Cheese collapse just wiped $0.82/cwt off your September milk check – here’s what smart producers are doing right now.

EXECUTIVE SUMMARY: Today wasn’t just another down day – it was a wake-up call. The cheese market collapse, which hammered Class III futures by $0.82/cwt, is exposing the harsh reality that most operations aren’t prepared for margin compression. We’re looking at a milk-to-feed ratio of 1.16, when anything below 2.0 means you’re bleeding money on every gallon. Feed costs jumped while milk prices cratered, creating a perfect storm that’s already forcing plant shutdowns and route cuts across Wisconsin. Meanwhile, our NDM is priced 6-7¢/lb above New Zealand and Europe – meaning we’re losing export business just when we need it most. The technical charts are screaming that $16.50 Class III is next if this selling continues. Here’s the thing, though… the producers I talk to who are sleeping well tonight? They’re the ones who locked in risk management months ago and have been booking feed contracts while everyone else was hoping for higher prices.

KEY TAKEAWAYS:

• Your margin math just changed: That 1.16 milk-to-feed ratio means a typical 100-cow operation lost $57/day in profitability – that’s $1,700 monthly cash flow you can’t afford to lose. Run your numbers tonight with $16.50 Class III and see if you can survive 90 days at those levels.
• Feed procurement window is closing fast: December corn jumped 2.5¢ today while soybean meal added $1.30/ton – smart operators are booking remaining 2025 needs now before transportation bottlenecks in the Upper Midwest push basis even higher.
• Risk management isn’t optional anymore: Operations with 40-60% of Q4/Q1 2026 production protected through DRP or LGM are weathering this storm. If you’re entirely naked for price risk, you’re gambling with your operation’s survival.
• Global competition is eating our lunch: U.S. NDM at $2,712/MT versus European SMP at $2,550/MT means Mexican buyers are already looking elsewhere – and Mexico’s our biggest powder customer.
• Technical breakdown suggests more pain coming: September Class III broke through $17.80 support like it wasn’t there, with next meaningful support at $16.75, then $16.25. The charts don’t lie about momentum.

Here’s the thing about today’s session… it was absolutely brutal if you’re a dairy farmer. The cheese complex didn’t just decline – it got hammered. We’re talking about a coordinated sell-off that wiped $0.82/cwt off September Class III futures in a single afternoon. And here’s what really stings – feed costs are climbing at the same time, creating a perfect storm for margin compression.

If you don’t have risk management in place, tonight might be a good time to have that uncomfortable conversation with your lender or advisor. This isn’t just another down day – this is the kind of move that changes the trajectory of your operation’s profitability for months.

Today’s Carnage: The Numbers That Hit Your Milk Check

Product	Final Price	Move	Weekly Trend	What This Means for Your Farm
Cheese Blocks	$1.7300/lb	📉 -3.50¢	-1.9%	This is what’s crushing your Class III
Cheese Barrels	$1.7425/lb	📉 -3.75¢	-2.1%	Confirms the cheese complex is broken
Butter	$2.0150/lb	📈 +0.25¢	📉 -5.1%	Tiny bounce, but butter’s still weak overall
NDM Grade A	$1.2275/lb	📉 -0.75¢	📉 -2.3%	Export demand is looking shaky
Dry Whey	$0.5675/lb	📉 -0.25¢	📉 -0.4%	Adding insult to injury on Class III

What Actually Happened Out There

The cheese pit was a bloodbath today. Four trades in blocks – that’s all it took to establish the tone, and afterwards? Zero bids left on the board. Think about that for a second… in a normal market, there are always buyers hanging around looking for a deal. Not today.

Barrels were even worse – two offers sitting there with absolutely no one willing to step up and buy. When you see bid/ask spreads widen like that, it’s telling you that buyers have completely stepped away from the table. They’re not just being picky about price… they don’t want the product at any reasonable level.

Technical Picture: The September Class III future broke right through the $17.80 support level like it wasn’t even there. We’re now testing the lower boundary at $17.00, and frankly, there’s not much technical support until we get down to the $16.50 area. The 20-day moving average at $18.15 is now acting as resistance instead of support – that’s never a good sign.

Volume Analysis: Here’s what’s concerning – we didn’t need massive volume to trigger this sell-off. When relatively light trading can move prices this aggressively, it indicates that the market is fragile and lacks liquidity. Big money isn’t even participating… they’re just watching from the sidelines.

