mitigation is now a competitive weapon – Operations with advanced cooling maintain 85% production vs. 70% for competitors, generating $8K-10K extra daily revenue. Install real-time monitoring systems before August heat peaks hit your region.
Regional basis opportunities are exploding – Southwest processors offering +$0.50 to +$0.75 premiums while Upper Midwest sees +$0.15 to +$0.30. Negotiate with multiple regional buyers now while supply tightness gives you leverage in 2025’s volatile market.
DRP enrollment surge reveals smart risk strategy – Leading producers using 60% DRP coverage plus 20% put options, leaving 20% upside exposure. With milk-to-feed ratios at 1.95, this approach protects against catastrophic losses while maintaining profit potential.
Technology adoption creates measurable advantages – Genomic selection delivering 2-3% annual efficiency gains, precision feeding optimizing every tenth of a pound per cow. These aren’t future investments anymore – they’re survival tools when margins are this tight.
Global competitive pressure demands operational excellence – Currency headwinds make U.S. exports 12-15% more expensive than EU competitors. Focus on feed efficiency, component optimization, and cost control because pricing power is limited in today’s global market.

So here’s what happened today… and honestly, it’s the kind of market move that makes you want to double-check your risk management strategy. Both cheese and butter got hammered in the spot market, and if you’re like most producers I know, you’re probably wondering what this means for that August milk check you’re already calculating in your head.

The thing about these simultaneous drops is they don’t happen in isolation. When cheese blocks fall 2 cents and butter drops 4 cents on the same day, it’s usually telling us something bigger about where buyers’ heads are at. And right now? They’re clearly not in a buying mood.

What strikes me about today’s session is how the volume backed up the price moves. We saw real business getting done at these lower levels – 4 loads of cheese blocks actually traded down to $1.6250. That’s not just paper trading or algorithmic noise. That’s actual product changing hands at prices that hurt.

Today’s Reality Check: The Numbers That Actually Matter

Let me break down what moved today, because the details matter when you’re trying to figure out where your milk check is headed:

Product	Price	Today’s Move	Trades	Bid/Ask Spread	What This Really Means
Cheese Blocks	$1.6250/lb	-2.00¢	4	3 bids vs 1 offer	Direct hit to Class III – buyers stepping back
Cheese Barrels	$1.6500/lb	-2.00¢	0	0 bids vs 1 offer	Barrel premium signals aging demand but no urgency
Butter	$2.5400/lb	-4.00¢	0	1 bid vs 3 offers	Sellers motivated, buyers absent – classic bearish setup
NDM Grade A	$1.2750/lb	+0.75¢	4	2 bids vs 3 offers	Export strength providing support despite broader weakness
Dry Whey	$0.5725/lb	+0.50¢	0	2 bids vs 1 offer	Minor help for Class III but not enough to offset losses

Here’s the thing though – while the cash market was getting roughed up, the futures complex told a slightly different story. Class III July futures closed at $17.39/cwt and Class IV at $19.01/cwt. That $1.62 spread between the two is… well, it’s telling us that the market still sees value in the fat complex relative to protein.

What’s particularly noteworthy about today’s bid/ask action is how thin the butter market became. One bid against three offers? That’s not a balanced market – that’s sellers looking for buyers who just aren’t there. I’ve seen this pattern before, and it usually means we’re in for more weakness until something changes the dynamic.

A longtime CME floor trader I spoke with this afternoon put it bluntly: “The butter buyers completely disappeared today. When you see that kind of imbalance, it’s usually not a one-day event. This feels like the beginning of a correction, not the end.”

The U.S. Picture: Margins, Heat, and Hard Choices

Feed Costs Are Making Everyone Nervous

The feed situation right now is honestly keeping me up at night, and I know it’s doing the same for producers across the country. December corn closed at $4.1925/bushel, and soybean meal at $279.90/ton. When you run those numbers against current Class III futures, you’re looking at a milk-to-feed ratio of about 1.95.

That’s… not good. Anything below 2.0 is where operations start making hard decisions about cow numbers, breeding programs, and expansion plans. I was talking to a 2,000-cow operation in Wisconsin last week (this is becoming more common), and the manager said something that stuck with me: “We’re not losing money, but we’re not making enough to justify keeping marginal cows in the herd.”

What’s particularly challenging is how feed costs are diverging regionally. In the Texas Panhandle, delivered corn is running $4.45-4.50/bushel. Meanwhile, Iowa producers are seeing $4.05-4.10 delivered. That 35-40 cent spread creates real competitive differences that show up in everything from expansion decisions to culling strategies.

Heat Stress Is Hitting Harder Than Expected

The production impacts from this summer’s heat are honestly more severe than I anticipated. Current industry observations suggest Texas operations are seeing 12-15% drops from peak production during extreme heat periods. That’s not just a temporary dip – that’s the kind of sustained production loss that shows up in regional milk supply numbers.

A large dairy operator in the Texas Panhandle told me yesterday: “We’ve invested millions in cooling systems, but when it’s 108 degrees with 85% humidity for five straight days, even the best technology has limits. Our butterfat numbers are holding better than protein, but the total volume… it’s painful to watch.”

California’s Central Valley tells a similar story, though the infrastructure investments there are helping. Most large dairies are reporting 6-8% production drops from optimal levels, but their cooling systems are preventing the catastrophic losses we’re seeing in less-equipped regions.

What’s particularly noteworthy is how the heat stress is affecting component levels. A nutritionist working with several large California operations mentioned: “The protein depression is more significant than the fat losses. We’re seeing protein drop 0.15-0.20 percentage points during peak heat, which really impacts the component pricing calculations.”

Regional Basis Patterns Are All Over the Map

The basis relationships this year are unlike anything I’ve seen in recent memory. In the Upper Midwest – Wisconsin, Minnesota, northern Iowa – local basis has been running +$0.15 to +$0.30 above Class III as processing plants scramble to secure consistent supply.

A Wisconsin cooperative manager shared: “We’re paying premiums we haven’t seen since 2014. The plants need the milk, and they’re willing to pay for consistency. Our members who can deliver steady volume are seeing +$0.25 to +$0.35 basis regularly.”

The Southwest is a different story entirely. Texas processors are offering +$0.50 to +$0.75 basis premiums to lock in milk supplies, reflecting the heat stress impacts I mentioned. Meanwhile, California’s basis has been more volatile, swinging from +$0.20 to +$0.60 depending on processing plant needs and regional production swings.

But here’s what’s fascinating – the Mountain West is becoming a sweet spot. Idaho and Utah producers are finding themselves with moderate heat stress, reasonable feed costs, and basis relationships holding steady at +$0.25 to +$0.40. One large Idaho operation told me: “We’re actually looking at expansion opportunities. The stars are aligning here in ways they aren’t for our competitors in other regions.”

The Global Picture: Competition, Currency, and Reality

New Zealand’s Season is Shaping Up Strong

Here’s what’s got me concerned about our export competitiveness… According to recent data from NZX, New Zealand’s 2024-25 season is projected to close 1.3% higher than the previous season. That’s additional competition in powder markets where we’ve been finding some success.

Their forecast opening milk price of NZ$9.50/kgMS for the 2025/26 season assumes currency rates that give them significant advantages in Asian markets. When you factor in their lower production costs and favorable exchange rates, they’re pricing us out of markets where we used to compete effectively.

An export trader based in Chicago shared this perspective: “New Zealand’s got the cost structure and the currency working in their favor right now. We’re having to compete on service and reliability because we can’t match their pricing in most Asian markets.”

Currency Headwinds Are Getting Worse

The dollar strength situation is honestly more problematic than most daily reports acknowledge. At current exchange rates, EU cheese exports to Southeast Asia are running 12-15% cheaper than equivalent U.S. products. That’s not a small competitive disadvantage – that’s a market-share killer.

What’s particularly frustrating is how this plays out in real business. Let me give you specific numbers that matter: A 40-foot container of cheese blocks to Singapore costs about $3,200 more if it’s from Wisconsin versus the Netherlands, just due to currency differences. That’s real money that affects real buying decisions.

The Australian dollar at US$0.67 is creating similar competitive pressures in butter markets. Their export butter is effectively 8-10% cheaper than ours in key Asian markets, which explains why we’re seeing more resistance to U.S. butter exports.

A regional export manager put it this way: “We’re losing established customers not because of quality issues or service problems, but purely on price. The currency math just doesn’t work in our favor right now.”

Forward-Looking Analysis: What USDA’s Seeing and What’s Coming

The Official Forecasts Are Getting Interesting

According to USDA’s latest monthly estimates, they’ve raised their 2025 milk production forecast to 228.3 billion pounds – that’s up 500 million pounds from their previous estimate. They’re also maintaining their all-milk price forecast at $22.00 per hundredweight.

But here’s what concerns me about these projections – they’re assuming production growth that might not materialize given the margin pressures we’re seeing. The heat stress impacts, feed costs, and general profitability squeeze are causing some operations to reconsider expansion plans.

From industry observations, the actual herd numbers tell a mixed story. The national dairy herd sits at 9.445 million head according to recent CoBank analysis, which is relatively stable but masks significant regional variations. Some areas are seeing modest growth while others are contracting.

A dairy economist I respect mentioned: “The USDA numbers look optimistic given what we’re seeing on the ground. The margin pressure is real, and it’s starting to show up in production decisions. I wouldn’t be surprised if they have to revise those forecasts lower later in the year.”

Technology Is Quietly Changing the Game

What’s fascinating is how technology investments are starting to create competitive advantages that show up in daily market dynamics. Several large operations are implementing AI-driven heat stress monitoring systems, and early results suggest they can maintain production levels during extreme weather that would traditionally cause significant losses.

A 5,000-cow operation in Arizona shared their results: “Our new monitoring system adjusts cooling automatically based on real-time cow behavior data. We’re maintaining 92% of peak production even during 115-degree days. Two years ago, we’d be down to 78-80% in these conditions.”

The data analytics side is getting more sophisticated too. Large cooperatives are using predictive models not just for production planning, but for milk marketing decisions. It’s not just about reacting to market conditions anymore – it’s about anticipating them.

This development is fascinating because it suggests the traditional seasonal patterns we’ve relied on for decades might be shifting. Producers with better technology and data analytics are gaining advantages that show up in everything from feed efficiency to marketing timing.

Export Markets Are Evolving

Mexico remains our most reliable customer, thank goodness. Their steady demand for NDM and cheese provides a price floor that we might not otherwise have. But even that relationship is evolving as their domestic production capabilities improve.

What’s particularly noteworthy is how the logistics have improved. Cross-border transportation costs have actually decreased 5-8% compared to last year, thanks to better coordination and increased capacity. A major exporter noted: “The Mexico relationship is more than just pricing – it’s about reliability and service. That’s our competitive advantage there.”

Southeast Asia continues to be extremely price-sensitive. Every dollar of currency movement matters there, and we’re fighting for market share against EU and New Zealand suppliers who often have cost advantages we can’t match.

China… well, that’s still a wild card. Their import patterns remain below peak levels as they work through domestic supply adjustments. The competition from New Zealand in whole milk powder remains intense, and frankly, we’re not winning that battle on price.

What Smart Producers Are Doing Right Now

The producers who are thriving in this environment aren’t trying to time the market – they’re managing through the volatility with increasingly sophisticated strategies. DRP enrollment has increased significantly this year, and I’m seeing more interest in collar strategies using options.

A Michigan producer with 1,200 cows shared their approach: “We’re using DRP for 60% of our production and put options for another 20%. That leaves us with 20% exposed to upside while protecting against catastrophic losses. It costs money, but it lets us sleep at night.”

Risk management has become more nuanced. The operations that are sleeping well at night are the ones who have downside protection in place while maintaining upside participation. It’s not about being right about market direction – it’s about being protected regardless of which way things move.

On the operational side, efficiency gains are where the money is. Every tenth of a pound of milk per cow matters when margins are this tight. I’m seeing renewed focus on ration optimization, cow comfort investments, and genomic selection programs that can improve feed conversion.

The Heat Management Investment

What’s particularly noteworthy is how heat stress mitigation is becoming a competitive advantage. Operations that invested in cooling systems, shade structures, and water delivery systems are maintaining production levels that their neighbors can’t match.

The ROI on these investments is becoming clear. A 2,000-cow operation that can maintain 85% of peak production during heat stress versus 70% for their competitor is generating an additional $8,000-10,000 per day in gross revenue. That kind of difference pays for a lot of infrastructure.

A Texas dairy manager put it in perspective: “The cooling investment we made three years ago is paying for itself every summer. When our neighbors are down 15%, we’re only down 5%. That difference is the margin between profit and just breaking even.”

Where We Head from Here

The seasonal patterns suggest we should see some recovery as we move into August and September. School food service programs will be ramping up, and that typically provides demand support for cheese markets. But the question is whether that seasonal boost will be enough to offset the global competitive pressures we’re facing.

What I’m watching most closely is how the heat stress situation evolves. If we get relief in the next few weeks, production could rebound faster than expected. If the heat persists into September… well, that could create supply tightening that supports prices despite the other headwinds.

The futures market is pricing in some recovery – October Class III contracts are trading around $17.80/cwt, suggesting the market expects improvement. But futures markets have been wrong before, and the global competitive situation is more challenging than it’s been in years.

A veteran market analyst offered this perspective: “The fundamentals are mixed at best. Yes, we’ve got some supply pressure from heat stress, but demand isn’t exactly robust either. The real question is whether the seasonal recovery materializes or if we’re looking at a longer period of sideways to weaker pricing.”

Here’s what’s clear: this industry is evolving rapidly, and the producers who thrive will be those who can adapt quickly and manage complexity effectively. Technology investments, sophisticated risk management, and operational efficiency aren’t nice-to-haves anymore – they’re requirements for survival.

The opportunities are there for those who can execute well. Efficient operations with good genetics, proper heat abatement, and smart marketing strategies can still generate decent margins. But the margin for error is smaller than it’s been in years.

Keep your eyes on the fundamentals, manage your risks intelligently, and remember that these market cycles are part of the business. The producers who survive and thrive are the ones who prepare for volatility, not those who hope it won’t happen.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Smart: Cutting Costs Without Compromising Cows in 2025 – Reveals practical strategies for managing feed efficiency when milk-to-feed ratios hit crisis levels, demonstrating how top operations cut feed costs while maintaining production during margin squeezes.
The Dairy Apocalypse of 2025: Why Your Milk Check is Disappearing and Whos Profiting from It – Exposes the strategic market forces behind falling milk prices and provides actionable biosecurity and efficiency programs that smart producers use to protect profitability during industry upheaval.
Unlock Hidden Dairy Profits Through Lifetime Efficiency – How Modern Genetics and Strategic Nutrition Can Cut Feed Costs by $251 per Cow – Demonstrates how integrated genetic selection and precision nutrition technologies deliver measurable $251 annual savings per cow, offering concrete solutions beyond basic heat stress management for long-term competitive advantage.

Join the Revolution!

Categories : CME Dairy Markets

CME DAIRY MARKET REPORT FOR JULY 14th, 2025: Cheese Takes a Tumble

Monday, July 14th, 2025

Cheese blocks crashed 1.5¢ in one trade Monday – here’s why your August milk check just took a $0.75/cwt hit.

Executive Summary: Monday’s CME session wasn’t just another down day – it was a masterclass in reading market signals that most producers completely miss. The real insight isn’t the 1.5¢ drop in blocks, it’s understanding why Wisconsin basis dropped from +$0.65 to +$0.35 while California plants are sitting at 115% inventory levels. When you combine that with the 30-day volume running 15% below last year and managed money holding net short positions of 3,200 contracts, you’re looking at a market that’s oversold and due for a bounce. The futures curve is still showing December Class III with a 68% chance of trading above $18.50, which means there’s real money to be made if you understand the timing. Global competition from New Zealand is fierce – they’re undercutting us by $85/MT on powder contracts – but domestic fundamentals aren’t falling apart. Smart producers are using this weakness to establish floor protection at reasonable cost levels while focusing on component quality and operational efficiency. This is exactly the kind of market intelligence that separates profitable operations from the rest.

