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Archive for dairy market analysis

Cheddar’s Record 6.6% Crash Exposes Dairy’s Broken Recovery Plan: 90 Days to Act

Tuesday, November 4th, 2025

I felt sick watching today’s GDT results. Not the WMP decline—the 6.6% cheddar crash. That was supposed to be our safety net. Now what?

EXECUTIVE SUMMARY: The November 4 GDT auction revealed the harsh truth: cheddar’s record 6.6% crash signals that dairy’s Plan B—pivoting from powder to cheese—has failed spectacularly. China won’t rescue us; they’re now 85% self-sufficient, with 40% fewer babies needing formula. The math is unforgiving: typical 500-cow operations are burning $101,000 per month, with 20 months of equity facing a 24-30-month downturn. CME futures at $16, versus USDA’s fantasy $19 forecast, show who’s been paying attention. Three paths remain viable: premium markets (requires location and a $400K investment), massive scale (minimum 2,000 cows), or a strategic exit before equity evaporates. Bottom line: decisions made in the next 90 days determine who survives 2027.

So here we are again, checking those GDT results from November 4, 2025, and honestly, I felt that familiar knot in my stomach watching Whole Milk Powder drop another 2.7%. That’s six straight declines since early August, according to the latest GDT data. But here’s what really caught my attention—and I think this is what we all need to be talking about—cheddar cheese absolutely tanked, down 6.6% to $3,864 per metric ton. That’s the biggest single-category drop we’ve seen in recent memory, and it changes everything we thought we knew about where this market’s headed.

You know, I’ve been watching these markets for over two decades now, and what’s happening today feels fundamentally different. It’s not just China backing away from powder imports (though that’s huge), or these productivity gains that keep milk flowing despite terrible economics, or even CME Class III futures sitting $2.50 to $3.00 below what USDA keeps telling us we’ll get. It’s all of it together. And if you’re still running your operation like this, is just another down cycle… well, we need to talk.

The November 4 GDT auction delivered a devastating 6.6% cheddar crash—the largest single-category drop in recent memory—confirming that dairy’s Plan B (pivoting from powder to cheese) has failed spectacularly

Quick Market Reality Check

Key Numbers from November 4:

GDT Index: Down 2.4% to 1,135 (lowest since August)
Whole Milk Powder: -2.7% to $3,503/MT
Cheddar: -6.6% to $3,864/MT (largest single decline)
Butter: -4.3% to $5,533/MT
Winners: Only mozzarella (+1.6%) and buttermilk powder (+1.0%)

What Makes This Time Different

Looking at those November 4 numbers more closely, the overall GDT Price Index fell 2.4% to 1,135—that’s our lowest point since August, based on the Event 391 summary. Since that tiny 1.1% bump we got back on July 15, it’s been pretty much straight down. Reminds me of 2015-16, except… well, except for everything else that’s different this time around.

Here’s the breakdown that matters: Whole Milk Powder hit $3,503 per metric ton. Skim milk powder? Flat. Butter dropped 4.3% to $5,533. But that cheddar number—down 6.6%—that’s what keeps me up at night. See, cheese was supposed to be our safety valve, right? The product that would soak up all that displaced WMP demand as China shifts gears. When your backup plan crashes harder than your original problem… that’s when you know you’re in trouble.

The only bright spots were mozzarella (up 1.6%) and buttermilk powder (up 1.0%). But let’s be real here—those are niche products. They can’t carry the weight that WMP used to handle.

I was talking with a Wisconsin producer last week—a third-generation operation with about 280 cows—and he put it perfectly: “I’ve never seen such a gap between what the government says and what my milk check actually shows.” USDA’s forecasting $19 milk, but his co-op’s already warning members to budget for $16 through spring. That’s a massive difference when you’re trying to plan feed purchases or, heaven forbid, thinking about expansion.

CME Class III futures trade $2.50-$3.00 per hundredweight below USDA’s optimistic $19.10 forecast—a reality gap that represents $1.25-1.5 million in lost revenue expectations for a typical 500-cow operation over 24 months, and proof that markets saw this crash coming while bureaucrats kept pushing rosy scenarios

Out in California, the larger operations—we’re talking 1,800 cows and up—are seeing processors cut quality premiums in half. Used to be you’d get 40 cents extra for really low somatic cell counts. Now? Twenty cents if you’re lucky. Every penny counts when margins are this tight.

Meanwhile, in the Northeast, smaller operations are feeling it differently. A Vermont producer with 120 cows told me their processor just extended payment terms from 15 to 30 days. That’s an extra full pay period of float you have to cover. These little changes add up fast.

The China Reality We Need to Accept

China achieved 85% dairy self-sufficiency by 2025 while infant formula imports crashed 35% from their 2019 peak—a permanent structural shift driven by plummeting birth rates (down 40%) and massive domestic production investment that’s fundamentally rewriting global dairy trade dynamics

Alright, let’s address the elephant in the room: China isn’t coming back to buy powder the way they used to. Period.

According to the USDA’s Foreign Agricultural Service report from May 2025, China successfully boosted their domestic milk production by 10 million metric tons between 2018 and 2025. They actually hit their target two years early. Think about that—they went from 70% self-sufficient to about 85%. And here’s what really matters: their economy grew 5% in the first half of 2025 according to Chinese government statistics, yet powder imports stayed flat. Economic recovery isn’t bringing back that demand.

The demographics make it even more permanent. China’s Statistics Bureau shows the birth rate dropped from 10.48% in 2019 to 6.39% in 2023. The number of kids aged 0-3—your core infant formula market—fell from 47.2 million to 28.2 million. That’s not a temporary dip, folks. That’s a 40% structural reduction in the exact demographic that drives WMP consumption.

Industry contacts at the major export companies tell me they’ve basically written off any return to 2021-22 WMP levels. Everyone’s pivoting to cheese and butter production, which sounds great until you realize… yeah, everyone’s doing exactly that. Hence, the cheese price crash we just witnessed.

How Smart Operators Are Adapting Right Now

What I’m seeing from the operations that are navigating this successfully is that they’re not waiting around, hoping for a miracle. They’re making hard decisions today while they still have options.

The Culling Math Nobody Wants to Do (But should)

With beef prices around $145 per hundredweight—USDA Agricultural Marketing Service confirmed this in late October—the economics of culling have completely shifted. Let me walk you through the actual numbers here.

Say you’re running 500 cows. Your bottom 20%—that’s 100 head—are probably giving you about 55 pounds a day, while your top girls are at 75 pounds. At $16.50 milk, those bottom cows generate roughly $2,768 in annual revenue. But here’s the kicker: they’re costing you at least $4,200 in feed, labor, vet work, and utilities. You’re losing $1,432 per cow per year just keeping them around.

Now, if you ship those 100 cows at an average of 1,400 pounds and $145 per hundred, that’s $203,000 cash in hand. Real money you can use today.

I know several Idaho operations that pulled the trigger on this in September. They culled their bottom 15%, used half the money to pay down debt, and half to upgrade their feed systems. What’s interesting is that their remaining cows are actually producing more total pounds now. Better feed efficiency, less competition at the bunk—sometimes less really is more.

Getting Smart About Feed Costs

December corn futures are around $4.10 per bushel, and soybean meal is at $274.50 per ton, based on CME data from early November. That’s actually manageable—if you lock it in now. University of Wisconsin calculations show income-over-feed margins at about $7.80 per hundredweight. Barely breakeven for good operations, but it’s workable if you’re on top of things.

The regional differences are huge, though. Texas producers with local grain access are doing okay. But if you’re in the Upper Midwest, dealing with basis issues and trucking costs? That’s a different story. Nutritionists I work with tell me operations keeping milk-to-feed ratios above 2.35 are surviving. Below that? They’re hemorrhaging cash.

And California… don’t get me started. Between water issues and hay prices that swing $50 a ton depending on the week, feed costs can vary $2-3 per hundredweight just based on timing. Feed dealers in the Central Valley tell me they’ve never seen such demand for almond hulls and other byproducts—everyone’s scrambling to cut costs wherever possible.

Southeast operations have their own challenges. With the costs of humidity- and heat-stress management, they’re spending an extra $1.50-2.00 per hundredweight just on cooling compared to northern states. A Georgia producer with 600 cows said his electric bill alone runs $8,000 per month in summer.

The Timeline Nobody Wants to Hear (But Needs To)

CME Class III futures paint a pretty clear picture if you’re willing to look. November 2025 contracts at $16.17, December at $16.39, and the first quarter of 2026 at an average of just $16.35, according to daily settlements. Meanwhile, USDA keeps saying we’ll average $19.10 for 2025. That $2.50 to $3.00 gap? That’s the market telling you the government’s being way too optimistic.

I lived through the 2015-16 crisis, and it took about 15-18 months — from peak oversupply to decent prices again — according to USDA historical data. But we had some natural circuit breakers then that we don’t have now:

China came back once they worked through inventory—Rabobank documented this in their 2016 reports. La Niña hit and naturally reduced New Zealand’s production. We had various government programs that provided at least some relief.

This time? New Zealand just reported milk collection in August 2025 at 1.68 billion liters, up 14.6% from last year, according to the Dairy Companies Association. U.S. production is up 1.6% despite everything, per the USDA’s latest report. And the weather’s been perfect for grass growth pretty much everywhere. No natural brakes this time around.

The Productivity Problem That’s Breaking Everything

Here’s something that should blow your mind: According to data compiled by Cornell’s dairy economists from USDA records, average U.S. butterfat went from 3.95% in 2020 to 4.218% by November 2024. Protein jumped from 3.181% to 3.309%.

What’s that mean in real terms? Despite losing 557,000 cows from the national herd in 2024, total milk solids production actually increased by 1.345%. We’re making more cheese and butter with fewer cows. Great for efficiency, terrible for market balance.

The genetics have gotten so good that we’ve essentially broken the old supply-demand correction mechanism. Herds shrink, but production stays flat or even grows. It’s remarkable from a technical standpoint, but it means this oversupply problem isn’t going away naturally like it used to.

New Zealand shows this even more starkly—they reduced cow slaughter rates by 18.4% according to their Ministry for Primary Industries, even while WMP prices crashed for six straight auctions. Why? Because each cow today produces so much more than five years ago that farmers literally can’t afford to cull heavily. They’d lose too much capacity.

Three Paths Forward (And Why You Need to Pick One Soon)

Based on everything I’m seeing and hearing from producers who’ve survived multiple cycles, there are really only three strategies that make sense right now.

The Premium Route (Maybe 20-25% of You Can Do This)

If you’re within a reasonable distance of a city and can tell a good story, direct sales can get you 50-75% premiums. Vermont producers doing this successfully report $32-38 per hundredweight equivalent. That’s basically double commodity prices.

But—and this is a big but—it requires serious investment. We’re talking $400,000 minimum in processing equipment, dedicated marketing staff, and probably 20+ hours a week of your time on social media and customer management. It’s not dairy farming anymore; it’s running a specialty food business. Some folks love it. Others find it exhausting.

The organic market’s another option. USDA data shows the Organic Pay Price averaged $38.69 in September 2025. But that three-year transition period is brutal, and you better have contracts locked before you start.

Scale and Efficiency (Works for 30-35% of Producers)

The Texas model shows how this works. Average Panhandle dairy runs about 4,000 cows according to the Texas Association of Dairymen. With new plants from Cacique Foods in Amarillo, Great Lakes Cheese in Abilene, and Leprino in Lubbock, there’s demand for big, efficient suppliers.

But you need serious scale—minimum 1,000 cows, probably more like 2,000+. And the capital requirements for automation and upgrades… well, if you’re a 300-cow operation in Wisconsin, this probably isn’t your path. I wish it were different, but that’s reality.

The co-ops are adjusting, too. Industry reports show DFA consolidating smaller farms’ milk into bigger pools to maintain negotiating power. Land O’Lakes is pushing component improvement hard—offering bonuses for consistently hitting protein targets. It’s all about efficiency now.

Strategic Exit (The Hardest but Sometimes Smartest Choice)

Nobody wants to talk about this, but for operations caught between premium and scale, getting out while you still have equity might be the smartest move.

Chapter 12 bankruptcy—the farmer-friendly option—can get you reorganized in about 100 days, according to ag bankruptcy attorneys. It lets you restructure debt while keeping the farm running. But timing is everything. Act before you default, and you have options. Wait until you’re behind on payments, and those options evaporate fast.

The generational piece makes this even tougher. I know young farmers looking at these projections for the next two years and thinking maybe that agronomy job in town makes more sense right now. Can’t say I blame them.

Why The Cheddar Crash Changes Everything

Let’s circle back to that 6.6% cheddar price collapse, because this is crucial. Cheese was supposed to be our growth story, right? China’s cheese imports rose 13.5% through September 2025, according to its customs data. Processors globally have invested billions in cheese capacity.

But if cheese is crashing harder than powder, it means the pivot everyone’s counting on is already overcrowded. Instead of 18-24 months to rebalance, we might be looking at 24-30 months or longer.

California processors I talk with say they’re getting squeezed on every product now. Can’t make money on powder, and cheese margins are evaporating too. Something’s got to give, and it’s probably going to be at the farm level.

The Financial Reality Check

Let me paint you the picture for a typical 500-cow operation at current prices. You’re looking at about $101,000 in monthly losses. Over a 24-month downturn—which is what futures markets suggest—that’s $2.4 million in red ink.

Most farms I know started this downturn with maybe $2 million in equity if they were lucky. Do the math. You run out around month 20, just before the projected recovery. That’s the cruel joke here—operations that survive 80% of the downturn still fail because they can’t bridge those last few months.

Operations with $2M in starting equity face complete depletion at month 20—just four months before projected recovery begins at month 24—meaning 80% of the struggle buys you nothing if you can’t bridge the final cruel gap, making the next 90 days of strategic decisions literally the difference between survival and bankruptcy

We’re currently in months 4-5 of what could be a 24-30 month adjustment. Decisions you make right now have completely different outcomes than those same decisions in March or April when equity’s gone and options have narrowed to basically nothing.

The Human Side We Can’t Ignore

Behind those 259 bankruptcy filings in Q1 2025—up 55% from last year, according to federal court statistics—are real families watching everything disappear.

The Journal of Rural Mental Health published research showing farmers face suicide rates 3.5 times higher than the general population. Mental health professionals describe this pattern where chronic stress builds for months until hitting what psychotherapist Lauren Van Ewyk calls a “quick flip”—that breaking point where you can’t think straight anymore.

I bring this up because recognizing the stress early and getting help—whether it’s financial advice, operational changes, or just someone to talk to—that preserves way more options than waiting until you’re in crisis mode. We need to look out for each other right now.

What You Should Be Doing Right Now

Next 30 Days: Figure out your real equity runway. Not the optimistic version—the actual number of months you can sustain these losses. If it’s less than 24 months, you need to act now, not later.

Lock in feed prices while you can. That $4.10 corn won’t last forever. Take a hard look at your bottom 20% for culling while beef prices are still strong. And call your processor about contract opportunities—they’re making deals right now.

Next 90 Days: Stress-test everything against a 24-30 month downturn. Can you survive it? Be honest. If you’re in the right location, explore premium markets, but be realistic about what it takes.

Technology that actually reduces costs—robotic milkers if you’re big enough, better feed systems, genetic improvements—these aren’t luxuries anymore. They’re survival tools. And if refinancing is in your future, talk to your lender now while you’re still current on your payments.

What to Watch: The late November GDT auction will tell us if this cheese crash was a one-off or a trend. If CME Class III futures for Q2 2026 start climbing above $17.50, maybe recovery comes sooner. China’s Q4 import data will confirm if this structural shift is as permanent as it looks. And keep an eye on processor announcements—they’re reshaping regional opportunities as we speak.

Where We Go from Here

The November 4 GDT results confirm what many of us suspected but didn’t want to admit: this isn’t your typical dairy cycle. China’s not coming back for powder, productivity gains mean we can’t count on natural supply correction, and none of the usual recovery mechanisms are working.

The operations that’ll make it through won’t necessarily be the ones with the best cows or the most land. They’ll be the ones who recognized early that the game has changed and adapted accordingly. Maybe that means doubling down on efficiency, maybe pivoting to premium markets, or maybe—and this is hard to say—getting out while there’s still equity to preserve.

For the industry as a whole, this evolution is probably necessary for long-term health. But that’s cold comfort when you’re trying to figure out next month’s loan payment.

What November 4 made crystal clear is that waiting and hoping aren’t strategies. The data says we’re in for extended weakness that requires careful planning, smart positioning, and probably some fundamental changes to how we operate.

The clock’s ticking, friends. The decisions you make in the next 60-90 days will determine whether you’re still milking in 2027. The path forward isn’t easy, but at least it’s becoming clearer. What you do with that clarity… well, that’s up to you.

If you or someone you know needs support, U.S. farmers can reach Farm Aid at 1-800-FARM-AID (1-800-327-6243). Canadian farmers can contact the Canadian Suicide Prevention Service at 1-833-456-4566. New Zealand farmers can reach Rural Support Trust at 0800 RURAL HELP (0800 787 254).

KEY TAKEAWAYS

Cheddar’s 6.6% Crash = Plan B Failed: When cheese falls harder than powder, your pivot strategy is dead. Stop hoping, start adapting.
China’s Done Buying: 85% self-sufficient + 40% fewer infants + 10M MT new production = permanent demand destruction. They’re not coming back.
The $2.4M Question: Your 500-cow operation loses $101K/month. You have ~$2M equity. Recovery takes 24-30 months. Do the math.
Only 3 Paths Work: Premium route (needs location + $400K), mega-scale (2,000+ cows + millions), or strategic exit (Chapter 12 before default).
90 Days to Decide: By February 1, 2026, you must commit to scaling, pivoting, or exiting. After that, the bankruptcy court decides for you.

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 – Provides the on-farm playbook for immediate efficiency. It details how to master forage quality, transition cow management, and amino acid strategy to cut costs and drive profit, even with low milk prices.
$2 Milk or $20 Milk: The Simple Testing Strategy Creating 1000% Premiums – This is the implementation guide for the “Premium Route.” It breaks down the real-world costs and strategies for A2, grass-fed, and micro-pasteurization, showing how to create value outside the commodity market.
Robotic Milking Revolution: Why Modern Dairy Farms Are Choosing Automation in 2025 – If you’re considering the “Scale” path, read this first. It provides the blunt, real-world ROI for robotics, detailing the true costs, labor savings, and management changes that separate profit from bankruptcy.

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Categories : Dairy Markets

Tags : Dairy Farm Profitability, dairy financial planning, dairy market analysis, Global Dairy Trends, herd management strategy, milk price risk management

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

Why Dairy Markets Can’t Self-Correct Anymore: The Hidden Forces Reshaping the Dairy Industry’s Future

Monday, November 3rd, 2025

Digesters: $100/cow. Beef crosses: $250/calf. Carbon credits: $28K. When milk becomes your SMALLEST revenue, you survive.

EXECUTIVE SUMMARY: Traditional dairy economics no longer exist—milk production rises 7.5% while prices crash 29% because half of the global supply doesn’t need milk profits anymore. Six structural forces —from European cooperatives locked into accepting all production to U.S. farms earning $100/cow from digesters —have permanently broken market self-correction mechanisms. This isn’t temporary: 40-50% of U.S. milk now comes from multi-revenue operations that profit even at $12/cwt, while conventional farms need $17/cwt to survive. The 2026-2027 shakeout will consolidate 25-40% of production into mega-dairies as thousands of single-revenue farms exit. But you can act now: implementing beef-on-dairy generates $15,000-20,000 annually with one phone call to your breeding tech—no loans, no construction. The divide is clear: farms with multiple revenue streams will thrive at prices that bankrupt traditional operations. Your survival depends on recognizing this transformation isn’t cyclical—it’s permanent.

I recently reviewed the UK’s latest production figures from AHDB Dairy, and something remarkable stood out. Milk output increased 7.5% while butter prices declined 29.2% year-over-year. This pattern extends across Europe—Poland’s growing 5.7%, Italy expanding 3%. Meanwhile, European Commission data shows cheese prices down 33-37% across varieties.

What’s particularly noteworthy is how this contradicts everything we thought we knew about market dynamics. When prices fall by a third, producers should reduce output. Basic economics, right? Yet that’s not happening, and understanding these dynamics becomes essential for navigating what lies ahead.

My analysis of Global Dairy Trade auctions, European Energy Exchange futures, and USDA production reports reveals something striking: approximately half of the global milk supply now operates under economic principles different from those we traditionally understood. This shift affects every segment of our industry, from family farms to mega-dairies, from local cooperatives to multinational processors.

***Milk production surges 7.5% while butter prices plummet 29.2% year-over-year—a violation of basic supply-demand principles proving half the global supply no longer responds to price signals***

Six Structural Forces Reshaping Market Dynamics

Through extensive analysis of production patterns and discussions with industry professionals across multiple regions, I’ve identified six key factors preventing traditional market corrections. As many of us have observed, these aren’t temporary disruptions—they’re permanent structural changes.

1. Cooperative Frameworks and Supply Obligations

European cooperatives manage approximately 60% of the continent’s milk, according to data from the European Dairy Association. What’s interesting here is how these systems operate under unique structural constraints that essentially lock in production.

Within these frameworks, members maintain contractual obligations to deliver their full production, while cooperatives must accept all member milk regardless of market conditions. Think about operations like Dairygold in Ireland—when most members have committed their supply through formal agreements, the cooperative can’t refuse deliveries even when tanks are full and prices are in the basement.

This represents a significant structural difference from the flexibility many North American producers experience. I’ve noticed that producers in Wisconsin or California often don’t fully appreciate how these European constraints ripple through global markets.

2. Infrastructure Investment and Economic Lock-In

Modern dairy facilities require substantial capital that creates what I call “economic handcuffs.” Current robotic milking systems range from $150,000 to $250,000 per unit, according to Lely and DeLaval specifications. The University of Wisconsin Extension‘s latest facilities guide indicates modern freestall barns require $2,000-3,500 per cow space.

Do the math on a 200-cow operation—you’re looking at $2-3 million in specialized assets. And here’s what keeps me up at night: agricultural equipment values have declined significantly, with virtually no secondary market for used robotic milkers.

Cornell’s agricultural economics research demonstrates what we’re seeing firsthand—operations continue production as long as variable costs are covered, even when they’re bleeding red ink on total costs. It’s rational for the individual farm, but it perpetuates the oversupply problem.

A 3,500-cow California operation generates $423,000 annually from non-milk revenue—with energy contracts dominating at $350K, fundamentally changing farm economics and making them profitable even when milk prices crash

3. Agricultural Support Programs and Income Stability

The European Union’s Common Agricultural Policy represents a €291.1 billion commitment from 2021-2027. What farmers are finding is that these payments, primarily based on land area rather than production, create income stability that’s independent of milk prices.

Research from Wageningen University indicates CAP payments constitute 30-40% of net farm income for many European operations. I’ve spoken with numerous Irish producers whose single farm payments—typically €15,000-20,000 annually—provide the cushion that keeps them milking when prices tank.

While these programs successfully maintain rural communities (and that’s important), they also reduce the supply response we traditionally expected during downturns.

4. Energy Production and Alternative Revenue Streams

This development changes everything about dairy economics. EPA’s AgSTAR program data shows methane digesters generate $80-100 per cow annually through renewable natural gas contracts. California Air Resources Board reports indicate some operations earn $2-3 per hundredweight from energy alone.

A senior consultant recently told me, “We’re approaching a point where milk becomes the co-product of energy production.” That might sound extreme, but look at the numbers…

California operations with 10-15 year renewable natural gas contracts can’t reduce cow numbers without breaching agreements worth millions. With over 200 digester projects operational or under construction, according to the California Department of Food and Agriculture, this fundamentally alters production incentives.

5. Environmental Compliance and Capital Lock-In

Environmental regulations create an interesting paradox. I recently spoke with a Vermont producer who invested approximately $275,000 in manure separation and phosphorus recovery to meet Required Agricultural Practices regulations.

“When you’ve invested that much in compliance infrastructure,” he explained, “continuing at marginal returns often makes more sense than exiting and losing everything.”

This becomes especially complex for operations with succession plans. Kids wanting to farm face tough choices between continuing marginally profitable operations or walking away from family legacies.

6. Beef-on-Dairy Programs: Accessible Revenue Diversification

Here’s a revenue stream that deserves particular attention because it’s accessible to everyone. USDA Agricultural Marketing Service data from October shows beef-cross dairy calves commanding $200-300 premiums over Holstein bulls. Regional auctions report Angus-Holstein crosses averaging $450-500 while Holstein bulls struggle to hit $200.

Industry breeding data suggests 30-40% of U.S. operations now use beef semen for 20-50% of breedings, up from under 10% five years ago. A 100-cow dairy breeding 30 animals to beef genetics at a $250 premium generates $7,500additional revenue—roughly 50¢ per hundredweight across total production.

Penn State’s dairy genetics team has documented how these programs provide crucial diversification for operations of all sizes, making it a key survival strategy in the current market environment.

Six permanent structural forces have destroyed traditional dairy market corrections—from European cooperative obligations to U.S. energy contracts—resulting in 40-50% of global milk supply operating independent of price signals, ending boom-bust cycles forever

Understanding Multi-Revenue Economics

The transformation from single to multiple revenue streams represents a paradigm shift in how we think about dairy profitability.

I recently analyzed a 3,500-cow California operation that illustrates this perfectly. Their annual alternative revenue includes:

Energy contracts: $350,000
Beef-cross premiums: $45,000
Carbon credits: $28,000

That’s over $400,000 in non-milk revenue, roughly $3 per hundredweight. Their effective break-even after all revenue streams? About $11.50/cwt. Meanwhile, University of California Cooperative Extension data shows conventional neighbors need $16-18/cwt just to cover costs.

***Multi-revenue dairy operations maintain profitability at $11.50/cwt while conventional farms require $16-18/cwt—a $4.50+ gap that’s forcing the largest industry consolidation in decades***

With November’s CME Class IV at $13.90, multi-revenue operations maintain positive margins while single-revenue neighbors hemorrhage cash daily.

Scale of the Transformation

EPA’s AgSTAR database documents over 270 digesting operations covering approximately 10% of the national herd. The California Energy Commission reports $522 million in private investment in digester projects.

When we combine operations with digesters, beef programs, carbon credits, and solar leases, approximately 40-50% of U.S. milk production now comes from farms with significant non-milk revenue. Traditional supply response? It’s essentially dead.

Processor Adaptation Strategies

Processors aren’t sitting idle—they’re repositioning aggressively. The whey market tells the story.

The Whey Market Divergence

While CME Class IV futures languish at $13.90-14.00/cwt through March 2026, dry whey hit nine-month highs at 71¢/pound—16¢ above the March-September average according to USDA Dairy Market News.

Why this divergence? Three factors stand out:

First, clinical guidelines for GLP-1 medications like Ozempic recommend 1.2-1.5 grams of protein per kilogram body weight to preserve muscle during weight loss. Whey’s amino acid profile makes it ideal.

Second, the sports nutrition market will reach $27.6 billion by 2030, up from $15.6 billion in 2022, with whey representing 70% of protein supplement sales.

Third, technology breakthroughs—companies like Milk Specialties Global have developed clear, fruit-flavored protein beverages that expand beyond traditional shake consumers.

Strategic Processing Investments

The International Dairy Foods Association reports over $11 billion in new processing capacity through 2027. Valley Queen Cheese Factory’s South Dakota expansion illustrates the strategy—management emphasizes whey and lactose demand drives growth planning, not cheese.

These processors recognize that a predictable milk supply from multi-revenue farms justifies substantial investments in protein concentration. Cheese enables whey capture—the latter increasingly drives decisions.

Global Price Transmission Mechanisms

Recent GDT auctions showed whole milk powder down 0.5%, European powder fell 2% per CLAL monitoring, and U.S. nonfat dry milk hit 13-month lows at $1.1325 CME spot. Three different structures, identical direction.

How Arbitrage Enforces Price Discipline

Import buyers consistently report shifting purchases immediately when New Zealand, German, or Wisconsin prices show 5% differentials. The Global Dairy Trade platform, with hundreds of bidders trading 10 million metric tonsannually, creates transparent global price discovery.

Structural Supply Rigidity Everywhere

All major exporters demonstrate inflexibility:

Fonterra must accept all shareholder milk (82% of New Zealand production)
European cooperatives, plus CAP support, maintain production regardless of price
U.S. operations with digester/beef revenue lock in production for years

When China’s imports grow just 6% versus the historical 15-20% (USDA Foreign Agricultural Service), no region possesses quick adjustment mechanisms.

Anticipated Market Evolution: 2026-2027

Based on financial indicators, here’s what I expect:

Q4 2025 – Q1 2026: Credit Market Adjustment

Financial institutions report rising delinquencies. Some require quarterly rather than annual production reports. American Farm Bureau data shows Chapter 12 bankruptcies increased 55% in 2024—that trend continues.

Q2-Q3 2026: Initial Consolidation

Credit-constrained operations begin exiting, but milk production doesn’t disappear—it consolidates. I’m seeing California Central Valley operations with 5,000+ cows buying neighboring 500-cow dairies as satellites.

Q4 2026 – Q2 2027: Structural Realignment

Analysis suggests Class IV stabilizes around $15.00/cwt—sufficient for multi-revenue operations but challenging for conventional single-revenue farms.

The dairy industry faces unprecedented consolidation: multi-revenue mega-dairies will more than double their market share to 32.5%, while conventional small farms shrink from 40% to 28% and the price-responsive segment collapses from 85% to under 45%—ending traditional supply-demand cycles

By mid-2027:

Multi-revenue mega-dairies: 25-40% of supply (up from 15%)
Conventional small farms: 26-30% (down from 40%)
Price-responsive segment: Under 45% (down from 85%)

This represents permanent transformation, not cyclical adjustment.

Southeast Asian Trade: Realistic Assessment

October’s agreements with Malaysia, Cambodia, Thailand, and Vietnam generated optimism. Let’s examine the actual impact.

USDA data shows current exports to these nations total $335 million—just 4% of our $8.2 billion total. Mexico alone buys $2.47 billion.

Even assuming aggressive growth, additional exports might reach $150-200 million by 2027—roughly 750 million pounds milk equivalent. But U.S. production ranges from 6.8 to 9.1 billion pounds annually. Southeast Asia absorbs 8-11% of growth—helpful but not transformative.

These agreements benefit operations with scale, integrated processing, and West Coast proximity—not the Wisconsin 300-cow farm facing bankruptcy.

Strategic Guidance by Operation Type

Small-to-Medium Conventional (100-500 cows)

Post-crisis prices around $14.85/cwt for Class IV are likely to fall below your break-even. University of Minnesota’s FINBIN shows operations this size need $15.50-17.50/cwt.

Immediate action: Implement beef-on-dairy tomorrow. Breeding 30-40% to beef generates $150-250/calf premium. For 200 cows, that’s $15,000-20,000 annually. Call your breeding tech today.

Exit strategies: Chapter 12 provisions offer tax advantages when properly structured. Timing matters as provisions may change.

Expansion: Only viable with 40%+ equity. Reaching 1,500+ cows requires $3-5 million in capital.

Metric	Holstein Bull Calf	Beef-Cross Calf	Premium/Advantage
Market Value	$150-200	$450-500	$250-300
Current Adoption	N/A	30-40% of farms	Growing rapidly
Breeding %	100% dairy	20-50% beef	Strategic flexibility
Capital Required	$0	$0	Zero investment
Annual Revenue (100 cows, 30% beef)	N/A	$7,500-9,000	Immediate impact
Per Cwt Benefit	N/A	+$0.50/cwt	Pure profit add-on

Large Conventional (500-1,500 cows)

You’ll survive but face persistent margin pressure. Push beef-on-dairy toward 40-50% if heifer inventory allows. Lock processor relationships now. Watch for acquisition opportunities.

Near gas pipelines? Seriously evaluate digesters—the economics are compelling, especially with access to infrastructure.

Integrated and Mega-Dairy Operations

The next 24 months present strategic opportunities: favorable asset acquisitions, long-term processor contracts, and continued revenue diversification. Don’t overestimate Southeast Asian volumes—focus on operational efficiency and strategic positioning.

The Bottom Line

What we’re witnessing represents market evolution driven by technology and policy, not temporary failure. The emerging industry will be more concentrated, less price-responsive, and fundamentally different.

Traditional boom-bust cycles are giving way to persistent equilibrium at lower prices, with alternative revenue determining competitive advantage. I know this challenges everything many of us learned. The farm I grew up on wouldn’t survive today’s reality.

But early recognition creates options. Waiting for “normal” to return? That normal no longer exists.

Operations understanding these structural changes will define the next era. Those managing based solely on milk prices risk missing critical competitive factors.

Your strategic window remains open, but it won’t remain open indefinitely. Whether implementing beef-on-dairy, evaluating energy opportunities, or planning transitions, purposeful action becomes essential.

In this evolving dairy economy, standing still means falling behind. The fundamentals have shifted, and our strategies must evolve accordingly. While challenging, this transition creates opportunities for those prepared to adapt.

Together, we’ll navigate this transformation. But success requires understanding the forces at work and a willingness to embrace new models. The path forward demands both realism about challenges and optimism about opportunitiesfor those ready to evolve.

KEY TAKEAWAYS:

Critical Market Intelligence Traditional dairy economics is dead: Half of global milk supply doesn’t need milk profits—digesters generate $100/cow, beef-on-dairy adds $250/calf, making $12/cwt profitable while you need $17/cwt
Immediate opportunity: Implement beef-on-dairy tomorrow for $15,000-20,000 annual revenue with zero capital investment—just one call to your breeding tech
Six permanent forces guarantee oversupply: European cooperatives must accept all milk, U.S. farms locked into 10-15 year energy contracts, and CAP subsidies cushion losses
2026-2027 consolidation inevitable: 25-40% of milk production shifting to multi-revenue mega-dairies as thousands of conventional farms exit at $15/cwt prices
Your choice is binary: Develop multiple revenue streams now or exit within 24 months—waiting for market recovery means waiting for something that won’t happen

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

Learn More:

Will Your Dairy Farm Survive the Next Decade? The Brutal Math of Consolidation – This strategic analysis digs into the math behind the consolidation wave. It reveals the cost-per-cow advantages of mega-dairies and the specific “scale or pivot” dilemma facing producers, reinforcing the main article’s 2026-2027 forecast.
Robotic Milking Revolution: Why Modern Dairy Farms Are Choosing Automation in 2025 – While the main article highlights the “economic handcuffs” of capital investment, this piece details the ROI. It quantifies the 60% labor savings and data advantages, explaining why producers are making the multi-million dollar investments that lock in production.
Europe’s Strategic Dairy Revolution: Why Cutting Herds is Making Producers Rich – This article provides a powerful alternative tactic. Instead of just adding revenue, it demonstrates how to achieve profitability through strategic contraction, using precision culling and component optimization to boost per-cow margins and cut feed costs.

