Milk prices held steadier than expected last week — but the underlying pressures are real. Here’s what smart producers are doing.
EXECUTIVE SUMMARY: Listen up — there’s some serious turbulence brewing in dairy markets right now. The Global Dairy Trade auction saw just a 0.3% price dip, but don’t let that fool you — U.S. cheese prices plummeted nearly 4% in one week, and China’s still pulling back hard from imports while Europe floods the market with surplus milk. Here’s what caught my attention… the producers who are thriving right now aren’t the ones with the most cows — they’re the ones milking smarter, not harder. We’re talking about farms that can break even at $17/cwt, while others are scrambling at $20. The difference? They’ve got their feed costs locked down, they’re culling strategically, and they’re using risk management tools that most farmers ignore. This isn’t just a rough patch — it’s a fundamental shift separating the wheat from the chaff.
KEY TAKEAWAYS:
- Lock in your downside with Dairy Revenue Protection — it’s not just insurance, it’s profit protection when milk hits $16-17/cwt (and with current trends, that’s not fantasy anymore)
- Feed strategy wins are real money — producers locking soybean meal contracts now are saving $30-50 per cow monthly compared to spot pricing
- Strategic culling delivers 5-12% efficiency gains — removing the bottom 20% performers can boost your per-cow average by 200+ pounds monthly
- Lender relationships matter more than ever — proactive communication about cash flow keeps credit lines open when markets get ugly (and they’re getting ugly)
- Market intelligence pays — tracking Global Dairy Trade auctions and China’s import data gives you a 2-3 week advance warning on price moves that can make or break your quarter
We get it. You see those market signals, and it makes your stomach drop.
Let’s sit down with a coffee and unpack what’s really going on with the dairy market in 2025—and what you can do on your farm to face these times head-on.
The Numbers Don’t Lie — And They’re Talking
Here’s what the latest data tells us:
U.S. milk production in July 2025 hit 19.23 billion pounds, up 3.3% from last year, with nearly 9.47 million cows and average milk per cow climbing about 1.7% to over 2,000 pounds monthly. What’s particularly noteworthy is that producers across the Midwest are crediting better herd management and refined feeding programs with driving these gains.
Meanwhile, European producers aren’t sitting idle. EU milk production reached 160.8 million tonnes in 2023, marking steady growth driven by favorable weather conditions and lower feed costs.
Now here’s the kicker: China, our longtime dairy superconsumer, has pulled back hard. Multiple industry reports confirm that they’ve dramatically scaled back imports due to high inventories sitting in warehouses, as well as economic headwinds that aren’t expected to subside anytime soon.
Look at the Global Dairy Trade auction on August 19—prices declined just 0.3%, suggesting some market stabilization after months of volatility. To put that in perspective, Fonterra’s benchmark unsalted butter sold for $7,175 per tonne, while their key Whole Milk Powder product fetched $4,025 per tonne.
But closer to home? CME cheese prices tell a different story.
Block cheddar dropped from $1.83 to $1.76 per pound (a 3.8% decline), while barrel prices took a 5% hit over the week ending August 22. Meanwhile, the European Mild Cheddar index is holding firmer at €4,435 per tonne, showing some regional price differences. That’s your classic foodservice demand warning signal right there.
What You Need to Do Right Now
If you can’t break even with milk around $17/cwt, it’s time for a hard look at your cost structure. Here’s what smart producers are focusing on:
- Get serious about risk management. Tools like Dairy Revenue Protection aren’t just government programs—they’re lifelines when markets get nasty.
- Optimize your feed strategy. With grain markets looking somewhat friendlier than last year, this might be your chance to lock in favorable contracts, especially on soybean meal. But don’t get greedy—flexibility has value too.
- Make tactical culling decisions. I know it’s painful, but removing your lower-performing cows earlier can save serious feed costs and help you right-size production for market realities.
- Don’t ghost your lender. Keep that relationship strong. Share your numbers, explain your plan, and show them you’re thinking ahead.
The Big Picture — Supply, Demand, and Reality
Here’s what’s fascinating about this cycle:
Europe’s creating what everyone’s calling a “wall of milk,” with massive volumes getting processed into skim powder. The U.S. is steadier but still quietly adding volume through those productivity gains I mentioned.
Add in the Southern Hemisphere’s seasonal flush—New Zealand’s spring milk is just starting to ramp up—and you’ve got a supply picture that’s, frankly, overwhelming.
But demand? That’s where things get interesting.
China’s absence has left this massive hole that nobody else can fill. This is creating some interesting trade shifts. For example, with European products needing a home, recent shipments of EU butter to the U.S. surged by over 80%. At the same time, China has been taking advantage of lower tariffs to buy huge volumes of whey from the U.S., even while shunning milk powder.
Southeast Asia and the Middle East are buying, sure, but they’re opportunistic and price-sensitive. They’ll nibble at the edges, but they can’t absorb the surplus.
Technology in Tough Times
What strikes me is how many producers continue to invest in automation, despite tight margins.
Robotic milking systems are now operating on about 20% of Canadian farms, and I get why—better consistency, reduced labor headaches, more detailed cow monitoring.
But let’s be real: these aren’t magic bullets. Recent industry analysis indicates that while efficiency improvements can be substantial, success ultimately depends on how effectively you manage both the technology and your operations. In this market, you’d better have rock-solid numbers before making that kind of investment.
Eyes on the Horizon
Mark your calendars for a few key dates:
The next Global Dairy Trade auction, scheduled for September 2, will reveal whether the price stabilization holds. China’s August import data (due in mid-September) could be a real game-changer if it signals a resumption of buying. Europe’s production report in late September will tell us if their supply surge is finally moderating.
And here’s something most folks miss: keep an eye on the U.S. Restaurant Performance Index. It’s your early warning system for foodservice demand, which drives a huge chunk of cheese consumption.
Bottom Line — Tough Times, Tougher Farmers
This industry has weathered brutal cycles before, and this time will be no different.
The producers who stay sharp on their numbers, utilize available safety nets, and make tough decisions now will be the ones who emerge stronger. This downturn won’t last forever, but the choices you make today will define your operation tomorrow.
The bottom line? While everyone else is complaining about prices, savvy operators are positioning themselves to emerge from this downturn stronger than when they entered.
What strategies are working on your farm to weather this storm? 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:
- Dairy Farming’s Brutal Reality: The Cold Hard Truth About the Cost of Production – This article provides a tactical masterclass in cost management. It reveals practical methods for analyzing your true cost of production, helping you identify immediate opportunities for efficiency gains that are crucial for profitability in a down market.
- Decoding Dairy Market Volatility: Key Factors Influencing Milk Prices in 2024 and Beyond – Go deeper into the strategic market forces discussed in the main article. This piece unpacks the specific economic drivers, from global supply chains to consumer trends, giving you the foresight to better anticipate price swings and manage long-term risk.
- The ROI of Dairy Automation: Is It Worth the Investment? – This piece examines the real-world return on investment for the technologies mentioned in the main article. It demonstrates how to evaluate if automation is the right fit for your operation, ensuring your capital investments directly translate into measurable cost savings.
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