Trading Floor Intelligence: What the Pros Are Really Seeing

The bid/ask action today told the whole story, and it wasn’t pretty. Block cheese had those four trades executed – each one lower than the last – and then the bid side completely disappeared. It’s like watching a poker game where everyone suddenly decides to fold.

Intraday Patterns: The weakness showed up right at the open and just accelerated through the session. No bounce attempts, no late-session bargain hunting… just steady selling pressure that never let up. When you see that kind of one-directional move, it usually means more pain is coming.

Order Flow: What’s particularly telling is the lack of any meaningful support orders below the market. Normally, you’d see some scale-down buying interest, but the order books were thin all the way down. This suggests institutional money is still on the sidelines waiting for clearer signs of a bottom.

Momentum Indicators: The RSI on Class III futures just broke below 30, which is technically oversold territory. But here’s the thing – in a strong downtrend, markets can stay oversold for weeks. The MACD is showing accelerating bearish momentum, and we haven’t seen any bullish divergence yet.

Global Competitive Reality: We’re Pricing Ourselves Out

This is where things get really concerning for U.S. exporters. Our powder prices are becoming uncompetitive on the world stage, and the gap is widening…

Price Comparison (Current Market Levels)

• U.S. NDM: $1.23/lb ($2,712/MT) – We’re the expensive option
• European SMP: ~$1.16/lb equivalent – Undercutting us by 7¢/lb
• New Zealand SMP: ~$1.17/lb equivalent – Also cheaper by 6¢/lb

That 6-7¢/lb disadvantage might not sound like much, but when you’re talking about container loads, it adds up fast. Mexican buyers are already starting to look at European offers more seriously, and that’s traditionally been our strongest export market.

Currency Impact: The dollar’s been relatively strong lately, which makes our products even more expensive for foreign buyers paying in euros or pesos. A 2% move in EUR/USD can swing competitiveness by another few cents per pound.

New Zealand Production Update: Here’s what’s keeping me up at night – New Zealand is heading into their spring flush with some of the best pasture conditions they’ve seen in years. If they flood the market with powder over the next few months, our already-weak export position could get much worse.

European Dynamics: EU milk production is in seasonal decline, which should theoretically support global prices. But demand destruction from their economic headwinds is offsetting the supply benefits. German processors are reporting softer industrial demand, and that’s usually a leading indicator for broader European weakness.

Feed Market Reality Check: Your Costs Are Moving the Wrong Way

Here’s where the margin squeeze really starts to hurt…

• Corn (December): $4.2075/bu – up 2.5¢ today
• Soybean Meal (December): $284.10/ton – up $1.30
• Hay Futures (compressed): Still elevated from summer weather issues

The Critical Ratio: Milk-to-Feed Cost Analysis

Using today’s September Class III settlement of $17.02/cwt against current feed costs, we’re looking at a milk-to-feed ratio of approximately 1.16. Anything below 2.0 means you’re in financial trouble, and anything below 1.5 means you’re bleeding money on every gallon.

Regional Feed Variations:

• Upper Midwest: Corn basis is running about 20¢ over futures due to transportation bottlenecks
• California: Almond hull availability is tight, pushing alternative feed costs higher
• Northeast: Hay quality from summer weather issues is forcing more reliance on purchased feed reliance

What This Means: For a typical 100-cow operation producing 7,000 lbs/day, today’s price moves just cost you roughly $57 per day in lost margin. Over a month, that’s $1,700 less cash flow.

Regional Deep Dive: Upper Midwest Takes the Hardest Hit

Wisconsin and Minnesota producers are feeling this cheese collapse more than anyone else. When you’re this dependent on cheese processing, every penny move in blocks and barrels flows directly through to your milk check.

Plant-Specific Intel:

• Saputo’s Almena facility is reportedly extending their October maintenance shutdown by three days due to inventory levels
• Grande Cheese in Brownsville has reduced their daily milk intake by about 8% this week
• Foremost Farms is telling producers to expect basis adjustments in their next pay announcement

Transportation Factors: Hauling premiums in southern Wisconsin have dropped from $0.75/cwt to $0.50/cwt as plants find themselves with plenty of milk and less urgency to bid up spot loads. Some smaller haulers are already cutting routes.

Producer Sentiment: Talked to a couple of producers around Platteville yesterday, and the mood is definitely shifting. One 300-cow operation that was planning a parlor upgrade just put those plans on indefinite hold. Smart move, probably.

What’s Really Behind This Sell-Off

Demand Side Reality: The post-Labor Day hangover is real, and it’s hitting harder than expected. Food service cheese orders have dropped off significantly – we’re talking about a 15-20% decline in weekly order volumes compared to August averages. Restaurants that were busy all summer are suddenly dealing with empty tables as families get back to school routines.