Join the Revolution!

Categories : Dairy Markets

Tags : beef on dairy, Dairy Farm Profitability, dairy market analysis, farm revenue diversification, Global Dairy Trends, methane digesters, 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

The 90-Day Dairy Pivot: Converting Beef Windfalls into Next Year’s Survival

Monday, October 20th, 2025

Cull cows over $2,000 and beef-on-dairy calves near $1,000—why this 90-day window could make or break your 2026 margins

EXECUTIVE SUMMARY: Fall 2025 delivers an uncommon—and urgent—opportunity for U.S. dairy operators. Strong cull and beef-on-dairy calf prices, reported at $2,000+ and near $1,000 respectively, are keeping many herds afloat amid relentlessly flat $17 milk. University and market economists warn these beef premiums look fleeting, with the cattle cycle and supply signals already tightening for 2026. Recent research shows Midwestern breakevens remain high, while only producers invested in butterfat performance and rigorous herd management capture true component bonuses. Meanwhile, export hopes are dimming—contract premiums are now won on genetics, traceability, and relentless cost control. As lenders prepare for summer’s critical cattle inventory and cash flow reviews, operations with intentional plans—whether expanding, pivoting, or winding down—consistently protect more equity. The next three months are a “use it or lose it” window for turning fleeting beef revenue into sustainable resilience. What farmers are discovering is that asking hard questions, running fresh numbers, and pushing for proactivity can make 2026 a year of opportunity—not regret.

Checking in with producers this fall, there’s one urgent takeaway: this is a critical 90-day window to turn temporary beef premiums into lasting resilience for 2026. The evidence is in the numbers—cull cows clearing $2,000 and beef-on-dairy calves pushing $1,000 (USDA National Weekly Direct Cow and Bull Report, October 2025). These premiums are propping up many milk checks stuck at $17. However, as extension economists and market analysts from the University of Wisconsin and Cornell emphasize, these conditions are shifting. We’re staring down the last weeks of this run before cattle cycles and supply buildup set a new tone for the coming year.

What’s interesting here is seeing smart operators use this moment to shore up their businesses—paying down debt, making pro-active facility investments, and building a cash buffer instead of assuming current premiums will last. This development suggests that treating a tailwind as flexibility—not false security—creates real strategic advantage for the next transition period.

The crisis in black and white: milk checks stuck at $17 while breakevens demand $17.50-$18.50, but cull cows and beef calves are throwing off unprecedented cash—turning cattle into the lifeline keeping farms afloat.

The Math of Survival: Breakevens & Components

Revenue Source	2024 Baseline	Fall 2025	Per Cow Impact	100-Cow Herd
Cull Cows (15% rate)	$1,500/head	$2,000+/head	+$75	+$7,500
Beef-Dairy Calves (40% births)	$600/head	$1,000/head	+$160	+$16,000
Component Bonus (3.7%+ protein)	Base milk	+$1.25/cwt	+$31/yr	+$3,100
TOTAL OPPORTUNITY	—	Stack strategies	+$266/cow	+$26,600
🚨 Baseline (No Action)	Wait for recovery	Miss window	-$50 to -$150	-$5K to -$15K

Looking at this trend, most Midwest herds face pre-beef breakevens between $17.50 and $18.50/cwt (UW Center for Dairy Profitability, Fall 2025 Update). Out west, Idaho’s and Texas’s biggest dry lot systems sometimes run at $14–$15/cwt, riding local feed and labor edge. Either way, high butterfat performance is the separating factor. Hitting 3.7% protein or better can mean $1–$1.50/cwt over base—if you’ve invested in genetics, tight fresh cow management, and keep transition periods on track. As many of us have seen, those premiums aren’t accidental; they follow from tough culling decisions and knowing your numbers cold.

***That $1-$1.50/cwt component bonus isn’t optional anymore—it’s the difference between red ink and breaking even, between selling out and surviving another season with $17 milk***

Export Hopes, Local Contracts

For years, many of us held out hope that another export surge would save the day—especially from China. But this season’s USDA GAIN trade data and Rabobank’s Dairy Quarterly all show it’s growth in cheese and butter, mostly cornered by New Zealand and Europe, that’s outpacing demand for U.S. powder. In the Midwest and Northeast, plants are hungry for consistent, high-component, specialty contracts. Herds that made early investments in A2, organic, or niche certifications find their milk in demand; others should ask whether fluid or low-component contracts will provide enough margin as the cycle shifts.

July Inventory—Lender Stress & Planning Leverage

It’s no surprise to seasoned managers that the USDA July Cattle Inventory Report is more than an annual headcount. When beef prices soften and heifer retention ticks up, lenders across regions—like those briefed by Minnesota Extension and New York FarmNet—run tougher stress tests on farm finances. Farms sitting right at a 1.25x debt service coverage are fine for now, but that can slip fast. Those who restructure or plot a sale while balance sheets are still strong tend to carve out six-figure equity advantages compared to late, forced exits. The lesson, as risk educators preach, is that deliberate action always beats hoping for a bounce.

Three Lanes: Exit, Pivot, or Scale

From kitchen tables in northeast Iowa to group calls with Western Idaho co-ops, three paths are front and center:

Exit with Intention: Producers looking at high debt or retirement are using strong asset values to secure their family legacies, not just chasing another cycle.
Premium Niche Pivot: Some are cutting herd size, chasing premium contracts—A2, grassfed, organic, you name it—with a willingness to meet tough specs on components, health, and traceability. This approach works best when paired with deep processor relationships and quick financial routines.
Expansion: A Tool for the Prepared: Rabobank’s 2025 sector review and extension management profiles agree: disciplined, high-performing herds with fresh cow and labor management dialed in can scale with confidence. For others, fast growth just means fast exposure if things don’t break right.

The north star here? Monthly cost-of-production benchmarking, regular review with lenders, and not waiting to renegotiate contracts until margins are squeezed.

Global Competition & Policy Realities

U.S. Midwest producers face a brutal 20-45% cost disadvantage against New Zealand and Argentina—at $0.39/lb versus $0.27-$0.32, every efficiency gain and premium matters when you’re starting in the hole.

It’s worth noting that IFCN’s 2025 benchmarks put leading New Zealand and Argentina herds at $0.27–$0.32/lb. Even top Western U.S. performers run about $0.35, with most Midwest herds closer to $0.39. The gap isn’t destiny: it reflects differences in feed-to-milk efficiency, heifer survival, and transition consistency. Policy backstops like DMC are valuable, and analysis from Cornell and Wisconsin Extension reinforce this: they help good operators stay afloat but aren’t enough to shore up chronic losses over time.

The Myth of the “Deal of the Century”

As expansion talk returns, recent Rabobank analysis and local case studies ring a familiar bell: the “deal of the century” works out for operations already strong on the basics—cost, herd health, labor discipline. Ramped-up purchases without this foundation rarely yield the hoped-for returns and often accelerate operational headaches.

Action Steps: Navigating the 90-Day Window

Here’s the practical bottom line: This window is closing, not expanding. First, benchmark your cost of production with the latest IFCN and extension tools; don’t trust last year’s averages. Next, proactively arrange a review session with your banker—not to plead for relief, but to present your plan for surviving and thriving into next year. Scrutinize your processor or coop contracts and specialty program agreements—will you be the supplier they prioritize in a shrinking market? And take the time this fall to address transition and herd health; waiting until calving issues flare won’t do.

The difference for 2026 will be made by those who act intentionally and aren’t afraid to adjust their course. That’s the mindset that’s kept American dairies resilient through every market twist—and it’s how the smartest operators I know are reading this moment.

KEY TAKEAWAYS

Farms leveraging this fall’s beef premiums could improve net margins by $100 to $200 per cow, while disciplined herd and transition management opens $1–$1.50/cwt in component bonuses (UW Extension, IFCN, Rabobank).
Practical action: Benchmark your cost of production now, meet proactively with lenders to review true breakevens, and secure or re-align premium contracts for 2026 before markets tighten.
Butterfat, protein, and health discipline now outperform volume; herds that master transition periods and component payouts lead in uncertain markets.
The window for turning “luck” into a long-term strategy is closing. Lenders, markets, and export buyers all point to greater volatility ahead for operations not dialed on costs or value.
Across Wisconsin, Idaho, and the Northeast, the most resilient producers are those who build trusted advisor relationships and plan ahead—regardless of herd size or business model.

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

Learn More:

Navigating Today’s Dairy Margin Squeeze: Insights from the Field – This piece provides tactical field insights for optimizing components and feed strategies. It reveals how targeted nutritional adjustments and culling discipline can directly boost per-cow income, offering an immediate action plan for improving the breakeven numbers discussed in our article.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong– Go deeper into the strategic market forces shaping 2026. This analysis challenges conventional wisdom on pricing models and policy risks, demonstrating why a component-based economic strategy and stronger processor relationships are now more critical than ever for long-term survival.
AI and Precision Tech: What’s Actually Changing the Game for Dairy Farms in 2025? – Explore the innovation and technology driving modern profitability. This article breaks down the real-world ROI for precision tools like AI-driven feeding and automated health monitoring, showing how strategic tech investments can slash input costs and enhance herd efficiency.

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Categories : Dairy Markets

Tags : beef-on-dairy, dairy market analysis, dairy profitability, farm efficiency, herd management, milk components, strategic farm planning

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 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:

Tips from the Sports Pros to Improve Your Dairy Herd’s Efficiency – This article provides a tactical, on-farm perspective on how to achieve the production efficiency gains mentioned in the market report. It offers practical strategies for optimizing herd health, nutrition, and management, helping producers improve per-cow productivity and profitability in a challenging market.
Dairy Profit Squeeze 2025: Why Your Margins Are About to Collapse (And What to Do About It) – Go deeper into the strategic market forces driving the issues highlighted in the report. This piece offers a hard-hitting look at the long-term implications of China’s tariffs, export challenges, and regional disadvantages, providing a crucial context for why a domestic focus is essential.
Future-Proof Your Dairy Farm: Tackling the Top 3 Challenges of 2050 – Look beyond the daily market swings and explore the innovative solutions that will define the dairy industry’s future. This article reveals how technological advancements in methane reduction, animal welfare, and data-driven management are not just future trends but actionable strategies for long-term sustainability and success.

Join the Revolution!

Categories : CME Dairy Markets

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

CME Daily Dairy Market Report for September 9, 2025: When Cheese Takes a Dive, but Whey Says “Hold My Beer”

Tuesday, September 9th, 2025

Your co-op says fall flush is normal. We found why 2025 is different – and it’s costing you $0.50/cwt

EXECUTIVE SUMMARY: We’ve been digging into today’s CME chaos, and here’s what’s really happening while everyone else is focused on the obvious cheese drop. The 3¢ whey surge isn’t random – it’s revealing where protein demand is actually flowing in 2025, and most producers are completely missing this shift.Your September milk check just took a $0.30-0.50/cwt hit, but that milk-to-feed ratio sitting at 1.65 is the real killer – anything below 2.0 means you’re in survival mode, not profit mode. Meanwhile, we’re sitting on butter that’s $0.95/lb cheaper than European competition globally, yet most operations aren’t structured to capture export premiums.The fall flush started early this year because processors are too comfortable with their inventory levels. What’s different from previous years? The financial pressure is forcing producers into culling decisions that might actually moderate the typical production surge – and that creates opportunity for operations positioned correctly.Bottom line: this isn’t your typical September softness, it’s a fundamental repositioning that separates the survivors from the thrivers.

KEY TAKEAWAYS

Lock your feed costs NOW before soybean meal climbs higher – today’s $3.40/ton jump to $288.60 is a warning shot, and with that 1.65 milk-to-feed ratio, every dollar in feed cost hits your margin directly (call your feed supplier this week for Q4 contracts)
Your butter is export gold at $2.00/lb – we’re underselling European competition by nearly a dollar per pound globally, but only operations with port access logistics can capture this premium (talk to your co-op about export programs immediately)
Whey’s 5% surge signals protein demand shift – while everyone panics about cheese, whey protein demand is exploding in 2025, making high-component milk more valuable than ever (focus on butterfat and protein optimization in your ration)
DRP coverage at $17.50/cwt for Q1 2026 still makes sense – with Class III futures tracking $16.96 and downside risk increasing, protecting above $17.50 covers your cost of production plus margin (don’t wait for premiums to climb higher)
Fall flush dynamics started early and aggressive – processors aren’t chasing milk like usual, meaning premium structures will stay weak through October unless you’re positioned with the right co-op contracts (review your marketing agreements now)

CME dairy prices, milk-to-feed ratio, dairy market analysis, dairy risk management, dairy export trends

Here’s what caught my attention today – while most of the dairy complex was getting hammered, dry whey decided to party like it’s 1999, jumping 3¢/lb in a market where everything else was bleeding red ink. The thing about days like this is they tell you exactly where the real demand is hiding.

Your September milk check just took a hit, no sugarcoating it. We’re looking at probably $0.30-0.50/cwt coming off what you were expecting just last week. But here’s what’s interesting – this isn’t some random market noise. This is processors telling us they’re comfortable, maybe too comfortable, with their inventory positions as we head into fall flush territory.

What Actually Happened Today

The story starts early this morning when the blocks opened weakly and never recovered. What strikes me about today’s action is how broad-based the selling was – this wasn’t just one product having a bad day.

Product	Price	Today’s Move	What This Means for Your Operation
Cheese Blocks	$1.6650/lb	-3.00¢	Ouch. This is your Class III taking a direct hit. Processors aren’t chasing milk
Cheese Barrels	$1.6800/lb	-2.00¢	Barrels over blocks again – weird market signal right there
Butter	$2.0050/lb	-2.00¢	Just above the psychological $2.00 level. Class IV is feeling the pressure
NDM	$1.2000/lb	-2.00¢	Making us the high-cost powder supplier globally – not good
Dry Whey	$0.6000/lb	+3.00¢	The lone soldier standing. Protein demand is real

The thing about cheese blocks dropping 3¢ in one session… that’s the biggest single-day move we’ve seen since late July. Meanwhile, barrels holding up better create this inverted spread that frankly has traders scratching their heads. When the market can’t decide which product should be worth more, you know uncertainty is creeping in.

Trading Floor Reality Check

Here’s where it gets interesting from a mechanics standpoint. We had zero barrel trades today – none. The price fell 2¢ without a single load changing hands. That tells you buyers just walked away from the market entirely at those levels.

On the flip side, dry whey had five active bids and zero offers at the close. Sellers didn’t want to part with the product, and buyers were begging for more. That’s why it popped 5% in one session while everything else was getting crushed.

The volume story is telling too – 11 butter loads and 12 NDM loads. This wasn’t some quiet drift lower on thin trading. There was real conviction behind the selling, which makes me more concerned about the sustainability of current price levels.

The Global Chess Match (And We’re Not Winning Everywhere)

This is where things get really interesting, and frankly, a bit concerning for some of our export programs.

Butter – We’re the Global Bargain Bin: Our CME butter at $2.0050/lb makes European butter at roughly $2.95/lb look like highway robbery. New Zealand’s sitting at around $3.14/lb. If we can get our butter to the ports – and that’s always the question with logistics these days – it should move internationally. The freight situation out of the West Coast has improved, but we’re still dealing with container availability issues that can turn a great export opportunity into a logistics nightmare.

Powder – Houston, We Have a Problem: Here’s where I get worried. Our NDM at $1.20/lb is pricing us out of the global market. European SMP is trading around $1.06/lb, New Zealand’s at $1.18/lb. That 6-14¢ premium we’re carrying is massive in commodity terms. I’ve been talking to export traders, and they’re basically shut out of new business except for some specialty applications.

What’s particularly troubling is the South American situation that’s not getting enough attention. Argentina and Uruguay have been quietly building their powder capacity, and they’re starting to compete directly with us in key markets like Southeast Asia and North Africa. Their cost structure, especially with favorable exchange rates, is putting additional pressure on global pricing.

The Asian Demand Picture: Speaking of Southeast Asia… the demand patterns we’re seeing out of Vietnam, Thailand, and Indonesia are shifting. These markets are becoming increasingly price-sensitive, opting to shop globally rather than remaining loyal to traditional suppliers. China’s still playing games with import timing – they’ll go months without buying, then suddenly need massive quantities. Makes planning impossible for our exporters.

Feed Costs and the Margin Squeeze

The math on feed costs is getting ugly, and today’s action made it worse. Soybean meal jumped hard – up $3.40/ton to $288.60 for December – while corn eased slightly to $4.1950/bu.

Here’s the calculation that’s keeping me up at night: with Class III futures at $16.96/cwt and current feed values, we’re looking at a milk-to-feed ratio of about 1.65. Anything below 2.0 means you’re in survival mode, not profit mode.

What’s particularly challenging is the regional variation in feed costs. Talking to producers in the Northwest, they’re dealing with drought-related hay costs that are astronomical. Meanwhile, parts of Wisconsin are seeing decent local corn prices, but their basis to futures is still wide due to transportation bottlenecks.

The currency angle isn’t helping either. The strong dollar makes our exports less competitive, but it also makes imported feed ingredients more affordable. It’s a mixed blessing that currently feels more of a curse than a blessing.

Production Patterns and Seasonal Reality

The fall flush is happening right on schedule, maybe even a bit early in some regions. I’m hearing from Wisconsin and Minnesota that milk is flowing freely – heat stress is gone, cows are comfortable, and production is ramping up just as it should this time of year.

But here’s what’s different this year compared to recent falls: the financial pressure on producers is more intense. With these tight margins, some operators are making hard decisions about culling and herd management that might actually moderate the typical fall production surge. It’s early to call this a trend, but it’s worth watching.

California’s telling a slightly different story. Central Valley producers are seeing more normal seasonal patterns, but they’re also dealing with feed cost pressures that are keeping some milk in the fluid market rather than going to manufacturing. The Class 4b premium for fluid milk is looking pretty attractive compared to manufacturing returns right now.

What’s Really Moving These Markets

Domestic Side of Things: Retailers finished their back-to-school cheese promotions and frankly don’t seem eager to reload aggressively. Food service demand always hits a lull in September – it’s as predictable as sunrise. The surprising thing is how comfortable processors seem with their inventory positions. Usually by now we’d see some restocking ahead of Q4 holiday demand, but that’s not happening yet.

Export Markets – The Full Story: Mexico remains our most reliable customer, but even they’re starting to shop around when our premiums get too wide. I’m hearing reports of Mexican buyers testing European suppliers for powder programs, which should be a wake-up call for our pricing.

The Middle East and North Africa markets are evolving rapidly. These regions are growing their import needs, but they’re also becoming more sophisticated buyers. They’ll take advantage of global price differentials in ways they didn’t five years ago.

Currency Impact Deep Dive: The dollar’s strength is a double-edged sword that’s currently cutting us more than helping. Yes, it makes feed imports cheaper, but it’s pricing us out of competitive export situations. A 5% move in the dollar can easily swing export profitability from positive to negative, and that’s exactly what we’re seeing in some markets.

Futures and Forecasting (With Some Healthy Skepticism)

The futures market’s reaction to today’s weakness was muted, which suggests that traders believe this might be overdone. September Class III settled at $16.96/cwt, up slightly, while Class IV dropped to $16.92/cwt.

Now, about those USDA forecasts everyone quotes religiously… their latest work suggests Class III averaging $17.25 for Q4 2025. Here’s the thing, though – their methodology tends to smooth out the kind of volatility we’re seeing right now. They use models that assume rational market behavior, but markets aren’t always rational, especially when seasonal patterns collide with global trade disruptions.

The confidence intervals on these forecasts are wider than USDA typically admits. I’d put real money on Q4 Class III being anywhere from $16.50 to $18.00/cwt, depending on how export demand develops and whether this fall flush is as pronounced as expected.

Hedging Reality Check: With this volatility, Dairy Revenue Protection (DRP) premiums are climbing. What cost you $0.25/cwt to ensure last month might run $0.45/cwt today. But given the downside risk we’re seeing, those premiums might be worth it for Q1 2026 coverage.

Put options on Class III futures are getting expensive, too, but they’re still cheaper than the potential losses if this downtrend continues. I’m particularly interested in the $17.00 puts for December and January contracts.

Regional Market Deep Dive: Upper Midwest Dynamics

Let’s talk about what’s happening in America’s dairyland, because it’s telling a broader story about supply and demand dynamics.

Wisconsin and Minnesota are experiencing what I’d call a “comfortable flush” – production is up, components are good, and there’s no shortage of milk for processors. But here’s the catch: local basis levels are weaker than usual because co-ops and processors don’t feel pressure to bid aggressively for supply.

Feed costs tell a mixed story across the region. Local corn basis is reasonable in areas with good crops, but transportation to deficit areas is keeping overall feed costs elevated. Hay prices are all over the map – some areas with decent alfalfa crops are seeing reasonable prices, while drought-affected regions are paying premium rates for imported feed.

The exciting development is how some producers are adjusting breeding and culling decisions based on margin pressure. Instead of the traditional fall breeding programs, some operations are being more selective, which could moderate the typical spring freshening surge.

Currency and Competitive Positioning

This doesn’t get talked about enough, but exchange rate movements are having a huge impact on global dairy competitiveness. The dollar has been strong against the currencies of most major dairy-producing countries, which makes our exports more expensive and their imports to our markets cheaper.

Here’s a concrete example: when the dollar strengthens 5% against the Euro, European butter becomes roughly 10¢/lb more competitive in Asian markets than it was before the currency move. Multiply that across multiple products and markets, and you’re talking about significant trade flow shifts.

The Brazilian real and Argentine peso have been particularly volatile, creating both opportunities and challenges for South American dairy exporters competing with us in key markets.

What Producers Need to Do Right Now

Look, I’m not going to sugarcoat this – the margin picture is challenging, and today’s price action made it worse. Here’s what needs to happen:

Feed Management (This Week): Get quotes on your next 90 days of feed needs. Today’s soybean meal surge is a warning sign that costs could rise further. Some nutritionists are recommending adjustments to rationing to reduce meal dependency where possible, without compromising production.

Price Risk (This Month): Your September milk check is tracking in the $16.90-17.00 range based on today’s action. If you haven’t locked in some Q4 and Q1 2026 protection, now’s the time to get serious about it. DRP coverage at $17.50/cwt for Q1 2026 still makes sense, even with higher premiums.

Cash Flow Planning (Immediate): With milk-to-feed ratios this tight, cash flow timing becomes critical. Know exactly when your milk checks arrive and plan feed purchases accordingly. Some producers are finding success with split deliveries to smooth out cash flow timing.

Production Decisions (Next 60 Days): This might not be the year for aggressive expansion plans. Focus on maximizing efficiency from your current operation rather than adding capacity in a tight margin environment.

Industry Intel You Need to Know

Processing Capacity News: Saputo’s expansion at their Turlock facility is ahead of schedule, adding whey protein concentrate capacity that should support stronger whey pricing in the long term. This is actually bullish for Class III calculations, since whey is carrying more weight in the formula.

Regulatory Developments: USDA’s Milk Production report drops September 19, and early indications suggest August production was up 1.8% year-over-year nationally. That’s in line with seasonal expectations, but doesn’t help the supply-demand balance in the short term.

Technology Trends: More operations are investing in precision feeding systems to optimize ration costs. With margins this tight, the technology that seemed nice-to-have last year is becoming essential for survival.

Putting Today in Historical Context

Today’s 3¢ drop in cheese blocks was the largest single-day decline we’ve seen in six weeks. But here’s the thing – we’re still trading 8-10¢/lb above the spring lows, so this isn’t exactly crisis territory yet.

What concerns me more is the character of the decline. This wasn’t some external shock or weather event driving prices lower. This was a fundamental repositioning as market participants adjusted to harsh realities and global competitive pressures.

September typically brings seasonal price pressure – that’s nothing new. What’s different this year is how quickly processors seem willing to step back from aggressive milk procurement. Usually, we see more of a gradual transition into fall patterns.

The technical picture on the charts is also becoming concerning. Cheese blocks broke below what had been solid support around $1.70/lb, and the next meaningful support level doesn’t appear until the $1.60-1.65 range.

Bottom Line Reality Check:

This market is telling us that fall flush dynamics are asserting themselves earlier and more aggressively than usual. The global competitive situation for some products is challenging, particularly powder, while others like butter remain attractively priced for export.

Your operation needs to be prepared for a potentially prolonged period of tight margins. This isn’t necessarily a crisis, but it’s definitely not a time for complacency. The producers who manage feed costs aggressively and protect downside price risk are going to be the ones still standing when margins improve.

The good news? Milk demand fundamentals remain solid, and we’re still the most efficient dairy production system in the world. This too shall pass… but it might take a while.

Market conditions as of 4:00 PM CDT, September 9, 2025. As always, consult with your risk management team before making marketing decisions – this market is moving fast enough to make yesterday’s strategy obsolete by tomorrow’s close.

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

Learn More:

The Feed Window That’s Got Everyone Talking – And Why Some Producers Are Already Cashing In – This piece provides tactical advice on feed procurement, revealing practical strategies for locking in feed costs and implementing precision feeding to capitalize on the exact margin opportunities discussed in the main report.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – For a strategic, big-picture view, this article analyzes the component revolution (butterfat and protein) and upcoming policy changes, helping you position your operation for long-term profitability beyond today’s spot market chaos.
Tech Reality Check: The Farm Technologies That Delivered ROI in 2024 (And Those That Failed) – Looking to the future, this report offers a critical review of which on-farm technologies, like robotic milkers, actually deliver a return on investment, providing an essential guide for making smart capital decisions in a tight-margin environment.

Join the Revolution!

Categories : Dairy Markets

Tags : CME dairy prices, dairy market analysis, dairy risk management, milk-to-feed ratio

The $6 Billion Shock: How Nine Days in April Changed Everything for American Dairy

Thursday, September 4th, 2025

Nine days changed everything—US dairy faces $6B loss. Your farm ready for what’s next?

<a href="https://rss.com/podcasts/the-bullvine/2199119/">E357 The $6 Billion Shock: How Nine Days in April | RSS.com</a>

Listen up, folks—if you are like many dairy farmers, you have been milking cows through droughts, recessions, and regulatory nightmares for many years, but spring 2025 knocked the US dairy industry sideways. If you haven’t felt it in your milk check yet, buckle up. Nine days in April cost American dairy farmers a projected $6 billion, and we’re still counting.

Look, I’ll cut to the chase. This isn’t some distant trade spat in Washington—this is hitting your bottom line right now, whether you’re running 50 head in Vermont or 5,000 in the Central Valley.

When Politics Became Your Biggest Risk Factor

Nine Days That Changed Everything

Product Category	Export Market	Year-over-Year Change (May 2025 vs. May 2024)	Key Driver/Commentary
Whey Permeate	China	-70% (down 34 million lbs)	Prohibitive retaliatory tariffs effectively closed the market.
WPC 80	China	-83%	High-protein whey caught in the same tariff escalation.
Lactose	China	-59% (plunged in May)	U.S. price advantage was erased by the 125% tariff.
Nonfat Dry Milk (NFDM)	China	-75%	Another commodity ingredient hit hard by the trade dispute.
Cheese	Global (ex-China)	Record Sales (+7% YTD)	Strong demand from Mexico, Japan, South Korea; U.S. price competitiveness.

Here’s how fast things went south: April 2, the administration slapped a 34% tariff on Chinese goods. By April 12—that’s ten days, people—we were staring at 125% tariffs both ways. China matched us move for move, hour for hour.

What that meant in plain English: If your processor was shipping whey to China (and most cheese plants were), that revenue stream dried up overnight. China was buying 42% of our whey exports and 72% of our lactose before this mess started.

The numbers from May tell the whole ugly story: whey exports to China dropped 70%, and lactose fell 59%. But here’s the thing that kept me up nights—cheese exports actually hit a record 50,000 metric tons that same month. Markets outside China are hungry, and our product is still competitive. The problem isn’t demand; it’s politics.

Where the Pain Hit Different

Wisconsin: Cheese Capital Under Siege

Wisconsin’s $52.8 billion dairy economy took it on the chin hard. University Extension economists are projecting state losses between $1-2 billion this year alone. That’s real farms going under, not some abstract number.

If you’re milking in Wisconsin:

Eastern counties (Kewaunee, Brown, Manitowoc): Large operations tied to export-heavy processors got hammered the worst
Driftless region (Grant, Crawford): Smaller operations and grazing dairies showed more resilience—they weren’t hanging their hat on China to begin with
Central counties (Marathon, Wood): Mixed bag, depending on your co-op’s export exposure

Your homework: Get on the phone with your field rep today. Find out exactly what percentage of your milk goes toward products that were China-bound. That’s your pain percentage.

California: Getting Hit from Both Ends

Central Valley dairies are facing what UC Davis economists call a “compound crisis.” Feed costs jumped $18-22 per ton for imported concentrates. Water costs are adding another buck-twenty-five per hundredweight. Energy up 12% year-over-year.

For a 3,000-cow operation using 300 tons of concentrate monthly, that’s an extra $6,600 in feed costs—if you can even source alternatives.

Smart operators are: Locking Q1 2026 feed pricing now. Diversifying suppliers. Looking at longer-term hay contracts while they’re still available.

Pennsylvania: Border Uncertainty

Pennsylvania farms exported $364 million in dairy products last year, mostly to Canada and Mexico. The 25% tariffs on non-USMCA goods and threats of broader 35% tariffs have created planning nightmares.

Unlike the mega-dairies out West, most Pennsylvania operations are 150-300 cow farms that depend on processor premiums and regional relationships. When that gets disrupted, there’s no cushion.

Scenario	Likelihood	China Market Access	U.S. Dairy Industry Impact	Recommended Producer Actions
Trade Détente	~25%	Partial access restored	Some market recovery; ongoing challenges	Diversify markets; maximize efficiencies
Protracted Stalemate	~60%	Chinese market remains closed	Permanent loss to China; shift to ASEAN and Latin America	Expand new markets; optimize operations
Escalation	~15%	Market worsens; broader conflict	Severe industry disruption; economic downturn risk	Enhance resilience; increase financial buffers

What Your Co-op’s Actually Doing:

DFA: Implementing Southeast Asia marketing strategy by Q4. Managing the risk of a domestic cheese surplus from blocked exports. Enhanced feed purchasing programs through regional teams.
Land O’Lakes: Enhanced market development for alternative export channels. Accelerating domestic protein ingredient programs. Six-month payment stabilization for members facing export disruption.
Northeast cooperatives: Optimizing Canadian TRQ utilization. Enhanced quality bonus programs for members facing margin pressure. Expanded forward contracting options.

Component Focus: December Changes You Can’t Ignore

The Federal Milk Marketing Order updates taking effect on December 1 make component optimization critical. New manufacturing allowances: cheese jumps to $0.2519/lb (up from $0.2003), butter to $0.2272/lb (up from $0.1715).

Current industry trends:

National average butterfat: 4.41% (up from 4.36% last year)
National average protein: 3.42% (up from 3.38% last year)

Real talk: University Extension calculations show increasing protein content by 0.15% across a 300-cow herd generates approximately $22,500 additional annual revenue. That’s not pocket change.

How to get there:

Focus genetics on bulls with high protein potential
Maximize nutrition programs for rumen-undegradable protein
Implement management systems that improve milk quality premiums

Technology That Actually Pays Back

Margin pressure is forcing real decisions. Here’s what works:

Automated Feeding Systems: $150,000 investment, 18-month payback verified at multiple Wisconsin operations. Requirement: minimum 500 cows for economics to work.
Rumination Monitoring: $75/cow for quality systems. University of Wisconsin 500-cow study shows health issues identified 3.2 days earlier. Pays for itself in reduced vet bills and improved reproduction.
Robotic Milking: $250,000/unit, 70+ cow minimum for economics. Reality check: labor savings only work if you can actually reduce staff.

Your DMC Lifeline

Month (2025)	All-Milk Price ($/cwt)	Average Feed Cost ($/cwt)	Calculated DMC Margin ($/cwt)	Indemnity Payment?	Reasoning
March	~$23.00 (implied)	~$11.45 (implied)	$11.55	No	Strong milk price and moderate feed costs kept margin >$2.00 above trigger.
April	(Data not available)	(Data not available)	(Expected to be high)	No	Market shock not yet fully reflected in monthly average prices.
May	$21.30	~$10.90 (implied)	$10.40	No	Margin tightened but remained nearly $1.00 above the trigger.
June	~$22.00 (implied)	~$10.90 (implied)	$11.10	No	Margin widened again due to price rebounds in some categories.

With this level of market volatility, the Dairy Margin Coverage program isn’t optional anymore.

2025 performance so far:

May margin: $10.40/cwt
June margin: $11.15/cwt
July margin: $10.85/cwt

Producers enrolled at the $9.50/cwt coverage level have been getting payments consistently since April.

2026 enrollment opens January 29. With margins this unpredictable, higher coverage levels are a cost-effective insurance, not a conservative farming approach.

What’s Coming Next

Trade experts see three scenarios, and frankly, none of them get us back to where we were:

Scenario 1: Trade Deal (25% probability) – Tariffs drop to a 15-25% range, partial Chinese market recovery. However, Brazil and New Zealand retain most of the market share gains. Even with a deal, the trust is broken.
Scenario 2: Extended Standoff (60% probability) – Current 125% tariffs persist for 2+ years. This becomes the new normal. US dairy permanently pivots to Southeast Asian markets and domestic whey applications.
Scenario 3: Broader Escalation (15% probability) – Trade conflict expands beyond dairy, triggering economic recession. Nobody wants this scenario.

Your Action Plan for Fall 2025

Right Now (September-November)

Assess Your Risk: Call your processor today. Get specific answers:

What percentage of your milk goes to China-bound products?
How has your pay price formula changed since April?
What’s their backup plan for whey marketing?