Key Takeaways

Basis arbitrage opportunity: Wisconsin Class III basis dropped 45% in 10 days while Northeast fluid premiums held steady at +$2.15-$2.35 – regional pricing disparities create immediate profit opportunities for producers who understand milk marketing timing
Options volatility spike: Implied volatility jumped to 22% (up from 15% in June) while put/call ratios hit 1.8:1 – establish downside protection through October Class III puts at $18.00 strike for just 35¢ premium before volatility normalizes
Component premium leverage: Every 0.1 point in butterfat equals $0.18/cwt at current values – with base prices under pressure, nutritional programs focused on heat stress mitigation can add $135/day to a 1,000-cow operation’s bottom line
Feed cost timing advantage: New crop corn basis running +5¢ to +15¢ vs. current supplies at +20¢ to +30¢ – lock in December/March corn delivery now while milk-to-feed ratios improve from current 1.85 levels
Export competitive positioning: U.S. powder exports down 18% year-over-year to Southeast Asia, but Middle East/North Africa up 15.8% – diversification strategies and currency hedging become critical for co-ops with international exposure

CME dairy market, dairy market analysis, milk price forecasting, dairy risk management, global dairy trends

You know that gut-punch feeling when you check the CME board first thing Monday morning? Well, that’s exactly what we got today. And honestly, after spending the weekend talking to producers at the county fair – hearing about everything from heat stress to feed costs – this kind of weakness is the last thing anyone needed to see.

Here’s the thing about today’s session… when blocks drop 1.5¢ on a single trade, you’re not looking at market noise. That’s a statement. And unfortunately for those of us trying to make a living in dairy, it’s not saying anything we want to hear about our August milk checks.

What really gets me about today’s action is how broad-based the weakness was. Sure, we’ve seen cheese stumble before – happens more than we’d like to admit. But when butter joins the party with a full cent drop? You’re looking at pressure on both your Class III and Class IV formulas. That’s the kind of double whammy that makes you reach for that second cup of coffee before 8 AM.

Product	Price	Daily Move	Weekly Trend	Historical Percentile	What This Means for Your Operation
Cheese Blocks	$1.6450/lb	-1.50¢	-2.3%	35th percentile (July avg: $1.72)	🔴 Your Class III driver just hit a serious pothole
Cheese Barrels	$1.6700/lb	-0.50¢	-2.4%	42nd percentile (July avg: $1.68)	🔴 Industrial demand showing cracks too
Butter	$2.5800/lb	-1.00¢	-0.6%	58th percentile (July avg: $2.54)	🔴 Class IV is taking heat from multiple directions
NDM Grade A	$1.2675/lb	Flat	+0.1%	62nd percentile (July avg: $1.24)	🟡 At least export demand isn’t completely tanking
Dry Whey	$0.5675/lb	Flat	-3.2%	48th percentile (July avg: $0.58)	🟡 Steady today, but that weekly trend…

The silver lining? And trust me, I’m really reaching here… NDM held flat, and it’s actually sitting above its five-year July average. What strikes me about this is that, according to USDA’s latest monthly export data, we moved 142,600 metric tons of total dairy products in June – that’s up 8.2% from the rolling three-month average. So at least the powder complex isn’t completely falling apart.

But let’s be real about what happened with cheese. That barrel-to-block spread widened to 2.5¢ today, which usually signals strong industrial demand versus retail. Problem is, when both are sliding, it’s just different shades of weak.

Under the Hood: Why It Happened

What’s particularly concerning about today’s session… well, it’s what didn’t happen as much as what did. We had one block trade, two butter trades, and that was pretty much it. The five-day rolling average for total daily trades is running around 12-15 contracts, so today’s three trades puts us well below normal activity levels.

Here’s what caught my attention – and I’ve been watching these markets for longer than I care to admit – zero bids for blocks and barrels at the close, but offers still sitting there. That’s not just weak; it’s a market where buyers are essentially saying, “Show me lower prices before I’ll even consider stepping in.”

The bid-ask spreads are telling their own story, too. We’re seeing gaps that’re 2-3 times the normal range – blocks trading with a 4¢ spread compared to the typical 1.5¢. When market makers are either scared or scarce, neither scenario is particularly comforting for figuring out where milk prices are headed next month.

What’s interesting is the volume patterns we’ve been seeing… the 30-day moving average for total CME dairy volume is running about 15% below the same period last year. Could be summer doldrums, but it could also signal that major players are sitting on the sidelines waiting for clearer direction.

The Commitment of Traders Story

The latest COT report (and this is fascinating stuff) shows managed money positions in Class III futures at their lowest level since March. Large speculators are holding net short positions of about 3,200 contracts, down from net long positions of 1,800 contracts just six weeks ago. That’s a pretty significant sentiment shift that explains some of today’s weakness.

What’s particularly noteworthy is that commercials – the processors and producers who actually handle physical milk – are sitting on their largest net long position since April. That disconnect between commercial and speculative positioning usually resolves itself… question is which way?

From what I’m hearing from contacts on the floor, traders are watching $1.60 on blocks like hawks. Break below that level and… well, let’s just say it could get uncomfortable quickly. For barrels, those unfilled offers at $1.6700 represent immediate resistance, assuming anyone actually wants to buy at those levels.

The Futures Curve and Options Tell a Different Story

Here’s where things get interesting – and maybe a little more optimistic. The futures market is telling a different story than today’s spot weakness, and the curve structure gives us some clues about where sentiment might be headed.

Current Futures Structure (and what it means):

August Class III: $17.76 (vs. today’s spot equivalent around $17.20)
October Class III: $18.78 (showing $1.00+ premium to spot)
December Class III: $19.15 (even stronger premium)

The curve is in what we call “normal contango” – later months trading at premiums to nearby. That typically suggests the market expects current weakness to be temporary. But here’s the thing… the curve can also reflect storage costs and seasonal patterns, so you can’t read too much into it.

Options Volatility Patterns: This is where it gets really interesting. Implied volatility on Class III options has spiked to 22% annualized, up from 15% we saw in May and June. That’s telling us traders are pricing in bigger potential moves, but it’s not extreme by historical standards. The volatility smile is also skewed toward puts, suggesting more demand for downside protection.

Confidence Intervals (based on current options pricing):

August Class III: 68% chance of trading between $17.25-$18.25
October Class III: 68% chance of trading between $18.15-$19.45
December Class III: 68% chance of trading between $18.50-$19.80

Those ranges actually aren’t terrible, especially when you consider we were trading in the low $16s as recently as March. The fact that December shows a 68% chance of staying above $18.50 suggests the market still believes in a seasonal recovery.

The View from the Farm: How It Impacts Producers

The thing about national price averages is that they don’t tell the whole story. Let me break down what’s happening in the regions that actually matter for your milk check, and how production realities are affecting supply patterns…

Regional Basis Reality – The Complete Picture

Upper Midwest Basis Differentials (this is becoming more critical as plants get pickier):

South-central Wisconsin: Class III basis dropped to +$0.35/cwt from +$0.65 ten days ago
Central Minnesota: Running about +$0.40/cwt, down from +$0.55
Northern Iowa: Holding around +$0.45/cwt, but processors pushing for lower premiums
Michigan: Sitting at +$0.30/cwt, down from +$0.50 in early July

California Dynamics: The Golden State’s always been its own animal, but what’s happening there affects everyone. California plants are reporting inventory levels at 110-115% of target – that’s comfortable enough to be selective about milk purchases. Their basis to Class IV has tightened to around +$0.25, down from +$0.45 in early July.

Pacific Northwest (and this region’s becoming more important): Oregon and Washington producers are seeing basis levels around +$0.20 to +$0.30 over Class III. The region’s smaller cheese plants are actually holding up better than expected, probably because they’re not competing directly with the big Midwest processors.

Southwest Expansion Markets: Texas, New Mexico, and Arizona operations are dealing with their own challenges. Basis levels are running +$0.15 to +$0.25, but transportation costs to processing facilities are eating into those premiums. A large operation in the Texas Panhandle mentioned that their effective basis is closer to flat after trucking costs.

Northeast Fluid Market: Here’s where it gets interesting… fluid milk demand in the I-95 corridor is actually holding up better than expected. Plants from Boston to Washington are maintaining decent premiums – Class I basis running +$2.15 to +$2.35 over Class III, which is typical for this time of year.

Production Dynamics and Heat Stress Reality

What’s happening on the production side varies significantly by region, but there are some common themes emerging that affect supply patterns and ultimately pricing. The heat stress situation is more widespread than usual this July, and it’s showing up in both production volumes and component quality.

According to USDA’s latest quarterly forecast (released last week), national milk production for Q3 2025 is projected to be 58.2 billion pounds, up 1.1% from last year, with a confidence interval of +/- 0.4%. But here’s what’s interesting… the regional breakdown shows some significant variations:

Upper Midwest: Q3 production forecast up 0.8% (confidence range: +0.2% to +1.4%)
California: Expected to be flat to down 0.2% (confidence range: -0.8% to +0.4%)
Southwest: Up 2.1% (confidence range: +1.5% to +2.7%)
Northeast: Up 0.4% (confidence range: -0.2% to +1.0%)

The heat stress impacts are showing up differently across regions:

Texas operations reporting 8-12% production drops from peak levels, with significant component quality issues
Wisconsin farms are seeing 2-4% declines but better component quality thanks to heat abatement investments
California Central Valley down 5-7% with mixed component impacts
Northeast is holding relatively steady thanks to milder temperatures

A large operation in central Minnesota mentioned their July butterfat test dropping to 3.68% from 3.81% in June – that’s significant money when you’re talking about 3,200 cows. But they’ve invested heavily in heat abatement, so their total production is only down about 3% from peak.

Herd Dynamics: Culling rates remain elevated across most regions, which is typical for this margin environment. A nutritionist I work with regularly mentioned that many of his clients are being more aggressive about moving older, lower-producing cows. The break-even production level for keeping a cow has moved up to around 65-70 pounds per day in many operations.

What’s particularly noteworthy is the heifer situation. Replacements are still relatively expensive – quality bred heifers running $2,200-$2,400 in most markets. That’s creating a situation where producers are being very selective about which cows to replace versus which ones to push through another lactation.

Feed Markets: The Other Half of Your Margin Equation

The thing about feed markets right now… they’re just sitting there like that relative who overstayed their welcome during the holidays. But let me get specific about what this means for different regions and how it’s affecting your milk-to-feed ratios.

Current Feed Landscape (and these numbers matter for your bottom line):

December corn futures: $4.12/bushel (down from $4.35 six weeks ago)
March corn: $4.18/bushel (showing some seasonal carry)
Soybean meal futures: $284/ton (up from $268 in early June)
Alfalfa basis in dairy country: Running $15-25/ton over normal premiums due to drought concerns

Your milk-to-feed ratio… and this is where individual operations really diverge… is running somewhere between 1.75-1.95 depending on your location and sourcing strategy. I was talking to a producer in central Wisconsin last week – he’s managed to keep his ratio around 1.85 through some creative feed sourcing, but that’s with corn basis running 20¢ over futures locally.

What’s becoming more common (and frankly more necessary) is seeing producers lock in feed prices further out. The forward curve on corn shows some decent opportunities for December and March delivery if you can find favorable basis levels. New crop basis in the Corn Belt is running +5¢ to +15¢ over futures, compared to +20¢ to +30¢ for current supplies.

Here’s what’s particularly frustrating for Upper Midwest producers… ethanol plants are still paying a premium for corn, and with rail logistics still not completely sorted out from earlier disruptions, local elevators aren’t exactly competing aggressively for our business. Basis levels in dairy country are running 15-25¢ over futures when they should be closer to +5¢ this time of year.

Regional Feed Cost Variations:

Wisconsin/Minnesota: Corn basis +20¢, soybean meal +$15/ton
California: Corn basis +35¢, alfalfa hay $280-320/ton
Texas: Corn basis +25¢, cottonseed meal competitive with soybean meal
Northeast: Corn basis +30¢, hay costs elevated due to weather

The Global Picture: External Pressures

The international competitive landscape is more complex than just production numbers and price comparisons. Currency movements, trade relationships, and logistics all play roles that directly affect U.S. dairy pricing – and frankly, we’re fighting an uphill battle on multiple fronts.

Export Competition Reality – The Detailed Numbers

Let me share some specific numbers that really highlight what we’re up against internationally. According to USDA’s latest monthly export data (and these are the actual volumes that matter for your milk check):

June 2025 Export Performance vs. June 2024:

Mexico: 31,200 metric tons total dairy products – up 2.1% from May, down 1.8% year-over-year
Southeast Asia: 22,400 metric tons – down 8.3% from May, down 18.2% year-over-year
China: 14,800 metric tons – up 12% from May but down 24% year-over-year
Middle East/North Africa: 8,600 metric tons – up 3.1% from May, up 15.8% year-over-year
Canada: 7,400 metric tons – steady from May, up 4.2% year-over-year

Rolling Three-Month Averages (this smooths out the volatility):

Total dairy exports: 142,600 MT/month (up 8.2% from the same period in 2024)
Cheese exports: 38,200 MT/month (up 3.1% year-over-year)
Powder exports: 68,400 MT/month (down 2.8% year-over-year)
Whey exports: 35,800 MT/month (up 12.4% year-over-year)

Here’s what’s frustrating… we’re losing market share not because of quality issues or logistics problems, but purely on price. A colleague in export trading mentioned losing a 2,500 MT powder contract to New Zealand last week – they were undercutting us by $85/MT. At that spread, there’s no way to compete unless the dollar weakens significantly.

New Zealand’s Aggressive Strategy: Fonterra has been particularly aggressive on SMP pricing, reportedly offering contracts $75-100/MT below comparable U.S. product. At those spreads, there’s simply no way to compete unless the currency situation changes dramatically. What’s concerning is this isn’t just opportunistic pricing – it appears to be a sustained strategy to capture market share while they’re in their winter doldrums.

Global Production and Currency Dynamics

The European situation adds another layer of complexity. According to the latest EU milk market observatory data, their production is following typical seasonal patterns – down from spring peaks but still running about 1.8% ahead of last year in key regions like Germany and the Netherlands. Currency-wise, the euro’s been relatively stable against the dollar, around 1.08-1.10, so we’re not getting help there either.

What’s particularly noteworthy about Argentina and Uruguay… early reports from contacts in South America suggest their spring flush could be significant this year. The Argentine Dairy Industry Chamber is forecasting 6-8% production increases for their 2025-26 season, which means more powder hitting global markets just when we’re trying to maintain our foothold in Asia.

Currency Impact: The dollar index has been trading in a relatively tight range around 104-106, but even small movements matter for export competitiveness. A contact in Southeast Asia mentioned that a 2% dollar strengthening can completely eliminate price advantages on powder contracts. Right now, we’re at a 3% disadvantage compared to where we were six months ago.

Logistics Reality: Shipping costs from U.S. West Coast ports to Asia are running about $180-220/container higher than pre-pandemic norms. That’s roughly $9-11/MT in additional costs that have to be absorbed somewhere in the supply chain. East Coast to Europe routes are running about $150-180/container above normal.

What’s fascinating is how these international dynamics feed back into domestic pricing. When we can’t move powder into export markets, it puts additional pressure on domestic utilization, which ultimately affects milk pricing in regions with significant powder production capacity like California and the Southwest.

Trade Policy Wildcards

Here’s something that doesn’t get enough attention but could really matter… the ongoing trade discussions with various countries. There’s talk about potential tariff adjustments with certain Asian markets, and honestly, any policy shifts could dramatically change the competitive landscape.

A contact at one of the major export houses mentioned that they’re seeing increased interest from African markets, specifically Nigeria and Kenya. The volumes are still small, but the growth potential is significant if we can maintain price competitiveness.

The Game Plan: What to Do About It

Look, talking about risk management in general terms doesn’t help anyone make real decisions. Let me get specific about what makes sense right now, given the current market structure and volatility patterns, plus what I’m hearing from people across the supply chain.

Market Sentiment and Real Voices

The sentiment across the supply chain… well, let’s just say it’s not exactly bullish right now. But the conversations I’m having reveal some interesting nuances that might affect how you think about pricing strategies.

A procurement manager at a major Midwest cheese plant told me yesterday: “Our inventories are in good shape – actually running about 10% above target levels. We’re not chasing milk right now because frankly, we don’t need to. But if spot prices stay weak for another week or two, we might start getting more aggressive on forward coverage.”

From the trading floor: “Nobody wanted to step up and catch this falling knife today. Volume was pathetic. But here’s the thing… when markets get this thin, they can turn on a dime. I’ve seen it happen too many times to count.”

A Wisconsin producer summed up the frustration: “Feed costs aren’t budging, but milk prices keep sliding. The good news is we locked in some fall coverage at $18.50 last month. Looking at today’s action, that’s feeling like a pretty smart decision.”

What’s interesting is hearing from nutritionists about how producers are responding. One contact mentioned that his clients are being more aggressive about culling older, lower-producing cows. With margins this tight, every cow needs to pull her weight – there’s less room for sentiment in these decisions.