Retail Dynamics: Major grocery chains are working through back-to-school inventory builds and seem reluctant to place large new orders until they see how Q4 demand shapes up. Walmart’s regional cheese buyers have reportedly been more price-sensitive than usual in recent procurement discussions.

Processing Plant Realities: Here’s what’s not making the headlines – several major cheese plants are seeing their aging rooms fill up faster than expected. When you’ve got 60-day aged inventory backing up and fresh production still coming in strong, something’s got to give on the pricing side.

Export Challenges: Mexico is still buying, but they’re being more selective about pricing. Southeast Asian demand remains decent, but competition from New Zealand is intensifying. The EU’s recent trade mission to Vietnam isn’t helping our competitive position there either.

Technical Analysis: Chart Patterns Don’t Lie

Class III September Contract:

• Support Levels: Next meaningful support sits at $16.75, then $16.25
• Resistance: The $17.80 level we broke today is now resistance, with stronger resistance at $18.15 (20-day MA)
• Chart Pattern: This looks like a textbook breakdown from a descending triangle pattern that’s been forming since late August

Cheese Block Futures:

• Key Level: The $1.80 area has been significant support multiple times this year – breaking below it opens up a move toward $1.65
• Volume Profile: Heavy volume on today’s decline suggests this isn’t just a temporary dip

Momentum Indicators:

• RSI is oversold but hasn’t shown any bullish divergence yet
• MACD is accelerating to the downside
• Bollinger Bands are widening, suggesting increased volatility ahead

Forward Curve Analysis: The Market’s Telling a Story

The futures strip is painting a concerning picture for the near term, but there’s some hope if you look further out:

Current Curve Structure:

• September Class III: $17.02/cwt (today’s disaster)
• October: $17.55/cwt (53¢ premium to September)
• November: $17.80/cwt (slight backwardation setting in)
• December: $18.05/cwt
• Q1 2026: $18.35-18.55 range

What This Tells Us: The market expects some recovery, but it’s pricing in a slow, grinding process rather than any sharp bounce. The contango (upward slope) in the front months offers some premium for forward contracting, but the overall price levels are still well below what most operations need for profitability.

Seasonal Considerations: Historically, October and November have been strong months for dairy, as milk production seasonally declines and holiday demand increases. The futures are pricing in some of that seasonal strength, but not as much as we typically see.

Historical Context: How Bad Is This Really?

Let me put today’s move in perspective… the $0.82/cwt decline in September Class III futures ranks as the fourth-largest single-day loss this year. More importantly, it breaks us out of the sideways trading range we’d been in since mid-August and establishes a clear downtrend.

Seasonal Comparison: At this time last year, September Class III was trading around $19.45. Two years ago, we were at $16.80 – so we’re actually closer to 2023 levels than 2024. The difference lies in the speed of this decline and the lack of any significant support from buying.

Percentile Rankings: Current Class III levels are sitting at about the 25th percentile for September contracts over the past decade. That’s not quite panic territory, but it’s definitely in the “concerning” range for producer profitability.

Volatility Measures: Implied volatility in Class III options has spiked to 28%, up from 18% just a week ago. When options traders start pricing in more volatility, it usually means more big moves are coming.

Supply Chain and Logistics: The Hidden Pressures

Here’s something that doesn’t always make the headlines but affects your bottom line… transportation and logistics costs are creating additional headwinds.

Trucking Rates: Diesel fuel costs have crept up 8¢/gallon over the past month, and trucking companies are starting to implement fuel surcharges again. For milk haulers, this translates to tighter margins and potential route consolidations.

Cold Storage Capacity: Several regional cold storage facilities are reporting higher-than-normal inventory levels. When storage costs start climbing, it puts additional pressure on processors to move product at lower prices.

Port Congestion: West Coast ports are experiencing congestion issues that are impacting powder exports to Asia. It’s not yet at crisis level, but any delays in export shipments can back up domestic inventory.

Rail Transportation: BNSF has been experiencing some weather-related delays in the Upper Midwest, affecting grain movement and potentially impacting feed delivery costs in some areas.

What Smart Producers Are Doing Right Now

Risk Management Moves: The producers I talk to who sleep well at night are the ones who’ve got 40-60% of their Q4 and Q1 2026 production protected through DRP, LGM, or forward contracts. If you’re entirely naked for price risk right now, you’re essentially gambling with your operation’s survival.