Lock Down 2026:

DMC enrollment (January 29 deadline)
Feed contracts for Q1 2026
Banking relationships for operating credit

Strategic Moves Through Year-End

Component Optimization: Focus genetics on higher protein potential. Audit nutrition programs for protein maximization. Implement milk quality monitoring systems.

Proven Technology Investments: Automated feed management with documented ROI. Health monitoring equipment with verified payback periods. Reproductive management platforms that actually work.

The Bottom Line

This isn’t weather or disease—it’s political volatility that makes long-term planning nearly impossible. But the operations that are thriving aren’t waiting for Washington to fix this.

Three things successful producers are doing right now:

Maximizing efficiency through technology with proven ROI
Optimizing components for December’s pricing changes
Building financial reserves for continued volatility

The era of single-market optimization is over. Feed efficiency isn’t a nice-to-have anymore—it’s survival. Component optimization isn’t next year’s strategy—it’s this December’s reality.

The rules changed in nine days back in April. Your decisions this fall determine which side of dairy’s new reality your operation lands on. Stay sharp, stay flexible, and keep your eyes on the next move.

KEY TAKEAWAYS:

Diversify your export channels now — with whey down 70% to China, Southeast Asia, and Latin America, which are hungry for US products; get your processor talking to these markets today
Push that protein percentage — even a 0.15% bump in protein content puts an extra $22,500 annually in your pocket for a 300-cow operation; focus your genetics program and nutrition protocols now
Invest in tech that pays back — precision feeding systems and rumination monitors are delivering 10% feed efficiency gains worth $200-400 per cow yearly; minimum 500 cows to make the economics work
Lock down your 2026 inputs today — feed costs are volatile and DMC enrollment opens January 29; secure contracts and coverage before uncertainty hits your margins harder
Master the December rule changes — Federal Milk Marketing Order updates are boosting component values; operations optimizing protein and butterfat will capture the premium, while others miss out

EXECUTIVE SUMMARY:

Alright, let me lay this out straight—we’re looking at a potential $6 billion hit to US dairy farmers over the next four years, and it all started with nine crazy days in April when tariffs exploded from 34% to 125%. The old playbook of waiting it out won’t work this time, because we’re no longer dealing with typical market cycles. Sure, whey and lactose got hammered—down 70% and 59% respectively—but here’s the kicker: cheese exports actually broke records at 50,000 metric tons by pivoting fast to new markets. Wisconsin alone is staring at $1-2 billion in losses, while California producers are getting squeezed by feed costs jumping $18-22 per ton. The farms that’ll survive and thrive? They’re the ones doubling down on component optimization, embracing proven tech, and diversifying markets right now. Don’t wait—the new dairy reality is here, whether you’re ready or not.

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

Learn More:

Maximizing Dairy Margins in 2025: Why Precision Genetics, Nutrition, and Tech Are Your Best Bets Amid Market Volatility – This article provides the tactical blueprint for the component strategies discussed above. It details specific genetic selection criteria and nutritional protocols you can use to immediately begin boosting butterfat and protein, directly impacting your milk check under the new FMMO rules.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook Is Wrong – Go beyond the immediate trade war crisis with this strategic market analysis. This piece unpacks the underlying supply, demand, and global competition factors shaping 2025, helping you build a more resilient long-term business strategy beyond a single political event.
The Fully Automated Dairy: Is It The Future Or A Fantasy? – Explore the next frontier of dairy innovation with this deep dive into full automation. It moves beyond individual technologies to examine the economics and operational realities of a fully integrated smart farm, helping you plan your long-term technology roadmap.

Join the Revolution!

Categories : Dairy Markets

Tags : component optimization, dairy market analysis, dairy trade war, farm profitability, Feed Efficiency

CME Dairy Market Report for September 2nd 2025: A Deep Dive into Today’s Dairy Market Sell-Off

Tuesday, September 2nd, 2025

Your October milk check just got $91 million lighter thanks to Washington’s latest “reform.” Here’s what smart farmers are doing about it.

Quick Market Snapshot (2-minute read)

Today’s Reality Check: Post-Labor Day weakness pressured dairy markets. Butter fell a sharp 3.25¢ to $2.0125, and cheese blocks dropped 1¢ to $1.7650.

Your Milk Check: Cooperatives report varied impacts—Wisconsin producers are seeing 15-25¢/cwt declines, while others with better hedging face smaller hits.

Key Levels: Watch butter at $2.00 and cheese blocks at $1.75—breaks below these on heavy volume signal more pain ahead.

Action Items: Consider Class III puts around $17.90; lock 25-50% winter feed; focus rations on protein over butterfat.

EXECUTIVE SUMMARY: Look, I’ve been tracking dairy markets for years, and what happened after Labor Day isn’t your typical seasonal dip. The FMMO “reforms” just shifted $91 million annually from your milk check straight into processor pockets—and December’s component changes will hit even harder. Here’s the kicker, though… while everyone’s focused on butter dropping 3.25¢ and cheese falling a penny, feed costs are sitting at the most favorable levels we’ve seen in months. Your milk-to-feed ratio’s still healthy at 3.8, but that window won’t stay open forever. Smart operators in Texas are riding 10.6% production gains thanks to new processing capacity and mild weather, while California struggles with H5N1 costs. The global picture? We’re selling butter 37% cheaper than Europe, but somehow still can’t move product. Time to get defensive with your pricing strategy and lock in those feed costs before this window closes.

KEY TAKEAWAYS

Lock Your Feed Now: December corn at $4.23/bushel won’t last—Texas producers who secured 60% of winter needs at $4.15 are already seeing the payoff as milk prices soften
Get Defensive on Pricing: Class III put options at $17.50-$17.00 are lighting up for good reason—October milk checks are tracking 15-25¢/cwt lower depending on your cooperative’s risk management
Focus on Protein Over Fat: With FMMO component changes hitting December 1st (protein factor jumping to 3.3%), shift your ration strategy now—butterfat premiums are getting crushed while protein holds steady
Watch Those Technical Levels: Butter support at $2.00 and cheese blocks at $1.75—if these break on heavy volume (5+ loads butter, 8+ loads blocks), we’re looking at July lows and even tighter margins
Regional Reality Check: California producers need milk-to-feed ratios above 4.2 just to match Midwest profitability due to hay costs running $45-65/ton higher—adjust your expectations accordingly

dairy market analysis, milk price volatility, dairy risk management, FMMO reform impact, dairy farm profitability

When Labor Day’s Over, Reality Hits Hard

You know that sinking feeling when you walk into the parlor on Monday morning and your milk hauler is shaking his head? That’s exactly what happened to dairy markets today.

Butter fell a sharp 3.25¢ to $2,0125, and cheese blocks dropped a full cent to $1.7650—and here’s what’s going to sting your wallet.

Regional Milk Check Reality Check

Don’t believe anyone giving you generic projections. The impact on your October milk check depends entirely on where you’re milking and who you’re shipping to:

Wisconsin cooperatives: Reporting 15-25¢/cwt declines depending on marketing strategies
California operations: Seeing varied impacts based on risk management programs
Texas producers: Geographic premiums providing some buffer against spot weakness
Northeast fluid markets: Class I differentials offering partial protection

“We’re seeing milk that used to command a 50¢ premium now at 25¢ over Class,” a Fond du Lac County producer told me yesterday. “When the plants are full and you’ve got extra milk looking for a home, that local basis gets pressured fast.”

Supply Pressures Hitting the Market

Processors came back from the break with cream tanks topped off and zero urgency to chase milk. Here’s why:

The USDA’s Supply-Side Shift: August 12th WASDE report bumped 2025 milk production to 228.3 billion pounds—up 500 million from July’s estimate. That’s 3.4% year-over-year growth, hitting an already saturated market.

Where The Milk’s Coming From

Texas leads the charge: 4% annual growth, with some counties posting spring gains as high as 10.6% thanks to mild winter weather and new processing capacity.
California struggles: Production is down 1.2% amid battles with H5N1 and heat stress, with new biosecurity costs adding $0.15-0.25/cwt for some operations.
Wisconsin and Minnesota are up 2.8%, but regional plant capacity maxed out, pressuring local premiums.

A Deep Dive into the CME Cash Session

The CME cash session told a crystal-clear story if you know the signs:

Butter Market Breakdown

7 offers vs. 3 bids = Sellers desperate to move product
All damage from 1 trade = Either forced liquidation or buyers vanished
Critical level: $2.00 support—5+ loads trading below triggers $1.95 test

Cheese Block Pressure Mounts

13 loads traded down = Real commercial selling, not spec money
Volume with decline = Sustained weakness likely
Key support: $1.75—break on 8+ loads targets July lows at $1.70

The Protein Bright Spot

Dry whey showed three bids, zero offers for the third straight session—protein demand holding steady while fat markets crater. While the revenue side of the ledger faces pressure, the expense side offers a critical silver lining for managing margins.

Feed Costs: Your Margin Lifeline

Here’s the silver lining keeping margins alive:

December corn: $4.23/bushel
Soybean meal: $283.30/ton
Milk-to-feed ratio: 3.8

But regional variations are significant:

Midwest Advantage

“We locked 60% of our winter corn at $4.15 back in July,” an Iowa producer shared. “That forward thinking’s paying off now with milk prices softening.”

Western Challenges

California dairies face hay costs $45-65/ton higher than Midwest operations, plus water expenses adding $1.20/cwt. UC Davis Extension data show that Western producers need ratios of 4.2 or higher to match Midwest profitability.

Key On-Farm Strategies

Protein Optimization: Beyond The Buzzword

With FMMO protein factor changes hitting December 1st, smart producers are already adjusting:

What Wisconsin Nutritionists Recommend

Balance third-cutting alfalfa quality with commodity proteins
Target rumen-degradable vs. undegradable protein ratios
Hit 16.8% crude protein without over-supplementing

“We’re shifting from chasing butterfat premiums to optimizing protein yield,” explains a Lancaster County producer running 800 head. “With the December component changes, protein’s where the money is.”

FMMO Now: What Farmers Need To Know

June 1st’s Federal Milk Marketing Order reforms created the biggest structural change in a decade:

What Changed

Class I skim pricing returned to “higher-of” Class III or IV
Make allowances updated: cheese to $0.2519/lb, butter $0.2272/lb
Net effect: $91 million annually transferred from producer checks to processor margins

Who Gets Hit Hardest

Order 5 regions with manufacturing-heavy operations feel the biggest squeeze. December’s component factor changes (protein to 3.3%, nonfat solids to 9.3%) will create another pricing shift (USDA AMS, Bullvine analysis).

Options Market Signals Caution

On the futures board, September Class III settled at $17.94 and October near $17.84 — a backward curve, meaning the market expects prices to rebound over the coming months. But, with today’s cash price moves, that hope might be premature (CME Group).

Class III put options at $17.50 and $17.00 strikes are lighting up—volume spikes showing producers getting defensive fast. Implied volatility jumped 15% last week, making hedging more expensive but potentially more valuable (CME data).

Smart Hedging Moves

Put options around $17.90-$18.00 to establish minimum milk prices
Call spreads on feed protect against crop weather surprises
Timing matters: Wait for volatility dips to reduce option costs

The Big Picture: Global Markets and Tomorrow’s Level

Global Export Disconnect

Here’s the head-scratcher: U.S. butter at $2.01/lb trades 37% below EU prices ($3.18/lb) and 36% under New Zealand ($3.14/lb).

That massive discount should drive explosive exports, but Global Dairy Trade’s September 1st auction saw its overall price index drop 4.3% to an average of $1,209/MT—international weakness removing any upward price pressure from world markets.

Tomorrow’s Critical Levels

What I’m Watching At 10:00 AM

Butter: Support test at $2.00—more than three loads below triggers $1.95 target
Cheese blocks: $1.75 line in sand—heavy volume break signals July lows retest
Dry whey: Bid strength continuation could support protein complex recovery

Volume Thresholds That Matter

Butter: >5 loads confirms directional moves
Blocks: >8 loads breaks technical levels
Any NDM volume signals export developments

Your Regional Action Plan

Upper Midwest Producers

Immediate: Review cooperative marketing agreements for basis risk
Feed strategy: Lock winter corn before harvest pressure lifts futures
Component focus: Optimize protein rations for December changes

Western Operations

Cost management: Evaluate water-saving technologies, rotational grazing
Hedging priority: Protect against feed cost spikes with call options
Margin reality: Adjust profitability expectations 15-20% below national averages

Texas Expansion Areas

Capacity planning: Monitor regional plant utilization rates
Growth management: Balance herd expansion with local milk demand
Weather hedge: Prepare for potential winter weather disruptions

The Bottom Line

This isn’t just market noise—it’s structural change happening in real time. The supply situation is strong, demand is cautious, and FMMO reforms are reshuffling who gets what from every hundredweight.

What Winners Are Doing Now

✓ Locking feed costs at current favorable levels
✓ Getting defensive with put options on Class III
✓ Focusing on protein over butterfat in ration management
✓ Managing cash flow for smaller October checks
✓ Planning component strategies for December FMMO changes

The margin squeeze is real, but it’s not panic time. Producers with solid risk management, flexible feeding programs, and tight cash flow control will weather this downturn better than those hoping for a quick recovery that might not come.

Feed costs are still your friend. Protein optimization is becoming crucial. And regional differences matter more than ever in determining who stays profitable through this challenging period.

Smart money is getting defensive now—not waiting to see how much worse it gets.

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

Learn More:

Navigating the Volatile Dairy Market: Essential Risk Management Strategies for Farmers – This article provides a practical framework for implementing the hedging strategies mentioned in our report. It breaks down how to effectively use futures and options to protect your operation from the exact price volatility seen today, reducing risk on future milk checks.
The Future of Dairy: Innovations in Processing and Product Development – To understand where the market is heading long-term, this piece unpacks the strategic trends in dairy processing and consumer demand. It offers insights into how new products and technologies will create future revenue streams beyond today’s commodity market pressures.
The Genetic Revolution: How Marker-Assisted Selection is Reshaping Dairy Herds – This report reveals how to boost profitability from within the herd using advanced genetics. It details innovative selection methods for improving feed efficiency and component yields, offering a powerful, long-term strategy to counter the margin squeeze discussed in today’s market analysis.

Join the Revolution!

Categories : Dairy Markets

Tags : dairy market analysis, dairy risk management, FMMO reform impact, milk price volatility

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

Collision Course: Navigating the 2025 U.S. Dairy and Grain Markets

Monday, August 25th, 2025

July milk per-cow jumped to 2,081 lb in the 24 big states—while corn’s pegged at a record 188.8 bpa. Margins? Tight… unless planned.

Executive Summary: Here’s the quick read over coffee. Milk output is running hot—per-cow hit 2,081 lb in July across the 24 major states—while butter’s been slipping on the board even though cold storage isn’t bloated. USDA’s August WASDE prints a record 188.8 bpa corn yield and a 16.7-billion-bu crop, which screams “cheap feed”… if it holds. But field scouts aren’t buying it—Pro Farmer’s final at 182.7 bpa points to disease shaving kernel weight, and that’s exactly the kind of shift that can add 20–40 cents/bu fast on a short-covering pop. Meanwhile, the butter spot around $2.235/lb and a firmer whey tone keep Class III steadier than Class IV—so checks tied to butter/powder feel more pressure. The big move right now isn’t fancy: lock about two‑thirds of feed through early 2026 while the curve is friendly, and set a reasonable floor on milk revenue—then lean into butterfat and protein to keep IOFC intact. Plants coming online in Dodge City and Lubbock will help basis, but not in time to save September spot loads—so plan hedges around the plant’s utilization, not a national average. The bottom line is to get coverage on the books while there’s room, and don’t wait for the market to force the hand.

Key Takeaways

Lock feed while it’s offered: with USDA at 188.8 bpa vs. Pro Farmer 182.7, pre‑commit ~66% of Q4’25–H1’26 rations; that cushions a 20–40c/bu corn jump that could hit IOFC $0.20–$0.40/cwt.
Use DRP as a true hedge tool: quote it in real time with an agent—the premium and coverage change daily with futures; set a floor that matches the plant’s utilization mix.
Aim components for ROI: pushing ~4.2% butterfat and ~3.3–3.4% true protein typically offsets Class IV weakness and stabilizes income-over-feed when whey props Class III.
Watch butter vs. stocks: butter around $2.235/lb despite July stocks down ~6% YOY says the market’s pricing future cream; don’t overbuild inventory if processing.
Expect basis relief later, not now: Dodge City is online and Lubbock ramps in 2026—help is coming, but September milk still travels; hedge the haul and basis accordingly.

dairy market analysis, feed cost management, income over feed cost, dairy profitability, milk price forecast

The U.S. dairy industry is heading for a collision. That isn’t hyperbole. July data shows milk production is running significantly higher year over year, while feed market risk is anything but settled, setting up a classic margin squeeze if timing goes the wrong way for producers selling milk daily and buying feed in chunks. USDA NASS Milk Production | USDA ERS LDP Outlook

More Than a Milk Price: Why Supply and Basis Are Driving Your Check

What’s striking this summer is a tricky mix for producers planning Q4 coverage and cash flow: stronger per‑cow output in key dairy states combined with unusually wide spreads in feed market signals that amplify basis and logistics risk on the ground. USDA Dairy Market News

Scope	Per‑cow (lb)	Notes
24 major states (July)	2,081	+36 lb YoY; higher output corridor
National (July)	2,063	Lower than 24‑state average

According to the USDA’s July Milk Production report, production per cow in the 24 major states averaged 2,081 pounds, up 36 pounds year over year; the national July average was 2,063 pounds, and that difference matters when estimating loads and component tons per month under tight plant schedules.

The growth corridors across the South‑Central and Plains keep adding milk and steel, but line time and trucking don’t appear out of thin air—when plants prioritize nearby milk, basis penalties can hit loads that have to move farther even if headline prices look fine. USDA Dairy Market News

Butter, Classes, and Why Inventory Isn’t the Whole Story

Butter told the market story in August as spot Grade AA settled around $2.2350 per pound on August 22, looking cheap versus global values but largely discounting what’s coming more than what’s currently in storage. CME butter prices

Cold Storage shows July butter stocks down about 6% year over year—tight enough today—yet prices softened anyway, signaling traders are pricing future cream flows and churn time rather than present availability. USDA Cold Storage – July 2025

This development has a fascinating effect on Class dynamics. When butter and powder soften while whey holds firm, Class III can look relatively better than Class IV. In certain months, this translates into weaker Producer Price Differentials (PPDs) in markets with a butter/powder‑heavy utilization mix. Class spreads and pricing context

Feed Risk: Why the USDA and Field Scouts Disagree on Your Corn Bill

According to the August WASDE, the first survey‑based national corn yield printed a record 188.8 bushels per acre with production at 16.7 billion bushels if realized—an undeniably feed‑friendly deck if it stands. DTN/Progressive Farmer summary

But the view from the field tells a different story: Pro Farmer’s final tour estimate pegs yield at 182.7 and flags widespread late‑season disease pressure across parts of the Belt, which is big enough to tighten carryout and nudge basis and futures higher into winter.

Positioning raises the stakes—CFTC data show managed money carrying sizable net shorts in corn ahead of harvest, the exact fuel that can power a fast short‑covering rally if the crop underperforms.

What to Do Now (Before the Market Makes the Choice for You)

Action	What to do now	Why it pays
Lock feed (~66% Q4–H1’26)	Pre‑commit while USDA’s high yield is priced	Cushions a 20–40c/bu corn pop; protects IOFC $0.20–$0.40/cwt
Price DRP in real time	Quote with an agent; align to plant utilization mix	Sets floor against Class IV softness, matches actual pooling
Push components (BF/TP)	Aim ~4.2% butterfat; ~3.3–3.4% true protein	Lifts pay price when cheese/whey support Class III

Based on market signals and risk calendars, producers should consider these three strategic actions now:

Lock In Feed Costs: Pre‑commit to roughly two‑thirds of feed needs for Q4 2025 and early 2026 while the forward curve still reflects the USDA’s high yield scenario, leaving room to average if field‑driven numbers prevail and basis firms. USDA WASDE
Evaluate Dairy Revenue Protection (DRP): Work with an agent to price DRP in real time—premiums and terms change daily with futures and endorsements, so it’s a tool to manage actively, not guess at. USDA RMA DRP policy
Maximize Component Pay: For component‑based pay, push butterfat toward 4.2% and true protein into the 3.3–3.4% range to lift IOFC even when class prices wobble—especially if feed conversion efficiency holds under current diets. Milk check and pooling dynamics

Capacity and Basis: Help Is on the Way, Just Not for September

Capacity growth is real but won’t solve September’s milk; it matters for anyone with spot loads and a long haul to a dryer or churn while plants juggle maintenance, staffing, and qualifications. USDA ERS LDP Outlook

Hilmar’s new Dodge City facility—an investment north of $600 million—anchors the emerging milk map from western Kansas into the Panhandle and should help rebalance line time and haul distance over the next 12–18 months.

Leprino’s Lubbock facility is staged toward early 2026 for a full ramp, so relief is coming, but not fast enough to erase basis pressure for milk still looking for a closer home this fall and winter.

Global Pull and Why U.S. Butterfat Still Matters

U.S. butterfat remained globally competitive in early 2025, and USDEC highlighted strong mid‑year export momentum that helped keep domestic butter stocks tighter even as milk rose—one reason current weakness is more about forward cream supplies than a freezer problem.

For operators reading the tea leaves, watch the spread between U.S. and EU/NZ butter values alongside Cold Storage—if the U.S. discount narrows as milk stays high, export pull can fade and leave more butterfat at home right into seasonal cream recovery. USDA ERS LDP Outlook

If exports hold, inventories won’t spike quickly; if they wobble, Class IV bears the brunt first, and it shows up in the milk check. Class IV and utilization context

Your Milk Check Explained: How Class Spreads and PPDs Impact Your Bottom Line

When whey resilience props up Class III while butter/powder softness drags Class IV, checks in cheese‑heavy utilization areas can look materially different than those tied more heavily to churns and dryers, and that matters for how DRP or options are layered over already‑contracted milk. Class spreads and pricing context

Weak Class IV tends to pull PPDs lower and reduce the final pay price in orders where Class IV utilization spikes, so re‑read the plant’s pay formula and align hedges with the utilization reality—not a national average that won’t match the load on the truck. Milk check and pooling dynamics

The cheapest penny is the one not lost to a mismatch between pooling math and hedges, especially in a fall when spreads can move faster than loads can be re‑routed. USDA Dairy Market News

Bottom Line: Before the Collision, Not After

If USDA’s big yield verifies, feed stays friendly and margin math gets breathing room, but if Pro Farmer is closer to right and disease pulled kernel weight, the short‑covering bid can meet softening milk and turn the screws on IOFC unless protections are already in place. USDA WASDE | Pro Farmer final

The smartest move is the one made before the market forces your hand—lock in feed and revenue floors while the opportunity exists, don’t wait for the market to dictate terms, and let new capacity in Dodge City and Lubbock ease basis and haul pressure as it ramps over the next few quarters. Hilmar Dodge City | Leprino Lubbock

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

Learn More:

Maximizing Milk Components: The Key to Higher Milk Checks – This article provides tactical, in-the-barn strategies for ration balancing and herd management to achieve higher butterfat and protein, demonstrating how to translate market signals into feeding decisions that directly boost your income-over-feed-cost (IOFC).
Beyond the Bulk Tank: How Global Dairy Demand is Reshaping the US Market – Shifting focus to the broader economic landscape, this piece analyzes long-term consumer trends and export dynamics. It provides a strategic framework for understanding how international demand will impact future U.S. milk prices and processor investments.
From Theory to Reality: How Genomic Testing is Delivering ROI in Commercial Herds – This forward-looking piece reveals how top producers are using genomic data to build more resilient and efficient herds. It offers a practical look at leveraging this technology to increase profitability and navigate the market volatility discussed in the main article.

Join the Revolution!

Categories : Dairy Markets

Tags : dairy market analysis, dairy profitability, feed cost management, income over feed cost, milk price forecast

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

Market ‘Balance’ or Farmer Trap? Why This Cattle Price Plateau Could Cost You Big

Tuesday, August 19th, 2025

Think the market’s stable? Think again — this plateau might be a trap!

EXECUTIVE SUMMARY: Look, I’ve been watching this industry long enough to know when something doesn’t smell right. Everyone’s talking about market “balance,” but history shows these calm periods usually end badly. Debt levels are climbing — many producers are sitting above 40% debt-to-asset ratios — while replacement heifers have skyrocketed from $1,600 to over $4,000 in just 18 months. Meanwhile, processing capacity is expanding faster than the milk supply can keep up, creating pockets of oversupply that could drive down local prices. Dr. Nicholson’s economic models at Wisconsin aren’t pretty — they show potential milk price drops of $1.90 per hundredweight and export losses hitting $22 billion. Here’s the thing: smart producers aren’t waiting around to see what happens. They’re tightening their belts, building cash reserves, and hedging their bets right now.

KEY TAKEAWAYS:

Debt management is critical — keep your debt-to-asset ratio below 35% to avoid getting squeezed when markets turn
Build liquidity like your business depends on it — aim for six months of operating reserves because cash creates options when others are forced into crisis decisions
Start hedging now while you can — use Class III futures or feed cost hedging to lock in margins before volatility hits
Diversify your buyer relationships — don’t put all your eggs in one processor’s basket, especially with new capacity coming online everywhere
Focus on operational efficiency ruthlessly — every dollar you save on feed conversion or labor costs today becomes margin protection when prices drop

The chatter in the dairy industry is all about “market balance.” Prices have plateaued, and many believe this stability will last. But here’s the thing — this perceived comfort might just be setting you up for a devastating fall.

History is littered with periods where seemingly stable prices plunged unexpectedly, catching producers completely off guard. Think back to the early 2000s and the 2014-2015 cycles — long stretches of steady pricing that lulled producers into aggressive expansion and debt accumulation. When the market suddenly shifted, those who had leveraged too heavily saw their equity vanish overnight.

Current Warning Signs Are Flashing Red

Today, multiple vulnerability indicators are blinking simultaneously, and frankly, they’re being ignored by too many operators who’ve bought into the “balanced market” narrative.

Debt levels are rising across the industry, with many producers carrying debt-to-asset ratios exceeding 40% — a historically critical stress marker that has preceded major financial casualties in previous downturns. Cash flows are being squeezed by stubbornly high feed and input costs that refuse to come down despite commodity corrections.

Interest rates are hovering near 5% for qualified operations, making expansion financing and debt refinancing particularly costly propositions. Add persistent policy uncertainties — from potential trade disruptions to shifting immigration and labor regulations — and you’ve got a perfect storm brewing beneath the surface calm.

The Economic Modeling Says It All

Crucially, recent economic modeling from Dr. Charles Nicholson at the University of Wisconsin-Madison isn’t speculative forecasting — it’s hard data analysis. His research reveals specific scenarios where various trade and policy shifts could result in milk price reductions of up to $1.90 per hundredweight and cumulative U.S. dairy export value decreases of $22 billion over a four-year period.

That’s not a theoretical risk — that’s economic modeling based on current market structure and realistic policy trajectories.

The replacement cattle market tells an even more dramatic story. Replacement heifers have surged from around $1,600 per head in mid-2023 to over $4,000 by late 2024 — a 150% spike driven by inventory scarcity and the beef-on-dairy trend. When input costs are exploding while revenue streams remain stagnant, that’s a classic vulnerability setup.

Meanwhile, dairy processing capacity has been expanding aggressively, with new mega-plants coming online across multiple regions. But milk production growth isn’t keeping pace uniformly, creating potential pockets of oversupply that could hammer local pricing.

Are You on This List? Identifying the Most Vulnerable Operations

Are the operations walking the tightrope right now? Those who expanded aggressively during recent favorable periods, especially in high-cost regions where water, feed, and regulatory pressures add operational complexity. Small to mid-size operations with thin margins and limited cash reserves are particularly exposed.

The highest-risk profiles include:

Operations with debt-to-asset ratios above 40% and debt service coverage below 1.25
Producers dependent on single-buyer relationships or concentrated market exposure
Facilities in regions facing water restrictions, increased regulatory pressure, or limited processing alternatives
Operations that banked on continued export market stability without downside protection

Here’s what really concerns me: the early warning signs I’m seeing mirror patterns from previous market corrections. The disconnect between soaring replacement costs and stagnant milk premiums? That’s a classic vulnerability indicator that preceded past crashes.

Your Defensive Playbook: Strategic Protection Plan

Market turbulence isn’t a question of if — it’s when. Smart operators aren’t sitting around hoping this plateau continues. They’re actively building defensive positions while opportunities still exist.

Diversification isn’t optional anymore. Don’t put your operation’s future on a single buyer or market channel. I’m seeing forward-thinking producers develop relationships with multiple processors, exploring emerging opportunities in specialty markets and value-added product streams.

Risk management tools deserve serious consideration. Whether through Class III milk futures, options contracts, or cross-hedging strategies for feed costs, you need downside protection. Recent analysis shows that effective hedging strategies can significantly manage margin risk during volatile periods.

Cash reserves aren’t a luxury — they’re survival insurance. Target at least six months of operating reserves. Operations with strong liquidity positions will have options when others are forced into crisis decisions.

Financial discipline matters more than ever. Aim for debt-to-asset ratios below 35% and debt service coverage ratios above 1.25. These aren’t arbitrary benchmarks — they’re financial stress indicators that historically separate survivors from casualties.

Take Action Now — Your 4-Step Priority Plan

If I were making decisions on your operation tomorrow, here’s my immediate action checklist:

1. Get a Real-Time Financial Snapshot. Immediately calculate your actual debt-to-asset ratio and debt service coverage. If you’re above 40% and below 1.25, respectively, you need a deleveraging plan now, while milk prices still provide some flexibility.

2. Lock In Your Risk Management. Don’t gamble with your operation’s future. Whether it’s forward pricing a portion of your production, establishing feed cost hedges, or negotiating flexible supply agreements with multiple buyers, your goal is to minimize as much uncertainty as possible from your profit and loss (P&L) statement.

3. Hunt for Efficiencies Ruthlessly. Every dollar you save in feed conversion, labor productivity, or operational costs today becomes a dollar of margin protection when the market turns. This requires disciplined focus on measurable improvements.

4. Hoard Cash Like Your Business Depends on It. If that means pausing expansion plans or selling non-core assets to build liquidity reserves, do it. In a downturn, cash creates options, and options are the difference between survival and failure.

The Bottom Line

Don’t be lulled into complacency by the current price plateau. This “market balance” narrative is dangerous precisely because it breeds the kind of strategic inaction that destroys operations when cycles inevitably turn.

The dairy industry’s current stability might be real, but it’s also fragile. External shocks — whether from trade policy changes, weather events, disease outbreaks, or broader economic disruption — could unravel today’s equilibrium faster than most producers realize.

The next market cycle isn’t coming someday — it’s building momentum right now, beneath the surface of this apparent calm. The question isn’t whether it will arrive, but whether your operation will be positioned to weather it when it does.

Will you be ready?

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

Learn More:

Profit and Planning: 5 Key Trends Shaping Dairy Farms in 2025 – While the main article advises hunting for efficiencies, this piece provides a tactical roadmap. It details five specific areas, from data integration to sustainability, where you can find cost savings and boost operational resilience against market volatility.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – This article provides the official market analysis to balance the main piece’s warning. It breaks down the USDA’s forecasts on milk production, pricing, and exports, giving you the hard data needed to assess opportunities and validate your risk management strategy.
The $8 Billion Infrastructure Trap: Why America’s Dairy Boom Could Become Its Biggest Bust – For a deeper dive into the processing capacity risk mentioned in the main article, this piece is essential. It explores how the massive infrastructure buildout could create regional oversupply and price pressure, revealing the mechanics behind the potential market trap.

Join the Revolution!

Categories : Dairy Markets

Tags : dairy market analysis, dairy risk management, farm financial management, milk price volatility, producer profitability

India-US Dairy Standoff: What North American Producers Should Learn

Monday, August 4th, 2025

India cranks out 239M tonnes of milk yearly with 2-cow herds—their feed efficiency secrets could boost your margins 20%

EXECUTIVE SUMMARY: Look, here’s what caught my eye about this whole India situation. These co-ops are absolutely crushing it with feed efficiency gains that we should all be paying attention to. We’re talking about 239 million tonnes of milk production annually—that’s massive—and their economic analysis shows potential losses of $12.4 billion if they open up to US imports. That tells you how profitable their system really is.What’s fascinating? They’re hitting 6% annual growth rates using IoT health monitoring and solar cooling tech that’s dropping spoilage by 40-50% in pilot studies. Their cooperative structure connects 3.6 million farmers who get transparent pricing based on butterfat and protein content… and it’s working. Global trends are moving toward exactly this kind of resilient, tech-enabled approach. Bottom line—if you want your operation ready for whatever trade chaos comes next, you need to start thinking like these co-ops do.

KEY TAKEAWAYS

Cut feed costs 15-20% immediately by focusing on precision nutrition over volume feeding—Indian co-ops prove better feed conversion ratios beat bigger rations every time, especially with 2025’s tight margins
Join or create cooperative marketing agreements to stabilize your milk checks—when 3.6 million farmers pool their bargaining power like Amul does, they control pricing instead of getting controlled by it
Install IoT health sensors now to slash mortality rates up to 15% and catch problems before they hit your bottom line—early detection beats expensive treatment, and consumer quality demands aren’t going backwards
Consider solar cooling systems if you’re dealing with high energy costs—pilot data shows 50% spoilage reduction translating to real margin improvements, plus it’s a sustainability win processors love
Push for component-based pricing in your contracts because butterfat and protein premiums are where the money is—Indian farmers get paid transparently for quality, and that model’s spreading globally whether we like it or not

The thing about the India-US dairy trade tensions? There’s way more happening than just politics. It’s a glimpse into how our dairy industry worldwide is shaping up. Culture, economics, and technology are all thrown into this mix, reshaping markets and livelihoods in ways we can’t ignore.

Just a few weeks ago, after months of tough talks, trade negotiations stalled, and dairy was right in the middle of the sticking points. This isn’t just about tariffs. It’s about understanding the bigger picture and preparing for what’s next.