Risk Management Reality: Specific Strategies for Today’s Market

Current Hedging Opportunities (and these are real examples you can act on):

October Class III puts at $18.00 strike are trading around a 35¢ premium
November Class III puts at $18.50 strike running about 48¢ premium
December Class III collars (buying $18.00 puts, selling $19.50 calls) can be established for about 15¢ net cost

What these numbers tell you is that you can establish downside protection at reasonable cost levels. The key is thinking about your cash flow timing and how much production you want to cover.

Forward Contract Opportunities: Several cooperatives I’ve talked to are offering forward contracts for Q4 2025 in the $18.20-$18.60 range, depending on volume and timing. That’s not exciting compared to where we were hoping to be, but it’s not terrible insurance against further weakness.

Here’s what’s particularly interesting about the options market right now… the put/call ratio on Class III options is running about 1.8:1, meaning there’s significantly more demand for downside protection than upside speculation. That’s typically a contrarian indicator, but in this environment, it might just reflect producers being realistic about risk management.

Component Focus Strategies: With base prices under pressure, your fat and protein premiums become even more critical. Every tenth of a point in butterfat is worth about $0.18/cwt at current component values. That might not sound like much, but over a 1,000-cow herd producing 75 pounds per day, it’s real money – about $135 per day.

Seasonal Expectations and Reality Checks

Here’s the thing about seasonal patterns… they provide guidance, but they’re not guarantees. Based on historical data and current fundamentals, here’s what I’m watching for in the coming weeks:

August Expectations: Back-to-school demand typically starts showing up in the first week of August. Food service orders for cheese and dairy ingredients usually begin placing orders 2-3 weeks before school starts, so we should start seeing some impact soon. The National School Lunch Program projections show cheese demand up about 2.3% for the upcoming school year.

Production Seasonality: The typical late-summer production decline should become more pronounced over the next 3-4 weeks. Even accounting for heat stress impacts, we usually see production drop 4-6% from peak levels by early September. This year’s heat stress might accelerate that decline.

Feed Harvest Impact: New crop corn harvest begins in about 6-8 weeks in early areas. Current yield estimates are running 175-180 bushels per acre nationally, which would be a decent crop if realized. That could provide some relief on feed costs by October, helping margins even if milk prices stay range-bound.

But here’s the reality check… international competition isn’t seasonal. New Zealand’s spring flush starts in September, which could maintain pressure on global powder markets through Q4. That’s a wildcard that historical seasonal patterns don’t account for.

Historical Context: Looking at July weakness over the past five years, we’ve seen block prices decline in four of those years with an average drop of 2.8¢. Today’s 1.5¢ decline puts us right in that historical range. The seasonal low typically occurs in late July/early August before back-to-school demand kicks in.

The Bottom Line: Navigating Uncertainty with Clear Eyes

Today’s market action is a reality check that the path to higher prices isn’t linear. The 1.5¢ drop in blocks on minimal volume suggests underlying sentiment has shifted, at least temporarily. But when I step back and look at the bigger picture…

What gives me some optimism – and I choose to focus on this rather than get discouraged – is that fundamentals haven’t completely deteriorated. The USDA’s quarterly production forecasts show modest growth, but nothing that should crash markets. Export demand, while challenging, isn’t collapsing entirely. And the options market suggests traders still expect recovery later this year.

The key challenge we’re facing is international competition at a time when domestic demand growth is modest. That’s putting a ceiling on how high prices can rally, even when supply-side factors are supportive.

For individual operations, this environment requires sharp pencils and careful planning. Margins are tight enough that operational efficiency and risk management become more important than trying to time market highs perfectly.

What strikes me most about conversations I’ve had with producers over the past week is the resilience and adaptability. Yeah, margins are tight, and today’s weakness is disappointing. But the good operators are finding ways to maintain profitability through better component management, careful feed sourcing, and strategic marketing.

Here’s what I’m telling producers who ask… don’t try to time the bottom perfectly. The futures curve still shows decent premiums for fall and winter contracts. If you can establish floor protection at levels that work for your cash flow, do it. The confidence intervals suggest we’re more likely to see $18+ milk prices by December than sub-$17 prices.

Sometimes markets just need to reset before moving higher. The key is not panicking into poor decisions or abandoning your risk management strategy because of one bad day or even one bad week.

This weakness creates opportunities as much as challenges… you just need to be positioned to take advantage when sentiment inevitably shifts. And in this business, sentiment always shifts – usually when you least expect it.

Keep your feed costs sharp, your butterfat numbers up, and your culling decisions ruthless. Focus on the things you can control – production efficiency, component quality, and strategic marketing. The market will sort itself out eventually, but your operation needs to be profitable regardless of where prices go.

We’ve weathered these storms before, and we’ll get through this one too. Just maybe with a few more gray hairs and a stronger appreciation for the good days when they come around again.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Reveals practical strategies for implementing layered financial protections, biosecurity protocols, and automation systems that reduce labor costs by 60%+ while delivering measurable ROI within 12 months to weather market volatility.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Demonstrates how to strategically position your operation around component optimization and processor relationships to capture premium returns as global trade dynamics shift and traditional volume-focused approaches fail.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Uncovers cutting-edge automation and AI technologies delivering 15-20% productivity gains and 40% mortality reductions, providing the competitive edge essential for thriving when markets turn volatile like today’s session.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy market, dairy market analysis, dairy risk management, milk price forecasting

CME Dairy Market Report for July 11th 2025: Friday’s Cheese Market Bloodbath

Friday, July 11th, 2025

15¢ milk check drop incoming – but feed efficiency gains could offset 60% of that loss this month

EXECUTIVE SUMMARY: Look, I’ve been watching dairy markets for fifteen years, and today’s cheese selloff isn’t the disaster everyone thinks it is – it’s actually a wake-up call we needed. Sure, your August milk check is going to be lighter by 15-20 cents per hundredweight, but here’s what the headlines aren’t telling you: feed costs dropped even harder, creating a net margin opportunity if you act fast. With December corn sitting at $4.11 and soybean meal backing off, the milk-to-feed ratio is compressing but not collapsing. The Class III probability scenarios I’m tracking show a 40% chance we hit sub-$17 territory, but also a 25% chance we bounce back above $18 before Labor Day. Global dairy demand from Mexico and Southeast Asia is still solid, and New Zealand’s winter production gives us breathing room. Bottom line? This correction is handing you a risk management opportunity on a silver platter – you just need to know how to grab it.

KEY TAKEAWAYS

Lock in feed costs NOW – December corn under $4.20 could save you $50-75 per cow through fall feeding, especially with 35% probability of Class III staying below $17.50. Call your elevator Monday morning and secure 60% of your needs.
Hedge 25-30% of August-October milk – Put options on Class III around $17.30 will cost you maybe 15-20 cents but protect against another $1+ drop if this cheese weakness has legs. With bid/ask spreads widening to 3-4 cents, volatility is your friend.
Maximize protein/fat components – Every tenth of a point in butterfat is worth more when base prices are soft. Focus feeding strategies on component optimization rather than volume – it’s pure margin in today’s market.
Regional basis matters more than ever – Wisconsin producers are feeling this cheese drop hardest, but California and Northeast operations have more buffer. Know your local pricing formulas and adjust forward contracting accordingly.

This isn’t doom and gloom – it’s market intelligence that separates profitable operations from the pack. The producers who move fast on these opportunities are the ones still farming in five years.

CME dairy market, milk price forecast, dairy profitability, cheese market analysis, feed cost management

You know that sinking feeling when you check the markets and realize your milk check just took a hit? Well, buckle up because today’s cheese market action is going to sting. We’re talking about a 15-20 cent drop per hundredweight for August milk payments, and honestly… it might be more if this selling pressure continues.

The thing about today’s session is that it wasn’t just profit-taking or end-of-week position squaring. This felt different. More urgent. Like buyers suddenly realized they’d been paying too much and decided to step back all at once.

Here’s what’s keeping me up tonight, though – this might actually be the reality check the market needed. Stay with me on this.

The Numbers That’ll Hit Your Mailbox

Let me break down what happened today, because the raw numbers don’t tell the whole story:

Product	Closing Price	Today’s Move	What This Actually Means for Your Operation
Butter	$2.59/lb	No change	Holding steady, but don’t expect miracles for Class IV
Cheddar Blocks	$1.66/lb	-2.50¢	This is your Class III killer – cheese drives about 70% of that formula
Cheddar Barrels	$1.675/lb	-3.50¢	Even uglier than blocks… buyers are definitely backing away
NDM Grade A	$1.2675/lb	+0.25¢	A tiny bright spot, but nowhere near enough to offset cheese pain
Dry Whey	$0.5675/lb	+0.50¢	Bouncing back from Thursday’s lows, but still struggling

What strikes me about this price action is how it reflects what I’ve been hearing from cheese plants across the Upper Midwest. The urgency just isn’t there anymore. Plants are running fine, but they’re not scrambling for loads like they were back in May.

The Trading Floor Reality – And Why This Might Have Legs

Here’s where it gets interesting, and why I think this selloff might not be your typical Friday afternoon nonsense. The bid/ask spreads on cheese widened significantly today – we’re talking 3-4 cent spreads on blocks when we normally see 1-2 cents. That’s not just profit-taking… that’s genuine uncertainty about where fair value sits.

Volume was decent, too. Six trades on blocks, which is above our recent average of 4-5. When you see volume and price movement going in the same direction, that usually means something real is happening. The smart money isn’t just taking profits – they’re repositioning.

Support for blocks looks solid around $1.64-$1.65, but here’s the thing, though – if we crack that level, we could see another 3-5 cent drop pretty quickly. The next meaningful support doesn’t show up until around $1.60, and honestly, that’s getting into territory that would make a lot of producers uncomfortable.

Feed Costs – The Silver Lining Nobody’s Talking About

Now here’s where things get interesting, and it’s probably the most encouraging part of today’s story. While milk prices are getting hammered, feed costs are backing off, too. December corn futures dropped to $4.1150/bu today, and August beans are sitting around $10.16/bu.

The milk-to-feed ratio is compressing a bit – sitting around 4.35 for the milk-to-corn ratio – but it’s not falling off a cliff. What’s fascinating is how this varies by region. I was just talking to a producer in central Wisconsin who’s seeing local corn prices that haven’t dropped as much as futures. But down in Illinois? The basis is much tighter to futures.

For producers who haven’t locked in feed yet, this might be your window. Corn under $4.20 for December delivery… that’s not terrible if you’re planning ahead.

The Probability Game – Let’s Get Real About What’s Coming

Based on what I’m seeing in the order books and hearing from the trade, here’s how I’m handicapping the next few months:

There’s about a 35% chance Class III stays above $17.50 through September. That’s down from what I would have said last week, but today’s action changed the dynamics.

The probability of seeing Class III drop below $17.00? I’m putting that at around 40% now, especially if this cheese weakness persists into next week. The fundamentals just don’t support the higher prices when buyers are this reluctant.

But here’s the interesting part – there’s still a 25% chance we bounce back above $18.00 before Labor Day. Why? Because these selloffs can create their own buying opportunities. If enough processors decide blocks at $1.64 are too cheap to pass up, we could see a quick reversal.

Regional Reality Check – It’s Not Just Wisconsin Anymore

The Upper Midwest obviously feels today’s pain the most, but let’s talk about what’s happening in other regions because this story is bigger than just cheese country.

California – Production is running steady, but their processing plants aren’t showing the same urgency they had earlier this summer. Utilization rates are good but not maxed out. The drought concerns from last year haven’t materialized, so feed costs are more manageable.

Northeast – Fluid milk markets are actually holding up better than expected. Class I differentials aren’t spectacular, but they’re providing some buffer against today’s commodity weakness. The bigger issue is transportation costs, getting the product to export facilities.

Southwest – This is where it gets interesting. Texas and New Mexico production continues growing, but they’re dealing with higher transportation costs to get milk to processing centers. When cheese prices are soft, every penny of logistics cost matters more.

Southeast – Georgia and North Carolina are seeing steady demand from regional cheese plants, but nothing that would offset national price weakness. The heat’s been manageable so far, which is helping maintain production.

What’s Really Driving This Mess – The Fundamental Story

The domestic demand picture is… complicated. Retail cheese sales are steady but not growing much. Food service is recovering, but slowly. The real issue seems to be processing plant inventory management. When buyers aren’t urgent about securing loads, prices soften – it’s that simple.

Export markets are the wild card here. Mexico remains our biggest customer, but they’re price-sensitive. Today’s drops actually help our competitiveness there, which could provide some floor support. Southeast Asia shows promise, but New Zealand and Australia are fierce competitors, especially in powders.

The China situation… look, nobody really knows what’s happening there. Import patterns are unpredictable, trade policies can change overnight, and they’re focused on domestic production anyway. We’re better off concentrating on markets we understand.

Historical Context – Where We’ve Been, Where We’re Going

What’s fascinating about today’s action is how it compares to previous cycles. We’re not in 2022 boom territory anymore, but we’re also not seeing 2020’s collapse. This feels more like 2019 – steady fundamentals with periodic corrections when supply meets lukewarm demand.

Looking at the three-year pattern, Class III has been bouncing between $16 and $19 with occasional spikes. Today’s action suggests we’re settling into the lower end of that range, at least for now. The question is whether this is temporary or the start of something bigger.

Seasonally, cheese demand typically picks up in Q4 with holiday baking and food service prep. But that seasonal lift depends on current production staying manageable. If we keep seeing strong milk output without corresponding demand growth, those seasonal patterns might not hold as strongly.

The Smart Money Moves – What Producers Should Do Right Now

Risk management is everything in this environment. If you’re comfortable with Class III around $17.30, consider hedging 25-30% of your August through October production. The math favors protection over speculation right now.

Immediate actions:

Review your milk pricing contracts – understand exactly how spot market moves affect your check
Consider put options on Class III to establish a floor while keeping upside potential
Lock in feed costs while corn is under $4.20 for December delivery

Medium-term strategy:

Focus on maximizing components (protein and fat) rather than just volume
Conservative cash flow planning – use $17.00-17.50 for Class III in your budgets
Stay flexible on production decisions – market conditions are changing faster than they used to

The Voices From the Trenches

What I’m hearing from around the industry tells a consistent story. Cheese plant managers are less aggressive about securing loads. Traders are watching key technical levels more closely. Producers are getting nervous about forward contracting too much at current levels.

The sentiment has definitely shifted from cautiously optimistic to… well, cautious. Period. Not panicky, but definitely more risk-averse than we were seeing a month ago.

The Bottom Line – Where This Heads Next

Today was a reality check, not a market crash. The fundamentals haven’t changed dramatically – we’re still dealing with adequate milk supplies meeting steady but unspectacular demand. Without a supply shock or demand surge, prices are likely to trade sideways to lower near-term.

The seasonal demand patterns we typically see in Q4 could provide support, but that depends on current production staying manageable and no major demand disruptions.

What I’m watching: processing plant capacity utilization, inventory levels at major cheese manufacturers, and any signs of production adjustments. If plants start scaling back or producers begin culling more aggressively, that could signal we’re finding a bottom.

Here’s the thing, though – the producers who stay flexible and manage risk appropriately are the ones who’ll come out ahead. Market conditions change faster than they used to, and adaptability matters more than ever.

Keep your pencils sharp, your risk management tight, and remember – we’ve seen worse markets than this. The key is focusing on what you can control while letting the market sort itself out.

This analysis reflects market conditions as of July 11th, 2025. Markets move fast, and conditions change – always consult with your risk management advisor before making significant decisions.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Cost Reality Check: How Smart Dairy Operators Can Lock in $200 Per Cow Savings While Markets Stay Predictable – Reveals practical strategies for implementing feed cost contracts and precision nutrition that deliver $200+ annual savings per cow, with specific procurement timing and alternative protein evaluation methods.
Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape – Demonstrates how to capitalize on shifting global production patterns and export opportunities as EU output declines 0.2% while US capacity expands, creating strategic market positioning advantages.
Revolutionizing Dairy Farming: How AI, Robotics, and Blockchain Are Shaping the Future of Agriculture in 2025 – Uncovers cutting-edge technologies delivering measurable ROI through precision herd management, automated health monitoring, and supply chain transparency that reduce operating costs while boosting production efficiency.

Join the Revolution!

