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
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
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 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.
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
| 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!
Join the Revolution!Join over 30,000 successful dairy professionals who rely on Bullvine Weekly for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
