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.
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.
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