Categories : CME Dairy Markets

Tags : cheese market analysis, CME dairy market, dairy profitability, feed cost management, milk price forecast

CME Daily Dairy Report: July 10, 2025 – Butter Soars, But Cheese & Whey Collapse Hits Class III Milk

Thursday, July 10th, 2025

Butter just jumped 2.75¢ while cheese tanked – your component mix could mean $1.20/cwt difference in your milk check this month.

dairy market analysis, component management, CME dairy prices, milk pricing strategy, dairy profitability

EXECUTIVE SUMMARY: Grabbed my coffee this morning and saw something that’ll make you rethink everything about your operation. Component management isn’t just nice-to-have anymore – it’s literally the difference between profit and breaking even in 2025’s market reality. Today’s numbers tell the whole story: butter rocketed up 2.75¢ to $2.59/lb while cheese blocks and barrels both took a beating, and dry whey? Don’t even get me started – down 2.75¢ in one session. With your milk-to-feed ratio sitting at a tight 2.21 (way below that comfortable 2.5-3.0 range), every component point matters more than it has in years. The Class III/IV spread is widening fast, and farms with strong butterfat genetics are literally banking an extra $1.20/cwt compared to their protein-heavy neighbors. Global production’s up 1.6%, new FMMO rules just kicked in last month, and processors are flush with cheese inventory… but here’s the kicker – they’re still bidding hard for butterfat. You need to start thinking like a component manager, not just a milk producer.

KEY TAKEAWAYS:

Lock in that Class IV premium now – With futures above $19.00 and butter strength holding, high-butterfat producers should forward contract 25-30% of Q4 production immediately. That’s potentially $380 extra per cow annually.
Feed efficiency beats total volume – Your 2.21 milk-to-feed ratio means every pound of milk costs $0.45 in feed. Focus genomic selection on butterfat percentage and feed conversion – not just total production. Smart money’s on cows that convert cheaper.
Component testing pays for itself – Install real-time component monitoring if you haven’t already. With the new FMMO pricing formula effective since June, knowing your daily fat/protein split gives you pricing power your co-op neighbors don’t have.
Hedge your protein exposure – Cheese markets are heavy and whey just collapsed. If you’re protein-heavy, grab some Dairy Revenue Protection or Class III puts for August-October milk. Don’t ride this one out naked.

***Today’s price changes for CME dairy products on July 10, 2025, highlighting positive and negative moves***

Look, I’ve been watching these markets for twenty years, and today’s action isn’t just a blip. It’s the new reality where your genetic choices from three years ago determine whether you’re profitable today. Time to act like it.

Today’s trading session delivered a classic tale of two dairy classes, with butter surging 2.75¢ to $2.59/lb while the cheese complex took a beating that’s going to sting your Class III returns. Both cheese blocks and barrels fell, with dry whey getting hammered for a 2.75¢ drop.

Bottom line for your operation: The weakness in cheese and whey is putting direct pressure on your upcoming milk checks. While that butter rally is welcome news for Class IV producers, the heavier weighting of cheese in the Class III formula means today’s slide hurts more than the butter strength helps your overall milk price.

Today’s Price Action: Component Divergence in Full Display

Five-day price trends showing butter strength versus cheese and whey weakness

The market delivered a clear message today – butterfat is king, but protein markets are struggling. This divergence is widening the gap between Class III and Class IV values, making your component mix more important than ever.

Product	Closing Price	Today’s Move	5-Day Change	Real Impact on Your Farm
Cheese Blocks	$1.6850/lb	-1.00¢	-1.56¢ (-0.9%)	Puts downward pressure on Class III price
Cheese Barrels	$1.7100/lb	-1.75¢	+0.38¢ (+0.3%)	Weakness will be felt in the milk check
Butter	$2.5900/lb	+2.75¢	+0.06¢ (+0.02%)	Provides solid support for the Class IV price
NDM Grade A	$1.2650/lb	-0.25¢	+0.62¢ (+0.5%)	Holding relatively steady, exports are key
Dry Whey	$0.5625/lb	-2.75¢	-0.94¢ (-1.6%)	Significant drop adds to Class III weakness

Market Commentary

Today’s story is all about the components. The butter market continues to find buyers, driven by steady domestic demand from retailers and food service as the summer progresses. Processors are bidding actively to keep churns running, and that 2.75¢ jump shows real conviction.

However, the cheese complex is feeling heavy. Strong milk production nationwide means cheese vats are full, and with 21 loads of blocks trading today, sellers were clearly motivated to move product. While barrel cheese is no longer used in the Class III pricing formula under the new FMMO rules, its price remains a key indicator of bulk cheese supply and market sentiment. The significant 2.75¢ drop in dry whey is also a major headwind for the Class III price, suggesting that inventories are ample and buyers can afford to be picky.

This divergence will likely keep the Class III/IV spread wide, favoring farms with higher butterfat production.

Trading Floor Intelligence & Market Mechanics

Bid/Ask Spreads

In the cheese markets, the bid-ask spread was relatively tight, with five bids and no offers for blocks at the close, indicating that sellers were aggressive and found their price. The butter market exhibited a wider spread, with four bids and eight offers, suggesting that some sellers were holding out for higher prices, but buyers weren’t willing to chase them much further after the initial run-up.

Trading Volume

Cheese volume was robust, with 21 loads of blocks and six loads of barrels changing hands. This relatively high volume on a down day gives more weight to the negative price move, suggesting it has some fundamental backing. Butter volume was lighter at six loads, indicating the price move higher may have been on less conviction than the drop in cheese.

Intraday Patterns

Cheese prices were soft throughout the session. The selling wasn’t a last-minute dump but rather a steady drip of offers that overwhelmed the bids. Butter, conversely, saw its strength early in the session and held those gains into the close.

Global Market Competitive Landscape

International Production Watch

EU: Milk production remains tight, with forecasts indicating a slight year-over-year decline due to environmental regulations and squeezed farmer margins. This provides a supportive backdrop for global dairy prices.
New Zealand: Fonterra announced its 2025-26 farmgate milk price forecast at $10.00 per kilogram of milk solids, with a range of $8.00 to $11.00. This strong forecast reflects ongoing robust global demand for dairy products, particularly in Asia-Pacific markets.

Where We Stand Globally

U.S. butter prices are currently competitive; however, our cheese prices are facing pressure from global supply. The U.S. Dollar has been trading in a range against major currencies, but any strengthening makes our exports more expensive for foreign buyers, a potential headwind we’re monitoring closely.

Feed Costs & Your Bottom Line

Feed futures were mixed today, offering little relief to your margins, especially with the pressure on Class III milk.

Corn (Dec ’25): $4.16/bu
Soybean Meal (Dec ’25): $285.30/ton
Premium Alfalfa Hay: ~$300/ton (regional average)

Milk-to-Feed Ratio

Based on today’s July Class III future of $17.39 and current feed prices, the milk-to-feed ratio sits at approximately 2.21. This is a tight number, below the 2.5-3.0 range generally considered necessary to cover all costs and generate a profit. It highlights the importance of managing feed costs and capitalizing on favorable milk prices when they arise.

Production & Supply Reality Check

The latest USDA Milk Production report showed U.S. milk production up 1.6% year-over-year in May 2025, reaching 19.93 billion pounds. The national dairy herd grew to 9.455 million head, up 114,000 from May 2024. This steady, albeit modest, growth in supply is enough to keep cheese vats and processing plants well-supplied, preventing any major supply-driven price spikes for now.

Production per cow averaged 2,110 pounds in May, up 7 pounds from the previous year. Favorable weather in key dairy regions has supported this production trend, but it’s also contributing to the pressure we’re seeing in the cheese markets.

What’s Really Driving These Prices

Domestic Demand

Retail butter demand is seasonally solid. Food service is stable. However, cheese inventories at the processing level appear more than adequate, leading to the softer prices we saw today.

Export Markets

Mexico remains our most critical export partner, although recent reports indicate some volatility in shipment volumes.
Southeast Asia: A key battleground for NDM and whey against New Zealand and the EU. Demand growth is present, but these markets remain price-sensitive.
China: Continued weakness in Chinese demand for powders and whey has been a major bearish factor. Today’s weakness in whey directly reflects this global reality.

Forward-Looking Analysis

USDA Projections

USDA’s June 2025 World Agricultural Supply and Demand Estimates raised dairy product price forecasts: cheese to $1.86/lb (up 2¢), butter to $2.535/lb (up 7.5¢), and dry whey to 56.5¢/lb (up 3¢). The 2025 all-milk price forecast was increased based on recent price strength.

Futures Market Guidance

Class III (Jul): Settled at $17.39/cwt. The market is pricing in the weakness from the spot cheese and whey markets.
Class IV (Jul): Settled at $19.01/cwt. The futures market clearly reflects the strength in butter and shows a significant premium over Class III.

Hedging Opportunities

The current spread between Class III and IV offers a clear signal. If your milk is heavily weighted to protein, consider strategies to protect your floor price. If you have high butterfat, the Class IV futures offer an attractive level to lock in prices.

Regional Spotlight: Upper Midwest

In Wisconsin and Minnesota, milk production is in its seasonal stride. The region continues to be a major contributor to the 1.6% national production increase, with favorable weather leading to good forage quality and strong milk flows. This ample supply is a key reason for the pressure on the spot cheese market, as a significant portion of the region’s milk is directly converted into cheese.

The local basis remains relatively stable, but a drop in the CME spot price will be felt in producer checks if it persists.

What Farmers Should Do Now

Review Your Hedges

With Class III weakening, now is the time to ensure you have downside protection. Look at Dairy Revenue Protection (DRP) or put options on Class III futures to establish a price floor for your third and fourth-quarter milk.

Talk to Your Nutritionist

The wide Class IV-III spread means butterfat is king. Work with your nutritionist to see if there are cost-effective ways to optimize butterfat components in your herd.

Price Your Class IV Milk

If you haven’t priced any of your second-half Class IV milk, the futures market is offering attractive levels above $19.00. Consider layering in some forward contracts to lock in these strong prices for a portion of your production.

Industry Intelligence

Processing Plant Expansion

Lactalis USA recently announced a $75 million investment in its New York facilities, including $60 million for the Buffalo plant to increase ricotta and mozzarella production by 37 million pounds annually, and $15 million for the Walton facility to boost cottage cheese and sour cream output by 30%. These facilities process milk from 236 area farms, demonstrating continued processor confidence in demand growth.

Regulatory Update

The Federal Milk Marketing Order reforms became effective June 1, 2025. Key changes include elimination of barrel cheese from pricing formulas (using only block cheese), increased make allowances, and revised Class I pricing mechanisms. These changes will impact how your milk is priced starting with June milk marketings.

Put Today in Context

Today’s drop in cheese prices broke the market out of its recent sideways channel. While the 5-day trend shows mixed results, the move today was significant because of the high volume, suggesting a potential shift in sentiment.

The divergence between butter and cheese has been a recurring theme this year, but it was particularly pronounced today. This isn’t just market noise – it’s a fundamental statement about the current supply and demand for different dairy components.

The message is clear: Component management is more critical than ever. Know your milk’s fat and protein percentages, understand how they translate to Class III versus Class IV pricing, and manage your risk accordingly. With milk production continuing to grow at a rate of 1.6% annually and new processing capacity coming online, staying ahead of market signals will be crucial for maintaining profitability.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

11 Proven Strategies to Lower Feed Costs and Boost Efficiency on Your Dairy – Practical strategies for implementing the feed efficiency improvements highlighted in today’s tight 2.21 milk-to-feed ratio, with actionable steps to reduce costs by 10-20% and boost profitability immediately.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Strategic context for today’s component divergence trends, revealing how USDA’s revised forecasts align with current Class III/IV spreads and what this means for your long-term positioning.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Demonstrates how cutting-edge monitoring technologies can optimize the component management strategies essential for capturing today’s butterfat premiums and maximizing returns in volatile markets.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy prices, component management, dairy market analysis, milk pricing strategy

CME Daily Dairy Market Report: July 9, 2025 – Butter Tumbles 5.5¢ – But Feed Cost Relief Softens the Blow

Wednesday, July 9th, 2025

Butter tanked 5.5¢ yesterday but smart farmers made $1,250/month on feed costs – here’s how to capitalize

EXECUTIVE SUMMARY: Look, I get it… seeing butter drop 5.5¢ in one day makes your stomach turn. But here’s what everyone’s missing: the real money yesterday wasn’t in milk prices – it was in the feed markets. Soybean meal crashed $11.50/ton while corn dropped 9¢, and if you’re running 200 cows, that translates to over $1,250 per month in feed savings if you lock it in now. Meanwhile, the Europeans are paying $8,485/MT for butter while we’re sitting pretty at $5,644/MT – that’s a $2,800+ export advantage that’s going to matter when global demand picks up this fall. The USDA’s projecting Class III futures above $18.00 for Q4, but the savvy producers aren’t waiting around… they’re hedging their bets and locking in these feed bargains while everyone else is freaking out about one day’s butter price. You should be doing the same thing.

KEY TAKEAWAYS

Feed Cost Arbitrage Opportunity: Soybean meal’s 85th percentile pricing just collapsed – lock in 60-90 days of protein needs immediately and pocket $15-20/ton savings. For a typical 200-cow operation, that’s real money: $1,250/month straight to your bottom line during winter feeding.
Component Premium Play: Class IV’s trading at a $1.71 premium over Class III right now, making every tenth of butterfat worth serious cash. Dial up your heat abatement game because summer stress is about to cost you big – each lost tenth of butterfat is leaving $1.00+ per cwt on the table.
Export Window Opening: U.S. butter’s $2,840/MT cheaper than European product thanks to yesterday’s drop, creating the best export arbitrage we’ve seen all summer. This price advantage historically drives domestic support within 30-45 days – perfect timing for your fall milk checks.
Risk Management Sweet Spot: Q4 Class III futures still holding above $18.00 despite cash market noise – use Dairy Revenue Protection or futures to lock floors on 25-30% of fall production. With USDA forecasting only 0.5% milk production growth, supply constraints are going to matter more than one day’s volatility.

dairy market analysis, dairy profitability, milk price trends, feed cost management, dairy risk management

Today’s market delivered a mixed message straight to your farm’s bottom line. Butter’s sharp 5.5¢ drop will pressure your upcoming Class IV milk check, but don’t overlook the silver lining – significant drops in soybean meal futures provided some of the best margin relief we’ve seen all month. Class III markets are treading water, with a small gain in cheese offset by weakness in whey, leaving farmers in a holding pattern that highlights why managing both milk price and input costs is critical.

Today’s Price Action (Make It Real for Farmers)

Product	Price	Today’s Move	Month Trend	Real Impact on Your Farm
Cheese Blocks	$1.6950/lb	+0.25¢	+0.6%	Slightly supports Class III, but very low volume raises questions
Cheese Barrels	$1.7275/lb	NC	+1.0%	The market is taking a breather, waiting for a clearer signal
Butter	$2.5625/lb	-5.50¢	-2.2%	Directly pressures your Class IV milk check; significant single-day drop
NDM	$1.2675/lb	NC	+0.6%	Powder markets holding firm for now, supporting the Class IV floor
Dry Whey	$0.5900/lb	-1.50¢	-1.2%	This weakness is a direct drag on the Class III price calculation

Market Commentary

The story of the day was butter’s sharp sell-off. After holding strong above $2.60, the market broke decisively lower on decent volume. This suggests summer demand may be softening, or buyers feel well-supplied for the near term. This will weigh heavily on the July Class IV price.

On the Class III side, the picture’s murky. A fractional gain in block cheese wasn’t enough to inspire confidence, especially with only one trade reported. More concerning is the 1.50¢ drop in dry whey, which acts as an anchor on Class III pricing. The fact that July Class III futures managed to close up $0.10 to $17.34 suggests traders see this as temporary weakness, but the cash market’s telling a different story for now.

Trading Floor Intelligence & Market Mechanics

Bid/Ask Spreads & Volume Analysis

Butter: Sellers were motivated. Even after 6 trades, there were still 4 unfilled offers versus 5 bids, but the price drop indicates sellers were hitting bids aggressively
Cheese Blocks: Only one load traded, meaning that price gain has very little conviction behind it
Barrels & NDM: Zero trades in barrels and the 3-to-1 offer-to-bid ratio in NDM suggest a general lack of buying enthusiasm

Order Book Analysis

Butter sliced right through the psychological support level of $2.60/lb. The next key level to watch will be around $2.55. For cheese, resistance remains firm near $1.70 on the blocks.

Intraday Patterns

The butter market saw a wave of late-day selling, which accelerated the drop into the close. This often suggests sellers who were holding out for a bounce finally capitulated, which could lead to follow-through selling in the next session.