Who Exactly is India in Dairy?

India produces around 239 million metric tonnes of milk annually—nearly a quarter of the global supply. To give you context, that’s more milk than the combined output of the European Union and the United States.

However, what’s surprising is that most of this milk comes from millions of smallholder farmers, who often have just two or three cows or buffalo under their care. According to their most recent survey data, these farmers rely heavily on local feed and grazing patterns, not on giant industrial farms.

While this model fosters resilience, it’s important to note the challenges inherent to small-scale operations, including disease management, access to capital, and variable feed quality.

And here’s the kicker—research from the Indian Council of Agricultural Research (ICAR) highlights ongoing improvements in feed utilization efficiency within cooperative herds, driven by innovative local feeding strategies.

The ‘Non-Veg Milk’ Factor: Culture Meets Economics

Now, here’s where things get particularly interesting and uniquely Indian. There’s a deep-rooted cultural and religious reason underlying dairy import restrictions: milk from cows fed animal-based supplements—such as bone meal, blood meal, or rendered fats—is labeled “non-vegetarian” and is strictly off-limits.

This isn’t just symbolic—it’s codified in regulation. According to reports from organizations such as the International Dairy Federation (IDF), this kind of feed-based barrier is rare globally but remains central in India’s dairy import policies.

Economically, according to an analysis referenced in the State Bank of India’s economic report, if the US floods India’s market, farmers could lose an estimated ₹1.03 lakh crore annually—roughly $12.4 billion. That economic risk impacts an estimated 80 million livelihoods, underscoring the weight behind India’s firm stance.

Cooperatives: How Amul Changed the Rules

Amul stands tall at the heart of India’s dairy revolution—a cooperative powerhouse connecting over 3.6 million farmers. What strikes me here is how this farmer-owned, three-tiered system flips the usual power dynamic. Instead of corporate-driven pricing, farmers receive transparent payment tied directly to milk’s fat and protein content.

This model’s reach is now global. The Michigan Milk Producers Association’s partnership with Amul brings a wide range of Amul products to US shoppers, showcasing how cooperative dairy structures can scale internationally while upholding farmer ownership values.

Producers in regions like Wisconsin are reportedly exploring similar cooperative approaches to strengthen local markets and manage price swings.

Innovating Under Pressure: Tech Trends in Indian Dairy

India’s dairy industry is embracing tech fast. IoT-based animal health monitoring is expanding, with early research from the Central Institute for Research on Buffaloes (CIRB) showing some promising initial outcomes in mortality reduction.

Blockchain traceability programs are currently in pilot stages, focusing on contamination control and enhancing consumer trust, although definitive impact measurements are still forthcoming.

Solar-powered milk cooling systems, with estimated costs ranging from $6,000 to $8,000, have achieved significant spoilage reduction on rural Indian farms. Based on similar pilot programs in developing regions, solar cooling systems typically result in see a 40-50% reduction in spoilage, which has translated in some cases to a 15-20% improvement in net milk sales, as noted in USDA findings and other international studies. California dairies adopting solar tech to mitigate demand charges further illustrate this technology’s practical benefits.

According to the Food and Agriculture Organization’s recent forecast, India’s dairy sector is projected to sustain an annual growth rate of around 6% through 2030, driven predominantly by domestic consumption.

What This Means for You

India’s firm stance on dairy imports serves as a wake-up call. Trade disruptions will impact global dairy supply chains, and producers need to build resilience.

Cooperatives remain a critical pillar of collective strength, while tech adoption—encompassing IoT health sensors, blockchain traceability, and renewable energy solutions—has shifted from optional to essential in building durable dairy operations.

No doubt, challenges like infrastructure and capital access persist, especially for small farms. Smart, targeted investments, supported by government and industry programs, can unlock significant gains in efficiency and sustainability.

The Bottom Line

India’s experience is a powerful reminder that in an unpredictable global market, the dairy operation of the future will be defined by its resilience, cooperative strength, and commitment to strategic innovation.

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

Learn More:

Smart Dairy Tech Isn’t Just Hype Anymore—It’s Your Competitive Survival Plan – This article provides a tactical deep dive into how to implement IoT and precision agriculture on your farm. It outlines practical strategies for slashing feed costs by 15%, improving labor efficiency by 40%, and using predictive maintenance to avoid costly equipment failures.
Global Dairy Market in 2025: Production Shifts, Demand Fluctuations, and Trade Dynamics – While our article focuses on India, this piece zooms out to offer a strategic, market-focused perspective. It reveals how U.S. producers are competing against a surging EU and recovering Argentina, offering critical insights into how to position your operation in a changing global trade landscape.
The Digital Dairy Revolution: How IoT and Analytics Are Transforming Farms in 2025 – This innovative, forward-looking article explores the full potential of integrated technology. It demonstrates how a holistic approach combining sensors, AI, and robotics can boost productivity by 15-20% and achieve a 91% ROI success rate on new investments, creating a blueprint for the farm of the future.

Join the Revolution!

Categories : Dairy Markets

Tags : dairy cooperative models, dairy market analysis, farm resilience, farm tech ROI, Global Dairy Trends

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

June Milk Numbers Tell a Story Markets Don’t Want to Hear

Tuesday, July 22nd, 2025

5% component-adjusted growth while markets tanked? Something’s broken in how we’re thinking about milk production.

EXECUTIVE SUMMARY: You know that feeling when good news hits like bad news? That’s exactly what happened with June’s milk production report. We hit 19.23 billion pounds nationally—up 3.3% year-over-year—but markets sold off hard anyway. The real story isn’t the volume; it’s that component-adjusted production surged 5% while geographic production is completely reshuffling. Kansas jumped 19.1% thanks to new processing capacity while Wisconsin barely moved at 0.3%. Meanwhile, butterfat climbed to 4.18% and protein hit 3.25%—those improvements alone are worth serious money per hundredweight. European competitors are struggling with environmental constraints, creating export opportunities, but domestic demand challenges aren’t going away. Here’s the thing: if you’re still thinking volume-first instead of components-plus-location strategy, you’re already behind where this industry’s heading.

KEY TAKEAWAYS

Component premiums are the new profit center – With butterfat up 2% and protein up 1.5% year-over-year, focus on genetics and nutrition programs that boost components rather than just volume. That 5% component-adjusted growth versus 3.3% base growth represents real dollars on every milk check.
Geography is destiny in 2025 – Plains states with new processing capacity are seeing explosive growth (Kansas +19.1%, Texas +9.5%) while traditional regions stagnate. If you’re planning expansion, secure processing agreements first—capacity constraints are creating 18-24 month margin pressure cycles.
Feed cost advantages won’t last forever – Current milk-to-feed ratios around 1.8 are workable, but smart producers are locking grain prices now. Weather, trade issues, or energy costs could flip the equation overnight, so build flexibility into your feed program.
Export opportunities exist but don’t count on them – U.S. cheese exports are strong while Europe struggles with environmental limits, but building your whole strategy around international demand is risky. Domestic foodservice demand remains weak, so diversify revenue streams through beef-on-dairy programs.
Strategic thinking beats volume obsession – Cornell analysis suggests 75-85% probability of continued margin pressure through early 2026. Winners will be operations that read market signals, optimize for components over volume, and adapt quickly when conditions change.

You know that pit-in-your-stomach feeling when production reports should make you smile, but instead your phone starts buzzing with panicked calls from concerned producers? That’s exactly where we landed when June’s milk numbers dropped. The raw data—19.23 billion pounds nationally, up a whopping 3.3% from last year—should’ve had us popping champagne. Instead, markets sold off sharply, and honestly, that disconnect is telling us everything we need to know about where this industry’s headed.

***Monthly U.S. Milk Production Trend for January–June, 2023–2025***

When Crushing Expectations Becomes the Market’s Nightmare

What strikes me about June’s numbers is how they caught absolutely everyone off guard. According to the latest StoneX analysis¹, the report was “bearish compared to expectations”—and that’s coming from analysts who eat, sleep, and breathe these numbers.

We didn’t just meet projections… we obliterated them. Most folks were penciling in maybe 2% growth, but here we are staring at production that jumped 3.3% year-over-year. What really gets my attention, though, is how the component story amplifies everything. Our butterfat content increased to 4.18% (up from 4.10% last year), while protein levels rose to 3.25%(up from 3.20%). When you factor in those improvements—and this is crucial for understanding the real market impact—we’re looking at component-adjusted production that surged 5% year-over-year.

Five percent! The last time we saw growth like that? May 2021, right when everything was still bouncing back from pandemic disruptions.

What really caught my attention was the 2,031 pounds per head in June, up 1.7% from the previous year. Now, before anyone gets too carried away, remember that we’re comparing this to a brutal June 2024 when H5N1 absolutely hammered production numbers across key regions. The StoneX folks note we were “lapping over a 1.7% drop last year due to bird flu,” so there’s definitely some recovery built into that figure.

However, here’s the thing that should make everyone pause—we’ve added 114,000 head since December (that’s equivalent to adding several good-sized dairies every month), and we’re still seeing these kinds of individual animal improvements. Mark Stephenson from Wisconsin’s dairy markets program has been tracking these patterns for decades, and as he pointed out in his recent university brief, “when you see both scale and efficiency gains happening together, producers are clearly responding to sustained positive signals… but markets don’t always interpret additional supply as welcome news.”

The Geographic Revolution That’s Rewriting Our Industry Map

What’s happening regionally is what really gets my blood pumping about this data. Producers are “culling fewer dairy cows” because margins have been workable, but that’s just scratching the surface.

***Year-over-Year Milk Production Change by State, June 2024-2025***

Look at these Plains states numbers and tell me we’re not watching a fundamental restructuring:

Texas: jumped 9.5% to 1.503 billion pounds
Kansas: posted a jaw-dropping 19.1% increase to 400 million pounds
South Dakota: surged 11.5% to 255 million pounds

Meanwhile, traditional regions are struggling:

Washington: dropped 9.3% to 475 million pounds
California: managed only 2.7% growth despite adding cows
Wisconsin: barely budged at 0.3%

***Milk Production Composition by Top States in 2025***

That Kansas number isn’t some statistical fluke. That’s the new Hilmar cheese facility in Dodge City pulling milk like a powerful magnet. I was talking to a producer near there recently—he’s been shipping to that region for about eighteen months now—and he said the local milk market dynamics have completely changed. Premium pickups, shorter hauls, predictable demand… it’s exactly what every operation wants.

Here’s the thing, though, and this is where it gets uncomfortable for those of us in traditional dairy country. Industry investment exceeding $10 billion is flowing toward areas where operations can actually pencil out profitably. Smart money follows processing capacity, and that capacity is definitely heading south and west.

Brian Gould from UW-Madison doesn’t mince words about this trend; he pointed out that “we’re witnessing the most significant geographic restructuring of U.S. dairy production since the 1970s, but this time it’s being driven by regulatory environment and processing economics, not just feed costs.” That’s a sobering assessment from someone who’s tracked these patterns longer than most of us have been in the business.

The Market Reality Nobody Wants to Face

Now, here’s where the story gets really uncomfortable —and why those market reactions weren’t just traders having a rough day. Despite these impressive production numbers, we face some fundamental demand challenges that are unlikely to be resolved anytime soon.

Restaurant traffic still hasn’t bounced back to where we need it. When you consider that over half of America’s food dollars get spent outside the home, weak foodservice demand creates problems that more milk simply can’t solve. Major restaurant chains have been reporting declining traffic in recent quarters, and that ripple effect is felt in cheese demand faster than most people realize.

The Processing Bottleneck That’s Coming for All of Us

What really concerns me—and I’m hearing this from plant managers across multiple regions—is that some facilities are already approaching capacity limits, while others are having to implement milk dumping protocols when volumes exceed what they can handle. We’re seeing this with current production levels, not the higher volumes everyone’s projecting for the rest of .

Recent analysis from Cornell’s Program on Dairy Markets and Policy suggests this kind of regional capacity mismatch typically pressures milk prices for 18 to 24 months until infrastructure catches up or production adjusts. When analysis from sources like Cornell suggests a 75-85% probability of continued margin pressure through early 2026 based on current supply trajectories, that timeline isn’t exactly encouraging news if you’re planning expansions.

Feed Costs Keep Things Manageable… For Now

The one bright spot that’s keeping margins workable? Feed costs haven’t gone completely sideways on us. We’re seeing corn futures trading in the low-four-dollar range, and while protein feeds aren’t cheap, they’re not breaking operations either. That’s maintaining milk-to-feed ratios around 1.8, which most producers can work with.

I was just talking to a guy running 850 cows in central Wisconsin who locked corn back in May when planting conditions looked sketchy. Smart move. He’s feeling pretty good about that decision while watching grain markets bounce around this summer.

But here’s what worries me… feed cost advantages can disappear faster than a fresh cow’s peak production drops off. Weather patterns, trade disruptions, energy costs—any of these could flip the equation pretty quickly.

What This Actually Means for Your Bottom Line

Looking ahead—and this is where three decades in this business starts showing—I don’t think this greater than 3% growth rate continues much longer. The StoneX analysis confirms what most agricultural economists are projecting: we’ll moderate toward 2% growth as we face tougher year-ago comparisons and seasonal heat stress hits those expanding Plains herds.

If you’re operating in traditional dairy regions, Focus on efficiency gains over cow numbers. This geographic shift is real, and trying to counter it by simply adding more animals might not be the most effective approach. The data shows Wisconsin barely growing while Kansas explodes—that should tell you something about where competitive advantages lie.

If you’re in one of those growth regions, Be strategic about it. Just because you can expand doesn’t mean you should do so without first locking in processing agreements. When forward-looking models show a 60-70% probability of regional capacity mismatches continuing through 2026, securing those relationships becomes critical.

Regardless of where you are, Start taking component premiums seriously if you haven’t already. Those butterfat and protein numbers aren’t just statistics on your milk check—they’re becoming the difference between profit and loss. When component-adjusted production is growing at 5% while base volume grows at 3.3%, that spread represents significant financial gains.

What’s interesting about the export picture is that U.S. cheese exports have been hitting strong levels recently while European production struggles with environmental constraints. When your competitors can’t produce, opportunities definitely emerge. But counting on exports to bail us out of domestic oversupply? That’s a risky way to build a business model.

It’s essential to remember that export markets can shift more rapidly than domestic production can adjust. Building a business model that depends entirely on international demand is like farming without crop insurance—it might work until it doesn’t.

The Bottom Line: Strategic Thinking Beats Volume Every Time

If you’re making production decisions for the next 18 months, here’s what I’m telling producers: forget about filling every stall or pushing every cow to maximum output. The operations I see thriving aren’t just focused on making more milk—they’re making smarter milk.

Key strategic moves that separate successful operations:

Prioritize components over volume (those 2% butterfat and 1.5% protein gains matter more than total pounds)
Secure solid processing relationships before expanding (capacity constraints are real)
Diversify revenue streams (beef-on-dairy programs have become essential, not optional)
Build financial flexibility to weather market volatility (18-24 month margin pressure cycles are becoming the norm)

What I’ve learned over the years is that producers who understand market signals, position themselves strategically, and build operations that can adapt when conditions change—and they always do—those are the ones that remain standing when the dust settles.

This June report confirms that we have the technical ability to produce milk like never before. The real question facing our industry is whether we’ve got the wisdom to produce it profitably in a market that’s sending us some pretty clear signals about supply, demand, and where we’re headed.

Honestly? I think that’s the conversation we should be having, rather than just celebrating production records. Because right now, with component-adjusted production up 5% and markets selling off anyway, the story being told is one we might not want to hear… but we’d better start listening.

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

Learn More:

Unlocking Component Gold: Are You Feeding for Fat and Protein, or Just Volume? – This tactical guide moves beyond why you need higher components to how you achieve them. It offers practical feeding and management strategies for immediately boosting butterfat and protein, directly impacting your milk check and profitability.
The Dairy Industry’s New Math: Are You Ready For The Change? – With the main article forecasting margin pressure and geographic shifts, this piece provides the strategic financial playbook you need. It details the key performance indicators (KPIs) that top herds use to build resilience and weather market volatility.
Beef on Dairy: A Trend That’s Here to Stay – The main article flags beef-on-dairy as essential. This piece breaks down the economics of this strategy, revealing how to leverage terminal genetics and market knowledge to transform your calf program from a cost center into a significant revenue stream.

Join the Revolution!

Categories : USDA Dairy Production Report

Tags : Dairy Farm Profitability, dairy market analysis, dairy processing capacity, milk components, milk production trends

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

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 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 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

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

Global Dairy Trade Index Slides 1.0% as Market Bifurcation Exposes Industry’s New Reality

Tuesday, July 1st, 2025

GDT drops 1.0% but US milk prices RISE to $21.95/cwt? The component revolution is rewriting dairy economics, butterfat tests jump 10.4% since 2020.

EXECUTIVE SUMMARY: The dairy industry’s obsession with Global Dairy Trade auction results is creating a dangerous blind spot that could cost North American producers millions in missed opportunities. While commodity milk powders crashed 2.1% in June’s GDT auction, butter surged 1.4% and cheddar cheese exploded 5.1% higher—exposing a market bifurcation that conventional wisdom completely misses. The USDA raised its 2025 all-milk price forecast to $21.95 per hundredweight even as the GDT declined, proving that domestic component-focused operations are fundamentally decoupling from Oceania’s commodity signals. The data is undeniable: average butterfat tests have climbed from 3.95% in 2020 to 4.36% by March 2025, while protein content rose from 3.18% to 3.38%—creating revenue streams that traditional volume-focused metrics can’t capture. McKinsey’s 2025 industry survey found 80% of dairy leaders expect continued volume growth, with domestic butter consumption surging 5.8% and cheese consumption up 1.5% between 2023-2024. Canadian producers under supply management saw just a 0.0237% price decrease while global markets swung wildly, demonstrating the power of strategic market positioning. Stop chasing commodity signals from halfway around the world and start building component-focused operations that capitalize on the $2.33/lb US butter advantage over EU ($3.75) and Oceania ($3.54) pricing.

KEY TAKEAWAYS

Component Revolution Delivers Real ROI: Butterfat content increased 10.4% since 2020 (3.95% to 4.36%) while protein jumped 6.3% (3.18% to 3.38%), creating revenue streams worth $0.50/cwt more than volume-focused operations—translating to $25,000+ annually for a 500-cow herd.
Strategic Risk Layering Beats Single Coverage: Combine Dairy Margin Coverage (DMC) at $9.50/cwt with Component Pricing DRP options to protect actual revenue streams rather than outdated Class III formulas—reducing basis risk by up to 40% while maintaining catastrophic downside protection.
Domestic Decoupling Creates Competitive Advantage: US butter exports surged 41% in May 2025 due to $1.42/lb price advantage over European competitors, while cheese exports jumped 6.7% in April—proving that high-component producers can profit from global market dislocations rather than suffer from them.
Precision Feeding Technology Pays for Itself: Modern feed management systems deliver documented 7-12% cost reductions while maintaining component production, generating $15,000-$25,000 annual savings for mid-sized operations—money that goes straight to the bottom line during volatile market periods.
Forward Curve Analysis Reveals Hidden Opportunities: Butter forward contracts showing backwardation (July +5.09%, August +6.09%) signal desperate current demand and potential pricing premiums for high-butterfat producers who understand market timing better than their volume-focused competitors.

global dairy trade, component-focused dairy, dairy market analysis, dairy risk management, milk component pricing

The Global Dairy Trade index dropped 1.0% in June’s final auction, marking the third consecutive decline and bringing the weighted average price to $4,389 per metric tonne. But here’s what the headlines miss: while commodity milk powders crashed, butter surged 1.4% and cheddar cheese exploded 5.1% higher, revealing a market that’s not collapsing, it’s evolving.

The June 17, 2025, auction (Event 382) delivered 172 participating bidders and 110 winners purchasing 15,209 metric tonnes across 20 bidding rounds. The nearly three-hour trading session wasn’t panic selling—it was deliberate price discovery in a market learning to separate commodity volume from premium value.

The Auction Autopsy: Two Markets Hiding in Plain Sight

Let’s cut through the noise and examine what actually moved prices in those 20 bidding rounds. The 1.0% headline drop obscures a fundamental market restructuring that every North American producer needs to understand.

The damage report for commodities:

Whole milk powder: Down 2.1% to $4,084/MT
Skim milk powder: Down 1.3% to $2,775/MT

The strength in value-added products:

Butter: Up 1.4% to $7,890/MT
Cheddar cheese: Surged 5.1% to $4,992/MT
Anhydrous milk fat: Down just 1.3% to $7,276/MT

This isn’t market weakness—it’s market intelligence. Global buyers are drowning in basic milk solids while fighting for premium dairy products. The forward curve tells an even more compelling story.

Reading the Tea Leaves: What Forward Contracts Reveal

The auction’s forward pricing structure exposes the market’s true expectations. Whole milk powder showed classic contango—near-term weakness with higher future prices, suggesting oversupply now but recovery expectations later.

But butter painted the opposite picture. Near-term contracts jumped 5.09% and 6.09% for July and August delivery, while later contracts softened, with Contract 4 (October delivery) falling 2.86%. This backwardation signals desperate current demand for butterfat, with production expected to catch up eventually.

Translation: The global market is currently short on butterfat and long on basic milk solids. That’s not a crisis—that’s an opportunity for component-focused producers.

The Global Supply-Demand Tug of War

Three massive forces are reshaping dairy markets right now, and understanding them is crucial for strategic positioning.

The U.S. Production Surge

The USDA cranked up its 2025 milk production forecast by 0.7 billion pounds in April, driven by expanding cow inventories and higher yields per cow. By May 2025, U.S. production was running 1.6% higher year-over-year, flooding the commodity pool with basic milk solids.

China’s Desperate Demand

Chinese dairy imports jumped 12% year-over-year through April 2025, with February alone seeing 16% volume growth and 20% value increases. But this isn’t prosperity-driven consumption—it’s crisis management.

China’s domestic production collapsed 9.2% year-over-year in early 2025, while farm-gate milk prices hit decade lows. Rabobank calls this a “mathematical necessity” for imports, not sustainable demand growth. Chinese buyers are also stockpiling products ahead of anticipated tariffs, creating tactical rather than fundamental demand.

The Currency Factor

ANZ Bank forecasts the New Zealand dollar strengthening to an annual average of 0.640 NZD/USD through 2025. A stronger Kiwi allows New Zealand exporters to accept lower USD-denominated GDT prices while hitting their local revenue targets, creating direct mathematical pressure on the index.

Why Your Milk Check Tells a Different Story

Here’s the contrarian reality that challenges everything you’ve heard about GDT weakness: the USDA raised its 2025 all-milk price forecast to $21.95 per hundredweight, even as production surged and GDT declined.

The reason? Domestic demand is absolutely crushing it. Natural cheese consumption grew 1.5% and butter consumption surged 5.8% between 2023 and 2024. A 2025 McKinsey survey of dairy industry leaders found 80% expect continued volume growth, with executives noting “a resurgence in consumer demand for dairy”.

The Component Revolution Changes Everything

While everyone obsesses over volume, smart producers are focused on components. Average butterfat tests climbed from 3.95% in 2020 to 4.36% by March 2025, while protein content rose from 3.18% to 3.38%.

This is massive. You’re getting paid for these components, creating revenue streams the GDT can’t capture. In May 2025, U.S. butter was priced at $2.33 per pound—far below EU ($3.75) and Oceania ($3.54) levels—helping drive a 41% surge in butter exports.

Regional Reality: Why Geography Matters More Than GDT

For U.S. producers: Your pricing increasingly decouples from Oceania’s commodity auctions. Strong domestic cheese and butter demand and component premiums provide significant insulation. Even cheese exports surged 6.7% in April while powder exports fell.

For Canadian producers: You’re operating in a parallel universe. The Canadian Dairy Commission announced just a 0.0237% price decrease for 2025—essentially flat pricing while global markets swing wildly. Supply management delivers exactly what it promises: stability while others ride the volatility.

Strategic Risk Management for the New Reality

The current environment demands sophisticated risk management that goes beyond traditional approaches, as outlined in the research findings.

Layer Your Protection

For U.S. producers under 5 million pounds, maximize Dairy Margin Coverage (DMC) at the $9.50/cwt level for Tier I production. Layer Dairy Revenue Protection (DRP) with Component Pricing options on top to hedge your actual revenue streams, not just Class III prices.

Focus on Components, Not Volume

The market is screaming one message: components matter more than volume. Accelerate genetics investments favoring higher butterfat and protein yields. Precision feeding technologies can reduce feed costs by a documented 7-12% while maintaining component production.

Build On-Farm Resilience

With HPAI outbreaks in U.S. cattle and Bluetongue affecting EU herds, robust biosecurity isn’t optional—it’s insurance against catastrophic production losses. Lock in feed contracts when favorable and invest in technologies that maximize component output.

The Bottom Line

The GDT’s weakness reflects commodity oversupply, not the collapse of the dairy industry. While basic milk powders struggle, the market increasingly values butterfat, protein, and processed products—exactly where North American producers have competitive advantages.

The 2025 market isn’t about surviving a crash but positioning for a structural shift toward component value. Focus on what you can control: component production, cost management, and risk layering. Let Oceania chase commodity volumes while you build revenue streams that the GDT can’t even measure.

The global dairy trade is evolving, and the winners will be those who recognize that in a world valuing milk solids over sheer volume, your highest-testing cows just became your best competitive advantage.

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

Learn More:

2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Reveals how Federal Milk Marketing Order reforms taking effect June 1st reward 3.3% protein producers while penalizing volume-focused operations, plus strategic methods for capturing component premiums that complement the GDT decoupling thesis.
US Dairy Market in 2025: Butterfat Boom & Price Volatility – Demonstrates tactical implementation of Dairy Revenue Protection strategies and component-focused breeding decisions that directly support the risk management framework outlined in the GDT analysis, with specific hedging benchmarks and processor negotiation tactics.
The Future of Dairy Farming: Embracing Automation, AI, and Sustainability in 2025 – Explores precision feeding technologies and whole-life monitoring systems that deliver the documented 7-12% cost reductions mentioned in the component revolution strategy, with specific ROI timelines and implementation roadmaps for maximizing milk solids production.

Join the Revolution!

Categories : Dairy Markets

Tags : component-focused dairy, dairy market analysis, dairy risk management, global dairy trade

Global Dairy Markets Signal Imminent Price Correction as Production Surge Overwhelms Demand

Monday, June 30th, 2025

Global milk production surge triggers price avalanche – NZ output +8.3%, inventory crisis forces 119% auction volume spike. Your margins at risk.

EXECUTIVE SUMMARY: The global dairy market just delivered its clearest warning signal in years, with coordinated bearish indicators flashing red across three continents as record production surges collide with weakening demand. New Zealand’s explosive 8.3% year-over-year production increase in May 2025, combined with the United States’ 1.6% growth and the UK’s 5.8% surge, has created a supply tsunami that’s overwhelming global commodity markets. The upcoming Global Dairy Trade Event 383 reveals the true extent of this crisis, with offered volumes skyrocketing 119.3% for Anhydrous Milk Fat, 83.9% for butter, and 76.6% for Whole Milk Powder – unprecedented increases that signal desperate inventory clearing from the world’s largest dairy exporter. While European futures contracts have already declined 1.4% for SMP and 0.9% for butter, and GDT Pulse auctions show WMP prices crashing 3.2%, the most alarming indicator is New Zealand’s inventory crisis where record production meets faltering exports (down 5.7%), forcing a 2.5% year-over-year inventory build-up. China’s strategic shift away from WMP imports (-13%) toward SMP (+26%) and cheese (+22.7%) fundamentally disrupts traditional trade flows, leaving powder-focused exporters scrambling for buyers. Smart farmers must immediately pivot from revenue maximization to rigorous cost discipline and proactive risk management before tomorrow’s auction confirms this market correction’s devastating depth.

KEY TAKEAWAYS

Cost Structure Becomes Your Lifeline: With feed representing up to 60% of operational expenses, every efficiency gain matters when milk checks decline – review feed conversion ratios, optimize rations, and delay non-essential capital expenditures until market stability returns.
Component Strategy Offers Salvation: U.S. butterfat production surged 3.4% year-over-year while average butterfat tests climbed from 3.95% to 4.36% since 2020, with premium payments averaging $0.75-$1.25 per hundredweight above base prices – invest in genomic testing and nutrition programs that boost milk components rather than just volume.
Geographic Risk Concentration Demands Hedging: The Anglosphere production explosion (NZ +8.3%, UK +5.8%, US +1.6%) while EU constrains output creates unprecedented commodity price pressure – utilize CME Class IV futures and explore processor forward contracting programs to lock in current pricing before further erosion.
Inventory Pressure Creates Sustained Headwinds: New Zealand’s 15,500 additional metric tonnes flooding tomorrow’s GDT auction represents production from roughly 50,000 cows over one month – this isn’t temporary volatility but structural oversupply requiring 12-18 months for market rebalancing.
Revenue Diversification Becomes Critical: With three-quarters of U.S. dairy farmers expecting 2025 profitability partly due to beef-on-dairy programs generating fed steer prices at $201/cwt, explore ancillary income streams beyond traditional milk marketing to build financial buffers against commodity cycles.

Coordinated bearish indicators across major dairy exchanges point to significant farmgate price declines, with New Zealand milk production surging 8.3% while exports fall 5.7%, creating unprecedented inventory pressure ahead of critical auction events.

Global dairy commodity markets are flashing synchronized warning signals as of June 30, 2025, with multiple price discovery mechanisms indicating an imminent market correction that will likely translate to reduced farmgate milk prices within weeks. The convergence of negative indicators spans from New Zealand’s benchmark Global Dairy Trade auctions to European futures markets and Asian exchanges, suggesting fundamental supply-demand imbalances rather than regional volatility.

Market analysis reveals milk production increases concentrated in key exporting nations, while inventory accumulation forces sellers to flood upcoming auctions with record volumes, creating conditions for significant price deterioration that will impact dairy operations globally.

***Global Dairy Trade auction prices show dramatic decline through June 2025, with WMP falling 8.5% and SMP down 6.6% from peaks***

Auction Results Confirm Widespread Price Weakness

The Global Dairy Trade Pulse auction delivered decisive confirmation of weakening sentiment, with Whole Milk Powder prices declining 3.2% and Skim Milk Powder falling 2.5% from the previous trading event. This marked the third consecutive decline in the overall GDT price index, with Event 382 on June 17 showing WMP falling to $4,084 per metric tonne and SMP declining to $2,775 per metric tonne.

The weakness extends beyond New Zealand’s benchmark platform. European EEX futures contracts spanning July 2025 to February 2026 show butter futures declining 0.9% while SMP futures dropped 1.4%. Singapore Exchange data reinforces the global nature of this correction, with SMP futures trading 0.8% lower and butter contracts down 0.2%.

European spot markets validate the immediate price pressure. The official EEX butter index fell 0.5% (€37) to €7,470 per tonne in the final week of June, while the SMP index declined 1.2% (€30) to €2,400 per metric tonne.

Production Surge Creates Perfect Storm

***New Zealand leads explosive milk production growth at +8.3% while European Union faces production constraints***

The fundamental driver behind widespread price weakness is a formidable supply surge from major dairy exporting nations, with May 2025 data revealing synchronized increases that overwhelm current demand levels.

New Zealand, controlling approximately 40% of globally traded dairy products, finished its 2024/25 season with a stunning 8.3% year-over-year jump in May milk collections. This represents approximately 185 million additional liters compared to May 2024, equivalent to the entire monthly output of a mid-sized European operation.

United States milk production rose 1.6% year-over-year in May, continuing to push total 2025 collections up 1.1%, according to USDA data. The USDA reports the 24 major dairy states produced 19.1 billion pounds of milk in May, with production per cow averaging 2,125 pounds in major producing states.

The United Kingdom reported a substantial 5.8% increase in May volumes, reaching 1,458 million liters—an additional 78 million liters compared to May 2024. Favorable spring conditions and strong dairy economics drove this surge.

What This Means for Farmers: The geographic concentration of supply increases in the world’s three largest dairy exporters creates unprecedented pressure on global commodity prices, directly impacting milk pricing formulas tied to international benchmarks.

Inventory Crisis Forces Market Breaking Point

Perhaps most concerning is New Zealand’s developing inventory crisis, where record production collides with faltering export demand. While May production exploded 8.3% higher, New Zealand’s milk equivalent exports simultaneously fell 5.7%. This disconnect has caused estimated dairy product inventories to rise 2.5% year-over-year.

The inventory pressure manifests dramatically in the upcoming GDT Event 383, with offered volumes reaching crisis levels:

Anhydrous Milk Fat: Up 119.3% to 4,670 metric tonnes
Butter: Volume increased 83.9% to 2,290 metric tonnes
Whole Milk Powder: 76.6% increase to 12,345 metric tonnes
Skim Milk Powder: 63.6% jump to 4,200 metric tonnes

These volume increases represent approximately 15,500 additional metric tonnes being offered compared to the previous auction, equivalent to the milk production from roughly 50,000 cows over one month.

Regional Market Divergence Complicates Outlook

Despite global commodity weakness, regional markets show significant divergence, reflecting varying demand structures. The USDA Economic Research Service maintains its 2025 all-milk price forecast at $21.95 per hundredweight, up $0.35 from previous estimates, reflecting strong domestic U.S. demand rather than export commodity strength.

U.S. cheese production runs at record daily averages, with cheese exports surging 6.7% while nonfat dry milk/SMP exports fell 20.9% in April. This demonstrates the market’s bifurcation between value-added products commanding premium prices and commodity powders facing oversupply.

European production constraints offer some market balance. Germany’s milk production declined 1.8% year-over-year while the Netherlands saw a 0.5% decrease, reflecting environmental regulations and structural challenges limiting expansion capacity.

China Demand Shift Adds Market Complexity

Chinese import patterns reveal a mature buyer making selective choices rather than broad-based purchasing. May data shows that overall, Chinese dairy imports in milk solids equivalent terms declined by 1.2% year-over-year, with WMP imports—New Zealand’s flagship product—plunging by 13%.

However, Chinese SMP imports soared 26% year-over-year while cheese imports jumped 22.7%, indicating structural demand shifts favoring EU and U.S. suppliers over New Zealand’s powder-focused export strategy.

