Class III prices continue to climb

The “Mielke” Market Weekly

Farm milk prices continue to rebound slowly. The May Federal Order Class III benchmark was announced by the U.S. Department of Agriculture at $16.92 per hundredweight, up 10 cents from April but $1.65 below May 2025. It is the highest Class III price since November 2025 and put the 5-month average at $15.89, down from $19.04 at this time a year ago, and it compares to $16.33 in 2024.

Late Friday morning Class III futures portended a June price at $16.12; July, $16.76; August, $17.22; and September, $17.76; with a peak at $18.45 in November.

The May Class IV price is $22.32, up $2.10 from April, $4.19 above May 2025 and the highest Class IV price since November 2022. Its 5-month average stands at $18.26, down from $18.98 a year ago, and it compares to $19.99 in 2024.

You’ll recall that April milk production was up 2.7% from a year ago. The USDA’s dairy products report shows where it ended up. Cheese output totaled 1.267 billion pounds, up 0.3% from March and 1.7% above April 2025. Output for the 4-month period totaled 4.97 billion pounds, up 2.8% from 2025. March output was revised up 4 million pounds.

Wisconsin produced 305.2 million pounds of the total, down 2.5% from March and 0.1% below April 2025. California produced 202.3 million pounds, up 8.9% from March but 7.7% less than a year ago. Idaho cheese amounted to 91.3 million, up 6.7% from March but 0.1% less than a year ago.

Mozzarella production totaled 434.9 million pounds, up 2.1% from a year ago. Year to date, 1.7 billion pounds had been produced, up 2.6% from 2025.

American cheese, at 490.0 million pounds, was off 0.4% from the March total, which was revised up 3.6 million pounds and was down 1.2% from a year ago. YTD 1.9 billion pounds of American had been produced, up 0.8%.

Italian-style cheeses totaled 556.3 million pounds, up 2.5% from March and 4.2% above a year ago, with YTD hitting 2.2 billion pounds, up 4.9%.

Cheddar output, the cheese traded at the Chicago Mercantile Exchange, dropped to 329.8 million pounds, down 10.4 million or 3.1% from the March level, which was revised up 1.6 million pounds but was down 12.1 million pounds or 3.5% from a year ago.

Butter production slipped to 224.4 million pounds, down 4.1 million pounds or 1.8% from March’s level, which was revised 3 million pounds lower. Output was up 9.8 million pounds or 4.5% from a year ago. YTD, 916.1 million pounds had been churned, up 6.1% from a year ago.

Yogurt production totaled 453.8 million pounds, up 0.5% from a year ago, with YTD output at 1.8 billion pounds, up 5.1%. Hard ice cream, at 67 million pounds, was up 5.5% from 2025, with YTD output hitting 244.1 million pounds, up 2.8%.

Dry whey output slipped to 76.9 million pounds, down 1.8 million or 2.3% from March, but it was up 5.6 million pounds or 7.8% from a year ago. YTD whey hit 300.5 million pounds, up 5.5%. Whey stocks fell to 61.6 million pounds, down 2.4 million or 3.8% from March but up 2.4 million pounds or 4.0% from a year ago.

Higher prices drove nonfat dry milk output to 181.4 million pounds, up 5.5 million pounds or 3.1% from March, and up 18.6 million pounds or 11.4% from a year ago. YTD hit 660.6 million pounds, up 6.9%. Stocks grew to 253.4 million pounds, up 24.7 million or 10.8% from March, but they were down 18.7 million or 6.9% from a year ago.

Skim milk powder production totaled 35.5 million pounds, down 1.9 million pounds or 5.1% from March but virtually even with a year ago. YTD skim milk powder stands at 147.7 million pounds, up 9.7% from a year ago.

CME block Cheddar closed the first Friday of June Dairy Month at $1.4725 per pound, down a quarter-cent on the week, the sixth consecutive week of decline and 38.50 cents below a year ago. The barrels held all week at $1.44, 42 cents below a year ago. Trading consisted of 39 loads of block on the week and three of barrel.