Global Market Competitive Landscape

International Production Watch

EU: Milk production is past its seasonal spring flush peak and now on a downward trend, which should tighten global supplies, particularly for cheese and butter
New Zealand: Production remains at seasonal lows during their winter months. Recent data shows New Zealand milk powder exports decreased 17% year-over-year through May 2025, while butter exports increased 28%
Australia: Production constraints continue with milk production down 0.4% from July 2024 through April 2025. Australian milk export volumes totaled 136,089 metric tons, down 11.3% from the previous year

Where We Stand Globally

Today’s butter price drop to ~$2.56/lb ($5,644/MT) makes U.S. butter more competitive against European offers. Meanwhile, European butter prices rose to 7,235 EUR/T on July 9, which translates to approximately $8,485/MT at today’s exchange rate of 1.1725 USD/EUR, maintaining a significant premium over U.S. offers and creating a favorable export window for American producers.

U.S. NDM at $1.2675/lb ($2,794/MT) remains competitive in key markets, with U.S. dairy exports starting 2025 with a 0.4% volume increase and 20% value increase to $714 million in January—a monthly record.

Feed Costs & Your Bottom Line

The best news for your operation today came from the feed markets:

Corn (Dec ’25): $4.16/bu (down 9¢)
Soybean Meal (Dec ’25): $282.90/ton (down $11.50 from Monday)

Milk-to-Feed Price Ratio Improvement

While milk prices were stagnant to lower, the significant drop in soybean meal costs provides critical margin relief. Current soybean meal prices are trading in the 85th percentile of their 10-year range, meaning this drop brings feed costs back toward more normal levels. This drop in protein cost directly boosts your income over feed costs (IOFC), giving you some much-needed breathing room.

Production & Supply Reality Check

The latest USDA data shows milk production trends entering summer with cautious optimism. June 2025 milk production data reflects continued modest growth, with the USDA maintaining its forecast of 227.3 billion pounds for 2025, up 0.4 billion pounds from previous projections. Current production is entering the summer doldrums, with heat and humidity across the Midwest and Southwest beginning to impact cow comfort and component levels.

U.S. cow numbers have shown resilience, with the March 2025 all-milk price averaging $22.00 per cwt, up $1.30 year-over-year. Strong margins in early 2025 – with the Dairy Margin Coverage (DMC) farm margin reaching $11.55 per cwt in March, $1.90 higher than March 2024 – have supported herd stability and modest expansion in key producing states.

The current weather pattern is the most significant factor for supply, as it will dictate both milk volume and the quality of homegrown forages for the rest of the summer.

What’s Really Driving These Prices

Domestic Demand

Food Service: Cheese demand remains a bright spot, driven by summer travel and dining out
Retail: Butter sales appear to have hit a summer lull after the spring baking season, contributing to today’s price drop

Export Markets – The Complete Story

Mexico Deep Dive

Our number one customer continues to be a steady buyer of U.S. cheese and NDM. U.S. cheese exports to Mexico grew just 1% in January 2025, but the stability of this relationship remains crucial for price support.

Southeast Asia & Global Expansion

The real export story is diversification. January 2025 cheese exports jumped 22% to 46,680 MT—a January record—with growth coming from Japan, Bahrain, Panama, and other diverse destinations. This broad market diversity reduces our dependence on any single buyer and supports stronger pricing power.

Risk Scenario Analysis

Bull Case: If current export diversification continues and EU/New Zealand production constraints persist, U.S. dairy could see Class III prices reach $19.00+ by Q4 2025.

Bear Case: A significant U.S. dollar rally or Mexican economic disruption could push Class III below $16.00, making risk management critical.

Base Case: Current USDA forecasts project Class III averaging $17.50-18.50 and Class IV at $18.75-19.75 through 2025.

Forward-Looking Analysis with Official Forecasts

USDA Projections Integration

The USDA’s latest forecasts show a more nuanced picture than previous projections. The revised 2025 milk production forecast of 227.3 billion pounds reflects both modest herd expansion and improved productivity. While milk production growth of 0.5-0.8% appears modest, regional variations are significant. The forecast indicates tighter supplies could support prices, but international competition remains a key variable.

Futures Market Guidance

Class III Futures: August settled at $17.65 and September at $17.90, indicating the market expects prices to climb into the fall
Class IV Futures: August settled at $19.08, showing that despite today’s cash drop, traders aren’t panicking and still expect powder to support the price

Current futures indicate a $1.71 premium for Class IV over Class III, making high-component production strategies particularly attractive.

Regional Market Spotlight: The Upper Midwest (WI, MN)

For producers in Wisconsin and Minnesota, the block and whey prices are paramount. Today’s fractional gain in blocks is welcome but offers little comfort when offset by the steep drop in whey values.

Regional production data shows Wisconsin and Minnesota maintaining steady output, with processing plants reporting 95%+ capacity utilization to meet summer demand. Excellent growing conditions have local feed supplies in good shape, but heat and humidity are starting to be a concern for production. Local cooperatives are encouraging members to forward contract 25-30% of fall production, taking advantage of strong deferred futures prices.

What Farmers Should Do Now

Feed Purchasing – Act Now

This is a clear opportunity. The significant drop in soybean meal futures is a strong signal to contact your nutritionist and feed supplier to lock in a portion of your fall and winter protein needs. With meal prices dropping from elevated levels, this represents potential savings of $15-20 per ton compared to recent months. For a 200-cow herd consuming approximately 2.5 tons of soybean meal per month, locking in these lower prices could translate to $1,250 in feed cost savings per month this winter – money that goes straight to your bottom line.

Hedging Strategy

With Class III futures for Q4 2025 still holding above $18.00, consider using Dairy Revenue Protection (DRP) or layering in some futures/options positions to protect a floor on a portion of your fall production. The $1.71 Class IV premium makes component-focused strategies particularly attractive.

Production Focus

With heat setting in, double down on heat abatement. Every tenth of a pound of butterfat you can save will be critical, especially with a weaker butter price. The current Class IV premium means butterfat optimization could add $1.00+ per cwt to your milk check.

Industry Intelligence

Regulatory Update

Keep an eye on the ongoing Federal Milk Marketing Order pricing formula discussions. Any changes to component values or make-allowances could have long-term impacts far greater than any single day’s trading.

Cooperative Note

Several Midwest cooperatives have announced their component values for June milk, reflecting the stronger cheese prices from last month, which should result in a welcome bump on the checks now arriving.

Export Infrastructure

The record January export performance demonstrates the value of continued investment in export infrastructure and market development. The 22% increase in cheese exports shows the benefits of market diversification strategies.

Put Today in Context

Today’s 5.50¢ drop in butter was the largest single-day loss in over a month and pulled the weekly average down. This move is a departure from the steady-to-firm trend we’ve seen since May, representing a price level that’s still 8.4% higher than a year ago but down 2.96% from recent peaks.

Conversely, the cheese market continues its slow, sideways grind. Compared to last year, current Class III values are lagging, but lower feed costs are keeping 2025 margins ahead of where they were in the summer of 2024. The milk production forecast showing only modest growth suggests supply constraints could support prices into the fall.

Today wasn’t a seismic shift, but it was a clear warning shot on the Class IV side and a gift on the feed side. The key takeaway is that successful dairy operations in 2025 will need to actively manage both sides of the margin equation—milk pricing and feed costs—rather than relying on either factor alone.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Cost Reality Check: How Smart Dairy Operators Can Lock in $200 Per Cow Savings While Markets Stay Predictable – Reveals practical strategies for implementing feed cost contracts and timing purchases to maximize the $1,250 monthly savings mentioned in today’s report, with specific action steps for different herd sizes.
US Dairy Market in 2025: Butterfat Boom & Price Volatility – Demonstrates how to capitalize on the $1.71 Class IV premium discussed today by implementing strategic breeding decisions and component optimization techniques that could add $1.00+ per cwt to your milk check.
Revolutionary Feed Strategy Transforms Dairy Economics: High Oleic Soybeans Deliver 30% Higher Butterfat Yields While Slashing Feed Costs – Uncovers innovative feeding approaches that boost butterfat production by 30% while cutting feed costs $1.00 per cow daily, perfectly complementing today’s focus on maximizing component premiums during market volatility.

Join the Revolution!

Categories : CME Dairy Markets

Tags : dairy market analysis, dairy profitability, dairy risk management, feed cost management, milk price trends

CME Dairy Market Report: July 8, 2025 – Cheese Rally Delivers Mixed Signals – Your August Milk Checks Could See Modest Boost

Tuesday, July 8th, 2025

Class IV’s $1.75 premium over Class III challenges milk pricing orthodoxy – component optimization could boost margins 15-20% vs traditional volume focus

Executive Summary: Stop chasing Class III premiums when Class IV’s sustained $1.75 advantage is rewriting dairy profitability fundamentals. While farmers obsess over cheese market volatility, today’s CME data reveals the Class IV premium has persisted for months, with July futures at $18.99/cwt versus Class III’s $17.24/cwt. Feed cost relief dropped corn 5¢ and soybean meal $2.00/ton, improving milk-to-feed ratios from 2.85 to 2.95 – yet most operations aren’t capitalizing on component strategies that could capture this margin expansion. Mexico’s 8.5% surge in cheese imports and 12% NDM growth demonstrates export demand strength that’s supporting this structural shift, while food service recovery hits 95% of pre-2020 levels for the first time. Processing capacity at 85% utilization signals optimal conditions for premium component production. It’s time to audit your component focus versus volume obsession – the math has fundamentally changed.

Key Takeaways

Component Strategy Rebalancing: Shift nutritional programs toward butterfat and protein optimization to capture the persistent $1.75 Class IV premium – operations implementing targeted component strategies are seeing $15-20 additional daily margin per 100 cows compared to volume-focused herds.
Proactive Feed Cost Management: Today’s corn drop to $3.9875/bu and soybean meal decline to $284.40/ton creates a narrow window for forward contracting – locking December corn at $4.15/bu could save $0.25-0.40/cwt on feed costs versus reactive purchasing strategies most farms still employ.
Export Market Positioning: Mexico’s 75% share of U.S. cheese exports and Southeast Asia’s 25% NDM import growth signals structural demand shifts – operations with flexible marketing should prioritize Class IV-heavy strategies to capture export premiums averaging $0.50-0.85/cwt above domestic pricing.
Processing Partnership Optimization: With processing capacity at 85% utilization and plants running 95%+ schedules, negotiate component-based contracts now – forward contracting 20-25% of fall production at current futures levels could lock in $17.50-18.50 Class III and $19.00-19.50 Class IV pricing.
Risk Management Revolution: The 2.95 milk-to-feed ratio improvement creates margin protection opportunities – implement Dairy Revenue Protection (DRP) coverage for Q4 2025 while premiums remain favorable, potentially securing $1.50-2.00/cwt downside protection versus unhedged operations.

dairy market analysis, milk pricing strategies, dairy profitability, component optimization, Class IV premium

Cheese prices jumped today while butter slipped, creating a tale of two markets that’ll impact your milk checks differently depending on your cooperative’s pricing formula. The 1.75¢ surge in cheese barrels signals strong food service demand heading into peak summer season, while butter’s quarter-cent dip suggests retail buyers are taking a breather. With feed costs dropping significantly today, your margins just got a bit more breathing room – but don’t expect miracles yet.

Today’s Price Action & Real Farm Impact

Product	Price	Today’s Move	Month Trend	Real Impact on Your Farm
Cheese Blocks	$1.6925/lb	+0.75¢	-2.5%	Positive: Block strength directly lifts Class III – expect modest August milk check improvement
Cheese Barrels	$1.7275/lb	+1.75¢	-1.8%	Strong Positive: The Biggest move of the day signals food service demand recovery
Butter	$2.6175/lb	-0.25¢	+3.2%	Slight Negative: Minor dip but still up 3.2% monthly – Class IV holding steady
NDM Grade A	$1.2675/lb	+0.50¢	+1.4%	Positive: Export demand stays solid, supports Class IV foundation
Dry Whey	$0.6050/lb	-0.25¢	-0.6%	Neutral: Minimal impact on overall milk pricing

Market Commentary

Today’s cheese strength wasn’t just random – nine actual trades on blocks show real buyers stepping up, not just paper shuffling. That 1.75¢ jump in barrels is particularly telling because it signals food service operations are restocking for summer demand. When restaurants and food processors start buying aggressively, it usually means they’re confident about demand.

Butter’s small dip doesn’t worry us much – no trades occurred, meaning it’s more about a lack of buying interest than active selling pressure. At $2.6175/lb, butter’s still sitting pretty after a strong monthly run.

The NDM strength at $1.2675/lb continues to be your steady Eddie – export demand from Mexico and beyond keeps this market supported, which directly benefits your Class IV-heavy milk checks.

Trading Floor Intelligence & Market Mechanics

Today’s Trading Activity

Cheese Blocks: 9 trades with three bids, one offer – Strong buyer interest
Cheese Barrels: 1 trade with three bids, two offers – Tight supply meeting demand
Butter: 0 trades, two bids, three offers – Sellers outnumber buyers
NDM: 1 trade, one bid, zero offers – Clean market with no overhead supply

What This Means for Price Direction

The bid-to-offer ratios tell the story: cheese has more buyers than sellers, while butter has more sellers than buyers. This dynamic typically continues for 2-3 days before reversing, giving you a short-term roadmap for where prices might head.

Support and Resistance Levels:

Cheese blocks: Strong support at $1.65, resistance at $1.75
Cheese barrels: Support at $1.70, next resistance at $1.80
Butter: Support at $2.55, resistance at $2.70

Feed Costs & Your Bottom Line

Here’s the good news buried in today’s numbers – feed costs dropped significantly:

Current Feed Costs

Corn (September): $3.9875/bu (-5¢ today)
Corn (December): $4.15/bu (-6¢ today)
Soybean Meal (December): $284.40/ton (-$2.00 today)

Milk-to-Feed Ratio Improvement

Using today’s Class III equivalent of around $17.20/cwt and current feed costs, your milk-to-feed ratio improved from 2.85 to 2.95 – not huge, but heading in the right direction. For every 100 cows, that’s roughly $15-20 more daily margin if these levels hold.

Regional Feed Cost Reality

Wisconsin/Minnesota: Corn basis remains tight, but the new crop looks promising
California: Higher transportation costs offset some of today’s futures gains
Texas: Drought conditions keep hay prices elevated despite grain relief

Production & Supply Reality Check

Current Production Trends

Milk production is following its typical seasonal decline after the spring flush, down roughly 1.5% from peak April levels. Cow numbers remain steady at 9.4 million head nationally, but per-cow production is moderating as heat stress begins impacting performance.

Weather Impact Assessment

Midwest: Favorable conditions support both milk production and crop development
Southwest: Persistent drought affecting 15% of the dairy herd, forcing higher feed costs
Northeast: Adequate moisture supports pasture conditions

Herd Dynamics

Culling rates remain at seasonal norms around 35% annually. Heifer prices holding firm at $1,400-$ 1,600 signals that producers aren’t rushing to expand herds – they’re focused on optimizing existing operations.

What’s Really Driving These Prices

Domestic Demand Breakdown

Retail cheese sales continue outperforming expectations, up 3.2% year-over-year through June. The food service recovery is the big story – restaurant cheese usage is approaching pre-2020 levels for the first time.

Butter demand has softened following the holiday season, but remains historically strong. Retail buyers are well-stocked heading into summer’s typically slower period.

Export Market Deep Dive

Mexico remains the top market for U.S. cheese exports, accounting for 75% of U.S. cheese exports and showing no signs of slowing. Recent trade data shows:

Cheese exports to Mexico: +8.5% year-over-year
NDM shipments: +12% year-over-year
Zero tariff disruptions anticipated

Southeast Asia is emerging as the growth market for NDM, with the Philippines and Thailand expected to increase purchases by 25% this year.

China’s situation remains challenging – they’re buying from the EU and Oceania first, leaving the U.S. as a swing supplier.

Supply Chain Status

Processing capacity is running at 85% utilization, which is healthy but not at maximum. No significant transportation bottlenecks have been reported, although diesel costs remain elevated at $3.85 per gallon nationally.

Forward-Looking Analysis & Official Forecasts

Futures Market Guidance

July Class III: $17.24/cwt (down 4¢ today)
July Class IV: $18.99/cwt (unchanged)
August Class III: $17.45/cwt
August Class IV: $19.25/cwt

The $1.75 premium of Class IV over Class III continues to favor high-component operations. This spread typically narrows by September as cheese demand seasonally strengthens.

USDA Projections Integration

Latest USDA forecasts project:

2025 milk production: +0.8% growth
Class III average: $17.50-18.50/cwt
Class IV average: $18.75-19.75/cwt
Export growth: +6% for cheese, +3% for NDM

Risk Factors to Watch

Summer weather – drought expansion could spike feed costs
Trade policy – any disruption in the Mexico relationship disruption would be devastating
Labor availability – processing plants struggling with staffing

Market Positioning Data

The Commitment of Traders report shows that large speculators are holding near-neutral positions in Class III futures, suggesting limited upside pressure from financial buyers. Options activity indicates farmers are actively buying $19 Class IV calls for fall coverage.

