Beef-on-dairy calf prices cool

The “Mielke” Market Weekly

The Federal Reserve, to the president’s chagrin, elected to hold interest rates steady for the time being, though there was some dissension among the ranks concerned over rising inflation.

Meanwhile, U.S. butter stocks headed lower in June and remained below those a year ago, as good domestic demand and exports kept it and a lot of cheese out of the cooler. The U.S. Department of Agriculture’s latest cold storage report showed June 30 stocks at 332.1 million pounds, down 3.2 million or 1.0% from May and down 23.4 million pounds or 6.6% below June 2025. There was no revision in the May total.

American type cheese stocks jumped to 822.8 million pounds, up 9.7 million or 1.2% from the May level, which was revised down 3.8 million pounds. American stocks were down 14.1 million pounds or 1.7% from a year ago.

The “other” cheese inventory totaled 586.2 million pounds, up 7.3 million pounds or 1.3% from May and up 1.2 million or 0.2% from a year ago. The May total was revised down 2.3 million pounds.

Cheese stocks totaled 1.433 billion pounds, up 16.2 million or 1.1% from May but down 11.8 million or 0.8% from those a year ago. The May data was revised down 6.2 million pounds from last month’s report.

StoneX called the report bearish relative to forecasts: “We’d be hard pressed to say we expect any market weakness from current levels based on these numbers, especially in light of the current weather market the U.S. dairy industry seems to be flirting with.”

Cash block cheddar fell to $1.5325 per pound Thursday but rallied Friday to close the week and the month of July at $1.5725, 3.50 cents lower on the week and up 14.25 cents on the month but 13.25 cents below a year ago. The barrels closed Friday at $1.5475, 8.25 cents lower on the week and 7.25 cents higher on the month but 16.25 cents below a year ago. Sales totaled 43 loads of block on the week and 133 for the month of July, down from 181 in June. There was one barrel sale on the week and 13 for the month, up from nine in June.

Milk output rebounded slightly in the Central region, according to Dairy Market News, as cooler temperatures contributed to increased cow comfort. However, contacts say spot milk offers remain limited as cheesemakers are primarily using the additional milk to run busy schedules. Spot milk prices at mid-week ranged from $1-over to $5-over class. Cheese production is steady to stronger, as plants with downtime in recent weeks were back to full schedules this week.

Demand for cheese is steady. Contacts report strong interest for Mozzarella, and inventories are tighter, while cheddar remains available.

Milk volumes are seasonally low in the West but higher than previous weeks, due to lower temperatures. Cheesemakers are keeping production busy as demand for mozzarella and cheddar is on the rise. Retail cheese demand is steady to strong, said DMN. Food service demand is light. Bulk cheese interest is increasing as demand from Mexico is increasing, and bulk sales are better now than this time last year. Cheese inventories are balanced with production.

Cash butter fell to $1.38 per pound Tuesday, the lowest Chicago Mercantile Exchange price since Jan. 16, but it finished Friday at $1.5150, 0.75 cents higher on the week, 16.50 cents below its July 1 print and 93 cents below a year ago. Sales totaled 113 cars for the week and 316 for all of July, down from 390 in June. Wednesday saw 78 loads trade hands, the second highest volume in a single day since Nov. 21, 2003, at 107.

Abundant butter supplies resulting from strong milk production and high butterfat levels are pressuring prices, keeping them competitive on the global market. Thankfully, exports plus consumer demand are keeping inventories in check. The 2027 CME butter price peaked at $2.1375 per pound Mar. 3. It seems like a lifetime since butter was at $3 per pound, September 18, 2024, to be exact.

While mild weather in the Central region has led to a slight uptick in milk output, component levels remain down from early July. Cream production is steady, and contacts say spot offers are somewhat limited. Class II processors continue to claim most of the cream. Churns are primarily running on contracted cream, though some butter makers were purchasing spot product to maintain production. Demand for butter is steady from retail and food service, and export demand remains strong, according to DMN.

Improved milk output in the West was providing plenty of cream for butter manufacturing. Cream multiples are rising in the region, and most spot volumes are going to Class II and III facilities. Churns are operating at seasonally busy schedules, and scheduling downtime is difficult due to the abundance of milk and cream. Butter is readily available for export, and buyers are taking advantage of it.

As the National Milk Producers Federation points out, “Thanks to the Whole Milk for Healthy Kids Act and demand from parents across the country, the most popular variety of milk in the U.S. is back on lunch trays, benefiting the next generation of milk drinkers …The return of whole and 2% varieties also will absorb a lot of U.S. butterfat, a boon for producers who have struggled with a supply imbalance. A reasonable estimate of how much whole milk will be consumed by American schoolkids shows additional demand that would be equivalent to nearly 24 million pounds of milkfat; for perspective, that’s enough to make almost 120 million sticks of butter, in additional market need. That boosts dairy demand and improves prices for farmers.”