Milk production is steady in the Central region, according to Dairy Market News, and up year over year. Class III spot trades were lighter this week, and prices ranged from $1-under to $2-over class at mid-week. Cheese output was strong, and plants were running full schedules, although some reported downtime for maintenance. Domestic cheese demand was unchanged. Export demand was strong but lighter than earlier in the year.

Milk production is ticking down from peak spring output in the West, but cheese manufacturers reported more than sufficient volumes. Cheese production and domestic demand was steady. Some sellers indicated that sales have shifted from food service to retail, but domestic demand has not changed overall.

Demand from international buyers is mixed, according to DMN.

CME butter hit $1.71 per pound Tuesday, the highest since April 21, but it closed Friday at $1.6925, 2.50 cents higher on the week but 86.25 cents below a year ago. There were 72 sales on the week, down from 104 the previous week.

Central region cream production remains strong, but strong demand from Class II and Class III processors has kept inventories snug. Some butter makers said they were exclusively using cream from within their network, while others in the Southwest purchased cream at favorable multiples from other regions. Butter makers were running full production. Retail sales are strong, while food service demand remains light. Export interest is strong, says DMN.

Western butter makers reported that milk and cream were meeting needs despite spring peak milk output sliding into the rearview mirror. Butter production was generally stable. Domestic demand was steady. International buying was mixed.

Grade A nonfat dry milk made it to $2.15 per pound Tuesday but closed Friday at $2.0450, 4.50 cents lower on the week but 78.25 cents above a year ago. There were 27 sales on the week.

Dry whey saw its Friday finish at 67 cents per pound, down 3 cents on the week but 9 cents above a year ago. There were seven CME sales on the week.

Another increase in the all-milk price was again tempered by increased feed prices in April; however, the month’s feed price ratio inched a little higher for the third consecutive gain. The USDA’s ag prices report showed April at 2.26, up from 2.25 in March, and it compares to 2.28 in April 2025.

The all-milk price was $20.80 per cwt., with a 4.34% butterfat test, up $1.10 from March’s $19.70 on a 4.39% test and up for the third month in a row, topping $20 for the first time since September 2025. It compares to $21.10 a year ago, however, which had a 4.32% test.

The national corn price averaged $4.31 per bushel, up 4 cents from March, but it was still 31 cents below April 2025. Soybeans averaged $11.20 per bushel, up a dime from March and $1 per bushel above a year ago. Alfalfa hay averaged $185 per ton, up $19 from March and $5 above a year ago.

The March cull price for beef and dairy combined averaged $168 per cwt., up $4 from March, $26 above April 2025 and $96.40 above the 2011 base.

Feed costs moved to the highest level since May 2025, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Missouri. Milk production margins increased for the third straight month, gaining 66 cents per cwt., and it was above $11.00 per cwt. for the first time in five months at $11.59.

“Income over feed costs in April was above the $8 per cwt. level needed for steady to higher milk production for the 32nd month in a row,” says Brooks. “Input prices were higher with two of the three input commodities inside of the top 10 for April all-time. Feed costs were the 11th highest ever for the month of April and increased 44 cents per cwt. from March. The April all-milk price was inside the top10 for the month, at the fourth highest ever recorded for the month.”

Milk income over feed costs in 2026 (using May 29 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) is expected to be $11.66 per cwt., says Brooks, a loss of 25 cents per cwt. versus last month’s estimate; “Income over feed costs in 2026 would be above the level needed to maintain or grow milk production, down 78 cents per cwt. from 2025’s level, and 95 cents higher than the 2021-25 average.”

“Milk income over feed costs for 2027 are expected to be $11.73 per cwt., a gain of 7 cents per cwt. versus 2025. Income over feed costs would also be above the level needed to maintain or grow milk production and up $1.02 per cwt. from the 2021-25 average,” Brooks concludes.

Meanwhile, the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC reports, “Dairy margins were relatively flat the second half of May, as lower milk prices and feed costs were largely offsetting.” The MW warned, “Continued growth in both the dairy herd and milk output along with growing stocks of American-style cheese are applying pressure to the market.” It also detailed the April milk production report, which I reported here in the last Dairy Star edition.