Regional Market Spotlight: Upper Midwest

Wisconsin and Minnesota producers are entering the sweet spot of summer dairying – cows are comfortable, pastures are good, and local cheese plants are running strong schedules.

Processing plant activity is particularly robust, with several major facilities reporting 95%+ capacity utilization to meet summer demand. This regional strength is reflected in basis levels, which remain 15-20¢ over futures.

Local milk marketing cooperatives are encouraging members to forward contract 25-30% of fall production, taking advantage of the strong deferred futures prices for late 2025.

What Farmers Should Do Now

Immediate Actions

Review your Class III vs Class IV exposure – if you’re heavy Class III, consider component strategies
Lock in December corn at $4.15/bu – downside protection worth the premium
Forward contract 20-25% of September-October milk futures are offering good opportunities

Risk Management Priorities

Dairy Revenue Protection (DRP): Consider coverage for Q4 2025 at current premium levels
Feed hedging: December corn and soybean meal positions make sense
Component optimization: Work with your nutritionist on fat/protein strategies

Cash Flow Planning

August milk checks are expected to see a modest improvement from today’s cheese strength. Class IV-heavy checks remain your most reliable source of income. Plan for $17.50-18.00 Class III and $19.00-19.50 Class IV through fall.

Industry Intelligence

Regulatory Updates

Federal Milk Marketing Order reform discussions continue, with a focus on making allowances and component pricing. Industry consensus suggests any changes won’t take effect until 2026 at the earliest.

Processing Plant Activity

Saputo announced the expansion of its Wisconsin cheese capacity
Dairy Farmers of America reported strong Q2 processing margins
Schreiber Foods is increasing food service production schedules

Cooperative Announcements

Associated Milk Producers raised member base prices 15¢/cwt for August deliveries, citing strong demand fundamentals.

Today in Context

Today’s cheese rally helps offset the weakness seen in July, but we’re still tracking below the levels reached in late June. The weekly block average of $1.6888 remains below last week’s $1.7006, showing the market is still working through resistance.

Butter’s performance remains the standout story of 2025, with prices up over 15% year-to-date, despite today’s minor dip.

Seasonal comparison: Current prices are running 8-12% above July 2024 levels, with much stronger export demand fundamentals supporting the market.

The mixed signals from today’s trading suggest the market is in a consolidation phase, working through inventory adjustments before the next significant move. For farmers, this means steady milk checks with modest upside potential rather than dramatic swings.

Bottom line: Today’s moves are net positive for your operation, especially with feed costs dropping. The cheese strength signals improving demand, while stable butter and NDM provide a solid foundation for Class IV pricing. Use this stability to make forward pricing decisions and manage your risk exposure for the second half of 2025.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

April 2025 Production Data Exposes the Strategic Milk Allocation Revolution Reshaping Global Dairy – Reveals practical strategies for implementing component optimization that delivers $120-180 more per cow annually, with actionable roadmaps for transitioning from volume-focused to component-reward systems.
Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape – Demonstrates how to capitalize on global production shifts and EU supply constraints to strengthen your competitive positioning in export markets and domestic pricing strategies.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Explores cutting-edge innovations like smart calf sensors reducing mortality 40% and robotic milkers boosting yields 20%, showing how tech adoption creates measurable ROI within 7 months.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class IV premium, component optimization, dairy market analysis, dairy profitability, milk pricing strategies

Daily CME Dairy Market Report July 7th, 2025: Butter Rally Drives Class IV Premium to $1.71/cwt Over Class III – Component-Rich Milk Commands Premium

Monday, July 7th, 2025

Stop chasing milk volume—butterfat surge creates $1.71/cwt Class IV premium. Component optimization beats bulk production for 2025 profitability.

Executive Summary: The era of “just fill the tank” dairy farming is officially dead—July 7th’s market action proves that butterfat and protein command completely different price signals, with Class IV premiums hitting $1.71/cwt over Class III. While most producers still think in terms of bulk milk pricing, the winners are already pivoting to component optimization, with butterfat production surging 5.3% year-over-year despite only 0.5% volume growth. The national average butterfat test has jumped to 4.36% and protein to 3.38%, creating a new reality where your genetic selection and nutrition programs directly determine your milk check competitiveness. U.S. butter exports are crushing global competitors with a 41% volume increase, while cheese markets struggle with foodservice demand weakness, proving that not all milk components are created equal. With over $8 billion in new processing infrastructure specifically designed for high-component milk, the question isn’t whether to optimize for solids—it’s how fast you can implement the genetic and nutritional strategies that’ll keep you profitable. Stop managing your operation like it’s 2020 and start treating butterfat and protein as separate profit centers.

Key Takeaways

Genetic Selection ROI Explosion: Prioritize bulls with +50 lbs fat and +40 lbs protein EBVs immediately—the current $1.71/cwt Class IV premium means every 0.1% butterfat increase translates to approximately $0.35/cwt additional revenue on 80% of your milk production.
Component-Focused Nutrition Pays: High-oleic soybean feeding strategies and precision nutrition targeting 3.8%+ butterfat can capture the butter export boom driving 41% volume increases, while traditional volume-focused rations miss this $2.62/lb opportunity.
Bifurcated Risk Management Strategy: Abandon “one-size-fits-all” milk pricing hedges—Class IV strength demands call options while Class III weakness requires put protection, with the persistent spread expected through Q4 2025 creating distinct risk profiles.
Processing Infrastructure Alignment: The $8 billion processing boom specifically targets high-component operations—farms producing 4.4%+ butterfat and 3.4%+ protein will command premium contracts while volume-focused operations face margin compression.
FMMO Reform Impact: The June 1st regulatory changes removed barrel pricing from Class III calculations and increased cheese make allowances to $0.2519/lb, structurally disadvantaging traditional cheese-focused operations while rewarding component-optimized producers.

dairy profitability, component optimization, milk pricing strategies, dairy market analysis, butterfat production

Today’s trading session crystallized the market’s new reality: butterfat pays, protein struggles. A decisive 1.50¢ butter rally to $2.6200/lb powered the Class IV future to $18.99/cwt, while cheese barrel weakness dropped 1.00¢ to $1.7100/lb, pressuring the July Class III contract to just $17.28/cwt. This $1.71/cwt spread between Class IV and Class III represents the widest premium in years and signals that producers with high-component milk will significantly outperform their counterparts in the coming months.

Today’s Price Action & Farm Impact

Product	Price	Daily Change	Weekly Trend	Trading Activity	Impact on Farmers
Butter	$2.6200/lb	+1.50¢	+0.92%	1 trade, three bids, one offer	Strengthens Class IV; supports higher butterfat premiums
Cheese Blocks	$1.6850/lb	No Change	-0.91%	5 trades, two bids, zero offers	Neutral today, but a negative trend weighs on Class III
Cheese Barrels	$1.7100/lb	-1.00¢	-0.29%	1 trade, five bids, one offer	Pressures Class III; signals softer processor demand
NDM Grade A	$1.2625/lb	+0.25¢	+0.25%	1 trade, one bid, one offer	Supports Class IV floor; export interest remains key
Dry Whey	$0.6075/lb	No Change	+1.15%	0 trades, zero bids, one offer	Provides minor Class III support, insufficient to offset cheese

Market Commentary

The market delivered a clear message today: component quality drives profitability. Butter’s 1.50¢ rally on light trading volume demonstrates underlying strength in butterfat demand. The trading dynamics reveal critical insights—blocks showed zero offers against two bids, while barrels had five bids competing for a limited supply, indicating tight nearby availability despite the price decline.

Key Takeaway: Producers should expect their July milk checks (received in August) to reflect this divergence, with the Class IV portion significantly outperforming Class III components.

Enhanced Trading Activity Analysis

Market Depth Indicators

Product	Bid/Ask Ratio	Weekly Volume	Market Sentiment
Butter	3:1	Light (1 trade)	Bullish – Strong bid support
Cheese Blocks	2:0	Active (5 trades)	Neutral – No selling pressure
Cheese Barrels	5:1	Limited (1 trade)	Mixed – High interest, weak pricing
NDM Grade A	1:1	Minimal (1 trade)	Balanced – Adequate supply/demand
Dry Whey	0:1	No activity	Weak – Limited buyer interest

The absence of offers in cheese blocks signals either supply tightness or seller reluctance at current levels. Conversely, the heavy bid interest in barrels (five bids) despite the price decline suggests that processors are actively seeking nearby supplies.

Feed Cost & Margin Analysis

Metric	Current Value	Trend & Implication
Corn (SEP)	$4.0375/bu	Stable; USDA projects potential further declines
Soybean Meal (AUG)	$272.60/ton	Below recent highs, supporting favorable ration costs
Milk-to-Feed Ratio	2.47	Strongly positive; well above the 2.0 stress threshold
IOFC (Est.)	$12.72/cow/day	Indicates robust per-cow profitability at current levels

Margin Outlook with Enhanced Risk Analysis

The milk-to-feed ratio of 2.47 represents a significant improvement from earlier in 2025. However, USDA forecasts suggest potential volatility ahead. The agency raised its 2025 milk production forecast to 227.8 billion pounds, up 500 million pounds from previous estimates, which could put pressure on prices if demand doesn’t keep pace .

Risk Scenarios:

Downside: A 10% feed cost increase could reduce IOFC by $2.50/cow/day
Upside: Continued low corn prices could add $1.00+/cow/day to margins
Weather Risk: Crop disruptions could spike feed costs 15-20% within 60 days

Production & Supply Insights with Regional Analysis

National Production Trends

The USDA’s latest forecasts indicate that milk production is expected to grow modestly by 0.5% in 2025; however, this masks significant regional variations and improvements in component production. The agency projects 2026 production will increase by 600 million pounds to 227.9 billion pounds, driven by expanding herds and higher milk per cow.

Regional Competitive Analysis

Region	Production Trend	Feed Cost Advantage	Processing Capacity	Competitive Position
Upper Midwest	Stable growth	20% below Western states	Expanding cheese facilities	Strong – low costs, high processing
California	Modest expansion	Higher feed costs	Diversified processing	Moderate – volume leader but cost pressure
Northeast	Declining slightly	Moderate	Fluid milk focused	Challenged – high costs, limited growth
Southeast	Rapid growth	Variable	New investments	Emerging – growth potential

The Upper Midwest continues to leverage its structural feed cost advantage, with Wisconsin and Minnesota accounting for 32.4% of U.S. cheese production.

Market Fundamentals Driving Prices

Export Markets: Record Performance Continues

U.S. dairy exports are demonstrating exceptional strength, providing crucial support for domestic pricing. May 2025 exports reached $794.8 million, a 13% increase from May 2024, with exports from January to May totaling a record $3.83 billion.

Cheese Export Surge: May cheese exports reached 113.4 million pounds, setting a new monthly record and continuing the record-breaking performance that began in July 2024.

Key Export Destinations (January-May 2025):

Mexico: $1.04 billion (+10%)
Canada: $571.4 million (+21%)
Japan: $252.9 million (+39%)
China: $214.3 million (-5%)
South Korea: $209.2 million (+20%)

Domestic Demand Patterns

Retail Strength: Grocery store consumers continue choosing dairy, with sustained demand for natural cheese and butter supporting premium pricing.

Foodservice Recovery: While restaurant consumption remains below pre-2020 levels, incremental improvements in away-from-home dining are providing gradual support for cheese demand.

Forward-Looking Analysis with Enhanced Risk Quantification

Futures Curve Analysis

Contract	Class III Price	Class IV Price (Est.)	Spread (IV-III)	Probability Assessment
JUL 2025	$17.28	$18.99	+$1.71	85% confidence
AUG 2025	$18.40	$19.85	+$1.45	75% confidence
SEP 2025	$19.00	$20.20	+$1.20	70% confidence
OCT 2025	$19.20	$20.20	+$1.00	65% confidence

USDA’s updated 2025 price forecasts support this outlook, with cheese at $1.8600/lb (up 2.0¢), butter at $2.5350/lb (up 7.5¢), and Class III milk at $18.70/cwt.

Quantified Risk Scenarios

High-Probability Risks (>50% likelihood):

Weather-related production disruptions: Could impact milk supply by 2-4%
Continued Class III/IV divergence: Spread likely to persist through Q4 2025
Export demand volatility: 10-15% swings possible based on global economic conditions

Medium-Probability Risks (25-50% likelihood):

Trade policy disruptions: Could reduce export values by $200-400 million
FMMO adjustment impacts: Additional 10-15¢/cwt downward pressure on Class III

**Low-Probability, High-Impact Risks (+50 lbs fat and +40 lbs protein

Focus on fat percentage improvements (target: 3.8%+)
Emphasize health traits to maximize a productive life

Nutritional Strategies:

Optimize for component production over volume
Implement precision feeding to maximize component response
Consider alternative protein sources given the soybean meal firmness

Cash Flow Planning with Scenario Analysis

Base Case Projections:

July milk checks: Expect solid payments from June’s $18.82/cwt Class III
August outlook: Budget for $17.28/cwt Class III impact
Component premiums: Class IV portion expected to outperform consistently

Stress Testing:

10% price decline scenario: Plan for $1.50-2.00/cwt revenue reduction
Feed cost spike scenario: Budget for $100-150/cow/month margin compression
Export disruption scenario: Potential 5-8% all-milk price impact

Industry Intelligence

Processing Investment Boom

Over $8 billion in new processing infrastructure continues to reshape the industry, creating long-term demand for high-component milk. Major projects include Walmart’s $350 million Texas facility and significant expansions of cheese plants by industry leaders.

Technology and Efficiency Trends

The industry’s shift toward precision agriculture and component optimization is accelerating. Successful operations are implemented:

Real-time milk component monitoring
Precision nutrition management systems
Advanced genetic selection programs
Sophisticated risk management platforms

Weekly/Monthly Context

Today’s action accelerates a trend that has been building for months. The 30-day performance shows cheese blocks down 10.4% and barrels down 8.1%, contrasting with butter’s 2.7% gain. This represents a definitive structural shift, not market noise.

The USDA’s upward revisions to both production and price forecasts for 2025 suggest that the market is finding equilibrium at higher price levels, supported by strong export demand and improving domestic consumption.

Strategic Imperative: The industry is shifting permanently toward a “component economy,” where butterfat and protein values are priced and managed separately. Producers who optimize for component value rather than bulk volume will maintain competitive advantages throughout this transition.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

April 2025 Production Data Exposes the Strategic Milk Allocation Revolution Reshaping Global Dairy – Reveals practical strategies for implementing component optimization that delivers $120-180 more per cow annually, with actionable roadmaps for genetic selection and precision feeding systems to capitalize on the butterfat premium trend.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Demonstrates how to navigate the component revolution delivering 1.65% production gains while volume drops, providing strategic insights for capturing the $8 billion processing investment opportunity beyond daily market fluctuations.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Reveals methods for leveraging smart sensors, AI analytics, and robotic systems to boost yields 20% and reduce mortality 40%, essential tools for maximizing component production in the Class III/IV divergence era.

Join the Revolution!

Categories : CME Dairy Markets

Tags : butterfat production, component optimization, dairy market analysis, dairy profitability, milk pricing strategies

Global Dairy Markets Hit Reality Check: Record Production Surge Triggers Largest Price Crash of 2025

Monday, July 7th, 2025

Why record milk yields are destroying dairy profits: GDT crash reveals the $4,274/MT reality behind production-obsessed farming strategies.

EXECUTIVE SUMMARY: The dairy industry’s obsession with maximum milk production has finally hit the wall of economic reality, proving that bigger isn’t always better when markets collapse. Global Dairy Trade auction results delivered a brutal 4.1% index crash to $4,274/MT while New Zealand celebrated record milk collections of 77.0 million kgMS (+7.5% year-over-year) – the perfect storm of supply overwhelming demand. With Chinese farmgate prices collapsing 8.0% to just 3.05 Yuan/kg and WMP prices plummeting 5.1%, the market is sending a clear message: production efficiency without demand consideration equals profit destruction. Ireland’s explosive 6.5% milk collection growth and New Zealand’s 18.4% reduction in cow slaughter rates signal sustained oversupply pressure that will extend well into 2026. The disconnect between Singapore Exchange futures (+0.8%) and physical GDT prices (-5.1%) reveals dangerous market distortions that threaten traditional hedging strategies. Progressive dairy operations must immediately shift from volume-based thinking to value-optimized production strategies that prioritize margin over milk yield. Every dairy farmer needs to evaluate whether their current expansion plans are building profitability or simply adding to the global supply glut that’s crushing everyone’s milk checks.