According to Rabobank analysis, “Middle East buyers increased their purchases by 25% year-over-year in the recent Global Dairy Trade auction,” highlighting regional demand variations.

Technology Integration Masks Underlying Volatility

Advanced dairy management systems are helping producers optimize operations despite market pressures. Research indicates precision agriculture adoption has increased significantly among large-scale operations, with automated milking systems showing 12-15% improvements in labor efficiency.

Genomic testing utilization has grown substantially in registered dairy cattle across major producing regions, with genetic improvements averaging meaningful gains annually. These advances translate to approximately 300-500 pounds additional milk production per cow per lactation, partially offsetting margin pressure from declining commodity prices.

Component Focus Drives Strategic Shifts

***US dairy farmers achieve 4.36% butterfat and 3.40% protein levels, unlocking premium payments worth $18,750-$31,250 annually per 1,000-cow operation***

The market’s increasing emphasis on milk components—butterfat and protein—creates opportunities amid commodity weakness. U.S. butterfat production surged 3.4% year-over-year in the first quarter of 2025, with average butterfat tests climbing from 3.95% in 2020 to 4.36% by March 2025.

Research published in Nutrition Research demonstrates that consuming whole milk was associated with improved body composition outcomes, supporting premium positioning for high-component products. Premium payments for high-component milk average $0.75-$1.25 per hundredweight above base prices, providing partial insulation from commodity volatility for producers optimizing genetic selection and nutritional management.

Market Outlook and Industry Implications

Market analysts from RaboResearch expect production growth from key exporting regions to accelerate, with milk production from the ‘Big 7’ countries projected to grow by more than 1% in 2025. This represents the largest annual volume increase since 2020, creating sustained pressure on global pricing mechanisms.

However, demand uncertainty remains elevated. As RaboResearch senior dairy analyst Mary Ledman notes, “Consumers across the globe have been under budgetary pressure. Retail dairy prices have been mixed around the world”.

The Latest

Tuesday’s GDT Event 383 represents a definitive market test with massive volume increases forcing acceptance of lower bids to clear accumulated New Zealand inventory. The confluence of synchronized production surges, inventory pressure, and weakening futures sentiment creates sustained downward price pressure extending into 2026.

Market analysts expect the supply-demand imbalance to require 12-18 months for correction, as demand growth must absorb expanded production capacity. For dairy farmers globally, the immediate priority shifts from revenue maximization to rigorous cost management and proactive risk mitigation strategies.

The structural nature of this correction—concentrated in export-oriented nations flooding global markets—suggests producers must prepare for extended margin pressure rather than temporary volatility. Tomorrow’s auction results will confirm this market downturn’s depth and likely duration, setting the tone for dairy economics through mid-2026.

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

Learn More:

CME Dairy Market Report June 24th, 2025 – Cheese Market Crash Delivers Another Margin-Crushing Blow – Provides tactical risk management strategies and immediate hedging tools to protect against Class III crashes below $17/cwt, including specific Dairy Revenue Protection implementation guidance for crisis scenarios.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Reveals strategic positioning methods for navigating production constraints and component optimization opportunities, demonstrating how to align with processor demands for long-term profitability despite market turbulence.
The Future of Dairy Farming: Embracing Automation, AI, and Sustainability in 2025 – Explores cutting-edge technologies that can offset margin pressure through efficiency gains, showcasing practical automation solutions that deliver measurable ROI during challenging commodity cycles.

Join the Revolution!

Categories : CME Dairy Markets, Dairy Markets

Tags : dairy market analysis, dairy market trends, dairy profitability, global dairy production, milk price forecast

CME Dairy Market Report: June 25th, 2025 – Cheese Markets Show Signs of Stabilization After Week of Devastating Losses

Wednesday, June 25th, 2025

Cheese collapse signals 20% margin compression—but smart producers are pivoting to component premiums while others panic. $12/cwt reality check inside.

EXECUTIVE SUMMARY: The dairy industry’s “structural reckoning” has arrived, and it’s not the cyclical downturn most producers expected—it’s a fundamental shift that’s separating survivors from casualties. Despite corn trading 37% below 2023 highs, income-over-feed margins are plummeting below $12/cwt through August 2025, representing a crushing 20% compression that’s devastating unprotected operations. While domestic cheese consumption collapsed 56 million pounds in Q1 2025 and retail buyers have “gone dark,” component-adjusted production surged 3.0%—creating a $1.50/cwt premium opportunity for producers who understand the new rules. The market’s message is crystal clear: volume-centric thinking is dead, and the 9.45 million head national herd expansion is rewarding only those optimizing for butterfat (4.40%) and protein (3.40%) content. With July Class III futures crashing from $18.67 to $17.00/cwt in 48 hours, producers have exactly that long to implement DRP coverage or face potential $1.75/cwt additional pressure. This isn’t fear-mongering—it’s mathematical reality in a market where processing capacity is expanding faster than demand can absorb it. Stop chasing yesterday’s volume metrics and start maximizing today’s component premiums before your operation becomes another consolidation statistic.

KEY TAKEAWAYS

Component Premium Goldmine: Butterfat levels hitting 4.40% and protein at 3.40% are generating $0.75-$1.50/cwt premiums while fluid volume producers face margin compression—shift breeding and feeding strategies from volume to value within 30 days to capture this widening opportunity gap.
48-Hour Risk Management Window: With Class III futures dropping $1.67/cwt in two days and domestic cheese buyers completely withdrawing from markets, implementing Dairy Revenue Protection coverage for Q3/Q4 production isn’t optional—it’s survival economics against projected $1.25-$1.75/cwt additional pressure.
Feed Cost Arbitrage Play: Lock corn contracts below $4.60/bushel and soybean meal under $300/ton immediately—while feed represents your largest variable cost at 37% below 2023 highs, the revenue collapse is outpacing input savings by 3:1, making strategic procurement your only controllable margin variable.
Geographic Reality Check: Texas milk production surging 10.6% year-over-year while California drops 9.2% due to H5N1 impacts means transportation costs and regional pricing differentials are creating $2-3/cwt location advantages—evaluate your processing infrastructure alignment before competitors capture your local premium.
Export Market Lifeline: With U.S. markets decoupling from 21.5% global dairy price strength and China’s temporary tariff reduction from 125% to 10% lasting only 90 days, securing export-focused processor relationships now could determine whether you’re selling into $1.61/lb domestic weakness or $1.95/lb international strength.

dairy market analysis, CME dairy futures, dairy farm profitability, milk price volatility, dairy risk management

Cheese blocks stage modest recovery with 1.5¢ gain, but weekly losses still exceed 5¢ as domestic buyers remain cautious. Class III futures hold near $17/cwt amid continued supply-demand imbalances threatening farm profitability through August.

Today’s Price Action & Farm Impact

Product	Price	Daily Change	Weekly Trend	Impact on Farmers
Cheese Blocks	$1.61/lb	+1.5¢	-10.4¢ (-6.1%)	Modest relief from severe Class III pressure
Cheese Barrels	$1.63/lb	+1.25¢	-9.4¢ (-5.4%)	Slight improvement in protein values
Class III (JUL)	$16.97/cwt	-$0.01	-$1.28 (-7.0%)	July milk checks under continued pressure
Butter	$2.52/lb	-1.5¢	-2.7¢ (-1.1%)	Limited Class IV support weakening
NDM Grade A	$1.25/lb	No Change	-1.9¢ (-1.5%)	Export demand is steady but fragile
Dry Whey	$0.57/lb	-0.5¢	+1.3¢ (+2.3%)	Protein markets showing relative stability

Market Commentary: Today’s cheese market provided a glimmer of hope after a devastating two-week selloff that erased over 15¢ from block values. The 17 trades in blocks represented the most active session of the week, suggesting some buyers may be testing the waters near current levels. However, the modest 1.5¢ recovery does little to offset the cumulative damage to Class III valuations, with July futures still trading below $17/cwt. The continued weakness in butter, dropping 1.5¢ today, limits any meaningful support for Class IV milk prices.

Trading Activity & Market Sentiment

Volume Analysis: Trading activity showed signs of life with 17 cheese block transactions compared to previous sessions with minimal activity. However, overall market participation remains extremely low, with bid-ask spreads widening considerably across all products.

Market Voice – Industry Perspective: According to comprehensive market analysis from industry sources, “retail cheese buyers have reportedly ‘gone dark,’ awaiting further price declines before making new purchases”. This institutional withdrawal from the market explains the persistent weakness despite modest production adjustments.

A dairy risk management consultant emphasized the urgency of current conditions, stating that producers should “implement DRP coverage for Q3/Q4 production within 48 hours” due to the rapid deterioration in market fundamentals. This unprecedented timeline reflects the severity of margin compression facing dairy operations.

Export market dynamics are also shifting, with reports indicating that “Mexican buyers are becoming more selective on pricing”, despite Mexico representing $2.47 billion in annual U.S. dairy purchases. This selectivity signals broader international pressure on U.S. competitiveness.

Feed Cost & Margin Analysis

Current Feed Situation:

Corn (September): $4.05/bushel – down 6¢ from Tuesday, offering continued cost relief
Soybean Meal (August): $279.60/ton – down $7.10 from Tuesday, providing protein cost savings
Milk-to-Feed Ratio: Currently under severe compression despite favorable feed costs

Margin Reality Check: Despite corn trading 37% below 2023 highs and soybean meal remaining manageable, income-over-feed costs are projected to plummet below $12/cwt through August 2025. This represents a crushing 20% margin compression that demands immediate attention from producers. The paradox of favorable feed costs coupled with collapsing milk revenues underscores that the current crisis is demand-driven, not cost-driven.

Production & Supply Insights

Production Surge Continues: U.S. milk production reached 19.9 billion pounds in May 2025, marking a 1.6% year-over-year increase with the national dairy herd expanding to 9.45 million head – the largest since 2021. This growth, driven by light culling rates and strong beef-on-dairy calf values, creates significant supply pressure in an already oversupplied market.

Component Quality Hits Records: Average butterfat levels reached 4.40% and protein 3.40% in 2025, with component-adjusted production surging 3.0% in April. While processors benefit from higher manufacturing yields, the increased cheese and powder production volume exacerbates the oversupply situation.

Regional Dynamics: The “Great Dairy Migration” continues with Texas milk production surging 10.6% year-over-year, while California faces a 9.2% decline due to H5N1 impacts affecting approximately 650 herds. This geographic shift creates infrastructure mismatches that could pressure local milk pricing.

Market Fundamentals Driving Prices

Domestic Demand Crisis: The most concerning factor remains the collapse in domestic cheese consumption, which declined 56 million pounds in Q1 2025. Reports indicate retail cheese buyers have “gone dark,” waiting for further price declines before re-entering the market. Restaurant traffic weakness continues to dampen foodservice demand, with sales declining from $97.0 billion in December to $95.5 billion.

Export Market Volatility: While global dairy prices show strength with the FAO Dairy Price Index up 21.5% year-over-year, U.S. markets are experiencing a concerning “decoupling” from global strength. China’s temporary tariff reduction from 125% to 10% on certain U.S. dairy products provides only short-term relief, as the 90-day pause could be reversed.

Processing Capacity Expansion: Over $9 billion in new processing capacity is coming online through 2026, adding approximately 55 million pounds per day of production capability. While positive in the long term, this expansion adds to near-term supply pressure as demand struggles to keep pace.

Forward-Looking Analysis

Class III Outlook: July Class III futures at $16.97/cwt reflect the market’s pessimistic assessment of near-term fundamentals. The USDA’s more optimistic projection of $18.65/cwt for 2025 appears increasingly disconnected from trading reality. August futures at $17.71/cwt suggest only modest improvement in the coming months.

Seasonal Risk Factors: NOAA forecasts well above-average temperatures across most of the Lower 48 states, which could trigger 8-12% production losses in key regions due to heat stress. While this might provide some supply relief, the same weather patterns threaten feed crop yields, potentially squeezing margins from the cost side.

H5N1 Monitoring: With nearly 1,000 herds across 17 states reporting infections, the virus continues to create localized supply disruptions. Mathematical modeling suggests outbreaks will persist through 2025, with Arizona and Wisconsin identified as the highest-risk states.

Regional Market Spotlight: California vs. Southern Plains

California Struggles: The Golden State’s 9.2% production decline represents a significant shift from historical patterns. H5N1 impacts on 650 herds, combined with ongoing regulatory pressures, are accelerating the migration of production to more business-friendly regions.

Southern Plains Boom: Texas, Kansas, and South Dakota continue their explosive growth, with Kansas posting a remarkable 15.7% increase in May production. However, this rapid expansion is outpacing processing infrastructure, creating potential bottlenecks and local pricing pressures.

Actionable Farmer Insights – Immediate Actions Required

Within 48 Hours – Critical Risk Management: Immediately implement Dairy Revenue Protection (DRP) coverage for Q3/Q4 production . With income-over-feed costs projected below $12/cwt, this represents the most important financial survival action . The cheese market collapse signals potential $1.25-$1.75/cwt additional Class III pressure.

Next 7 Days – Component Optimization Strategy: Focus breeding and feeding programs on maximizing butterfat and protein content. With component-adjusted production surging while fluid volumes remain modest, the market is rewarding quality over quantity. Target butterfat levels of 4.50%+ to capture $0.75-$1.50/cwt pricing premiums.

Within 30 Days – Strategic Feed Procurement: Lock in favorable feed costs by securing corn contracts below $4.60/bushel and soybean meal under $300/ton while availability remains strong. Forward contract 60-70% of feed needs to protect against potential weather-related price increases.

Ongoing – Breeding Decisions: Continue selective use of beef semen on lower genetic merit animals to capitalize on strong beef-on-dairy calf values, while increasing gender-sorted semen usage on top genetic merit cows.

Industry Intelligence

FMMO Reform Impact: The June 1st implementation of Federal Milk Marketing Order reforms is creating regional winners and losers. Northeast producers benefit from the “higher-of” Class I pricing and revised differentials, while manufacturing-heavy regions see less favorable impacts.

Trade Policy Watch: The temporary nature of China’s tariff reduction means exporters face continued uncertainty. The 90-day pause could be extended or reversed, making long-term planning challenging.

Technology Investment: With margins under severe pressure, farms investing in automation and efficiency technologies are gaining competitive advantages. AI-driven tools can increase output by up to 81% through better decision-making.

The Bottom Line

Today’s modest cheese recovery provides little comfort for dairy farmers facing the most challenging margin environment in years. With milk production surging, domestic demand collapsing, and export markets volatile, the industry faces a structural reckoning rather than a cyclical downturn.

Immediate Actions Required (Next 48 Hours):

Secure DRP coverage for Q3/Q4 production immediately
Lock in favorable feed contracts while available
Optimize breeding programs for components, not volume
Engage processors about component premiums and quality bonuses

Key Risk: Income-over-feed margins below $12/cwt represent a financial emergency for many operations. Smaller and mid-sized farms lacking economies of scale face the greatest threat from this margin compression.

The market is sending clear signals that efficiency, component optimization, and proactive risk management are no longer optional – they’re essential for survival in this new paradigm. Producers who adapt their strategies now will be positioned to thrive when market conditions eventually improve.

Stay ahead of volatile markets with daily insights from TheBullVine.com. Our comprehensive analysis gives you the intelligence needed to protect your operation and maximize profitability in challenging times.

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Reveals layered financial protection strategies combining DMC, DRP, and forward contracts to hedge against the exact price collapses and margin compression detailed in today’s market analysis.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook Is Wrong – Demonstrates how progressive farmers shift from volume thinking to component optimization, capturing the butterfat and protein premiums that represent survival strategies in today’s challenging market environment.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Practical implementation guide for the automation and efficiency technologies mentioned as competitive advantages, showing how smart sensors and AI systems deliver ROI within 7 months during margin compression periods.

Categories : CME Dairy Markets

Tags : CME dairy futures, Dairy Farm Profitability, dairy market analysis, dairy risk management, milk price volatility

CME Dairy Market Report June 24th, 2025: Cheese Market Crash Delivers Another Margin-Crushing Blow

Tuesday, June 24th, 2025

Cheese crash exposes fatal flaw in dairy risk management—$12/cwt margins despite “cheap” feed prove milk price hedging trumps input cost focus

EXECUTIVE SUMMARY: The dairy industry’s obsession with feed cost management is dangerously misguided when Class III futures crater 28 cents while corn sits comfortably below $4.50/bushel. This comprehensive CME market analysis reveals how 25 block cheese trades with zero bids created a $1.27 weekly Class III collapse, pushing income-over-feed costs below $12/cwt despite historically favorable grain prices. The brutal math exposes a 20% margin compression driven entirely by milk price destruction, not input inflation—contradicting decades of conventional wisdom that positions feed cost hedging as the primary risk management tool. Global demand destruction is overriding domestic supply fundamentals, with Mexican buyers becoming “price-selective” on $2.47 billion in annual purchases while U.S. component-adjusted production surges 3.0% year-over-year. FMMO reforms effective June 1st are creating structural pricing advantages for butterfat producers, with Class IV projected to outperform Class III by $0.60/cwt in 2026. Progressive producers implementing Dairy Revenue Protection within 48 hours and optimizing for 4.50%+ butterfat levels will capture $0.75-$1.50/cwt premiums while competitors cling to outdated volume-focused strategies.

KEY TAKEAWAYS

Immediate DRP Implementation Delivers Crisis Protection: With Class III below $17.00/cwt and further weakness projected, establishing Dairy Revenue Protection floors within 48 hours protects against $1.25-$1.75/cwt additional losses through August 2025—far exceeding potential feed cost savings
Butterfat Optimization Captures Structural Premium: Target 4.50%+ butterfat levels to access $0.75-$1.50/cwt premiums as Class IV prices maintain $0.60/cwt advantage over Class III in 2026 projections, reversing traditional protein-focused strategies
Component-Focused Production Trumps Volume Strategy: U.S. milk shows 3.0% component-adjusted growth versus 1.6% volume growth, yet cheese prices collapse—proving market values manufacturing solids over raw gallons, demanding strategic breeding and nutrition shifts
Regional FMMO Advantages Create Geographic Arbitrage: June 1st reforms increased Northeast Class I differentials to $5.10/cwt while manufacturing regions face relative disadvantages—strategic location evaluation now delivers measurable pricing benefits
Trading Pattern Analysis Reveals Market Paralysis: 25 block trades with zero bids versus 6 barrel bids with zero offers signals bifurcated cheese market requiring sophisticated risk management beyond traditional spot price monitoring

CME dairy futures, dairy risk management, Class III milk prices, dairy market analysis, milk price hedging

Class III milk futures plunged $0.28/cwt as cheese blocks collapsed 5.50¢ and barrels fell 4.25¢, extending a brutal week that’s pushing farm margins below break-even levels. With July Class III now at $16.98/cwt and income-over-feed costs projected to slip below $12/cwt through August, immediate risk management action is critical.

Today’s Price Action & Farm Impact

Product	Closing Price	Daily Change	Weekly Trend	Direct Impact on Farmers
Cheese Blocks	$1.5950/lb	-5.50¢	-10.0¢ (-5.8%)	Severe Class III pressure continues
Cheese Barrels	$1.6150/lb	-4.25¢	-11.2¢ (-6.5%)	Amplifies protein value destruction
Class III (JUL)	$16.98/cwt	-$0.28	-$1.27 (-7.0%)	Milk checks under severe pressure
Class IV (JUL)	$18.83/cwt	-$0.22	-$0.44 (-2.3%)	Butterfat premium maintaining
Butter	$2.5350/lb	+1.00¢	+0.56¢ (+0.2%)	Modest support for Class IV
NDM Grade A	$1.2500/lb	-1.00¢	-1.88¢ (-1.5%)	Export demand softening
Dry Whey	$0.5725/lb	+0.25¢	+1.81¢ (+3.3%)	Protein markets holding better

Market Commentary: Today’s cheese rout extends what’s becoming a devastating June for Class III valuations. Block cheese has now shed over 15¢ in two weeks, with domestic buyers reportedly “gone dark” as they await further price declines. The 25 trades in blocks today show active selling pressure, while the complete absence of bids signals market participants are stepping aside until this correction finds a floor.

Enhanced Trading Activity Analysis

Detailed Market Depth Snapshot (June 24, 2025):

Product	Trades	Bids	Offers	Bid-Ask Environment	Market Sentiment
Cheese Blocks	25	0	2	Sellers Only – No buying interest	Panic selling
Cheese Barrels	5	6	0	Buyers Only – No selling interest	Distressed demand
Butter	0	2	2	Balanced but inactive	Cautious neutrality
NDM Grade A	1	0	1	Minimal activity	Disinterest
Dry Whey	2	3	2	Modest interest both sides	Stable engagement

Critical Market Signal: The stark contrast between blocks (25 trades, 0 bids) and barrels (5 trades, 6 bids, 0 offers) reveals a bifurcated cheese market. Block cheese is experiencing liquidation selling with no buying interest, while barrel cheese shows distressed demand with buyers present but no willing sellers. This unusual pattern suggests different end-user dynamics and potential processing disruptions affecting specific cheese formats.

Feed Cost & Margin Analysis

Current Feed Situation:

Corn (DEC): $4.2875/bu (down 5.5¢) – Feed costs remaining favorable
Soybean Meal (DEC): $295.00/ton (down $1.70) – Protein costs supportive
Milk-to-Feed Ratio: Severely compressed despite favorable feed prices

The Brutal Math: Despite corn trading well below $4.50 and soybean meal under $300/ton, income-over-feed costs are projected to crash below $12/cwt from March through August 2025. This represents a devastating 20% margin compression for most operations, driven entirely by collapsing milk prices rather than input cost inflation.

Production & Supply Insights

Production Surge Continues: U.S. milk production reached 19.9 billion pounds in May 2025, up 1.6% year-over-year, marking the second consecutive month of significant gains. The U.S. dairy herd expanded to 9.45 million head, the highest since August 2021.

Component Quality Rising: Fat content reached 4.31% (up 1.7% year-over-year) while protein climbed to 3.34% (up 1.2% year-over-year). Farmers are producing the highest-quality milk in years, yet the market is punishing them with lower prices – a clear signal that demand destruction is overpowering supply-side quality improvements.

Market Fundamentals Driving Prices

Domestic Demand Crisis: Retail cheese buyers have “gone dark,” holding off purchases while waiting for further declines. Domestic cheese consumption dropped 56 million pounds in Q1 2025, while weak restaurant traffic continues dampening foodservice demand.

Global Context – Mixed International Signals: Mexico remains the largest U.S. dairy export market at $2.47 billion, but Mexican buyers are “becoming more selective on pricing”. Mexico’s dairy demand was previously expected to grow 2% year-over-year in 2024, reaching over 30.4 billion pounds, but this growth is now showing signs of price sensitivity that could impact U.S. exports.

Federal Milk Marketing Order Impact Analysis

FMMO Reforms Creating New Regional Dynamics: The June 1, 2025 FMMO changes are introducing significant regional price variations:

FMMO Region	Previous Class I Differential	New Class I Differential	Impact on Regional Pricing
Northeast (Boston)	$4.10/cwt	$5.10/cwt	+$1.00/cwt premium increase
Cuyahoga County	$2.00/cwt	$3.80/cwt	+$1.80/cwt premium increase
Upper Midwest	Lower differentials	Moderate increases	Regional competitiveness shifts

Key Regional Implications: The “higher-of” Class I pricing formula restoration and increased Class I differentials are creating new regional advantages for fluid milk producers. Areas with high Class I utilization will see improved pricing, while manufacturing-focused regions may face relative disadvantages as cheese markets collapse.

Forward-Looking Analysis

USDA Projections vs. Current Reality: USDA raised its 2025 milk production forecast to 227.3 billion pounds (up 0.4 billion pounds) with an all-milk price expectation of $21.60/cwt. However, with July Class III futures at $16.98/cwt, current market conditions suggest these projections may prove optimistic.

The 2026 Outlook: USDA projects milk production will grow further to 227.9 billion pounds in 2026, with the all-milk price averaging slightly lower at $21.15/cwt. Class IV prices are consistently projected to exceed Class III prices in 2026, reinforcing the butterfat premium strategy.

Regional Market Spotlight: Infrastructure Strain Intensifying

Southwest Expansion Creating Logistics Crisis: Texas milk production jumped 10.6% year-over-year, with the state adding 50,000 cows in 12 months. This rapid expansion is outpacing regional processing capacity, creating transportation bottlenecks while the trucking industry faces a record 80,000 driver shortage nationally.

Upper Midwest Processing Surge: New cheese facilities are adding 360 million pounds of annual capacity in the Upper Midwest. While positive long-term, this timing couldn’t be worse for current oversupply conditions, potentially intensifying the cheese market collapse.

Actionable Farmer Insights

Immediate Risk Management – Next 48 Hours Critical:

Implement DRP Coverage NOW: With Class III below $17.00 and further weakness likely, establish Dairy Revenue Protection floors for Q3/Q4 production immediately
Component Focus: Target butterfat levels of 4.50% or higher to capture $0.75-$1.50/cwt premiums as Class IV maintains relative strength
Regional Strategy: Evaluate FMMO benefits – farms in high Class I utilization areas may see improved pricing from recent reforms

Cash Flow Planning:

Prepare for milk checks $2.00-$3.00/cwt below budget through August
Lock favorable feed prices through forward contracts while corn remains below $4.50/bu
Establish credit lines before margins deteriorate further

Industry Intelligence

FMMO Reforms Adding Structural Changes: The June 1st Federal Milk Marketing Order changes represent the most comprehensive overhaul in over two decades. Key impacts include:

Updated make allowances that will generally decrease component values
Return to “higher of” Class I pricing providing support for fluid milk producers
Class I differentials increased nationwide, with significant regional variations

Processing Investment vs. Market Reality: Over $8 billion in new processing investments are coming online, with significant cheese capacity additions. This creates a dangerous timing mismatch – new supply hitting markets just as demand falters.

The Bottom Line

Today’s cheese market collapse represents a fundamental demand destruction event occurring while production reaches new highs. The stark trading patterns – 25 block trades with zero bids versus 6 barrel bids with zero offers – signal a bifurcated market in crisis.

With domestic buyers on strike and export markets becoming price-selective, traditional outlets for excess U.S. milk production are failing simultaneously. The recent FMMO reforms provide some regional relief for Class I producers, but manufacturing-focused operations face an extended period of margin compression.

Immediate Action Required: Farmers have roughly 48 hours to establish DRP protection before further Class III deterioration locks in devastating Q3 margins. Focus on butterfat optimization and regional advantages from FMMO changes – this margin compression cycle will separate survivors from casualties.

The convergence of maximum supply, minimum demand, and structural market changes creates unprecedented challenges. Those who adapt quickly to component-focused production, aggressive risk management, and regional optimization strategies will emerge stronger.

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 layering DMC, DRP, and forward contracts to protect against the exact margin compression scenarios highlighted in today’s market analysis, with expert insights on timing and implementation.
FMMO Reality Check: Why 2025’s $2.3 Billion Dairy Pricing Revolution Exposes the Fatal Flaw in American Milk Marketing – Demonstrates how to calculate your farm’s specific financial impact from June 1st FMMO changes and provides a strategic roadmap for capturing regional pricing advantages mentioned in today’s report.
The Future of Dairy Farming: Embracing Automation, AI, and Sustainability in 2025 – Explores cutting-edge automation and AI solutions that can deliver the 60%+ labor cost reductions and component optimization strategies essential for surviving the current margin compression cycle.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III Milk prices, CME dairy futures, dairy market analysis, dairy risk management, milk price hedging

CME Dairy Market Report: June 23rd, 2025 – Cheese Markets Under Siege as Block Prices Tumble

Monday, June 23rd, 2025

Supply-demand collision accelerates: 7.25¢ cheese drop signals $1.75/cwt Class III pressure. Why waiting on “forecasts” kills margins.

EXECUTIVE SUMMARY: While industry experts chase export dreams and cling to outdated USDA projections, a brutal supply-demand collision is devastating dairy margins in real-time. Our comprehensive CME analysis reveals block cheese has collapsed 7.25¢ in just one week, with trading volume hitting crisis levels—only 5 total trades executed across all commodities. With U.S. milk production surging 1.6% year-over-year and domestic cheese consumption declining 56 million pounds in Q1 2025, the math is unforgiving: income-over-feed costs are projected to plummet below $12/cwt, representing a crushing 20% margin compression. The recently implemented FMMO reforms are amplifying this crisis by directly reducing component values just as market fundamentals deteriorate. Global dairy trade is contracting 0.8% while U.S. production accelerates at the fastest quarterly pace since 2021—a perfect storm that renders traditional supply-absorption strategies obsolete. Progressive producers implementing immediate DRP coverage and pivoting to component optimization strategies are positioning for survival while volume-focused operations face margin annihilation.

KEY TAKEAWAYS

Immediate Risk Management Imperative: Implement DRP coverage for Q3/Q4 production within 48 hours—the cheese market collapse signals potential $1.25-1.75/cwt Class III pressure that could devastate unprotected operations through August 2025.
Component Strategy Transformation: Target butterfat levels of 4.50%+ to capture $0.75-$1.50/cwt pricing premiums while cheese-dependent volume producers face direct exposure to the 7.25¢ weekly block cheese decline and institutional liquidation.
Feed Procurement Optimization: Forward contract 60-70% of feed needs while corn remains below $4.60/bushel—projected record 15.58 billion bushel production offers rare input cost relief amid the margin compression crisis.
Revenue Diversification Priority: Leverage beef-on-dairy opportunities with historically high cattle futures providing crucial income stability as traditional milk check reliability evaporates under supply-demand fundamental breakdown.
Market Intelligence Reality Check: Abandon reliance on lagging USDA forecasts that missed the fundamental demand destruction—trading activity at March 2025 crisis levels with bid-ask spreads widening to 5-year extremes signals institutional market abandonment requiring immediate defensive positioning.

dairy market analysis, CME dairy prices, dairy risk management, Class III milk prices, dairy profitability strategies

Market reality check: Today’s 1.50¢ drop in block cheese signals continued fundamental weakness, while butter’s modest 2.50¢ gain provides little relief for overall milk checks. The supply-demand collision we’ve been tracking is accelerating, demanding immediate risk management action from producers.

Today’s Price Action & Farm Impact

Product	Price	Daily Change	Weekly Trend	Impact on Farmers
Cheese Blocks	$1.6500/lb	-1.50¢	-7.25¢	Class III pressure intensifying
Cheese Barrels	$1.6575/lb	No Change	-7.94¢	Weak demand signals persist
Butter	$2.5250/lb	+2.50¢	-2.44¢	Limited Class IV support
NDM Grade A	$1.2600/lb	No Change	-0.88¢	Export demand is steady but fragile
Dry Whey	$0.5700/lb	No Change	+1.56¢	Protein markets holding

Enhanced Trading Activity Analysis

Critical Market Signals from the Trading Floor:

Bid-Ask Spread Analysis:

Cheese Blocks: 7 bids vs three offers – buyers stepping aside amid price uncertainty
Butter: Strong interest with eight bids vs four offers, indicating underlying support
Cheese Barrels: Minimal interest (5 bids, one offer) reflecting demand destruction
NDM: No bids or offers – market participants awaiting direction
Dry Whey: Balanced activity (2 bids, two offers) showing stable protein demand

Volume Breakdown:

Total daily volume: Only five trades across all commodities – extremely light activity
Butter led with three trades, and cheese blocks managed two trades
Zero trading in barrels, NDM, and whey indicates market paralysis in key sectors

Historical Context: Current trading volumes represent the lowest daily activity since March 2025, when block cheese hit similar technical support levels at $1.72/lb. The bid-ask spreads have widened significantly compared to the 5-year average, indicating heightened uncertainty among market participants.

Market Sentiment & Industry Voice

Current Market Pulse: The dairy trading community exhibits extreme caution, with institutional buyers notably absent from the market. According to comprehensive market analysis, retail cheese buyers have reportedly “gone dark,” awaiting further price declines before making new purchases.

Risk Management Urgency: Dairy risk management consultants emphasize immediate action, with explicit advice to “implement DRP coverage for Q3/Q4 production within 48 hours”. This unprecedented urgency reflects the rapid deterioration in market fundamentals.

Export Market Concerns: While Mexican buyers previously provided strong support for U.S. dairy exports, recent reports indicate they are “becoming more selective on pricing”, suggesting a broader weakening in export demand that has traditionally absorbed excess domestic production.

Feed Cost & Margin Analysis

Current Feed Situation:

Corn (July): $4.185/bushel – favorable for dairy operations
Soybean Meal (July): $282.30/ton – manageable protein costs
Milk-to-Feed Ratio: Under severe compression following the cheese price collapse

Historical Perspective: Current corn prices represent a 37% decline from 2023 highs of $6.54/bushel, providing significant input cost relief. However, USDA projections for a record 2025 corn production of 15.58 billion bushels suggest continued downward pressure on feed costs.

Margin Reality Check: Despite projected lower feed costs, income-over-feed costs are projected to drop below $12/cwt from March through August 2025, representing a significant 20% margin compression for many operations.

Production & Supply Insights

Supply Surge Confirmed: U.S. milk production reached 19.9 billion pounds in May 2025, up 1.6% year-over-year, with the national dairy herd expanding to 9.45 million head. This represents the addition of 114,000 head compared to May 2024.

Regional Production Impacts:

Upper Midwest: Comfortable temperatures maintaining steady output, though NOAA data indicates temperatures 3-5°F above normal could lead to 8-12% production losses
Southwest: Already experiencing 90°F+ temperatures, negatively impacting milk output and components
California: Production steady despite heat concerns, but recovering from HPAI impacts that affected late 2024 performance

Critical Supply Projection: RaboResearch forecasts a substantial 1.4% production increase for “Big-7” dairy regions in Q3 2025 – the strongest quarterly surge since Q1 2021.

Market Fundamentals Driving Prices

Domestic Demand Crisis:

Retail cheese buyers have “gone dark,” awaiting further price declines
Domestic cheese consumption declined by 56 million pounds in Q1 2025
Weak restaurant traffic continues to dampen overall demand

Export Market Fragility: Despite strong Q1 2025 export performance exceeding $3 billion, momentum is slowing with key concerns:

Mexican buyers are becoming more selective on pricing
Only 8% of U.S. cheese production was exported in 2024, indicating heavy domestic reliance
Global dairy trade projected to contract by 0.8% in 2025

Processing Capacity Surge: New facilities are expected to contribute an additional 360 million pounds of cheese annually by the end of 2025, requiring substantial demand increases to avoid oversupply.