“Dairy economists expect ongoing expansion in coming months as well,” says the MW, “given the extra revenue producers are currently enjoying from the contributions of Class 1 and Class 4 milk, as well as record cull cow and crossbred beef calf prices.”

Highlights were given from the April cold storage report, which I also detailed last week, and showed total cheese stocks of 1.42 billion pounds at the end of April, up 12.4 million from March, with American-style cheeses, including Cheddar, accounting for nearly all the increase.

The MW warned, “While total cheese inventories were down 0.9% from 2025, the large increase in American-style cheese stocks during March and April implies that export demand for American Cheddar is weak, which, over time, may bring more deliveries to Chicago and further weaken the CME spot price.” The butter build from March to April was “smaller than normal and down 8.5% from last year,” the MW concluded, “the lowest April stocks since 2022.”

The USDA’s latest crop progress report showed that 93% of U.S. corn is now planted as of the week ending May 31, up 1% from a year ago and 1% ahead of the 5-year average. Seventy-six percent was emerged, up from 60% the previous week and dead even with a year ago but 2% ahead of the average. Sixty-seven percent of the corn was rated good to excellent, 2% behind a year ago at this time.

Soybean plantings were 87% complete, up from 79% the previous week, 4% ahead of a year ago and 7% ahead of the 5-year average. Sixty-five percent was emerged, up from 49% the previous week, 4% ahead of a year ago and 8% ahead of the average. Sixty-six percent was rated good to excellent, 1% behind a year ago.

The USDA’s latest weekly slaughter report showed 45,900 dairy cows were sent to slaughter the week ending May 23, up 400 or 0.9% from a year ago. Year to date, 1,118,500 had been culled, up 54,600 head or 5.1% from a year ago.

New World screwworm has entered the U.S. USDA confirmed detection in a 3-week-old calf in Zavala County, Texas.

The National Milk Producers Federation stated, “The return of NWS to the U.S. decades after its initial eradication is a disappointing milestone, but it’s also one for which dairy producers have been preparing for more than a year in collaboration with USDA and across agriculture. It’s important to remember that this development has no effect on food safety and that measures to combat both the screwworm and its spread are in place and time-tested.”

Powder pulled this week’s Global Dairy Trade, Event Number 405, slightly lower. The weighted average slipped 0.6%, following a 0.6% rise May 19. Volume jumped to 31.7 million pounds, up from 28.6 million May 19. The average metric ton price was $4,021 U.S., down from $4,198 May 19.

The gains were led by anhydrous milkfat, up 5.3%, following a 1.6% drop last time. Butter was up 1.2% after jumping 2.5% last time. Lactose was up 4.6%, following a 0.5% advance and buttermilk powder was up 3.0%. Cheddar was up 4.6% after dropping 1.3% last time, while GDT Mozzarella was down 4.6% after climbing 2.9% May 19. Skim milk powder fell 3.0% after inching 0.2% higher last time, and whole milk powder was down 2.2%, following a 1.2% rise last time.

StoneX says the GDT 80% butterfat butter price equates to $2.5375 U.S. per pound, up from $2.5109 May 19, and it compares to CME butter, which closed Friday at $1.6925. Cheddar equated to $2.0963, up from $2.0684 last time, and it compares to Friday’s CME block Cheddar at $1.4725. GDT skim milk powder averaged $1.5682 per pound, down from $1.6112. Whole milk powder averaged $1.6809, down from $1.7111. CME Grade A nonfat dry milk closed Friday at $2.0450 per pound.

This week, the GDT announced it will establish Singapore as its global headquarters as “part of the next phase of its international development,” according to a GDT press release. “The move reflects GDT’s increasingly global role in supporting participants across international dairy markets, with buyers and sellers operating across interconnected global supply chains.”

Chief Executive Officer Lloyd Cartwright said, “The move reflects strong board and shareholder support for GDT’s long-term growth agenda and its continued development as a trusted and neutral market infrastructure for the global dairy industry.”