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

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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