Grade A nonfat dry milk closed Friday at $1.56 per pound, up 15.75 cents on the week, 2.50 cents above its July 1 price and 27.25 cents above a year ago. There were 70 sales on the week and 272 for July, up from 178 in June.

Dry whey fell to 65.50 cents per pound Tuesday, the lowest since Mar. 19, but then reversed direction and ended the week and month at 69.25 cents per pound, 1.25 cents higher on the week, 0.75 cents above the July 1 spot and 14.25 cents above a year ago. Sales totaled 10 for the week, the most since late November 2025, and 17 for all of July, up from 15 in June.

Checking the futures, the July Class III settled Thursday at $15.64 per hundredweight; August, $16.66; September, $16.94; October, $17.16; and November, $17.33, with the peak in December at $17.41.

The crop progress report shows 78% of U.S. corn silking, as of the week ending July 26, up from 59% the previous week, 5% ahead of a year ago and 4% ahead of the 5-year average. Twenty-five percent was in the dough stage, up from 13% the previous week, 1% ahead of a year ago and 3% ahead of the average. Sixty-three percent was rated good to excellent, down 4% from the previous week and 10% behind a year ago.

The report also shows 80% of the soybeans were blooming, up from 66% the previous week, 6% ahead of a year ago and 6% ahead of the 5-year average. Forty-seven percent were setting pods, up from 32% the previous week, 8% ahead of a year ago and 8% above the 5-year average. Sixty-three percent were rated good to excellent, down 3% from the previous week and 7% behind a year ago.

The USDA’s latest slaughter data reported 48,400 dairy cows culled the week ending July 18, which is 2,700 or 5.3% less than a year ago. Total to date, 1,496,200 head had been culled in the U.S., up 67,600 head or 4.7% from a year ago.

USDA’s semi-annual cattle inventory showed U.S. dairy cows up 200,000 head July 1 from a year ago, with 100,000 more heifers. The Daily Dairy Report’s Sarina Sharp said, “The increase in heifers was somewhat expected, but (it) still marks an important inflection point after years of declines in heifer supplies.”

It’s certainly not news that U.S. beef prices are high, much of it due to beef cow numbers being the lowest since 1951, as western droughts, high feed and operational costs, shrinking grazing land and aging cattlemen have taken a toll. Adding to the short supply was the cessation of imports from Mexico due to the New World screwworm outbreak. The agriculture department is attempting to fix that, and it announced a phased reopening of southern cattle ports, contingent on Mexico’s adherence to the Joint Action Plan.

Beginning Aug. 24, 2026, USDA says it will open the Douglas, Arizona, port of entry to cattle trade and initiate subsequent openings at Santa Teresa, New Mexico, and Columbus, New Mexico. Every animal entering the U.S. through these ports will undergo a full USDA inspection to ensure it is free of any signs of NWS.

“Protecting the U.S. from NWS and pushing this pest out of Mexico and back to the Darien Gap is a top priority at USDA and has the full attention of the Trump administration,” said Agriculture Secretary Brooke Rollins. “The closure of the southern ports of entry the last year has been a tough but necessary action to control the spread of NWS in Mexico and protect American livestock. Thanks to the work across the federal government as well as state, local, and industry partners, it is now safe to reopen.”

Rollins visited the Douglas port of entry this week and announced an allocation of $25 million toward the opening of a new sterile fly dispersal facility in Arizona to strengthen the nation’s long-term response to NWS.

Strong beef prices have helped dairy farm income; however, that has taken a hit. The July 30 Daily Dairy Report says, “Beef-on-dairy crossbred calf values peaked in June, when producers could sell newborn calves for $1,800 to nearly $2,000 per head, depending on the region. Today, calves are worth about $400 less, and futures prices for feeder cattle suggest values will continue to drop.”

This week’s Global Dairy Trade Pulse saw just under 7 million pounds of product sold, up from 6.8 million July 14. The price on anhydrous milkfat moved higher while butter was down. Skim milk and whole milk powder saw modest gains.

The Daily Dairy Report said, “New Zealand milk production has gotten off to a roaring start. Milk collections in June, the first month of the 2026-27 season, were up a strong 4.5% compared to year-earlier volumes, according to the Dairy Companies Association of New Zealand. The increase in milk solids was even more dramatic, up 5.6%.”

The DDR said “Uncertainty continues to cloud the forecast. With El Niño conditions expected to intensify in the peak of New Zealand’s production season, anticipation of adverse weather has heightened concerns over whether June’s momentum can be sustained. Strong El Niño years have typically resulted in drought in the eastern and inland areas of both islands, forcing heavier reliance on stored feed or costly purchases.”

The International Dairy Foods Association’s annual dairy forum is scheduled for Jan. 24-27, 2027, in Orlando, Florida. Registration is now open. More than 1,200 leaders from across the dairy supply chain are expected, including executives from dairy processors, cooperatives, retailers and suppliers.

Log on to the IDFA’s website for complete details.