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

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.

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