Dairy prices remain under pressure

The “Mielke” Market Weekly

The war in Iran may have come to an end, as a memorandum of understanding was digitally signed by Iran’s president and President Trump at this week’s G7 Summit. Meanwhile, the Federal Reserve, now under its new chairman, Kevin Warsh, decided not to make any changes in interest rates.

The U.S. Department of Agriculture announced the July Federal Order Class I base milk price at $21.33 per hundredweight, down 85 cents from June but $2.51 above a year ago. It equates to $1.83 per gallon, up from $1.62 a year ago. The 7-month class I average now stands at $18.41, down from $19.53 at this time a year ago, and it compares to $19.16 in 2024.

Fluid milk sales inched higher in April after gaining 2.3% in March. USDA’s latest data reported packaged sales at 3.5 billion pounds, up 0.3% from April 2025. Conventional product sales totaled 3.3 billion pounds, up 0.6% from a year ago. Organic sales, at 241 million, were down 4.0% from a year ago and represented 6.9% of total milk sales in the month.

Whole milk sales totaled 1.3 billion pounds, up 2.6% from a year ago and up 3% for the 4-month period. Whole milk represented a typical 36.5% of total sales for the month. Skim milk sales, at 136 million pounds, were down 9.3% from a year ago and down 8.3% year to date.

Packaged fluid sales in the four months totaled 14.3 billion pounds, down 0.1% from 2025. Conventional product sales totaled 13.3 billion pounds, virtually unchanged from a year ago. Organic products, at 1.0 billion pounds, were down 0.9% and represented 7.1% of total milk sales for the year so far.

The figures represent consumption in federal market orders, which account for about 92% of total fluid sales in the U.S. About 7.5% of U.S. fluid sales are consumed in schools.

Chicago Mercantile Exchange block cheddar fell to $1.45 per pound Thursday, the lowest price since Feb. 17, down 3.75 cents on the Juneteenth-holiday shortened week and 21.50 cents below a year ago, as traders anticipated Monday’s May milk production report. The barrels were bid up 4 cents Thursday, hitting $1.46, 19.75 cents below a year ago. Trading totaled a whopping 63 cars of block on the week, the highest since the week of June 23, 2025, and no barrel.

Central region milk production is strong, reports Dairy Market News. Some cheesemakers said they were getting fewer offers for discounted Class III milk. Prices at mid-week ranged from $2 under to 50 cents over class. Cheesemakers continue to run busy schedules, although some are producing more barrels.

Domestic demand for cheese was unchanged in both retail and food service markets. Export interest is strong, and contacts say they are hearing more from purchasers in Mexico looking for additional loads than they were a year ago.

Cheese manufacturers in the West report milk and cream production continues to meet their needs. Cheese production was steady. Some manufacturers report production paces and demand are in good parity, making their uncommitted inventories tight. Demand from domestic and international buyers is steady.

Butter fell to $1.5550 per pound Wednesday, the lowest CME price since May 22. It stayed there Thursday, down 11.25 cents on the week and 94.50 cents below a year ago. There were 51 sales on the week, down from 161 the week before.

Higher temperatures in the Midwest are negatively impacting component levels and contributing to lighter cream production, said DMN. Spot cream is available, but strong demand from Class II and III processors was leaving little available for churns. Some were paying higher cream multiples this week, while others were securing volumes from other regions. Butter makers continue to run busy production. Retail butter demand was unchanged, and some contacts noted an uptick in food service sales. Export interest has softened compared to the early months of 2026, but demand is meeting expectations.

Western milk output continues to readily fill cream processor needs. Some Class II manufacturing downtime freed up spot cream in parts of the region. Demand from butter makers was not heavy. Churns were very active with contractual cream intakes and running well. Inventories are generally stable or building. Domestic demand is steady. International demand was mixed, said DMN.

Grade A nonfat dry milk continued to plunge, dipping to $1.6350 per pound Wednesday, the lowest since Feb. 19, but it closed Thursday at $1.64, 14.50 cents lower on the week and 38 cents above a year ago. There were 26 sales.

Dry whey finished Thursday at 68 cents per pound, unchanged on the week but 11 cents above a year ago, with one sale posted for the week.