KEY TAKEAWAYS

Implement aggressive production hedging strategies: Forward contract 40-60% of production at current Class III levels (~$17.50/cwt) while market fundamentals suggest 12-18 month correction period, potentially saving $2-4/cwt compared to spot pricing
Optimize component production over volume: Focus on butterfat and protein premiums rather than total milk yield – with fat complex showing 12.4% year-over-year strength versus protein markets, shifting feed strategies toward component optimization can improve margins by 8-15%
Strategic herd size management: Consider tactical 5-10% herd reduction to maximize per-cow productivity during oversupply cycles – New Zealand’s 18.4% reduction in cow slaughter signals sustained supply pressure that rewards efficiency over scale
Geographic market diversification: Leverage regional pricing premiums like the $1,045/MT spread between European and New Zealand WMP at recent GDT auctions – operations with export flexibility can capture 15-20% price premiums through strategic market timing
Risk management portfolio rebalancing: The dangerous 3.1% basis divergence between SGX futures ($3,752/MT) and GDT physical prices ($3,859/MT) demands immediate hedging strategy review – traditional derivatives may not provide expected downside protection in current market structure

dairy market trends, milk production optimization, farm profitability strategies, global dairy markets, dairy risk management

Let’s face it – while you were focused on breeding decisions and feed costs, the global dairy market just delivered a wake-up call that’s going to hit your milk check harder than a poorly-timed breeding decision.

The first week of July 2025 marked the moment when months of building supply pressure finally overwhelmed global dairy demand, with the Global Dairy Trade (GDT) auction delivering its most devastating blow of the year – a 4.1% index crash to $4,274/MT. This wasn’t just another market correction; it was the dairy industry’s equivalent of a margin call, forcing producers worldwide to confront an uncomfortable reality: sometimes, more milk isn’t better milk.

Here’s the harsh truth: While Fonterra celebrated record milk collections of 1.509 billion kilograms of milk solids for the 2024-2025 season – the highest in five years – the market responded by punishing every extra liter with lower prices. The combination of New Zealand’s explosive 7.5% production growth and Ireland’s 6.5% surge has created a supply tsunami that’s drowning global prices.

The Numbers Don’t Lie: When Success Becomes Failure

Why are we celebrating record production when it’s destroying our own profitability? The answer lies in a fundamental misunderstanding of market dynamics that’s costing producers millions.

Fonterra’s May collections alone reached 77.0 million kilograms of milk solids, with New Zealand’s South Island posting a 12.3% increase compared to the previous year. But here’s what every dairy economist will tell you: production without demand is just expensive inventory. And right now, that inventory is piling up faster than a feed mixer on overtime.

The GDT auction results tell the complete story: 25,705 tonnes were sold—a substantial increase from the previous event’s 15,209 tonnes—but only by accepting significantly lower prices across all major commodity categories. This combination of increased volume and sharp price declines represents a classic bearish indicator that suppliers were desperate to move product off their books.

China’s Demand Collapse: The $50 Billion Question

Chinese farmgate milk prices fell to 3.05 Yuan per kilogram in June 2025, a 8.0% year-over-year decline. When your biggest customer is drowning in their own milk, what does that mean for your expansion plans?

This isn’t just about Chinese oversupply; it’s about the fundamental shift in global dairy trade patterns. China’s domestic milk glut has created a demand vacuum precisely when New Zealand and Ireland are producing record volumes. The result? A perfect storm where abundant supply meets non-existent demand.

The Chinese Ministry of Agriculture and Rural Affairs reported that farmgate prices stabilized at “bottom levels” during the fourth week of June. When officials use language like “bottom levels,” you know the situation is dire. With abundant and inexpensive local milk available, Chinese processors have little economic incentive to import large volumes of dairy commodities.

The Forward Indicators Nobody Wants to Talk About

Here’s the data point that should keep every dairy producer awake at night: New Zealand dairy cow slaughter rates plummeted 18.4% in May 2025 to only 137,983 head. Fewer cows going to slaughter means larger herds, which means more milk production ahead.

This isn’t just a number – it’s a powerful forward-looking indicator that ensures a larger milking herd will be carried into the 2025/26 season. The 12-month rolling slaughter figure is now down 11.7%, indicating sustained supply pressure that will likely extend this correction well into 2026.

Commodity Breakdown: Where the Pain Hit Hardest

Whole Milk Powder (WMP) took the heaviest beating, with the index collapsing 5.1% to $3,859/MT. This decline is particularly significant as WMP is the bellwether product for Oceania pricing. Fonterra’s Regular WMP for Contract 2 settled at $3,875/MT, a 4.67% drop from the prior event.

The fat complex wasn’t spared either. Butter prices fell 4.3% to $7,522/MT, while Anhydrous Milk Fat dropped 4.2% to $6,928/MT. This synchronized weakness across both protein and fat categories signals that the supply pressure is affecting the entire milk stream.

Even cheese markets felt the pressure, with Cheddar falling 2.8% to $4,860/MT and Mozzarella dropping 0.2% to $4,790/MT. When even traditionally profitable cheese outlets show weakness, you know the milk abundance has reached saturation levels.

The Bullvine Bottom Line: Strategic Actions for Different Operations

For Large-Scale Operations (500+ cows):

Implement aggressive forward contracting for 40-60% of production using current price levels as a floor
Evaluate component optimization strategies to maximize butterfat and protein premiums while global markets remain weak
Consider tactical herd reduction of 5-10% to optimize per-cow productivity over total volume

For Mid-Size Operations (100-500 cows):

Focus on cost control and efficiency gains rather than expansion during this correction period
Secure feed cost hedging while grain markets remain volatile and before dairy margins compress further
Explore value-added marketing opportunities to capture premium pricing outside commodity channels

For Smaller Operations (<100 cows):

Prioritize cash flow management over growth investments until market conditions stabilize
Consider cooperative marketing agreements to improve bargaining power against processors
Evaluate niche market opportunities that command premium pricing and aren’t tied to commodity fluctuations

Regional Market Dynamics: The Dangerous Divergence

European markets are reflecting the same supply pressure reality. EU butter prices managed only a negligible €10 (+0.1%) increase to €7,460/MT, while French Whole Milk Powder collapsed €300 (-6.7%) to €4,250/MT. This weakness shows that even traditionally strong European markets can’t escape global supply pressure.

The European Energy Exchange (EEX) futures prices aligned with the physical market’s weakness, with butter futures averaging €7,227/MT (down 0.4%) and SMP futures at €2,480/MT (down 0.3%). However, here’s where it gets interesting—and dangerous.

The Singapore Exchange (SGX) showed surprising strength that’s completely disconnected from reality. SGX WMP futures rose 0.8% to $3,752/MT while GDT physical prices crashed to $3,859/MT. This divergence won’t last – when convergence happens, somebody’s getting hurt.

The Uncomfortable Truth About Production Efficiency

Progressive dairy operations have spent decades optimizing for maximum milk production per cow. But what happens when maximum production becomes maximum pain? The current market correction raises a fundamental question: Should we prioritize volume or value?

The reality check is brutal: Ireland’s May collections jumped 6.5% year-over-year to 1.218 kilotonnes, with cumulative 2025 collections reaching 3.68 million tonnes, a 7.9% year-over-year increase. Poland achieved an all-time high for May milk solids production at 90.5 kilotonnes, up 2.0% year-over-year.

When every major producing region is flooding the market with record volumes, the mathematics are simple: supply overwhelms demand, and prices collapse.

Market Outlook: The Reality Check

The SGX-GDT basis divergence demands immediate attention. With 14,900 tonnes trading on SGX versus the physical market weakness, this spread is likely to converge, likely downward. When it does, the price movement could be swift and brutal.

The next GDT auction on July 15th will be critical, with Fonterra forecasting significant volumes of WMP (1,530 MT for Contract 2) and Cheddar (240 MT for Contract 2). If these large volumes hit the market and prices fall again, it will confirm the downtrend has further to run.

The Next 90 Days: Critical Decision Points

What should dairy producers be watching? Three key indicators will determine whether we’re seeing a correction or a crash:

The July 15th GDT auction results – with large volumes of whole milk powder and cheddar forecasted
Chinese import data for June and July – any sign of demand recovery could stabilize prices
Northern Hemisphere milk production data – whether seasonal declines materialize or production remains stubbornly high

The Bullvine Bottom Line

The global dairy market has undergone a fundamental shift from supply-constrained strength to demand-overwhelmed weakness. The 4.1% decline in the GDT index isn’t just a number – it’s a sign of market capitulation in the face of overwhelming supply fundamentals.

Here’s what every dairy producer needs to understand: The current correction represents more than a temporary adjustment. With New Zealand’s 18.4% reduction in cow slaughter rates signaling sustained supply pressure and the uncertain timing of Chinese demand recovery, producers face a fundamentally altered landscape where maximum production may no longer equal maximum profit.

The successful operations of the next 18 months won’t be those that produce the most milk – they’ll be those that produce the right milk at the right cost with the right risk management. The market has spoken, and it’s saying that bigger isn’t always better.

The dairy industry’s uncomfortable truth? Sometimes the best strategy is knowing when not to fill every tank, milk every cow to maximum, or expand every operation. In a market drowning in milk, the winners will be those who learn to swim against the current, not with it.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Feed Smart: Cutting Costs Without Compromising Cows in 2025 – Reveals practical strategies for capitalizing on declining feed costs while maintaining production, demonstrating how to save up to $470/cow/year through precision nutrition and strategic procurement during market volatility.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Exposes strategic market insights that challenge conventional wisdom about hedging approaches, offering component-based strategies that protect margins when traditional price forecasting fails during global supply surges.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Demonstrates how smart dairy technologies can slash mortality 40% and boost yields 20%, providing competitive advantages that help farms survive margin compression through automation and data-driven decision making.

Join the Revolution!

Categories : CME Dairy Markets, Dairy Markets

Tags : dairy market trends, dairy risk management, farm profitability strategies, global dairy markets, milk production optimization

CME Dairy Market Report – July 1, 2025: Cheese Barrels Surge 3¢ as Processor Competition Signals Supply Tightness

Tuesday, July 1st, 2025

3¢ barrel surge exposes processor desperation while futures dive – smart operators are cashing in on the $1.28 Class IV premium. Here’s how.

EXECUTIVE SUMMARY: While most dairy farmers obsess over daily price fluctuations, the real money is being made by operators who understand the disconnect between cash market panic and futures market skepticism. Today’s CME session revealed a processor so desperate for barrels they paid 3¢ premium on a single trade, yet Class III futures dropped 20 cents – creating a textbook arbitrage opportunity that savvy producers are already exploiting. Mexico’s commanding 29% share of U.S. dairy exports, up from 25% in 2023, proves international demand isn’t the problem – it’s domestic operators failing to capitalize on a $1.28 Class IV premium over Class III that’s practically screaming “hedge me now.” With $8 billion in new processing capacity coming online and heat stress costing the industry $245 million annually in lost production, the farms investing in cooling infrastructure and component optimization are positioning themselves to dominate while competitors struggle with 1.98 milk-to-feed ratios. The June 1st FMMO reforms just handed component-focused operations a massive competitive advantage – question is, are you bold enough to restructure your entire pricing strategy around it?

KEY TAKEAWAYS

Processor Desperation = Your Opportunity: Single 3¢ barrel trades with zero offers signal immediate supply tightness while futures weakness creates perfect hedging conditions – operations locking in the $18.83 Class IV price are capturing $1.28/cwt premiums that historically disappear within 30 days
Mexico’s $2.32 Billion Appetite Reshapes Everything: With 29% export share and 32.4% year-over-year cheese growth, forward-thinking cooperatives are restructuring transportation and processing to capitalize on cross-border demand that’s literally rewriting North American dairy geography
Heat Stress = $245 Million Mistake Most Farms Keep Making: University of Illinois research proves cooling investments pay for themselves through maintained production, yet 80% of operations still treat summer losses as “seasonal normal” – those installing advanced cooling systems are gaining permanent competitive advantage
Component Revolution Hidden in Plain Sight: New FMMO composition factors (3.3% protein, 6% other solids) reward farms optimizing genetics and nutrition for components over volume – while competitors chase pounds per cow, smart operators are engineering higher-value milk that processors fight over
Processing Capacity Tsunami Demands Strategic Positioning: $8 billion in new facilities means short-term price pressure but long-term processing competition – farms developing direct processor relationships now will command premium basis when capacity utilization normalizes in 2026

dairy market analysis, CME cheese prices, dairy futures trading, milk pricing strategy, dairy profitability

Trading activity reveals aggressive processor bidding with barrel cheese jumping 3¢ on a single trade, while futures weakness creates hedging opportunities. Despite current margin pressures, Mexico’s commanding 29% share of U.S. dairy exports supports the long-term demand outlook.

The July 1st CME session delivered a textbook example of supply-demand imbalance, with a dramatic 3-cent barrel surge on limited trading volume signaling immediate processor need, yet Class III futures declining 20 cents suggests market skepticism about sustained strength. The disconnect between cash urgency and futures caution creates both opportunity and uncertainty for dairy operations navigating volatile summer markets.

Today’s Price Action & Trading Analysis

Product	Final Price	Daily Change	Weekly Trend	Trades	Bids	Offers	Impact on Your Farm
Cheese Blocks	$1.7225/lb	+0.25¢	+6.5%	7	1	0	Steady support for protein premiums in milk checks
Cheese Barrels	$1.7250/lb	+3.00¢	+4.2%	1	1	0	Processor urgency signals tight nearby supplies
Butter	$2.6025/lb	+0.25¢	+2.6%	3	2	4	Butterfat value boost supports Class IV strength
NDM Grade A	$1.2550/lb	+0.25¢	+0.1%	0	1	0	Export demand steady, minimal powder inventory pressure
Dry Whey	$0.5950/lb	Unchanged	+3.6%	0	2	1	Holding recent gains adds Class III calculation support

Source: CME Daily Cash Dairy Product Prices, July 1, 2025

Market Depth Analysis

The trading patterns reveal critical market dynamics beyond simple price movements. Despite modest price gains, cheese blocks showed robust trading activity with seven completed transactions and zero offers, indicating sellers were willing participants rather than forced liquidators. This contrasts sharply with barrels, where a single trade moved prices 3 cents – a clear sign of a processor caught short and willing to pay premium prices for immediate delivery.

Butter markets displayed balanced activity with three trades completing despite four offers versus two bids, suggesting adequate supply to meet current demand at prevailing prices. The zero trading activity in NDM and dry whey, combined with persistent bid interest, indicates steady underlying demand but adequate inventory levels.

Feed Cost & Margin Analysis with USDA Context

Current Feed Position: Feed futures provided meaningful relief with December corn dropping 3.75¢ to $4.2175/bushel and soybean meal declining $2.60 to $287.50/ton. This represents a significant improvement from recent highs, offering critical margin support during a challenging revenue environment.

USDA Production Forecasts: The USDA projects the national milking herd to average 9.410 million head in 2025, while milk per cow is projected to average 24,155 pounds per cow. Total milk production in 2025 is forecast at 227.3 billion pounds, indicating continued expansion despite margin pressures.

Income Over Feed Cost Context: Margins remain compressed with Class III futures at $17.55/cwt and current feed costs. The current milk-to-feed ratio of approximately 1.98 remains below the 2.0 threshold that typically indicates sustainable profitability for most operations.

Enhanced Global Context & Export Dynamics

Mexico Market Dominance: The U.S.-Mexico dairy relationship continues strengthening, with Mexico now purchasing 29% of all U.S. dairy product exports as of September 2024, up from 25% in 2023. This growth is particularly significant given Mexico’s annual dairy product deficit, ranging between 25% and 30%, with the U.S. supplying more than 80% of that shortfall.

The economic impact is substantial: Mexico purchased $2.32 billion in U.S. dairy products in 2023, representing one-fourth of all U.S. dairy exports. Cheese has emerged as a key growth driver, with U.S. cheese exports to Mexico totaling 314 million pounds from January to September 2024, marking a 32.4% year-over-year increase.

Processing Capacity Expansion: A large increase in dairy processing capacity is due to come online in 2025, with $8 billion invested in plants for products from cheese to ice cream. Leonard Polzin, Extension dairy market and policy outreach specialist at the University of Wisconsin-Madison, noted that “an increase in milk supply for these plants has been happening on a farm level”.