Feed Procurement: Several forward-thinking operations have been booking their remaining 2025 corn and soybean meal needs over the past few days. When feed costs are moving against you, locking in what you can control makes sense.

Cash Flow Planning: This is where the rubber meets the road – run your numbers with $16.50 Class III and see what that does to your operation. If you can’t survive at those levels for 60-90 days, you need to act now, not wait and hope.

Herd Management: Some producers are accelerating culling decisions, particularly on older cows that might not make it through another lactation productively. In tight margin environments, every cow needs to earn her keep.

Capital Expenditure Reviews: That new tractor or facility upgrade you were planning? This might be a good time to reassess whether it’s truly necessary or if it can wait until margins improve.

Regional Opportunities and Challenges

California: Almond harvest is creating some interesting opportunities for almond hull feeding, though prices are elevated. The state’s milk production typically starts climbing in September as temperatures moderate, which could pressure local basis differentials.

Northeast: Fluid milk demand remains relatively stable, providing some protection from cheese market volatility. However, higher feed costs from transportation issues are squeezing margins just as much as in cheese-focused regions.

Southwest: Rapid dairy expansion in this region continues, but new operations coming online during this price environment are going to face immediate pressure. Some planned expansions may get delayed.

Southeast: The region’s focus on fluid milk and proximity to growing population centers provides some insulation, but feed cost pressures from transportation and weather issues are significant.

Looking Ahead: What to Watch For

Key Reports Coming:

• Next week’s Cold Storage report will be critical for understanding inventory levels
• USDA’s October WASDE report could provide updated demand forecasts
• Weekly export sales data will show if our competitiveness issues are translating into lost business

Seasonal Factors:

• Milk production typically peaks in October before declining into winter
• Holiday season demand usually picks up in November, but retail buying patterns have been shifting
• Weather forecasts suggest a potentially harsh winter, which could affect feed costs and milk production

Global Developments:

• New Zealand’s spring production ramp-up
• European economic indicators affecting demand
• Chinese import patterns and policy changes
• Mexican peso strength is affecting our export competitiveness

Technical Levels to Monitor:

• Class III support at $16.75 and $16.25
• Cheese block support at $1.65
• Butter’s ability to hold above $2.00

Bottom Line: This Is More Than Just a Bad Day

Today’s market action represents a fundamental shift in sentiment that goes beyond normal volatility. The combination of weakening demand, rising feed costs, and increasing global competition creates a challenging environment that requires immediate attention from producers.

The good news? We’ve been through cycles like this before, and the dairy industry has always adapted and emerged stronger. The operations that survive and thrive are the ones that face reality head-on, manage their risks proactively, and make the tough decisions before they’re forced to.

Action Items for Tonight:

1. Calculate your true cost of production – be honest about it
2. Review your risk management position and identify gaps
3. Run cash flow scenarios with lower milk prices
4. Consider your feed procurement strategy
5. Have that conversation with your lender or advisor

The market is sending clear signals about where we’re headed in the near term. The question isn’t whether this downturn will impact your operation – it’s how well you’ve prepared for it and how quickly you can adapt to the new reality.

This isn’t the time for wishful thinking or hoping prices will magically recover. It’s time for clear-headed decision-making based on facts, not emotions. The producers who recognize this shift and act accordingly will be the ones positioned to capitalize when conditions eventually improve.

Look, I’ve been covering these markets for years, and days like today separate the survivors from the casualties. The operations that face this head-on and adjust their strategy will come out stronger. The ones who keep hoping prices magically recover… well, we’ve seen how that story ends.

Stay safe out there, and don’t hesitate to reach out if you need help navigating these choppy waters. We’re all in this together. What’s your play here? Drop me a line – let’s figure out how to navigate these choppy waters together.

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

Learn More:

• Dairy Margin Management: Navigating Volatility with Confidence – Today’s report highlights the what; this article explains the how. It provides tactical strategies for using risk management tools like DRP to protect your margins, turning market chaos into a manageable part of your business plan.
• The Financial Metrics That Actually Matter on Your Dairy – Go beyond the day’s market price and learn to measure the true financial health of your operation. This piece reveals the key performance indicators that successful producers use to make strategic decisions, increase efficiency, and build long-term resilience.
• Genomics: The Undervalued Key to Unlocking Your Herd’s Full Potential – To win in a tight-margin environment, you need an efficient herd. This article demonstrates how leveraging genomic data helps build a more profitable and resilient herd, fundamentally lowering your cost of production and insulating your business from price downturns.

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