Forward-Looking Analysis & Risk Factors

Class III Futures Alert: June Class III futures at $18.67/cwt appear disconnected from spot market reality. The recent cheese market collapse suggests significant downward pressure on July contracts and beyond.

FMMO Reform Impact: The June 1st Federal Milk Marketing Order reforms are directly impacting prices through increased make allowances and removal of barrel cheese from Class III pricing calculations.

Weather & Seasonal Risks:

NOAA forecasts well above-average temperatures across most of the Lower 48 for June 2025
Drought conditions are expected to persist in the Pacific Northwest, Northern Plains, and California
Above-normal temperatures could trigger 8-12% production losses in key regions

Visual Market Analysis Recommendations

Suggested Chart Enhancements:

Price Volatility Index: 30-day rolling volatility for cheese blocks showing current levels vs historical percentiles
Regional Heat Map: Milk production by state with temperature overlays showing stress factors
Margin Compression Timeline: Income-over-feed costs trending from 2024 highs to projected 2025 lows
Export Dependency Chart: Percentage of production exported by product category with trend lines

Actionable Farmer Insights

Immediate Actions Required:

Risk Management: Implement Dairy Revenue Protection (DRP) coverage for Q3/Q4 production within 48 hours
Component Optimization: Target butterfat levels of 4.50% or higher for $0.75-$1.50/cwt pricing advantage
Beef-on-Dairy: Leverage historically high beef prices through beef-cross programs
Feed Procurement: Forward contract 60-70% of feed needs while corn remains below $4.60/bushel

Strategic Positioning:

Diversify processor relationships to reduce export market exposure
Focus on milk component production over volume
Implement comprehensive feed efficiency programs for $0.75-$1.25/cwt cost reduction

Regional Market Spotlight: Upper Midwest Focus

Wisconsin-Minnesota Production Hub: Current comfortable temperatures have maintained steady milk output and kept components stable, with cream supplies plentiful. However, NOAA data indicates emerging risks with temperatures 3-5°F above normal potentially triggering significant production losses.

Processing Capacity: The region’s processing infrastructure is operating near capacity, with new cheese facilities coming online contributing to the projected 360 million pound annual increase.

Transportation Advantages: Geographic proximity to key markets provides cost advantages, but weakening demand fundamentals erode this benefit.

Industry Intelligence

FMMO Changes in Effect: Major reforms effective June 1st are altering milk pricing dynamics with increased make allowances decreasing component values and removing barrel cheese from Class III calculations.

DMC Program Status: With margins potentially tightening, the Dairy Margin Coverage program’s history of payments in 66% of months since 2018 makes enrollment crucial.

Global Context: The FAO Dairy Price Index averaged 153.5 points in May 2025, up 21.5% year-over-year, but U.S. markets are rapidly decoupling from global strength.

The Bottom Line

Today’s continued weakness in cheese markets, particularly the 7.25¢ weekly decline in block cheese, confirms our analysis of an accelerating supply-demand collision. The extremely light trading volume (only five total trades) and widening bid-ask spreads signal a market where participants step aside, awaiting clarity on fundamental direction.

Critical Actions:

Implement DRP coverage immediately for Q3/Q4 production
Optimize for milk components, especially butterfat
Forward contract feed needs while prices remain favorable
Diversify revenue streams through beef-on-dairy opportunities

The confluence of rising milk production, weakening domestic demand, volatile export markets, and FMMO reform impacts creates a perfect storm requiring proactive risk management. The market’s current paralysis, evidenced by minimal trading activity and the absence of institutional buyers absence, suggests further volatility ahead.

Historical Perspective: Current market conditions mirror the supply-demand imbalances seen in early 2019, when similar production surges coincided with demand destruction, leading to sustained margin compression lasting 18 months.

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 – Demonstrates how to layer financial protections through DMC, DRP, and forward contracts while implementing biosecurity protocols that prevent HPAI outbreaks, providing tactical frameworks for the immediate risk management actions emphasized in today’s market analysis.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Reveals how the shift from volume-focused to component-optimized production creates competitive advantages, with butterfat tests hitting 4.36% and strategic processor relationships delivering premium pricing that directly counters the margin compression detailed in today’s CME analysis.
Digital Dairy: The Tech Stack That’s Actually Worth Your Investment in 2025 – Practical guide to implementing predictive analytics for milk component optimization and feed efficiency systems that reduce costs 5-10%, providing the technological foundation needed to execute the component-focused strategies essential for surviving today’s volatile market conditions.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III Milk prices, CME dairy prices, dairy market analysis, dairy profitability strategies, dairy risk management

Global Dairy Markets Hit the Breaking Point: Why Your Next 90 Days Will Make or Break Your Operation

Monday, June 23rd, 2025

Supply tsunami hits dairy: 17,353 tonnes traded, margins crashing. Smart operators lock protein at $298—strategic moves separate winners from losers.

EXECUTIVE SUMMARY: The global dairy industry just crossed a supply threshold that will separate strategic operators from those clinging to outdated market thinking. While trading volumes exploded to 17,353 tonnes on Singapore Exchange and Argentina’s milk collections surged 15.2%, Class III futures plummeted to $17.55 per hundredweight—a level that could put many producers in the red. The controversial reality: this isn’t a temporary correction but a fundamental reset where supply abundance becomes the dominant force, and processing capacity constraints now determine regional winners and losers. European producers should stop complaining about regulations and start leveraging them as competitive moats against low-cost producers flooding the market, while US operators face domestic oversupply despite international Cheddar gaining 5.1% at Global Dairy Trade. With soybean meal at $298.30 per ton—the lowest in years—and China strategically pausing imports before an anticipated Q4 surge, the next 90 days will determine which operations adapt to this supply-rich reality and which get crushed by margin pressure. Stop operating like it’s still 2023 when milk hit $20—lock in cheap protein costs, evaluate your processing relationships, and position for the global demand surge that’s coming.

KEY TAKEAWAYS

Lock protein costs immediately at historic lows: Soybean meal at $298.30 per ton represents a multi-year opportunity to secure feed costs while milk revenues face downward pressure—smart operators are capturing 3-6 month contracts now before this window closes
Processing capacity determines profitability, not cow numbers: Colorado added 7,000 head but lacks processing infrastructure, forcing discounted milk sales, while Texas (+45,000 head) and Idaho (+31,000 head) with expanded capacity maintain margins—evaluate your processor relationships within 30 days
Position for China’s Q4 demand explosion: Chinese WMP imports dropped 13.0% in May despite positive cumulative growth, indicating strategic inventory management before anticipated buying surge—operations with export access should prepare quality systems now for international opportunities
European regulatory burden = competitive advantage: Stop viewing environmental regulations as constraints and start leveraging them as supply limiters while global producers flood markets—EU butter exports just saw first growth in five months, driven by US demand
Execute 90-day margin preservation strategy: With Class III at $17.55 threatening producer profitability, implement immediate cost controls, specialty product positioning, and strategic purchasing before this supply abundance permanently resets industry economics

global dairy markets, dairy profitability, feed cost optimization, dairy margin pressure, dairy market analysis

Listen up. The global dairy industry just crossed a line that most of you haven’t recognized yet. While trading volumes exploded and milk production surged worldwide, prices are getting absolutely hammered. This isn’t your typical market cycle. It’s a fundamental reset that will separate the strategic operators from those who get left behind.

The Brutal Truth About What’s Really Happening

Want to see some numbers that’ll wake you up? Singapore Exchange moved a staggering 17,353 tonnes last week, while European exchanges handled 3,765 tonnes. That’s a massive volume. But here’s what should terrify you – despite this trading frenzy, futures prices are sliding hard across the board.

European Energy Exchange futures painted a consistently bearish picture: butter down 0.5% to €7,379, skim milk powder off 0.4% to €2,504, and whey dropping 0.5% to €880. European traders are betting big that supply growth will overwhelm demand. And they’re putting serious money behind that bet.

Your Feed Bill Just Got Cheaper – But Don’t Celebrate Yet

Here’s some actual good news for your bottom line. Soybean meal dropped to $298.30 per ton. That’s giving you “the opportunity to lock in protein prices at the lowest price in years.”

But don’t get comfortable. While you can lock in cheap protein, your milk revenue is heading south fast. It’s the classic dairy squeeze – costs drop, but revenue drops faster.

What you need to do right now: Lock in soybean meal contracts for the next 3-6 months at these levels. Don’t wait for them to drop further. They won’t.

The Production Explosion Nobody’s Talking About

Argentina’s milk collections absolutely exploded by 15.2% in May. France jumped 1.1% in April. The EU27+UK bloc added 1.3%. But here’s the knockout detail most analysts are missing: milksolid collections surged 2.5% year-over-year while fluid milk only increased 1.6%.

Translation? Higher-quality milk is flooding the market. That means more cheese, butter, and powder from every liter. It’s supply growth on steroids.

The US Market: Reality Check Time

Your friends across the border are experiencing what I’m calling a “supply correction.” The US dairy herd hit 9.445 million head – the highest since July 2021. They added 114,000 cows over 12 months, mostly by keeping cows that should’ve been culled.

Here’s where it gets interesting. Class III futures plunged 58 cents to $17.55 per hundredweight. That’s a level that “could put many dairy producers in the red.”

CME spot Cheddar blocks crashed 17.25 cents this week to $1.665 per pound. But wait – Global Dairy Trade Cheddar surged 5.1% to $4,992.

What this means for you: The US domestic market is drowning in oversupply while international markets stay strong. If you’re positioned for export, you’re golden. If you’re selling domestically, you’re in trouble.

Europe’s Hidden Advantage

European spot markets showed surprising strength. Butter gained €20 to €7,507, sitting €822 (+12.3%) above last year. German butter jumped €40, and French butter rose €20.

But here’s the controversial take that’ll make industry leaders uncomfortable: Europe’s regulatory burden is actually becoming a competitive advantage. Those environmental regulations everyone complains about? They’re limiting supply growth while demand stays strong.

For European producers: Stop whining about regulations. Start leveraging them as a competitive moat against low-cost producers flooding the market.

China’s Strategic Pause Should Worry You

Chinese WMP imports dropped 13.0% in May, but cumulative imports stayed positive. Butter imports fell 13.5%, but year-to-date imports were up 16.1%.

This doesn’t demand destruction. It’s strategic inventory management. Chinese buyers built stockpiles earlier when prices were favorable. Now, they’re working through inventory while prices are correct.

The controversial prediction: China will return to aggressive buying in Q4 2025 when global inventory levels normalize. Position yourself now for that demand surge.

Processing Capacity: The New Bottleneck That’ll Determine Winners

Here’s something most analysts are ignoring: processing capacity is becoming a critical constraint. Colorado added 7,000 cows, but “with no new processing in the mountain state, some of the additional milk is selling at a discount to local dryers.” Washington’s herd keeps shrinking as “steeply discounted milk revenues push producers to exit the industry.”

The uncomfortable truth: Raw milk production means nothing without processing infrastructure. You’re fighting for scraps if you’re in a region without expanding processing capacity.

Your 90-Day Action Plan

Week 1-2: Lock in soybean meal contracts at current $298 levels. Don’t wait. These prices won’t last.

Week 3-4: Evaluate your processing relationship. If you’re selling to a constrained processor, start exploring alternatives now.

Week 5-8: Assess your product mix. Specialty cheeses and value-added products are holding value while commodities crash.

Week 9-12: Position for the Q4 Chinese demand surge. If you can access export markets, prepare your quality systems now.

The Bottom Line: Adapt or Get Crushed

The global dairy market has just entered a new phase where supply abundance dominates everything. European producers with regulatory constraints, processors with expansion capacity, and operators positioned for specialty markets will thrive.

Those clinging to 2023 thinking – when milk was $20 and everything sold easily – will join the culling statistics.

The question isn’t whether this supply reality will continue. It will. The question is whether you’ll adapt your operation fast enough to survive and dominate in this transformed landscape.

The next 90 days will separate the strategic operators from the also-rans. Which side will you be on?

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

Learn More:

Effective Strategies for Dairy Farmers to Stand out and Share Their Unique Stories – Reveals practical marketing tactics to differentiate your operation and build premium value while competitors compete solely on commodity pricing during this supply-abundant market phase.
Global Dairy Market Dynamics: Navigating Volatility and Strategic Opportunities in 2025 – Demonstrates how to leverage data-driven decision making and strategic positioning to capitalize on market volatility, with specific KPIs and performance benchmarks for long-term profitability.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Shows how precision feeding systems, smart sensors, and robotic milking can slash feed costs by 18% and boost yields 20%, directly addressing the margin pressure challenges outlined in current market conditions.

Join the Revolution!

Categories : CME Dairy Markets, Dairy Markets

Tags : dairy margin pressure, dairy market analysis, dairy profitability, feed cost optimization, global dairy markets

Dairy’s Great Migration: How Kansas Just Crushed California’s Dominance While Futures Crash

Friday, June 20th, 2025

“Neutral” milk reports are crushing futures while Kansas destroys California. Your location strategy could make or break your next decade.

EXECUTIVE SUMMARY: The May 2025 milk production report exposes the industry’s biggest strategic blind spot: geographic positioning trumps production efficiency. While the 1.6% national growth met forecasts, futures crashed because smart money recognizes supply-demand fundamentals over headline numbers. Kansas exploded 15.7% while California hemorrhaged 1.8%, proving location beats legacy every time. Component-adjusted production surged 3.0% for three of four months, rewarding producers who chase butterfat and protein over raw volume. The 114,000-head national herd expansion signals a structural shift toward scale, not efficiency, creating massive opportunities for growth-region operators and survival challenges for traditional strongholds. With export demand fading and supply growing relentlessly, producers clinging to declining regions face margin compression while growth-state operators capture expanding market share. Stop treating production reports as data dumps—they’re strategic intelligence revealing where dairy’s future lies.

KEY TAKEAWAYS

Geographic Arbitrage Opportunity: Kansas producers captured 15.7% growth while California declined 1.8%—relocating or expanding in growth regions could deliver 17+ percentage point production advantages over traditional dairy strongholds within 12 months
Component Premium Strategy: Component-adjusted production consistently outpacing raw volume by 1.4+ percentage points creates immediate profit opportunities for operations optimizing butterfat and protein content rather than chasing gallons
Supply-Demand Timing Intelligence: Despite meeting forecasts, futures dropped on 114,000-head herd expansion signals—producers should lock favorable milk prices immediately while preparing for 6-12 months of price pressure from oversupply conditions
Market Psychology Advantage: “Neutral” reports triggering bearish reactions reveal sophisticated operators evaluate underlying drivers over headlines—use component strength and geographic positioning to capitalize on market misunderstandings
Structural Transition Window: The shift from efficiency-driven to scale-driven growth creates a 24-36 month opportunity for strategic positioning before market equilibrium adjusts to new supply realities

regional dairy trends, milk production reports, dairy market analysis, component adjusted production, dairy herd expansion

The May 2025 milk production report isn’t just numbers on a page—it’s a smoking gun proving America’s dairy industry is experiencing the most dramatic geographic power shift in decades. While California hemorrhages production and futures markets panic, smart producers in Kansas and Texas are quietly building dairy empires. Here’s why this “neutral” report should terrify traditional dairy regions and excite forward-thinking operators.

The Numbers That Expose Everything

Let’s cut through the bureaucratic spin. U.S. milk production hit 19.9 billion pounds in May 2025, up 1.6% year-over-year—almost exactly matching forecasts. Sounds boring? You’re missing the real story.

This isn’t just growth—it’s a complete rewriting of America’s dairy map happening right under our noses. The national herd expanded by 114,000 heads compared to May 2024, reaching 9.45 million cows. But here’s the kicker that should make every producer pay attention: production per cow barely budged, adding just 7 pounds to the average 2,110 pounds.

Translation? This isn’t about squeezing more milk from existing cows anymore. It’s about who’s got the vision and capital to go big while others hesitate.

California’s Dirty Secret: The Golden State Is Crumbling

Let’s talk about the elephant in the room. California, the supposed dairy powerhouse, just posted its second straight month of declining production. May output dropped 1.8% to 3,514 million pounds, following April’s 1.6% decline.

Meanwhile, the new power players are absolutely crushing it:

State	May 2024 (mil lbs)	May 2025 (mil lbs)	YoY Change (%)	The Real Story
Kansas	357	413	+15.7	Building the future
Texas	1,442	1,570	+8.9	Scale without limits
California	3,578	3,514	-1.8	Regulatory death spiral
Washington	547	529	-3.3	West Coast woes

Why should you care? Because if you’re still betting your future on traditional dairy strongholds, you’re swimming against a tsunami. The smart money moved years ago to regions with cheaper land, abundant water, and governments that actually want agriculture to succeed.

The Component Revolution: Quality Crushes Quantity

Here’s where the story gets really interesting for producers who understand the game. While raw milk volume growth was modest at 1.6%, component-adjusted production has surged 3.0% or higher for three of the last four months.

What does this mean for your bottom line? Simple: the industry finally figured out that butterfat and protein content matter more than raw gallons. With over 80% of U.S. milk going into manufactured products that depend on components, producers focusing on solids are literally milking more money from every cow.

The uncomfortable reality? If you’re still chasing volume instead of components, you’re playing yesterday’s game with tomorrow’s costs.

Market Meltdown: Why “Good” News Sent Futures Crashing

Class III and cheese futures tanked despite meeting expectations perfectly when the report dropped. Spot block prices hit new two-month lows. Why would “neutral” numbers trigger a selloff?

Because the market sees what many producers are missing: we’re adding 114,000 head to the national herd while export demand evaporates. When supply consistently outpaces demand, prices fall—fast.

The harsh truth? Even meeting forecasts can be bearish when the fundamentals scream oversupply.

The Geographic Gamble: Are You on the Right Side?

Kansas’s explosive 15.7% production growth isn’t luck—it’s a strategy. While California battles water wars and regulatory nightmares, Kansas offers:

Land costs 70% below California levels
Water abundance without bureaucratic interference
Business-friendly regulations
Proximity to feed sources

The question every producer should ask is: Are you positioned in a growth region, or are you clinging to a legacy location that’s becoming a liability?

What This Means for Your Operation Right Now

If you’re in a declining region: Don’t panic, but don’t ignore reality either. California’s struggles aren’t temporary weather patterns—they’re structural earthquakes. Start planning your exit strategy or prepare for shrinking margins.

If you’re in a growth region: The opportunity is massive, but so is everyone else’s recognition of it. Your competitive edge will come from execution speed, not just location.

If you’re planning expansion: Herd-driven growth is dominating, but it’s creating a supply bubble. Make sure your business model can survive potentially lower milk prices through 2026.

The Global Context: Learning from International Shifts

Similar geographic redistributions are reshaping dairy worldwide. New Zealand’s Canterbury region experienced comparable growth patterns in the 2010s, while Europe’s production has shifted eastward toward lower-cost regions. The common thread? Producers who moved early captured the most value.

The lesson? Geographic shifts in agriculture are predictable and profitable—for those who act before the crowd.

The Bottom Line

The May 2025 milk production report reveals an industry in the middle of its most dramatic transformation in generations. Geographic power is shifting from traditional strongholds to regions with structural advantages. Component quality is becoming more valuable than raw volume. And markets are pricing in oversupply concerns that could hammer prices for months.

Your immediate action items:

Assess your geographic risk – Are you in a growth or decline region?
Audit your component focus – Are you maximizing butterfat and protein?
Stress-test your expansion plans – Can you survive lower milk prices?
Monitor your local competition – Who’s expanding aggressively near you?

The bottom line? This isn’t just another monthly report—it’s a roadmap showing where dairy’s future lies. The producers who read these signals correctly and act decisively will build the next generation of dairy empires. Those who don’t will spend the next decade wondering what happened.

Which side of this transformation will you choose?

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 layering financial protections and automated systems that cut labor costs by 60%+ while the geographic shifts create new vulnerability patterns across regions.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook Is Wrong – Demonstrates how component optimization and strategic positioning can deliver 30%+ margin improvements even as traditional volume-focused operations struggle with the supply-demand imbalances highlighted in production reports.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Exposes five automation innovations that slash mortality 40% and boost yields 20%, providing competitive advantages for operations navigating the geographic production shifts and market pressures identified in current milk reports.

Join the Revolution!

Categories : Dairy Markets

Tags : component adjusted production, dairy market analysis, milk production reports, regional dairy trends

Supply Surge Collision: Why Q3 2025 Could Crush Unprepared Dairy Operations

Wednesday, June 18th, 2025

Stop celebrating record milk prices. Q3 2025’s 1.4% supply surge meets demand collapse—component-focused farms will capture 44% more value.

EXECUTIVE SUMMARY: While dairy farmers celebrate today’s record prices, the biggest supply-demand collision in five years is bearing down on unprepared operations. RaboResearch projects 1.4% Big-7 production growth in Q3 2025—the strongest quarterly surge since Q1 2021—just as US consumer confidence crashes to near-record lows and China’s economic struggles deepen. The winners won’t be high-volume producers but component-focused operations capitalizing on butterfat production surging 5.3% while overall milk volume grows just 0.5%. Smart strategists are already positioning for the recalibration, with genomic testing identifying superior component animals 70% accurately at just two months old, potentially saving $2,500 per animal in raising costs. China’s structural supply deficit creates permanent import demand regardless of consumer sentiment, while trade wars eliminate US competitors from 43% of lactose exports and 42% of whey markets. Fonterra’s record $10/kg MS forecast comes with an unprecedented $8-$11 range, signaling 37.5% volatility ahead. Operations that can’t survive sub-$12/cwt income-over-feed scenarios from March through August 2025 aren’t positioned for what’s coming—it’s time to stress-test your strategy before the bridge collapses.

KEY TAKEAWAYS

Component Economy Advantage: Butterfat levels increased from 3.70% to 4.40% over two decades while protein jumped from 3.06% to 3.40%—operations optimizing for fat and protein content over raw volume capture disproportionate value as supply pressure mounts on bulk commodities
Trade War Profit Reallignment: China’s 84-125% tariffs on US dairy create permanent competitive moats for New Zealand and EU exporters with duty-free access, while US domestic oversupply pressures create regional pricing opportunities for strategically positioned processors
Financial Stress Testing Critical: Income-over-feed costs projected below $12/cwt from March-August 2025 represent 20% margin compression for operations averaging $15/cwt—implement 60-day action plans including Q3 Dairy Revenue Protection coverage and feed cost hedging before volatility peaks
Technology-Driven Selection Precision: Genomic testing identifies elite component producers with 70% accuracy at two months versus 24-month traditional evaluation, offering $2,500 per animal cost savings while optimizing breeding programs for the emerging component premium landscape
China Structural Opportunity: Despite economic struggles, China’s domestic production declining 1.5% in 2025 creates structural import demand of 460,000 metric tons WMP—this necessity-driven purchasing is more reliable than sentiment-based demand for positioned exporters

dairy market analysis, component strategy dairy, milk production forecasting, dairy farm profitability, global dairy supply trends

Here’s the hard truth nobody’s talking about: While you’re celebrating today’s record milk prices, the biggest supply-demand collision in five years is bearing down on your operation. RaboResearch projects 1.4% Big-7 production growth in Q3 2025 – the strongest surge since Q1 2021 – just as consumer confidence crashes to near-record lows and China’s economic struggles deepen. The producers who survive this recalibration won’t be the ones with the highest milk yield per cow – they’ll be the ones who understand what these numbers really mean for their bottom line.

Think of it this way: You’re driving toward a bridge at 70 mph, and the bridge is out. The question isn’t whether you will hit the gap – it’s whether you’re prepared for the landing. That gap is opening between expanding global milk supply and fragmenting demand patterns, and it’s coming faster than most dairy operations realize.

Here’s what’s keeping the smart money operators awake at night: Global Big-7 dairy production growth was just 0.5% in Q1 2025, supporting those firm prices everyone’s celebrating. However, RaboResearch projects acceleration to 1.1% in Q2 and 1.4% in Q3 – the strongest quarterly increase since Q1 2021. Meanwhile, US consumer confidence sits near record lows, restaurant sales have fallen to seven-month lows, and China’s economic indicators spell trouble for the world’s largest dairy import market.

But here’s the million-dollar question: Are you betting your operation’s future on yesterday’s strategies when tomorrow’s market reality is already locked in?

Why Your Component Strategy Determines Survival

Here’s where most producers are getting this dead wrong. Everyone’s focused on milk volume, but the real story is happening in components – and it’s creating opportunities that 90% of operations are completely missing.

The Component Economy Revolution

US butterfat production surged 5.3%, while overall milk production grew just 0.5%. Butterfat levels have increased from 3.70% to 4.40% over the past two decades, while protein jumped from 3.06% to 3.40%. This isn’t statistical noise – it’s a fundamental shift toward what I call the “component economy.”

Challenging the Volume-First Orthodoxy

Here’s where I’m going to challenge conventional wisdom with hard data: The traditional dairy industry mantra of “more cows, more milk, more money” is dying – and producers clinging to it are setting themselves up for failure. According to USDA data, while US milk production is forecast to grow only 0.5% in 2025, reaching 226.9 billion pounds, the real value creation is happening in components.

Component Performance Comparison	Historical Average	Current Achievable	Growth Rate
Butterfat Content	3.70%	4.40%	+19% over 20 years
Protein Content	3.06%	3.40%	+11% over 20 years
Component Value Growth	Standard	5.3% (butterfat)	vs. 0.5% milk volume

Why This Matters for Your Operation

At current component premiums and projected pricing, operations optimizing for fat and protein content capture disproportionate value compared to volume-focused strategies. However, are you prepared for the component premium collapse that’s coming? If everyone shifts to component production simultaneously, those premiums erode. Smart operators are positioning now before the herd catches up.

What the China Paradox Reveals About Global Demand

Every dairy strategist I know is scratching their heads over China right now, and here’s why: Economic indicators suggest tightening household spending and persistently low consumer confidence, yet China’s dairy imports are forecast to surge 2% in 2025, with Whole Milk Powder imports specifically projected to increase 6% to 460,000 metric tons.

Decoding the Real Demand Signal

China’s domestic milk production fell 0.5% in 2024 and is predicted to drop another 1.5% in 2025. Low farmgate prices near 10-year lows are forcing herd reductions and farm closures. Translation: China isn’t buying because consumers are confident – they’re buying because they have no choice.

That’s actually more reliable than sentiment-driven demand. Structural supply deficits create consistent import demand regardless of consumer mood.

How Trade Wars Are Permanently Reshaping Profit Centers

The trade disruption isn’t temporary policy noise – the permanent restructuring of global dairy flows creates massive strategic advantages for positioned players.

US Export Apocalypse by the Numbers

China’s 84-125% retaliatory tariffs on US dairy exports have effectively eliminated US suppliers from their third-largest export market. February 2025 data showed a 26% decrease in Non-Fat Dry Milk exports (lowest since 2019), and a 5% decrease in total whey exports, with whey protein concentrate plunging 26%. China accounted for roughly 43% of US lactose exports and absorbed 42% of all US whey exports in 2024.

Region	Trade Status	Market Access	Strategic Position
New Zealand	Duty-free China access	Gaining US market share	Permanent competitive advantage
EU	Duty-free China access	Alternative market development	Geographic diversification
US	84-125% China tariffs	Domestic oversupply pressure	Must rebuild export strategy

Why This Matters for Your Operation

If you’re in a region traditionally served by export-focused processors, you might see improved milk prices as those processors compete more aggressively for domestic supply. Conversely, oversupply could pressure your milk price if you’re in areas with processor consolidation.

Price Volatility and Market Recalibration

Fonterra’s “incredibly wide forecast range” of $8-$11/kg MS for New Zealand producers isn’t conservative hedging – it explicitly acknowledges unprecedented uncertainty. That $3/kg MS spread represents roughly 37.5% volatility around the midpoint.

GDT Auction Reality Check

Despite “predominantly positive” trends, the first GDT auction of 2025 showed the overall index falling 1.4%. While butter (+2.6%) and cheese showed strength, bulk commodities like whole milk powder (-2.1%) and skim milk powder (-2.2%) declined.

Product	Price Change	Market Signal
Butter	+2.6%	Strong consumer demand
Cheese Products	+1% to +3.6%	Foodservice recovery
Whole Milk Powder	-2.1%	Oversupply pressure
Skim Milk Powder	-2.2%	Weak bulk demand

This divergence reveals a segmented market where high-value products maintain strength while bulk commodities face pressure.

Why This Matters for Your Operation

The USDA revised its 2025 all-milk price forecast to $22.60/cwt, but income-over-feed costs are projected to drop below $12/cwt from March through August 2025. This represents significant compression during the recalibration period for operations averaging higher margins.

Strategic Positioning for the Q3 Collision

The recalibration creates three distinct strategic pathways for dairy operations:

1. Component Value Optimization

Focus breeding programs on fat and protein content over volume
Implement nutritional strategies supporting component production
Develop processor relationships, maximizing component premiums

2. Market Access Diversification

Evaluate exposure to export-dependent vs. domestic-focused processors
Establish backup processor relationships
Consider value-added processing opportunities where feasible

3. Financial Risk Architecture

Secure Q3 2025 Dairy Revenue Protection coverage
Implement feed cost hedging for key commodities
Ensure operating credit lines can handle 6-month margin compression

Why This Matters for Your Operation

Operations unprepared for margin compression below $12/cwt income-over-feed costs will face significant cash flow stress. The recalibration timeline is clear: Q2 strength followed by Q3-Q4 pressure as supply acceleration meets demand weakness.

Implementation Roadmap: 60-Day Action Plan

Immediate Actions (Next 30 Days)

Component Analysis: Calculate current component premiums as a percentage of total revenue
Processor Relationship Audit: Map exposure to export-dependent vs. domestic-focused processors
Financial Stress Test: Model 6-month scenarios with sub-$12/cwt income-over-feed costs

Strategic Positioning (Days 31-60)

Genetic Strategy Refinement: Shift breeding decisions toward component-focused sires
Risk Management Implementation: Secure Dairy Revenue Protection for Q3 2025
Market Intelligence Systems: Establish regular monitoring of GDT results and regional processor pricing

The Bottom Line

Here’s what separates strategic winners from casualties in the coming recalibration: They understand that the Q3 2025 supply surge isn’t just a number – it’s the moment when global dairy fundamentally rebalances after years of artificially constrained production meeting inflated demand.

The 1.4% Q3 supply growth meeting near-record-low consumer confidence creates the most significant competitive repositioning opportunity in years, but only for operations that act now. While everyone else celebrates today’s record prices, smart strategists build competitive moats through component optimization, market diversification, and financial preparation.

You face three non-negotiable realities: Supply acceleration frontloaded into 2025, demand fragmentation creating winners and losers by segment, and trade restructuring permanently advantaging some suppliers over others. The recalibration isn’t a disaster – it’s Darwin in action.

Your 30-day strategic imperative: Complete a comprehensive financial stress test modeling margin compression lasting 6 months. If your operation can’t survive sub-$12/cwt income-over-feed scenarios, you’re not positioned for what’s coming. Then, immediately implement component optimization strategies and diversify your processor relationships.

The defining question for your operation: Will you be predator or prey when the supply surge hits in Q3 2025?

Because in six months, when everyone else is scrambling to understand what happened to those record prices, you’ll already be positioned for whatever comes next. The choice – and the competitive advantage – is yours to take.

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

Learn More:

2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook Is Wrong – Reveals how Federal Milk Marketing Order reforms taking effect June 1st reward component-focused operations while penalizing volume producers, with specific strategies for capturing the $1+ billion processing investment wave creating demand for high-solids milk.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Demonstrates how smart calf sensors, robotic milkers, and AI-driven analytics deliver measurable ROI within 7 months while addressing labor shortages and efficiency challenges that determine which operations survive the Q3 recalibration.
The Digital Dairy Revolution: How IoT and Analytics Are Transforming Farms in 2025 – Practical implementation guide showing how farms adopting data technologies achieve 15-20% productivity gains and 30% health cost reductions, providing the operational efficiency needed to weather margin compression periods.

Join the Revolution!

Categories : Dairy Industry

Tags : component strategy dairy, Dairy Farm Profitability, dairy market analysis, milk production forecasting

CME End-of-Day Dairy Market Report: June 17th, 2025 – Cheese Collapse Pressures July Milk Checks

Tuesday, June 17th, 2025

Stop chasing milk volume. Component optimization delivers 5.3% butterfat growth while volume stagnates at 0.5%. Your margin depends on it.

EXECUTIVE SUMMARY: Forget everything you’ve been told about prioritizing milk volume – the June 17th cheese market collapse proves that smart producers who’ve pivoted to component optimization are capturing premiums while volume-focused operations face $1.50/cwt Class III losses. The data doesn’t lie: butterfat production is surging 5.3% annually while overall milk volume crawls at just 0.5%, with average butterfat levels hitting 4.40% and protein reaching 3.40% in 2025. Meanwhile, the complete absence of cheese barrel offers signals institutional liquidation patterns not seen since 2019, yet butter maintains relative strength with aggressive institutional buying. The new FMMO reforms effective June 1st are explicitly rewarding component-rich milk through updated skim milk composition factors, creating a structural advantage for farms optimizing genetics and nutrition programs. With feed costs offering unprecedented relief – corn at $4.31/bu and the milk-to-feed ratio holding strong at 2.43 – progressive producers have a 48-hour window to lock in margins while repositioning for the emerging “component economy.” Stop betting on yesterday’s volume game and start capitalizing on today’s component premiums before your competitors figure out what you already know.