Production & Supply Insights with Climate Research

Heat Stress Impact: Recent University of Illinois Urbana-Champaign research reveals significant production challenges. Heat stress analysis of over 56 million cow-level production records from 18,000 dairy farms between 2012 and 2016 discovered that heat stress led to a cumulative loss of approximately 1.4 billion pounds of milk over five years.

The financial impact is substantial: with milk prices factored in, this equates to an estimated $245 million in lost revenue. As study co-author Marin Skidmore noted, “When cows are exposed to extreme heat, it can have a range of negative physical effects. For dairy producers, the heat impact is a direct hit on their revenue”.

Regional Production Considerations: The research emphasizes that large farms have access to advanced cooling technologies, while smaller farms struggle to mitigate these effects, making them more vulnerable to heat stress impacts.

Federal Milk Marketing Order Reform Impact

2025 FMMO Implementation: The USDA’s final rule amending all 11 FMMOs became effective June 1, 2025, representing the most significant pricing overhaul in decades. Key changes include updated milk composition factors from 3.25% true protein, 5.75% other solids, to 3.3% true protein, 6% other solids, and 9.3% nonfat solids.

Industry Support: The reforms received strong industry backing, with two-thirds of voting producers in each FMMO approving the amendments and two-thirds of the pooled milk volume in each FMMO supporting the reforms. As NMPF’s Gregg Doud stated, “This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive”.

Forward-Looking Analysis with Official Forecasts

USDA Price Projections: Based on recent data, the forecasts for the average number of dairy cows and milk per cow for 2025 have been raised from the previous forecast by 5,000 head and 25 pounds per cow, respectively. This upward revision suggests continued sector confidence despite current challenges.

Processing Integration Timeline: Leonard Polzin noted that one of the large facilities will be online in February, and “once we find a new equilibrium, it could be low for quite some time to measure and figure out what to do with the product”. This suggests potential price pressure as markets adjust to increased processing capacity.

Export Market Evolution: The relationship with Mexico continues deepening, with Mexico now accounting for 37% of all U.S. cheese sold internationally. CoBank’s lead dairy economist Corey Geiger emphasized that “cheese exports to Mexico have been a consistent growth story,” with exports growing by 17.9% in 2022 and 15.4% in 2023.

Actionable Insights for Your Operation

Heat Stress Mitigation Priority: Given that research shows $245 million in annual revenue losses from heat stress, investing in cooling infrastructure becomes financially justified. The data shows smaller operations are disproportionately affected, making cooling investments critical for competitive positioning.

Component Focus Strategy: On June 1, 2025, FMMO reforms emphasizing updated composition factors made component optimization increasingly important. Operations should evaluate nutrition programs that maximize butterfat and protein percentages to benefit from the new pricing structure.

Export Market Positioning: With Mexico representing 29% of U.S. dairy exports and growing, operations should consider how global demand patterns affect local pricing and contract negotiations. The 32.4% year-over-year increase in cheese exports to Mexico suggests continued strength in this market.

Processing Capacity Planning: The $8 billion in new processing capacity coming online in 2025 creates both opportunities and challenges. Operations should prepare for potential short-term price adjustments as markets absorb increased product availability while positioning for long-term benefits from expanded processing options.

Risk Management Considerations

Weather Risk Assessment: The University of Illinois research demonstrates that heat stress can lead to decreased appetite, higher stress levels, and an increased risk of infection, making weather monitoring and mitigation strategies essential operational components.

Market Timing Strategy: The disconnect between today’s cash strength and futures weakness creates hedging opportunities. The Class IV contract at $18.83/cwt, maintaining a $1.28 premium over Class III presents excellent Dairy Revenue Protection opportunities for high-butterfat operations.

Capacity Absorption Timeline: With major processing facilities coming online through 2025, operations should prepare for market adjustments as the industry absorbs increased capacity while positioning for long-term benefits from expanded processing infrastructure.

Market Outlook Based on Verified Data

The combination of Mexico’s growing 29% share of U.S. dairy exports, $8 billion in new processing capacity, and USDA projections of 227.3 billion pounds of milk production in 2025 creates a complex but potentially positive long-term outlook for the dairy sector.

However, heat stress research showing $245 million in annual losses and current margin pressures from the Class III futures at $17.55/cwt require careful operational management and risk mitigation strategies.

The successful implementation of FMMO reforms on June 1, 2025, provides a modernized pricing framework that should improve market transparency and component value recognition, particularly benefiting operations focused on quality production.

This analysis incorporates verified data from CME settlement reports, USDA official forecasts, peer-reviewed university research, and established industry publications. All data points are sourced from credible industry authorities. Futures trading involves substantial risk and may not be suitable for all investors.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Your 2025 Dairy Gameplan: Three Critical Areas Separating Profit from Loss – Practical strategies for boosting profits by $500+/cow through forage optimization, methionine supplementation, and transition cow management while navigating current market volatility and margin pressure.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Official USDA forecasts revealing why milk production is declining to 226.9 billion pounds and how component optimization strategies can capture the revised $22.75/cwt all-milk price target.
Digital Dairy: The Tech Stack That’s Actually Worth Your Investment in 2025 – Demonstrates how predictive analytics and integrated sensor systems deliver measurable ROI within 8 months, transforming market intelligence into automated profit-driving decisions for competitive advantage.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME cheese prices, dairy futures trading, dairy market analysis, milk pricing strategy

CME Dairy Market Report for June 30, 2025: Cheese Prices Surge 10¢ – Class III Milk Checks Set for July Jump

Monday, June 30th, 2025

Cheese prices just jumped 10¢—tight milk supplies and rising feed costs demand smarter milk pricing and genomic testing strategies for better margins.

Executive Summary: The recent 10-cent surge in CME spot cheese prices shatters the complacency around milk pricing strategies, exposing outdated assumptions about supply and demand balance. This sharp rally, fueled by aggressive pre-holiday buying and tightening milk flows due to summer heat stress, signals a potential $1.00+/cwt lift in July Class III milk checks. Butter and powder markets remain steady, supporting Class IV values near $18.83/cwt, while feed costs hold firm with corn at $4.09/bu and soybean meal near $290/ton—pressuring margins but also incentivizing efficiency gains. Globally, U.S. dairy remains competitive thanks to a stable dollar and strong export demand from Mexico and Southeast Asia, contrasting with modest production growth in New Zealand and the EU. Progressive dairy operations that integrate genomic testing for feed efficiency and milk yield alongside proactive risk management will capitalize on these market dynamics. It’s time to challenge your pricing and production assumptions—are you ready to capture the upside?

Key Takeaways

Lock in premium milk pricing: The 10¢ cheese block rally could boost Class III milk checks by over $1.00/cwt in July, directly increasing farm revenue.
Optimize feed efficiency: With feed costs steady but high, genomic testing focused on feed conversion ratios can improve profitability by reducing input costs up to 5%.
Manage heat stress proactively: Summer heat is already curbing milk yield in key regions; implementing cooling strategies can preserve production and maintain butterfat percentages.
Leverage export demand: Strong international markets—especially Mexico and Southeast Asia—support powder and whey prices; aligning production to these trends can stabilize income streams.
Hedge with precision: Futures markets lag spot prices; using Dairy Revenue Protection (DRP) and options can safeguard margins amid volatile global conditions.

dairy profitability, milk pricing strategies, feed efficiency, genomic testing, Class III milk

Today’s dramatic 10-cent surge in CME spot cheese blocks signals a major tailwind for farm milk prices. This rally, paired with steady butter and powder markets, points to a stronger July milk check and improved margins for producers, just as summer heat starts to pinch milk flows.

1. Key Price Changes & Market Trends

Product	Closing Price	Daily Change	30-Day Trend	Impact on Farmers
Cheese Blocks	$1.7200/lb	+10.00¢	+6.8%	Major Class III boost; higher premiums likely
Cheese Barrels	$1.6950/lb	+3.00¢	+4.1%	Reinforces cheese market strength
Butter	$2.6000/lb	+3.75¢	-1.5%	Supports Class IV; offsets powder weakness
NDM	$1.2525/lb	+0.25¢	+1.8%	Stable; export demand remains firm
Dry Whey	$0.5950/lb	+1.00¢	+3.5%	Adds bullish support to Class III

Commentary:
Cheddar blocks rose sharply by 10 cents on robust trading volume (12 trades, nine bids), reflecting strong demand from both retail and foodservice channels ahead of the July 4th holiday. Barrels followed, confirming market-wide strength. Butter’s gain further supports Class IV, while NDM and whey prices remain steady, reflecting solid export demand. If spot cheese holds, July’s Class III could settle well above the current $17.75/cwt future.

2. Volume and Trading Activity

Trading Activity Summary:

Cheese Blocks: 12 trades, nine bids, zero offers; tight bid/ask spread indicates strong buying interest.
Cheese Barrels: 6 trades, one bid, one offer; moderate activity with firm undertone.
Butter: 3 trades, four bids, two offers; steady interest, slight upward price movement.
NDM: 1 trade, one bid, zero offers; minimal activity, stable pricing.
Dry Whey: 1 trade, six bids, one offer; increased bidding supports price uptick.

Notable Patterns:
Cheese blocks exhibited the highest trading activity, with a tight bid/ask spread and aggressive buying. Butter and whey also saw increased bidding, suggesting processors are securing product ahead of holiday demand.

3. Global Context

Export Demand:

According to USDA Dairy Market News and recent USDA GAIN reports, U.S. NDM and whey exports remain strong, particularly to Mexico and Southeast Asia.
A stable U.S. dollar continues to support U.S. competitiveness in global dairy markets.

Global Production Trends:

New Zealand’s milk production has been seasonally steady, while the EU has reported modest year-over-year growth (European Commission Milk Market Observatory, June 2025).
These trends keep the global supply adequate but not excessive, supporting U.S. export opportunities.

International Benchmarks:

U.S. cheese prices are now competitive with European and Oceanian benchmarks, further stimulating export demand (USDA Dairy Market News, June 2025).

4. Forecasts and Analysis

USDA/CME Forecasts:

USDA projects Class III milk prices to average $18.50/cwt for Q3 2025, supported by strong cheese demand but tempered by higher feed costs (USDA Livestock, Dairy, and Poultry Outlook, June 2025).
CME July Class III futures settled at $17.75/cwt, but spot market strength suggests upside risk.
Class IV futures remain robust at $18.83/cwt, reflecting continued butter strength.

Actionable Insights:

If spot cheese prices persist, final July Class III settlements could exceed current futures, offering a pricing opportunity for unhedged milk.
Producers should monitor global weather and feed markets, as volatility could impact both input costs and export competitiveness.

5. Market Sentiment

General Sentiment:

The market is bullish on cheese, with traders citing “aggressive pre-holiday buying and robust foodservice demand” (Progressive Dairy, June 2025).
One Midwest cooperative analyst noted, “Processors are scrambling to secure product as summer heat crimps milk output and demand remains strong.”
Overall, the sentiment is optimistic but cautious, with an eye on the weather and export trends.

6. Closing Summary & Recommendations

Summary:
Today’s CME dairy markets were led by a sharp cheese rally, supported by steady butter and powder prices. Trading activity was robust in cheese, with strong bidding across the board. Export demand and competitive global positioning continue to underpin U.S. dairy’s outlook.

Recommendations:

Consider forward contracting or Dairy Revenue Protection (DRP) for July/August milk to lock in gains.
Monitor feed markets and global production trends for margin management.
Engage with cooperatives on premium programs and stay alert for updates on FMMO reform.

7. Visuals and Formatting

Tables: Presented above for price and volume data.
Charts: (Recommended for publication) Line graph comparing Class III futures and USDA projections, bar chart of weekly cheese price trends.
Formatting: Bold section headers, green for price increases, red for decreases, Arial font, clear axis labels.

8. Handling Low-Activity Days

While today was high-volatility, on quieter days, focus on:

Weather forecasts and their impact on production.
Feed cost trends and global market developments.
Upcoming USDA reports or international trade policy changes.

Today’s cheese rally is a wake-up call—milk checks are poised to improve, but volatility remains. Use this window to lock in profits, review risk management, and stay nimble as summer weather and global demand continue to shape the market. For daily actionable insights and tools, keep TheBullVine.com as your go-to source—and let us know what’s working on your farm.

Complete references and supporting documentation are available upon request by contacting the editorial team at editor@thebullvine.com.

Learn More:

Reverse Your Herd Expansion Strategy: Why Strategic Downsizing Could Boost Profits 40% in 2025 – Discover practical strategies for culling low-performing cows and optimizing herd efficiency. This guide demonstrates how targeted downsizing and feed cost arbitrage can immediately raise per-cow margins and operational ROI.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Gain a strategic perspective on evolving market dynamics, component pricing, and export trends. This analysis reveals methods for aligning production with processor demand and maximizing returns in a volatile global market.
The Future of Dairy Farming: Embracing Automation, AI, and Sustainability in 2025 – Explore how automation, artificial intelligence, and sustainability initiatives are reshaping dairy operations. This forward-looking piece highlights innovations that can boost efficiency, reduce labor costs, and future-proof your farm.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III milk, dairy profitability, Feed Efficiency, Genomic Testing, milk pricing strategies

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Archive for CME Dairy Markets

Warning: Today’s cheese collapse confirms what smart money already knows – milk’s heading for $16. Action plan inside.

Today’s Market Summary Table

Reading the Tea Leaves in Today’s Trading Patterns

How Global Markets Are Boxing Us In

Feed Markets: The Silver Lining Gets Thinner

Production Growth: The Numbers We Can’t Ignore

What This Means for Your December Check

Tomorrow Morning’s Practical Action Plan

The Bottom Line

Key Takeaways

Learn More:

Join the Revolution!

Canada won the trade panel. The U.S. has the sunset clause. July 2026 decides who blinks first in the $850M dairy standoff.

What the U.S. Industry Says Was Promised vs. What They Got

Why Canada Defends Supply Management So Fiercely

How American Farmers See the Economic Stakes

Canada’s Counter-Argument: Why They Say They’re Complying

Two Countries, Two Systems

The Political Leverage Game for 2026

What the U.S. Industry Has Going For It

Canada’s Strategic Position

Three Scenarios and What They Mean for Different Farm Sizes

Scenario 1: More Incremental Changes (45% probability, if you ask me)

Scenario 2: Real Enforcement Mechanisms (30% probability)

Scenario 3: A Standoff (25% probability)

Who’s Pushing for What: The Players Making Things Happen

Market Alternatives: What Some Smart Operators Are Doing

The Bottom Line: No Easy Resolution in Sight

KEY TAKEAWAYS

Learn More:

Join the Revolution!

Cheese tanked. Buyers ghosted. Farmers bleeding. Welcome to Monday in dairy.

Why This Class Spread Breaks Farms

Regional Pain Points

The Global Picture Nobody Wants to See

Feed Markets: The Other Shoe Dropping

Processing Plants Playing Different Games

What Smart Operations Do Now

Cooperatives Scrambling for Answers

The Six-Month Survival Test

The Bottom Line

KEY TAKEAWAYS:

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Two identical farms. One gets $17.81/cwt today. The other? $13.75. The ONLY difference: where their milk truck goes.

Today’s Price Action — What These Numbers Mean for Your Farm

From the Trading Floor — Reading Between the Lines

Where We Stand Globally — And Why It Matters

Feed Costs Keep Creeping Higher

Production Reality Check — Where the Milk’s Coming From

What’s Really Driving These Markets

Forward Markets and What They’re Telling Us

From the Farm — Producer Perspectives

Regional Spotlight: The Changing Landscape

Three Market Scenarios for Next Week

What Farmers Should Do Now

Industry Intelligence — What’s Coming Down the Pike

The Bottom Line — Context for Today’s Market

Key Takeaways:

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$2.86/cwt Class spread costs average 500-cow dairy $18,000/month—widest gap since 2011

Today’s Price Action: The Numbers That Matter

Trading Floor Dynamics: Reading Between the Bids

The Global Arbitrage Opportunity Nobody’s Talking About

Feed Economics: The Margin Squeeze Nobody Wants to Discuss

Production Patterns: Why Components Matter More Than Volume

Market Drivers: The Real Story Behind Today’s Moves

Forward Curve Analysis: What the Futures Are Telling Us

Regional Focus: Upper Midwest Riding the Cheese Wave

Your Action Plan for Tomorrow Morning

The Bigger Picture: Industry Intelligence

Bottom Line: Navigating the October Crossroads

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Block cheese drops 3¢ to $1.67 while feed costs hold at $4.10 corn—margin decisions define survival

When Six Block Trades Tell the Whole Story

Today’s Numbers and What They Actually Mean