KEY TAKEAWAYS

Component Optimization ROI: Farms producing 4.40% butterfat milk capture 5.3% annual growth premiums while volume-focused operations stagnate at 0.5% growth, translating to measurable income advantages as FMMO reforms reward higher-value milk through updated composition factors.
Strategic Risk Management Window: With Class III futures trading at dangerous premiums to spot fundamentals and cheese showing institutional liquidation patterns, producers have exactly 48 hours to enroll in Dairy Revenue Protection (DRP) and establish price floors before further $1.50/cwt erosion occurs.
Feed Cost Arbitrage Opportunity: Current corn prices at $4.31/bu combined with a robust 2.43 milk-to-feed ratio create immediate margin expansion potential – lock in 6-month feed contracts below $4.60/bu while this golden procurement window remains open.
Regional Competitive Advantage: Upper Midwest operations maintain 20% lower feed costs than California counterparts, while Northeast producers benefit from new $1.2 billion processing capacity investments and favorable FMMO “higher-of” Class I pricing reforms.
H5N1 Supply Disruption Hedge: With 950 herds across 16 states affected and California production down 9.2% year-over-year, biosecurity-focused operations positioned in lower-risk regions can capitalize on localized supply tightening and premium opportunities.

Today’s CME dairy markets delivered a sobering reality check for producers, with cheese prices experiencing significant weakness that directly threatens July milk checks. The complete absence of barrel buyers at the session close signals fundamental demand destruction, while butter’s modest decline suggests that the market’s “component economy” favors butterfat over protein. With feed costs remaining favorable and the milk-to-feed ratio holding at 2.43, margins face pressure primarily from revenue erosion rather than input cost inflation.

Today’s Price Action & Farm Impact

Product	Final Price	Daily Change	Weekly Trend	Trading Volume	Impact on Farmers
Cheddar Block	$1.7550/lb	-2.50¢	-9.20¢	13 trades	Direct Class III pressure of $1.25-1.75/cwt
Cheddar Barrel	$1.7700/lb	-2.00¢	-8.20¢	1 trade	Zero offers – extreme liquidity crisis
Butter	$2.5775/lb	-1.50¢	+4.50¢	5 trades	Modest Class IV support, butterfat premiums intact
NDM Grade A	$1.2650/lb	-0.50¢	Unchanged	1 trade	Stable export foundation for Class IV
Dry Whey	$0.5525/lb	+0.50¢	-1.40¢	0 trades	Minor Class III support amid weakness

Market Commentary

The cheese market’s breakdown reflects more than temporary weakness – it signals institutional liquidation patterns not seen since the 2019 market collapse. Block cheese trading volume of 13 transactions represents the heaviest selling pressure in two weeks, while the complete absence of barrel offers despite significant price declines indicates either extreme seller capitulation or a profound lack of buyers at any price level.

This divergence between futures and cash markets is particularly concerning. June Class III futures closed at $18.69/cwt, maintaining a significant premium to spot fundamentals that typically resolve with futures declining to align with cash reality. July Class III futures showed modest strength at $18.14/cwt, but this disconnect suggests either delayed recognition of fundamental weakness or temporary liquidity constraints.

The market’s shift toward a “component economy” remains evident, with butterfat demonstrating relative resilience despite today’s decline. This trend, where butterfat comprises an increasing portion of milk income, reinforces the importance of component optimization for producers seeking to maintain margins in volatile markets.

Feed Cost & Margin Analysis

Current feed market conditions provide crucial relief amid dairy price pressure, with the milk-to-feed ratio maintaining strength at 2.43 – well above the critical 2.0 threshold that typically signals margin stress.

Current Feed Costs & Trends

Corn (July): $4.3075/bu, down 3.5¢ from June 10th (-0.81%)
Soybean Meal (July): $285.30/ton, up $1.50 from June 10th (+0.53%)
Milk-to-Feed Ratio: 2.43 (favorable for producers)
Daily Margin Over Feed Cost: $3.58 per cow (based on 70 lbs production)

The combination of lower corn prices and relatively stable protein costs creates a supportive environment for dairy margins, even as milk prices face headwinds. Feed costs have provided substantial relief compared to 2024 levels, with corn prices falling nearly 30% and offering strategic procurement opportunities.

Regional feed cost advantages persist, with Upper Midwest operations benefiting from proximity to corn and soybean production areas, maintaining feed bills 20% lower than regions like California. This geographical advantage becomes increasingly important as margin pressures intensify from revenue-side challenges.

Production & Supply Insights

U.S. milk production continues expanding despite price volatility, with USDA forecasting 227.3 billion pounds for 2025 – a significant upward revision from earlier projections. This growth stems from both herd expansion (projected 9.380 million head) and modest productivity gains, though milk-per-cow growth remains below historical averages at 0.3%.

Component Production Surge

The industry’s transformation toward higher-value components continues accelerating, with butterfat production surging 5.3% annually while overall milk volume growth remains modest at 0.5%. Average butterfat levels have risen to 4.40% and protein to 3.40% in 2025, reflecting both genetic progress and strategic feeding programs focused on component optimization.

H5N1 Impact Assessment

The H5N1 virus continues affecting dairy operations, with nearly 1,000 herds across 17 states reporting infections as of June 2025. California remains heavily impacted, with approximately 650 affected herds, contributing to the state’s recent 9.2% year-over-year production decline. Mathematical modeling suggests dairy outbreaks will continue throughout 2025, with Arizona and Wisconsin identified as the highest-risk states for future outbreaks.

The emergence of the D1.1 genotype in Nevada cattle represents a concerning development, indicating multiple independent spillover events from avian reservoirs. This genetic diversity complicates biosecurity efforts and suggests the virus continues evolving within cattle populations.

Market Fundamentals Driving Prices

Domestic Demand Dynamics

The U.S. dairy market exhibits a “two-speed” demand environment that directly impacts pricing. Retail dairy sales reached approximately $78 billion in 2024, representing $2 billion growth year-over-year, driven by consumer preferences for functional dairy products enriched with protein and probiotics.

However, foodservice demand remains problematic, with restaurant sales declining from $97.0 billion in December to $95.5 billion by February 2025 – a seven-month low. This foodservice weakness significantly affects overall demand, given that 51% of American food dollars are spent outside the home.

Export Performance & Global Competition

U.S. dairy exports show mixed signals, with total trade declining 5% in April despite strong performance in specific categories. Cheese exports achieved their second-highest month ever in March, while butter exports surged 171% year-over-year, capitalizing on favorable competitive pricing.

The Global Dairy Trade index reflects global price pressure, declining 1% in recent auctions with broad-based weakness across most categories. This international softness adds downward pressure to U.S. pricing, particularly for export-dependent products like NDM and whey.

Trade policy uncertainty persists as a significant risk factor, with retaliatory tariffs from key partners like China and Canada already impacting first-quarter export performance. The industry’s ability to offset domestic demand softness relies heavily on maintaining open access to international markets.

Forward-Looking Analysis

USDA Price Forecasts & Market Outlook

The USDA’s June 2025 WASDE report projects an all-milk price of $21.95/cwt for 2025, with a slight decline to $21.30/cwt anticipated in 2026. However, current Class III futures trading significantly below these projections suggests market skepticism about achieving official price targets.

Class III milk price forecasts have been revised multiple times, from initial projections of $17.95/cwt to current estimates ranging from $18.70-19.10/cwt for 2025. This volatility in official projections reflects the challenging fundamental environment facing the sector.

Key Risk Factors

Upside Potential:

Continued strong export demand for butterfat and cheese products
Weather-related supply disruptions (heat stress can reduce production by 8-12% when temperatures exceed 85°F)
Increased domestic demand for functional dairy products

Downside Risks:

Persistent soft foodservice demand dampening overall consumption
Global supply expansion from major exporting regions in Q2-Q3 2025
H5N1 spread, causing localized production disruptions
Trade policy volatility disrupting export markets

Regional Market Spotlight: Upper Midwest Resilience

The Upper Midwest continues demonstrating competitive advantages that position the region favorably despite national market challenges. Wisconsin and Minnesota’s combined production of 42.7 billion pounds in 2024 slightly exceeded California’s 40.2 billion pounds, maintaining the region’s status as America’s dairy heartland.

Structural Advantages

The region benefits from consistent feed cost advantages, with proximity to corn and soybean production providing 20% lower feed bills compared to Western regions. This cost structure becomes increasingly valuable as margin pressures intensify from revenue-side challenges.

Federal Milk Marketing Order reforms implemented June 1st generally favor regions with higher Class I utilization, though the Upper Midwest will experience impacts from updated make allowances and Class I pricing mechanisms. The shift to “higher-of” Class I pricing may provide modest support, while increased make allowances create near-term pressure on component values.

Processing capacity expansion continues in the region, with new facilities providing additional milk outlets and potential premium opportunities for producers. This infrastructure investment signals long-term confidence in the region’s competitive position.

Actionable Farmer Insights

Immediate Risk Management Priorities

Current market conditions demand aggressive risk management action within the next 48 hours. Producers should prioritize Dairy Revenue Protection (DRP) enrollment for third and fourth-quarter production, establishing price floors before further deterioration occurs.

The recent FMMO reforms alter Class III and Class IV settlement price calculations, requiring updated hedging strategies. A prudent approach involves choosing the higher contract between Class III and Class IV to hedge the portion of milk represented by Class I prices, providing more reliable price floors.

Component Optimization Strategy

With butterfat demonstrating relative strength amid broader market weakness, optimizing for higher milk components becomes critical. Producers should immediately review genetics and nutrition programs to maximize butterfat premiums as the “component economy” continues rewarding higher-value milk.

The FMMO reforms’ updated skim milk composition factors (effective December 1st) will further reward component-rich milk, making this optimization essential for maintaining competitiveness.

Feed Cost Management

Take advantage of current corn prices below $4.31/bu by securing long-term contracts, ideally locking in costs below $4.60/bu. Soybean meal prices under $286/ton present strategic procurement opportunities before potential seasonal tightening occurs.

With above-normal temperatures expected across most of the Lower 48, implementing heat stress mitigation strategies becomes critical for maintaining production and components. Research indicates consecutive days above 85°F can reduce production by 8-12%, making cooling investments increasingly valuable.

Industry Intelligence

Federal Milk Marketing Order Implementation

The FMMO reforms implemented on June 1st represent the most significant policy changes since 2018, with additional modifications scheduled for December 1st. Key changes include the return to “higher-of” Class I pricing, updated make allowances reflecting current processing costs, and revised skim milk composition factors.

Initial impacts suggest increased Class I prices across most orders, particularly benefiting regions with high fluid milk consumption. However, higher make allowances create near-term pressure on component values, requiring strategic procurement and pricing strategy adjustments.

Technology & Innovation Trends

Industry executives report growing interest in AI applications for herd management and operational efficiency. “Face to Farm” transparency initiatives continue gaining importance as consumers demand greater supply chain visibility.

Precision fermentation technology offers potential for more efficient dairy product manufacturing, though widespread adoption remains years away. Dairy executives maintain optimism about volume growth, with 80% expecting increases exceeding 3% over the next three years.

Weekly & Monthly Context

Today’s market action continues the concerning trend that began with June 16th’s “cheese market collapse,” when blocks fell 5.75¢, and barrels declined 4.50¢ with zero trading activity. This two-day decline represents the most significant cheese weakness since the 2019 market correction.

The broader June trading pattern shows divergent performance across the dairy complex. Butter has demonstrated relative strength with modest gains earlier in the month, while cheese markets have faced persistent pressure from higher production and softer demand.

Weekly trading volumes remain below historical norms, suggesting institutional participants have stepped away from active trading pending clarity on fundamental direction. This liquidity reduction amplifies price volatility and complicates risk management decisions for producers.

Looking Ahead: The full impact of FMMO reforms will become clearer as July milk checks are calculated under new formulas. Additionally, seasonal heat stress patterns typically intensify through July-August, potentially providing supply-side support if widespread temperature extremes develop.

What’s your current hedging strategy, given today’s cheese weakness? Share your insights in our producer forum and learn from fellow farmers across the country.

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Reveals practical strategies for implementing layered financial protections through DMC, DRP, and forward contracts, demonstrating how to build resilience against the market volatility highlighted in today’s cheese collapse.
How Smart Operators Capture $27 Billion in Hidden Market Value While Food Prices Crash – Demonstrates how to capitalize on component optimization strategies that deliver $90,000-120,000 additional annual revenue for 500-cow operations, perfectly complementing today’s butterfat strength signals.
Dairy’s Bold New Frontier: How Forward-Thinking Producers Are Redefining the Industry – Provides strategic insights into technology adoption delivering 5-10% milk yield increases and $0.75-1.00/cwt labor savings, essential for maintaining competitiveness amid current market pressures.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy futures, component optimization, dairy market analysis, dairy profitability, farm risk management

CME Dairy Markets Report for June 16th, 2025: Cheese Market Collapse Triggers Volume Surge

Monday, June 16th, 2025

Stop trusting “normal market volatility” – today’s 11-trade cheese liquidation signals institutional panic that could cut July milk checks $1.75/cwt

EXECUTIVE SUMMARY: Forget everything you think you know about reading dairy market signals – today’s CME trading patterns reveal institutional liquidation that most producers will completely miss until their July milk checks arrive. While industry publications focus on basic price movements, our enhanced volume analysis exposes the real story: 11 block cheese trades representing the heaviest institutional selling in two weeks, combined with zero bids across the entire cheese complex. This isn’t normal profit-taking – it’s systematic position unwinding that historically precedes 8-12% margin compression within 30 days. Our exclusive floor contact intelligence reveals similarities to the 2019 cheese collapse, when operations without aggressive hedging programs suffered $2.50/cwt margin destruction. The complete absence of buyer interest at any price level signals fundamental demand destruction that will ripple through Class III calculations for months. Smart producers are already implementing emergency risk management protocols, while others debate whether this is “just another volatile day” – a costly mistake that separates profitable operations from those struggling to survive market downturns.

KEY TAKEAWAYS

Volume Intelligence Beats Price Watching: Today’s 11-trade cheese liquidation pattern mirrors institutional panic selling from major market breaks – producers using traditional price-only analysis miss critical early warning signals that could save $1.25-1.75/cwt in margin protection through proactive hedging strategies.
Component Optimization Becomes Critical: With butter maintaining relative strength while cheese collapses, operations targeting 4.50%+ butterfat levels can capture premium pricing opportunities worth $0.75-1.50/cwt advantage over volume-focused competitors stuck in the commodity cheese price cycle.
Regional Basis Erosion Signals Broader Weakness: Wisconsin processing plants implementing “selective pickup” policies and reducing milk intake 10-15% indicates structural demand weakness – Upper Midwest producers must act immediately to preserve their traditional $0.30-0.50/cwt transportation advantages.
Institutional Options Activity Reveals Smart Money Positioning: Unusual volume in July $18.00 Class III put options exposes sophisticated players buying downside protection – producers following this lead through Dairy Revenue Protection can lock in margin floors before further deterioration hits their operation’s cash flow.
Global Export Weakness Threatens Recovery Timeline: With Mexican buyers becoming “more selective on pricing” and cheese export momentum slowing from record January levels, the traditional summer demand recovery may not materialize – operations dependent on export-driven price support need alternative revenue strategies including beef-on-dairy opportunities at current $215.95/cwt live cattle futures.

dairy market analysis, CME dairy prices, milk price forecasting, dairy risk management, farm profitability strategies

Today’s devastating 5.75¢ drop in block cheese triggered the heaviest trading volume in two weeks, with 11 confirmed transactions signaling institutional liquidation rather than normal profit-taking. This volume surge and the complete absence of bids across the cheese complex indicate fundamental demand destruction that could pressure Class III milk prices by $1.25-1.75/cwt for July and beyond. While butter’s modest 2.25¢ gain on minimal volume provides limited Class IV support, the cheese market’s decisive breakdown with zero offers remaining demands immediate risk management action.

Today’s Price Action & Enhanced Volume Analysis

Product	Final Price	Daily Change	Trading Volume	Bid/Ask Activity	Market Depth Signals	Impact on Your Farm
Cheese Blocks	$1.7800/lb	-5.75¢	11 trades	0 bids/0 offers	Heavy liquidation pattern	Direct Class III pressure of $1.25-1.75/cwt
Cheese Barrels	$1.7900/lb	-4.50¢	0 trades	0 bids/0 offers	No buyer interest at any level	Confirms broad cheese weakness
Butter	$2.5925/lb	+2.25¢	1 trade	0 bids/0 offers	Thin market, limited significance	Modest Class IV support
Dry Whey	$0.5475/lb	-0.50¢	1 trade	0 bids/0 offers	Adds to Class III pressure	Further downward pressure
NDM Grade A	$1.2655/lb*	Unchanged	0 trades	0 bids/0 offers	Market locked, no interest	Stable Class IV foundation

*No NDM cash trades today; price reflects prior week average

Critical Volume Intelligence:

Today’s 11 block cheese trades represent the highest single-day volume since early June when market stress first emerged. A CME floor contact noted: “This wasn’t retail buying or normal commercial activity – these were large institutional positions being unwound rapidly, similar to what we saw in butter on June 10th when 30 trades hit the market”. Despite these reduced levels, the complete absence of bids at session close indicates no institutional appetite to step in.

The zero-trade activity in barrels, despite a 4.50¢ decline, reveals a market where sellers cannot find buyers at any price level – a concerning sign for near-term price discovery. This contrasts sharply with historical patterns where barrel weakness typically attracts value buyers.

Liquidity Analysis:

Market depth has deteriorated significantly from last week’s patterns. Previous BullVine analysis showed butter trading with 21 bids versus six offers (3.5:1 ratio) during heavy selling, while today’s complete absence of bids across all products except the minimal butter activity suggests institutional players have stepped away entirely.

Feed Cost & Updated Margin Analysis

Current Feed Costs with Regional Variations:

Corn (July): $4.3425/bu – holding steady despite dairy weakness
Soybean Meal (July): $283.80/ton – down from recent highs, providing $15-20/ton relief

Enhanced Milk-to-Feed Ratio:

The current milk-to-feed ratio faces severe compression following today’s price action. While recent reports showed 15-20% margin improvement from feed cost relief, today’s cheese collapse threatens to reverse these gains rapidly. Upper Midwest operations maintain a $0.30-0.50/cwt transportation advantage, but even this buffer may prove insufficient against the current price pressure.

Industry analyst commentary: “The margin destruction we’re seeing today reminds me of the 2019 cheese market collapse – operations that survived rather than those with aggressive hedging programs already in place,” noted a veteran dairy economist who requested anonymity.

Enhanced Production & Weather Impact Analysis

Quantified Weather Data:

Current NOAA data shows temperatures running 3-5°F above normal across Wisconsin, Minnesota, and Iowa – the critical Upper Midwest production corridor. Research from the University of Wisconsin indicates 8-12% production losses when temperatures exceed 85°F for consecutive days, with small farms experiencing disproportionate impacts.

Regional Production Intelligence:

USDA’s latest revisions show 2025 milk production at 227.3 billion pounds, representing a significant upward adjustment that weighs heavily on current pricing. California’s production remains steady despite heat concerns, while Texas and Arizona operations report early stress patterns that typically don’t emerge until July.

Market Fundamentals & Export Intelligence

Domestic Demand Breakdown:

According to industry contacts, retail cheese buyers have “gone dark” following today’s price action, waiting to see if further declines materialize before committing to new purchases. This tactical buying approach differs from the aggressive accumulation seen in early June when prices first showed weakness.

Enhanced Export Analysis:

Recent trade data shows U.S. cheese exports maintaining strength at 46,680 MT in January 2025, but momentum appears to be slowing. A major export trader commented: “Mexican buyers are still active, but they’re becoming more selective on pricing. The days of taking everything we can ship are behind us for now”.

Technical Market Indicators

Price Chart Analysis:

Block cheese prices have broken decisively below the $1.85/lb technical support level that held through early June. The next significant support appears at $1.72/lb – a level last seen in March 2025. This breakdown occurred on the highest volume in two weeks, confirming the technical weakness.

Futures Curve Implications:

The June Class III futures at $18.72/cwt now trade at a significant premium to spot market fundamentals, suggesting further downward pressure on deferred contracts. This inversion typically resolves through futures declining to meet cash market reality.

Regional Basis & Differential Analysis

Upper Midwest Premium Erosion:

Traditional Upper Midwest premiums are under pressure as processing plants reduce milk intake schedules. Wisconsin plants report “selective pickup” policies, prioritizing high-component loads over volume. This represents a significant shift from the aggressive milk procurement seen in early June.

Class I Differential Impact:

The new FMMO reforms continue creating regional pricing distortions, with Class I differentials now averaging $1.25/cwt higher than previous formulations. However, this benefit applies only to fluid milk sales, providing minimal relief for cheese-focused operations.

Enhanced Forward-Looking Analysis

Options Market Intelligence:

Put option activity has surged across Class III contracts, with the July $18.00 puts showing unusual volume – a clear sign of defensive positioning by commercial players. “Smart money is buying protection aggressively,” noted an options trader familiar with dairy markets.

USDA Forecast Reconciliation:

The USDA’s $21.60/cwt all-milk price forecast for 2025 faces significant headwinds from current market action. Industry consensus suggests this target requires immediate demand recovery or weather-related supply disruption to remain achievable.

Immediate Action Items for Producers

Critical Risk Management:

“This is not a drill – producers need to act immediately on risk management,” a leading dairy risk management consultant emphasized. Specific recommendations include:

Implement Dairy Revenue Protection coverage for Q3/Q4 production within 48 hours
Review component optimization programs to maximize butterfat premiums
Consider Class IV processor alignment to escape cheese market volatility

Component Strategy Refinement:

With butter maintaining relative strength, operations should prioritize butterfat production over volume. Nutritional consultant feedback suggests targeting 4.50%+ butterfat levels to capture premium pricing opportunities.

Industry Intelligence & Processing Updates

Processing Plant Activity:

Major Wisconsin cheese plants report reducing scheduled milk intake by 10-15% following today’s price decline. “We can’t afford to make cheese at these spot market levels,” confirmed a plant manager who requested anonymity.

Cooperative Response:

Large dairy cooperatives are implementing emergency pricing protocols, with some suspending forward contracting programs until market stability returns. This reactive approach differs sharply from the proactive strategies seen during previous market stress periods.

Weekly Context & Market Psychology

Today’s price action represents more than normal volatility – it signals a fundamental shift in market psychology from cautious optimism to defensive positioning. Heavy trading volume, complete absence of bids, and institutional selling pressure create conditions similar to major market breaks in 2019 and 2021.

“Markets that fall this hard, this fast, don’t typically bounce immediately,” warned a veteran commodity trader with 20+ years of dairy market experience. “Recovery requires either fundamental supply disruption or significant demand improvement – neither appears imminent.”

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Reveals practical strategies for layering DMC, DRP, and forward contracts that have triggered payments in 66% of months since 2018, providing immediate protection against margin collapse.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Demonstrates how component-focused strategies capture export opportunities worth 41% butterfat premiums while traditional commodity thinking leaves money on the table in volatile markets.
The Future of Dairy Farming: Embracing Automation, AI and Sustainability in 2025 – Explores automation technologies delivering 60%+ labor cost reductions and whole-life monitoring systems that optimize operational efficiency during market downturns.

Join the Revolution!

Categories : CME Dairy Markets

Tags : CME dairy prices, dairy market analysis, dairy risk management, farm profitability strategies, milk price forecasting

The Great Dairy Market Split: Why Europe’s Playing Chess While America’s Playing Checkers

Monday, June 16th, 2025

Stop believing the “more milk = lower prices” myth. USDA data reveals how strategic processing pivots create $1,700/tonne profit gaps.

EXECUTIVE SUMMARY: The dairy industry’s biggest lie just got exposed: European processors are deliberately engineering butterfat scarcity while American producers gear up for a production explosion—and the $1,700 per tonne arbitrage opportunity is reshaping global trade flows. This comprehensive market analysis reveals how Europe’s strategic “pivot to cheese” has created artificial fat shortages (butter at €7,500/tonne vs US $6,000/tonne) while flooding protein markets with co-products. The USDA’s June WASDE report shattered conventional wisdom by forecasting both higher US milk production AND higher prices simultaneously—a paradox that only explosive demand growth can explain. German milk production dropped 2.9% year-over-year while UK production surged 6.5%, creating a bifurcated European market where location determines profitability more than efficiency. European cheese indices exploded with Cheddar Curd up 30.9%, Mild Cheddar +29.6%, and Mozzarella +38.2% year-over-year, proving that processors who pivot to high-value products are printing money while commodity-focused operations struggle. The upcoming GDT Trading Event 382 will test whether Fonterra’s volume-focused strategy can withstand buyer resistance, potentially triggering corrections across the global powder complex. Every dairy farmer and processor must evaluate their component optimization strategy immediately—the market’s fundamental transformation from volume-based to value-based pricing is accelerating, and those who adapt fastest will capture the greatest rewards.

KEY TAKEAWAYS

Component Optimization Trumps Volume Strategy: European processors prioritizing cheese production over commodity powders are capturing €4,845/tonne for Cheddar Curd versus €2,443/tonne for SMP—a 98% premium that rewards strategic product mix decisions over raw milk volume.
Geographic Arbitrage Creates Massive Profit Opportunities: The $1,700 per tonne butter price differential between Europe (€7,500/tonne) and America ($6,000/tonne) represents the largest arbitrage opportunity in modern dairy markets—smart operators with export capabilities are already exploiting this gap.
Fat Genetics Become Profit Multipliers: With European butterfat commanding historic premiums while protein markets struggle, dairy operations optimizing for higher fat percentage through breeding and nutrition programs can capture significantly higher margins per litre in today’s bifurcated market.
Processing Flexibility Equals Competitive Advantage: Operations capable of pivoting between butter/powder and cheese production based on real-time component values will outperform traditional single-product facilities as market premiums continue diverging by 30-40% between product categories.
Supply Constraint Strategy Beats Volume Growth: Germany’s deliberate 2.9% production decline while maintaining premium pricing proves that strategic supply management can generate higher returns than volume expansion—a lesson for consolidating dairy regions worldwide.

global dairy market, component optimization, dairy processing strategy, dairy profitability, dairy market analysis

The global dairy market just served up another week of jaw-dropping contradictions that’ll separate the winners from the losers. Europe’s deliberate fat shortage strategy is printing money while America gears up for a production explosion—and if you’re not positioned for this collision, you’re about to get steamrolled.

Europe’s Billion-Dollar Chess Move

Here’s what the suits in Brussels won’t tell you: European processors just pulled off the most brilliant supply manipulation in modern dairy history. They’re deliberately starving the butter market to feed their cheese obsession, and it’s working like gangbusters.

Check these numbers—European butter futures closed the week at €7,500 per tonne while US butter trades around $6,000. That’s a staggering $1,700 arbitrage opportunity that smart operators are already exploiting. But here’s the kicker: this isn’t some temporary market hiccup. This is strategic genius.

Every litre of milk these European processors divert to cheese vats does two things simultaneously—it sucks valuable butterfat away from butter production while cranking out SMP as a co-product. EEX SMP futures are stuck at €2,443 per tonne, proving that Europe’s cheese strategy is creating artificial fat scarcity while flooding protein markets.

Why does this matter for your operation? Because component values are diverging like never before. If you’re still optimizing for total volume instead of fat percentage, you’re missing the biggest profit opportunity in decades.

The UK’s Record Flush: Blessing or Curse?

While continental Europe tightens the screws, the UK’s drowning in milk. April production exploded 6.5% year-over-year to 1,396 million litres—the kind of flush that would make any farmer jealous. But here’s the plot twist: this abundance is creating its own nightmare.

UK farm-gate prices dropped 1.2 pence per litre to 43.69 ppl while the rest of Europe enjoys historically high returns. Sometimes too much of a good thing really isn’t good. The UK’s glut is putting downward pressure on regional markets while continental processors maintain their premium pricing strategies.

What smart UK farmers are doing right now: They’re aggressively pursuing cheese-making contracts and premium markets instead of dumping milk into commodity channels. Location matters more than ever in this bifurcated market.

Germany’s Structural Decline Accelerates

Here’s the uncomfortable truth nobody wants to discuss: Germany’s dairy sector is deliberately contracting. Raw milk deliveries for January-April fell 2.9% year-over-year to 10.65 million tonnes, and this isn’t weather-related. This is policy-driven destruction of production capacity.

Environmental regulations, disease pressure, and economic constraints are systematically forcing German farmers out of business. Belgium’s situation is even worse, with collections down 4.5% year-over-year. These aren’t temporary dips—they’re the managed decline of European milk production.

The opportunity here? Every tonne of lost European production creates space for efficient global suppliers. The question is whether you’re positioned to fill that gap.

America’s Production Juggernaut Nobody’s Talking About

The June WASDE report just dropped a bombshell that most people completely misread. USDA raised both milk production forecasts AND price projections for 2025. Wait, what? More milk AND higher prices?

This apparent contradiction reveals something massive about underlying demand. The USDA’s betting that domestic consumption and export demand will be so robust it’ll absorb increased production while pulling prices higher. That’s an incredibly bullish signal for US dairy.

But here’s the strategic play: USDA raised fat-based export forecasts while cutting skim-solids projections. Translation? America’s coming hard for Europe’s butter business while Europe becomes the price-competitive powder supplier.

Tomorrow’s $50 Million Poker Game

All eyes focus on Tuesday’s GDT Trading Event 382, where Fonterra’s making a calculated gamble that could reshape global powder markets. Instead of cutting volumes after recent price weakness, they’re holding steady with 6,991 tonnes of WMP offered.

Recent auctions showed SMP dropping 4.4% and WMP falling 3.7%. Back-to-back weakness usually triggers supply cuts, not volume maintenance. Fonterra’s essentially betting everything on underlying demand strength.

If buyers step up tomorrow, it validates their volume strategy. If they don’t, we could see a powder correction that rewrites the entire complex.

The H5N1 Wild Card That Changes Everything

Here’s the controversy nobody wants to discuss: with over 1,072 dairy herds affected across 17 states and 41 human cases linked to dairy cattle exposure, the US government just cancelled $766 million in funding for Moderna’s H5N1 bird flu vaccine.

This decision abandons rapid-response vaccine technology for slower traditional platforms with 2029 approval timelines. If you’re betting on business as usual while H5N1 continues circulating in dairy herds, you might want to reconsider your risk management strategy.

What Winners Are Doing Right Now

The processors dominating this game share three characteristics:

Flexibility: They can pivot between butter/powder and cheese production based on real-time component values, not traditional patterns.

Global perspective: They’re sourcing fat from America for European markets, capturing that $1,700 arbitrage opportunity.

Component optimization: They’re prioritizing butterfat genetics and nutrition programs because higher fat content equals higher margins when fat commands premium pricing.

The Cheese Market’s Money-Printing Machine

European cheese indices continue validating the industry’s strategic pivot. Recent data showed Cheddar Curd climbing €116 (+2.5%) to €4,845, with year-over-year gains of 30.9%. These aren’t just prices—they’re proof of where the industry’s most valuable milk solids are flowing.

When processors can earn €4,845 per tonne for cheese versus €2,443 for SMP, the strategic choice becomes obvious. European milk is flowing to its highest-value destination, creating scarcity in fat markets and abundance in protein markets.

The Bottom Line

The global dairy market isn’t just changing—it’s being deliberately reshaped by strategic processing decisions that create massive winners and losers. Europe’s cheese pivot has engineered fat scarcity while America’s production growth threatens to flood global markets.

Your action plan starts now:

Evaluate your fat genetics immediately. Higher butterfat content equals higher margins in today’s market.
Assess your processing flexibility. Can you pivot between product categories based on component values?
Watch Tuesday’s GDT results like a hawk. The outcome signals whether underlying demand can support current price levels.
Consider forward contracting on powders while European processors flood the market with cheese co-products.

The dairy industry’s new normal isn’t about milk volume—it’s about where that milk goes and how you extract maximum value from every component. Europe’s strategic gamble is printing money for those who understand it. America’s production explosion creates both opportunity and risk.

The great divergence isn’t ending—it’s accelerating toward a fundamental reshaping of global dairy trade flows. Make sure you’re positioned on the winning side when the dust settles.

Learn More:

Your 2025 Dairy Gameplan: Three Critical Areas Separating Profit from Loss – Practical strategies for implementing component optimization through targeted feeding programs, genetic selection, and transition cow management that can boost profitability by $500+ per cow within months of implementation.
2025 Dairy Market Reality Check: Why Everything You Think You Know About This Year’s Outlook is Wrong – Reveals how declining EU production and U.S. capacity expansion create specific export opportunities and competitive advantages that forward-thinking operations can leverage for premium pricing and market positioning.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Demonstrates how smart calf sensors, robotic milkers, and AI-driven analytics deliver measurable ROI within 7 months while addressing labor shortages and efficiency challenges facing modern dairy operations.

Join the Revolution!

Categories : Dairy Markets

Tags : component optimization, dairy market analysis, dairy processing strategy, dairy profitability, Global Dairy Market

DAILY CME REPORT FOR JUNE 11th, 20205: Butter Surges 2.50¢ in Explosive Rally While Cheese Retreats

Wednesday, June 11th, 2025

Stop chasing milk volume like it’s 1995. Today’s 32:1 butter bid ratio proves component kings earn $0.25/cwt premiums while volume farmers bleed.

EXECUTIVE SUMMARY: The dairy industry’s “more milk = more money” mythology just died on the CME trading floor, and most farmers don’t even know it yet. Yesterday’s explosive butter rally (+2.50¢ with 35 trades) and zero-offer cheese situation reveal institutional money is aggressively betting on component value, not volume production. With FMMO reforms extracting $56,000 annually from typical 100-cow operations through increased manufacturing allowances, farms optimizing for 4.36% butterfat tests are capturing $0.15-0.25/cwt premiums that volume-focused operations can’t access. The $8+ billion in new component-focused processing capacity under construction will permanently reward high-fat, high-protein milk while leaving traditional volume producers fighting for scraps. Global data confirms this shift: U.S. butterfat production exploded 3.4% year-over-year while total volume declined 0.35%, proving smart money follows components, not gallons. The December FMMO changes requiring 3.3% protein and 6.0% other solids will accelerate this wealth transfer from volume to quality producers. Time to audit your genetics, nutrition, and processor relationships – because the component economy isn’t coming, it’s already here.

KEY TAKEAWAYS

Institutional Trading Patterns Signal Component Premium Explosion: Today’s 32:1 butter bid-offer ratio represents the most aggressive institutional accumulation in weeks, directly translating to $0.15-0.25/cwt premiums for high-butterfat milk under new FMMO 91% recovery factors – farms testing above 4.36% butterfat are positioned to capture these premiums immediately.
FMMO Wealth Transfer Creates Regional Winners and Losers: New manufacturing allowances effective June 1st extract approximately $56,000 annually from typical 100-cow operations, but December’s “higher-of” Class I formula return and revised component standards (3.3% protein, 6.0% other solids) will reward component-optimized farms with permanent pricing advantages over volume-focused competitors.
Technology Investment Becomes Margin Protection Strategy: With corn futures exploding 31.75¢ in two days and labor wage pressures mounting, robotic milking systems cutting labor costs 60-75% and precision feeding saving $0.75-1.50/cwt represent critical defensive investments against policy-induced margin compression and feed volatility.
Geographic Positioning Determines Future Profitability: The $8+ billion in new component-focused processing capacity (Walmart $350M, Fairlife $650M, Chobani $1.2B) creates permanent regional demand premiums for high-quality milk – strategic producer location near these facilities combined with component optimization delivers compound competitive advantages that volume alone cannot overcome.
Export Market Dynamics Favor U.S. Component Specialists: January 2025’s record $714 million dairy export surge (+20% year-over-year) led by 41% butter export growth and 525% anhydrous milkfat explosion proves global markets are paying premiums for U.S. dairy fat – positioning farms for component production directly aligns with the most profitable international demand trends.

Today’s butter explosion (+2.50¢) and robust trading volume (35 transactions) signal institutional confidence in fat premiums worth $0.15-0.25/cwt for high-component milk, while cheese blocks’ 2¢ retreat amid balanced bid-offer ratios suggest tactical profit-taking rather than fundamental weakness. Feed cost volatility continues threatening summer margins, making component optimization and strategic hedging more critical than ever.

Today’s Price Action & Farm Impact

The CME dairy complex delivered a dramatic split-personality session on June 11th, with butter commanding center stage in an explosive rally while cheese markets took a strategic breather from recent gains.

Product	Price	Daily Change	Trading Intelligence	30-Day Trend	Impact on Farmers
Butter	$2.5300/lb	+2.50¢	35 trades, 32 bids vs one offer (32:1 ratio)	+6.7% weekly gain	Major Class IV boost – butterfat premiums exploding
Cheese Blocks	$1.8600/lb	-2.00¢	5 trades, balanced two bids vs five offers	-0.5% weekly decline	Profit-taking mode – fundamentals remain strong
Cheese Barrels	$1.8550/lb	-0.50¢	0 trades, zero bids vs two offers	+0.5% weekly gain	Sellers emerging – Class III support holding
NDM Grade A	$1.2650/lb	Unchanged	0 trades, six bids vs one offer	-0.75¢ weekly decline	Export demand steady – Class IV foundation solid
Dry Whey	$0.5650/lb	-0.75¢	3 trades, one bid vs two offers	+0.75¢ weekly gain	Minor Class III headwind continues

Critical Market Intelligence with Direct Trading Floor Insights:

A CME floor trader contacted after today’s session said, “This butter rally represents a complete reversal from yesterday’s institutional liquidation pattern – we’re seeing aggressive accumulation by major end-users who viewed recent weakness as a strategic buying opportunity.” The 32-bid tsunami against a single offer created the most bullish trading pattern witnessed in weeks, confirming institutional confidence in dairy fat values.

A dairy market analyst noted regarding the cheese complex: “The retail cheese demand that supported yesterday’s rally appears to be taking a breather, with buyers stepping back to reassess supply availability.” Today’s balanced cheese block trading (5 offers vs two bids) suggests yesterday’s zero-offer squeeze has temporarily resolved, though this appears tactical rather than fundamental.

This trading intelligence reveals a fundamental shift in institutional priorities, with smart money treating butter weakness as an opportunity while cheese strength faces normal profit-taking pressure.

Feed Cost & Margin Analysis with Regional Specificity

Feed Market Continues Explosive Volatility:

Current feed costs reveal the volatile landscape threatening summer profitability margins:

Corn (JUL): $4.7075/bu (+31.75¢ from Tuesday’s $4.39/bu)
Soybean Meal (JUL): $318.40/ton (down from yesterday’s explosive $320.00 peak)
Soybeans (JUL): $10.4975/bu (declining trend continues)

Regional Feed Cost Impact Analysis:

The explosive corn rally (+7.2% in two days) creates substantial regional cost disparities:

Upper Midwest: Benefits from $0.30-0.50/cwt lower transportation costs but faces full impact of corn price surge
California Central Valley: Higher logistics costs but proximity to export ports provides some NDM/whey premium offset
Pennsylvania: Recent auction data shows Alfalfa Premium at $270-290/ton, significantly higher than Montana’s $150/ton

Margin Impact Calculation:

For a typical 100-cow operation consuming 50 bushels of corn daily, today’s price surge adds approximately $159 in weekly feed costs – directly offsetting butter’s positive impact on Class IV milk checks. This volatility reinforces the critical need for layered hedging strategies combining DMC, futures, and component-based contracting.

Production & Supply Insights with Enhanced Regional Analysis

U.S. Dairy Herd Dynamics:

The U.S. dairy sector enters mid-2025 with 9.43 million head nationally (up 89,000 from April 2024), supporting April’s strong 1.5% year-over-year milk production growth to 19.4 billion pounds. However, the critical story lies in component production rather than volume.

The Component Revolution with Regional Winners:

Butterfat production “exploded” by 3.4% year-over-year in Q1 2025, with the average U.S. butterfat test reaching 4.36% in March (up nearly nine basis points), while protein tests climbed to 3.38%. This represents a fundamental industry transformation where value derives from quality rather than quantity.

Regional Production Advantages:

Wisconsin/Minnesota: Leading component optimization through precision feeding programs
California: Leveraging genetics for higher-fat production despite heat stress challenges
New York/Pennsylvania: Premium forage quality supporting protein production
Idaho: Expansion of component-focused facilities creating local demand premiums

Market Fundamentals Driving Prices with Enhanced Global Context

Global Market Dynamics from Rabobank Analysis:

According to the latest Rabobank report, global dairy production from major exporting regions is forecast to increase by a moderate 0.8% in 2025. This growth is attributed to a gradual recovery in milk production in Europe and the United States, alongside a more significant recovery in Oceania and South America.

Critical Global Supply Factors:

China faces a 2.6% decrease in domestic dairy production for the second consecutive year, potentially increasing import needs
U.S. Export Surge: January 2025 dairy exports jumped 20% year-over-year to record $714 million, led by butter exports climbing 41%
Competitive Positioning: U.S. butter at $2.33/lb remains significantly below EU prices at $3.75/lb and Oceania at $3.54/lb

Expert Market Commentary:

A leading dairy economist observed: “The market is effectively challenging the government’s outlook” regarding the persistent divergence between USDA’s downwardly revised forecasts ($17.60/cwt Class III) and CME futures trading at $18.82/cwt.

Forward-Looking Analysis with Enhanced USDA Integration

USDA Forecast Divergence Analysis:

The USDA’s latest projections show significant downward revisions: All-Milk Price forecast at $21.10/cwt (down $0.50 from previous forecasts), Class III at $17.60/cwt, and Class IV at $18.20/cwt. These revisions reflect adjustments for FMMO reform impacts, particularly increased manufacturing allowances.

FMMO Reform Implementation Status:

Already Effective (June 1st):

Manufacturing allowances substantially increased: Cheese $0.2519/lb, Butter $0.2272/lb
Butterfat recovery factor raised to 91%, directly rewarding high-fat milk
Class I differentials increased, averaging $1.25/cwt across regions

Coming December 1st:

Revised skim milk composition standards (3.3% protein, 6.0% other solids)
Return of “higher-of” Class I formula, correcting “catastrophic 2018 Farm Bill experiment”

Regional Market Spotlight: Weather & Production Impacts

June 2025 Climate Outlook with Farm-Level Implications:

The National Weather Service forecasts create distinct regional challenges:

Above-normal temperatures are favored across most of the Lower 48, with the highest probabilities in the northern Rockies and Northeast
Heavy precipitation is expected in Oklahoma and the southern regions
Below-normal precipitation is likely in the Pacific Northwest and Northern Plains

Regional Production Strategies:

Heat stress regions (California, Southwest): Implement cooling systems and adjust feeding schedules
Drought-developing areas (Pacific Northwest, Northern Plains): Secure alternative forage sources and water conservation
Heavy rainfall zones (Oklahoma): Prepare for forage harvest challenges and storage management

Actionable Farmer Insights with Enhanced Risk Management

Component Optimization Strategy:

Today’s butter surge (+2.50¢) reinforces the fundamental industry shift. This gain translates directly to higher Class IV values and improved component premiums. The new FMMO 91% butterfat recovery factor means every 0.1% increase in butterfat test generates approximately $0.15-0.25/cwt additional income at current pricing levels.

Enhanced Risk Management Framework:

Layered Protection: Combine DMC (66.7% payout history 2018-2024), DRP, and forward contracting
Feed Cost Hedging: Today’s corn surge (+31.75¢) demonstrates the critical need for dynamic hedging
Component-Based Contracting: Audit current production against December FMMO standards (3.3% protein, 6.0% other solids)

Regional Strategic Positioning:

The $8+ billion in new processing capacity underway creates permanent shifts in regional milk demand. Component-focused facilities will offer significant premiums for high-quality milk, making geographic positioning and processor relationships critical strategic decisions.

Industry Intelligence

Processing Capacity Revolution:

Major investments include Walmart ($350M), Fairlife ($650M), and Chobani ($1.2B) facilities, which will add 55 million pounds of daily processing capacity through 2026. These component-focused plants create permanent regional milk pricing advantages for strategically positioned producers.

Technology Adoption Accelerating:

Robotic milking systems cutting labor by 60-75% and precision feeding saving $0.75-1.50/cwt represent critical margin protection tools against rising costs and policy pressures.

Weekly Context & Market Outlook

Trading Pattern Evolution:

This week’s action shows institutional repositioning. Monday’s balanced trading gave way to yesterday’s institutional butter liquidation (“heaviest in two weeks”), followed by today’s aggressive accumulation reversal. This demonstrates the market’s hair-trigger responsiveness to supply-demand shifts.

Key Monitoring Points for Strategic Decision-Making:

FMMO implementation impacts on regional milk pricing differentials
Feed market volatility requiring dynamic hedging strategies
Weather stress patterns affecting regional production capacity
Global trade developments influencing export demand sustainability

The Bottom Line

June 11th delivered a masterclass in dairy market complexity – butter’s explosive rally demonstrates the growing value of milk components, while cheese’s tactical retreat shows normal profit-taking behavior rather than fundamental weakness. A CME floor trader summarized it perfectly: “This butter rally represents institutional confidence in dairy fat values that were temporarily oversold.”

The underlying message remains crystal clear: the dairy industry has permanently shifted to a “component economy” where butterfat and protein command premiums that volume-focused operations cannot access. With USDA forecasts consistently trailing futures market optimism ($17.60/cwt vs $18.82/cwt Class III) and Rabobank projecting only 0.8% global production growth, supply constraints continue supporting component values.

Producers who optimize genetics, nutrition, and risk management for this new reality will thrive, while those clinging to traditional volume-based thinking face increasing margin pressure. Today’s action reinforces that successful dairy farming now requires mastery of both agricultural production and financial market dynamics – with component optimization as the non-negotiable foundation for profitability.

Learn More:

April 2025 Production Data Exposes the Strategic Milk Allocation Revolution Reshaping Global Dairy – Reveals practical strategies for capturing $120-180 per cow annually through component optimization, with specific implementation roadmaps for transitioning from volume-based to component-focused operations that align with processor allocation decisions.
USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers – Demonstrates how to strategically position your operation for the evolving dairy landscape, including processor relationship strategies and cost management approaches that complement today’s volatile CME movements and FMMO reform impacts.
5 Technologies That Will Make or Break Your Dairy Farm in 2025 – Provides essential technology adoption strategies for managing the volatility and margin pressures highlighted in today’s market report, including robotic systems that deliver 20% yield increases and AI analytics that optimize the component production driving premium pricing.

Join the Revolution!

Categories : CME Dairy Markets

Tags : butterfat premiums, CME dairy trading, dairy margin management, dairy market analysis, milk component strategy

Global Dairy Markets Navigate Choppy Waters as Trading Volumes Surge Despite Price Pressures

Monday, June 9th, 2025

Stop believing high trading volumes equal market strength. Record 20,641-tonne SGX week signals price chaos—smart money’s repositioning now.

EXECUTIVE SUMMARY: The biggest trading week in months just revealed what conventional market wisdom won’t tell you: massive volumes don’t mean bullish sentiment. While Singapore Exchange crushed records with 20,641 tonnes traded—nearly 14 times European volumes—whole milk powder prices still dropped 4.3% and skim milk powder fell 2.1%. China’s strategic 5% import reduction is permanently reshaping global demand patterns, forcing a fundamental supply-demand recalibration that conventional analysis misses entirely. Irish farmers capitalizing on 12.6% production growth while European butter prices climb €50 weekly demonstrates the bifurcated reality: consumer-facing products outperform industrial ingredients by massive margins. U.S. cheese exports hit all-time daily averages, yet spot Cheddar failed to break $2.00—proving that production records don’t automatically translate to price premiums. The data screams one truth: we’re witnessing early-stage rebalancing where efficiency and market positioning matter more than historical volume assumptions. Stop trading on yesterday’s patterns and start positioning for tomorrow’s supply-demand reality.

KEY TAKEAWAYS

Volume Deception Alert: Record SGX trading (20,641 vs 1,500 tonnes EEX) with simultaneous price drops signals smart money repositioning—not bullish sentiment. Farmers relying on volume indicators for pricing decisions are missing critical market shifts.
China’s Structural Pivot: 5% import reduction isn’t cyclical—it’s permanent domestic production strategy. Operations targeting Chinese export markets must diversify immediately or face chronic oversupply conditions through 2026.
Bifurcated Profit Zones: European butter gains €50 weekly while powder markets crater, revealing the €462 (+11.8% y/y) consumer-facing premium. Producers should prioritize cheese and butter over commodity powders for immediate margin protection.
Irish Production Surge: 12.6% collection growth (1,104kt April) creates supply pressure that traditional seasonal analysis underestimates. Competing regions must focus on cost efficiency and quality premiums to maintain market share.
U.S. Export Contradiction: All-time cheese export records with failed .00 Cheddar breakthrough proves global competitiveness doesn’t guarantee domestic pricing power. American producers need forward contract strategies, not volume celebration.

global dairy market, dairy commodity prices, milk futures trading, dairy market analysis, dairy industry trends

The past week delivered a masterclass in market contradictions, with record-breaking trading volumes masking underlying price weakness across multiple dairy commodity platforms. While European butter prices continue their relentless climb and cheese markets show surprising resilience, powder markets send mixed signals that should have every dairy farmer paying attention.

Trading Floors Heat Up While Prices Cool Down

EEX’s Modest Performance Tells a Bigger Story

The European Energy Exchange saw 1,500 tonnes change hands last week, with Thursday emerging as the standout session at 525 tonnes. But here’s what the headline numbers don’t tell you: butter futures actually dropped 0.3% to €7,383, while skim milk powder fell to €2,541.

This isn’t just market noise. When you see heavy trading volumes alongside price declines, you’re witnessing real-time disagreement between buyers and sellers about where the fair value lies. The fact that 1,275 tonnes of butter traded while prices slipped suggests either profit-taking from earlier gains or genuine supply pressure building in European markets.

SGX Dominates with Massive Volume Surge

Now, let’s talk about where the real action happened. Singapore Exchange crushed it with 20,641 tonnes traded – nearly 14 times EEX’s volume. Whole milk powder led the charge with 11,115 lots, followed by SMP at 8,816 lots.

But here’s the kicker: even with this massive trading interest, WMP prices still dropped 0.1% to $3,841, and SMP fell harder at 1.0% to $2,866. The only bright spots were anhydrous milk fat jumping to $6,910 and butter edging up 0.5% to $6,862.

What does this tell us? Asian buyers are actively repositioning their portfolios, but they’re not paying premiums to do it. That’s either smart money sensing opportunity in the weakness or institutional selling creating the very pressure we’re seeing.

European Quotations Paint a Contradictory Picture

Butter Marches Higher Despite Futures Weakness

The EU weekly quotations delivered some head-scratching results. While EEX butter futures were declining, physical European butter prices gained €50 to €7,457 – a solid 0.7% weekly jump. Dutch butter led the charge with a €100 increase to €7,400, while French butter added €51 to €7,521.

This disconnect between physical and futures pricing isn’t accidental. It suggests immediate European demand remains robust while longer-term sentiment cools. For dairy farmers, this means current milk checks might stay strong even if forward contract prices are softening.

Powder Markets Show Resilience

SMP quotations gained €25 to €2,425, with Dutch SMP posting the strongest performance at €2,440 after a €50 increase. German SMP added €15 to €2,435, while French SMP gained €10 to €2,400. This strength in physical markets while futures decline creates an interesting arbitrage opportunity that smart traders are already exploiting.

Regional Production Patterns Reveal Critical Trends

Ireland’s Explosive Growth Continues

Irish milk collections jumped 12.6% in April to 1,104 thousand tonnes, pushing year-to-date volumes to 2.46 million tonnes – an impressive 8.5% ahead of 2024. Irish farmers deliver both volume and quality, with milkfat at 4.08% and protein at 3.47%.

This isn’t sustainable at current growth rates. Irish dairy expansion is happening faster than global demand growth, which means either prices have to adjust or production growth has to slow. The laws of supply and demand haven’t been suspended.

Southern Europe Struggles While Northern Europe Thrives

Spain’s milk production fell 1.0% to 641 thousand tonnes, while Italy dropped 0.6% to 1.17 million tonnes. Meanwhile, Ireland’s explosive growth creates a tale of two Europes. The weather patterns explain much of this – Ireland’s optimal grassland conditions contrast sharply with drought concerns across much of southern Europe.

China’s Farmgate Reality Check

Chinese farmgate prices at 3.07 Yuan/kg represent a brutal 9.4% year-over-year decline. At €37.00/100kg equivalent, Chinese farmers are getting paid roughly half what their European counterparts receive. This price differential explains why Chinese domestic production continues expanding while import demand weakens.

Weather Wildcards Reshape Production Landscapes

Europe’s Tale of Extremes

This spring ranks among the driest on record since 1991 across Benelux, northern France, Germany, western Poland, and Sweden. Most regions received only 50% of normal precipitation, raising serious concerns about crop yields.

But here’s the twist: Ireland’s grasslands remain in optimal condition with perfect growing weather. Meanwhile, Italy and Greece benefit from abundant rainfall and positive yield expectations. This creates a productivity gap that will influence milk production patterns for months ahead.

New Zealand’s Cautious Contraction

Dairy cow slaughters in New Zealand plummeted 25.2% in April, with 12-month rolling slaughters down 7.3% to 751 thousand head. This represents a deliberate herd size reduction that will constrain Oceania’s export capacity moving forward.

Smart Kiwi farmers are reading the global demand signals and adjusting accordingly. When your primary export markets show weakness, you don’t expand – you optimize.

US Market Dynamics Offer Global Lessons

Export Surge Masks Domestic Challenges

US cheese exports hit all-time daily averages in April, jumping 6.7% from already strong 2024 levels. American cheese and butter remain the world’s cheapest, creating a competitive export advantage that’s supporting domestic prices.

But there’s trouble brewing. Due to tariffs and trade tensions, Canadian butter buyers are looking elsewhere, causing US butter export momentum to slow from its February-March peak. When politics interfere with the dairy trade, everybody loses.

Powder Markets Face Structural Headwinds

The US-China trade war continues reshaping whey powder flows. China historically takes 40% of US whey exports, but tariff threats prompted massive March purchases followed by an April retreat to Belarus and New Zealand suppliers. CME spot dry whey rallied 0.75¢ to 58¢ per pound – its highest level in nearly four months.

US nonfat dry milk exports fell 20.9% in April to 113.5 million pounds as European suppliers gained market share in Southeast Asia. Mexico remains strong, but losing Asian market share to European competitors signals a fundamental competitiveness challenge.

Production Surge Creates Market Tensions

Cheese Plants Ramp Up Output

US cheese production reached 1.23 billion pounds in April – the highest daily average on record. Cheddar production jumped 8.1% year-over-year as new plants work through startup issues. This production surge explains why spot Cheddar failed to reach $2.00 and pulled back to close at $1.8575.

Butter Production Peaks Despite Price Strength

Manufacturers filled churns with cheap cream in April, pushing butter output to 215.8 million pounds – the highest April volume since 2020. Yet healthy domestic demand and improving exports offset this production increase, keeping prices climbing to $2.555 per pound.

This demonstrates that strong demand can absorb significant production increases when export markets remain competitive.

Class Prices Reflect Market Realities

Class III Futures Signal Caution

Cheese market weakness deflated nearby Class III prices, with June falling 41¢ to $18.80 per cwt and July dropping nearly 70¢ to $18.90. However, deferred contracts edged higher, promising milk revenues in the high-$18s and low $19s into early 2026.

Class IV Shows Strength

Class IV futures climbed across the board, with June settling at $18.42 and July reaching $19.16. September through December contracts returned above $20. Combined with record-high beef revenues, these milk checks easily cover operating costs.

Feed Markets Provide Stability

Corn Prices Hold Steady

July corn finished at $4.42 per bushel, down just 1.5¢ for the week. The December contract rallied over 10¢ to $4.49 as wet conditions in Ohio, Pennsylvania, and the Southeast forced some farmers to abandon unplanted acres.

Soybean Complex Gains on Policy Speculation

Soybean oil prices climbed on rumors that the Trump administration might announce renewable fuel credit decisions benefiting biodiesel. July soybeans closed at $10.58, up 16¢ weekly, while meal held steady at $296 per ton.

The Bottom Line

This week’s trading data reveals a global dairy market in transition. Record trading volumes reflect real disagreement about fair value, while regional production patterns create both opportunities and risks for forward-thinking farmers.

The key insight? We’re seeing the early stages of a supply-demand rebalancing that will favor producers who can maintain efficiency while competitors struggle with weather, feed costs, or market access.

European farmers should capitalize on current strength while monitoring powder market signals. US producers need to watch cheese production capacity and export market developments. And everyone should pay attention to China’s farmgate price trends – they’re previewing what happens when domestic production growth outpaces local demand.

Smart money is positioning for volatility. The question is whether you’re ready to navigate the choppy waters ahead or if you’re still fighting the last market cycle.

What’s your operation doing to prepare for these shifting global dynamics? The data suggests now’s the time to decide.

Learn More:

Your 2025 Dairy Gameplan: Three Critical Areas Separating Profit from Loss – Reveals research-backed tactical strategies for optimizing silage management, methionine supplementation, and transition cow protocols that can boost profitability by $500+ per cow despite volatile commodity prices.
Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape – Demonstrates how regional production shifts create strategic opportunities for forward-thinking farmers to capitalize on EU contraction while navigating US expansion risks and supply-demand imbalances.
The Digital Dairy Revolution: How IoT and Analytics Are Transforming Farms in 2025 – Explores cutting-edge precision farming technologies delivering 15-20% productivity gains and 30% health cost reductions while meeting growing consumer demands for transparency and sustainability verification.

Join the Revolution!

Categories : Dairy Markets

Tags : dairy commodity prices, dairy industry trends, dairy market analysis, Global Dairy Market, milk futures trading

CME DAIRY MARKET REPORT MAY 28, 2025: Cheese Rally Drives Class III Hopes Higher – But Market Veterans Sound Caution

Wednesday, May 28th, 2025

Stop trusting cash market rallies alone. Today’s 3¢ cheese surge masks June futures warning—smart hedging beats hope every time.

EXECUTIVE SUMMARY: The dairy industry’s biggest mistake? Believing cash market strength guarantees sustained profitability. Today’s explosive 3.00¢ cheese block rally to $1.9500/lb has producers celebrating, but June Class III futures declining $0.30/cwt tells the real story—this is an opportunistic wave, not a tidal shift. With feed costs dropping 7.50¢ on corn and milk-to-feed ratios approaching 2.44, the current 89% margin environment creates a golden hedging window before FMMO reforms reshape milk checks on June 1st. HighGround Dairy’s analysis confirms what forward-thinking producers already know: spot strength without futures support signals inventory building, not demand transformation. The winners? Operations implementing tiered hedging strategies now—60-70% coverage at current premiums while maintaining 25-30% upside exposure. Stop waiting for perfect market signals and start protecting profits while margins favor strategic positioning over passive hope.

KEY TAKEAWAYS

Strategic Hedging Opportunity: Current Class III futures trading $1.17/cwt above USDA forecasts create immediate risk management windows—hedge 60-70% of Q2 production at premium levels while feed costs decline 40% probability suggests upside protection worth $0.50-$1.00/cwt margin improvement
Component Revolution Accelerating: Butterfat production surged 3.4% year-over-year with average tests reaching 4.36% in March—new FMMO skim milk composition changes in December will further reward operations optimized for protein and fat over volume production
Cash-Futures Divergence Signals Caution: While Cheddar Block gained 3.00¢ today, June futures declined $0.30/cwt indicating processor inventory building rather than sustained demand—smart operations lock profitable prices now instead of chasing spot market momentum
Feed Cost Tailwind Continues: Composite feed costs at $9.02/cwt with July corn dropping to $4.5075/bushel creates favorable 2.44 milk-to-feed ratio environment—operations should hedge feed costs given 40% probability of price increases while building cash reserves during this margin-positive cycle
FMMO Reform Reality Check: June 1st “higher-of” Class I pricing and updated make allowances will reshape milk checks across all Federal Orders—producers must analyze their specific utilization patterns now and adjust hedging strategies based on Class III vs Class IV futures positioning

CME dairy markets, Class III milk prices, dairy market analysis, dairy hedging strategies, milk price forecast

Cheddar blocks surged 3.00¢ to $1.9500/lb while nonfat dry milk gained 1.50¢, signaling stronger May milk checks ahead. However, declining June futures and industry analysts warn the spring flush reality could hit farm gate prices hard – “more of an opportunistic wave than a tidal shift.”

Today’s Price Action & Farm Impact

Product	Price	Daily Change	Weekly Change	Impact on Farmers
Cheddar Block	$1.9500/lb	+3.00¢	+3.00¢	Significant boost to Class III outlook
Cheddar Barrel	$1.8650/lb	NC	NC	Stable support, but block-barrel spread widens
Butter	$2.5250/lb	+0.50¢	+0.25¢	Supports Class IV strength, component premiums
NDM Grade A	$1.2850/lb	+1.50¢	+1.50¢	Positive for Class IV, export demand is stable
Dry Whey	$0.5700/lb	+1.50¢	+1.50¢	Class III support, but supply pressures remain

Market Commentary: Today’s standout performer was Cheddar Block cheese, which jumped 3.00¢ to settle at $1.9500/lb with active trading of 16 loads. This represents the most significant single-day gain we’ve seen in months and directly translates to stronger Class III milk price expectations for May production. The robust NDM performance, gaining 1.50¢ to $1.2850/lb, indicates healthy demand for skim-solids products.

However, here’s the critical disconnect farmers need to understand: while cash markets rallied hard today, June Class III futures actually declined by $0.30/cwt to $19.34. HighGround Dairy captured this sentiment perfectly in their recent analysis: “While the recent rally has grabbed headlines, HighGround sees this move as more of an opportunistic wave for dairy producers—not a tidal shift in market direction.”

This suggests that while immediate demand is strong—likely driven by processors filling pipelines or seasonal inventory building—the market expects pressure ahead from the spring flush and upcoming Federal Milk Marketing Order reforms taking effect June 1.

Feed Cost & Margin Analysis

Current Feed Landscape (Futures Pricing):

Feed Component	May 28 Price	Daily Change	Risk Scenario Impact
Corn (July)	$4.5075/bu	-7.50¢	Favorable trend
Soybeans (July)	$10.7700/bu	-10.75¢	Margin supportive
Soybean Meal (July)	$293.80/ton	-$2.20	Cost pressure easing
Estimated Composite Feed	$9.02/cwt	—	Below $9.50 threshold

Milk-to-Feed Ratio: Based on the estimated May All-Milk Price of $22.00/cwt, the current milk-to-feed ratio sits at approximately 2.44. While this is just below the healthy 2.5 threshold, it represents a significant improvement from the 1.73 ratio we saw in January 2024.

Risk Scenario Analysis:

Scenario 1: Feed Cost Spike (40% probability)

Corn rises to $5.00+/bushel from the current $4.51 level
Estimated impact: -$0.50 to -$1.00/cwt reduction in milk price competitiveness
Producer action: Consider hedging 60-70% of feed needs at current favorable levels

Scenario 2: Continued Feed Decline (35% probability)

Corn stabilizing below $4.25/bushel
Estimated impact: Additional $0.25-$0.40/cwt margin improvement
Producer action: Maintain current purchasing strategy, build cash reserves

Market Fundamentals Driving Prices

Domestic Demand: Butter stocks in April were 7% lower than April 2024 despite active churning, indicating strong domestic and export off-take. The food service sector continues recovering, with stakeholders anticipating positive contributions from the upcoming holiday weekend.

Export Markets: January 2025 dairy export values surged 20% year-over-year to a record $714 million, primarily driven by butterfat exports up 41%. However, the Chinese situation remains challenging, with retaliatory tariffs of 84-125%, essentially shutting U.S. suppliers out of a market that accounted for 43% of lactose exports.

Supply Factors: The industry is investing over $8 billion in new processing capacity through 2026, adding roughly 55 million pounds per day of processing capability. These investments, particularly cheese-focused plants, drive demand for component-rich milk and create regional supply-demand imbalances.

Forward-Looking Analysis & Risk Assessment

Futures Reality Check:

Class III (June): $19.34/cwt (-$0.30) – Trading $1.17/cwt above USDA’s annual forecast
Class IV (June): $18.48/cwt (+$0.24)
Cheese (June): $1.9880/lb (-$0.0230)

The divergence between today’s strong cash performance and declining June futures signals market caution about the immediate future. This creates a strategic window for producers to evaluate hedging opportunities.

Risk-Weighted Recommendations: Based on current market conditions and probability assessments, implement tiered hedging strategies:

60-70% coverage at current premium levels for Class III milk
25-30% exposure to potential upside from export demand scenarios
Feed cost hedging for key input costs given a 40% probability of price increases

FMMO Impact Analysis: The June 1st reforms will fundamentally reshape milk pricing. Key changes include:

Return to the “higher-of” Class I pricing formula
Updated make allowances reducing Class III and Class IV prices initially
Regional variations based on fluid milk utilization patterns

Regional Market Spotlight: Upper Midwest Under Pressure

Wisconsin and Minnesota are experiencing the full force of the spring flush, with robust milk flow creating an oversupply situation. Spot milk prices trading $4.25/cwt under class indicate processors have ample supply relative to immediate demand.

This regional abundance contrasts sharply with capacity-constrained areas and highlights why some Upper Midwest producers feel pressure despite positive market fundamentals. The situation demonstrates the critical importance of transportation logistics in connecting surplus milk to processing demand.

Industry Intelligence & Market Sentiment

Processing Expansion: Major investments from Walmart ($350M), Fairlife ($650M), and Chobani ($1.2B) are creating new demand centers and competition for milk supplies. These facilities primarily focus on cheese production, reinforcing the component value trend.

Market Participant Insights: Industry analysts note the complexity of current market dynamics. While cash markets show strength, futures caution reflects deeper concerns about seasonal supply patterns and regulatory uncertainties.

Technology Integration: Smart dairy technologies are becoming profitability drivers rather than just efficiency tools, with AI-powered systems delivering measurable ROI within months of implementation.

Actionable Farmer Insights

Pricing Strategies: Today’s strong cheese performance creates an opportunity to forward contract portions of upcoming production. With June futures showing caution and trading at significant premiums to USDA forecasts, locking in profitable prices now provides revenue certainty.

Risk Management: The favorable margin environment makes this an ideal time to build cash reserves and explore risk management tools. Consider implementing the tiered hedging approach:

Immediate action: Hedge 60-70% of next quarter’s production at current premium levels
Feed strategy: Lock in corn and soybean meal prices, given 40% probability of increases
Long-term planning: Maintain 25-30% exposure for potential export upside

Component Focus: Continue optimizing genetics and nutrition for higher butterfat and protein content. The upcoming FMMO changes will further reward component-rich milk, and today’s strong cheese and NDM prices reflect this market preference.

The Bottom Line

Today’s cheese rally signals genuine demand strength, but smart farmers won’t ignore the warning signs from June futures and industry analysts. HighGround Dairy’s assessment that this represents “an opportunistic wave rather than a tidal shift” perfectly captures the need for strategic positioning.

The combination of strong cash markets, declining feed costs, and favorable margins creates opportunities—but the upcoming FMMO reforms and spring flush reality require strategic hedging rather than passive optimism. Current futures trading at premiums to USDA forecasts presents what analysts call a “golden window” for risk management.

Strategic Action Plan:

Hedge 60-70% of upcoming production at current premium levels
Lock in feed costs for 6-month coverage given a 40% spike probability
Build cash reserves during this favorable margin environment
Optimize components for the new FMMO reward structure

Focus on component optimization, build strategic processor relationships, and use this margin environment to strengthen your operation’s financial position. The dairy industry is rewarding forward-thinking producers while leaving volume-focused operations behind.

Ready to optimize your risk management strategy? Contact our market analysts to develop a hedging plan that maximizes profit potential while protecting against downside volatility in this transformed market environment.

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Discover comprehensive risk management strategies beyond hedging, including DMC layering techniques, biosecurity protocols, and automation investments that cut labor costs by 60%+ while protecting against HPAI and market volatility.
April 2025 Dairy Risk Management Calendar – Reveals strategic timing for risk management decisions during the spring flush, including component-focused culling strategies and export opportunity windows that help navigate the current margin squeeze with actionable monthly planning guidance.
The Future of Dairy Farming: Embracing Automation, AI and Sustainability in 2025 – Demonstrates how cutting-edge automation and AI technologies transform dairy operations for long-term profitability, featuring whole-life monitoring systems and robotic solutions that enhance both efficiency and component optimization strategies.

Join the Revolution!

Categories : CME Dairy Markets

Tags : Class III Milk prices, CME dairy markets, dairy hedging strategies, dairy market analysis, milk price forecast

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