Writing in the June 12 Milk Producers Council newsletter, the Daily Dairy Report’s Sarina Sharp said, “European whey prices have climbed straight upward since April, making U.S. whey look like a bargain. U.S. dry whey exports posted their second-largest monthly total on record in April, up 72% year over year. Strong demand from China has boosted whey exports all year, but going forward, the U.S. is likely to gain market share around the globe. While U.S. exporters typically compete with their European peers, Europe is suddenly the destination of choice for U.S. whey product shipments.”

The latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC said, “Dairy margins were relatively flat over the first half of June, as lower milk prices and feed costs were largely offsetting. With expanding milk production, there has been a significant boost in dairy product output, although strong exports are helping to limit a surge in inventories.”

“USDA’s dairy products report showed April butter production was up 4.5% from last year, with cottage cheese output up 16% and full-fat ice cream up 5.5% from 2025. Total cheese output was 1.7% higher than April 2025, with cheddar production down 3.5% from last year but mozzarella production up 2.1%. April milk powder output was the highest since 2023 at 216.9 million pounds, with combined nonfat dry milk and skim milk powder production up 9.4% from last year. Total powder inventories increased 25 million pounds from March to 253.4 million pounds, though that was still down 6.9% from April 2025. While milk powder inventories were relatively tight in February and March, which helped contribute to the strong price surge, stocks were no longer tight by April due to increased production and a slowdown in exports,” the MW stated.

“USDA also reported strong dairy product exports in April, with volumes increasing across nearly every product and growth to several destinations. Cheese exports hit a new monthly record of 141.5 million pounds, up 29.9% from last year, with shipments to Mexico up 28.2% and South Korea up 69%. Butter exports were 103.9% higher than April 2025 to 21.4 million pounds, with strong shipments to Saudi Arabia, South Korea, Australia and Mexico. U.S. nonfat and skim milk powder exports were also up 9.5% from 2025, to 124.3 million pounds,”.

Meanwhile, the agriculture department’s monthly livestock, dairy and poultry outlook, issued June 17, mirrored milk price and production projections in the June 11 World Agricultural Supply and Demand Estimates report.

“The dairy herd is projected to continue to expand in 2027,” the outlook stated. “Both dairy margins over feed costs and demand for beef-on-dairy calves are expected to stay robust throughout the second half of 2026, which in turn has a lagged impact on the size of the dairy herd in 2027. Consequently, the forecast for the average size of the dairy herd in 2027 is revised upward by 30,000 head to 9.650 million. The yield per cow forecast is also revised upward by 25 pounds to 24,560 pounds. Milk production for 2027 is projected at 237.0 billion pounds, 1.0 billion pounds higher than last month’s forecast.”

The USDA’s latest crop progress report showed 94% of the U.S. corn crop was emerged as of the week ending June 14, up from 86% the previous week, 1% ahead of a year ago and 1% ahead of the 5-year average. Sixty-eight percent was rated good to excellent, up 1% from the previous week but 4% behind a year ago.

Soybean plantings were 95% complete up from 92% the previous week, 2% ahead of a year ago and 2% ahead of the average. Eighty-eight percent was emerged, up from 79% the previous week, 5% ahead of a year ago and 6% ahead of the average. Sixty-five percent were rated good to excellent and mirrored that of a year ago.

Dairy culling continues to run ahead of a year ago. As of the week ending May 30, 1,163,000 dairy cows had been sent to slaughter, up 56,400 or 5.1% from a year ago. That percentage has ranged from as low as 3.2% to as high as 7.6%.

The June 16 Daily Dairy Report said, “Cattle packers are scaling back operations, attempting to realign slaughter capacity with the shrinking supply, an exceptionally painful process. Despite a justice department investigation alleging the nation’s largest beef packers are colluding to hold down cattle values and drive up beef prices, beef packers are consistently paying more for cattle than they’ve earned through beef sales. They are absorbing hundreds of billions of dollars in red ink, hoping that their competitors will succumb first and shutter a plant or two.”

Rising beef prices prompted a call by the advocacy group Farm Action to release what it called “A rancher-backed policy roadmap to address record-high beef prices by rebuilding domestic cattle production and restoring competition, rather than relying on increased imports.”

“The roadmap argues that today’s high beef prices are rooted in decades of consolidation in meatpacking and retail,” Farm Action charged. “In the 1970s, the top four beef packers controlled about 36% of the market. Today, four companies control roughly 85%, leaving ranchers with fewer buyers, less bargaining power and a smaller share of the consumer beef dollar. That same market power also makes it less likely that increased imports would translate into lower prices at the grocery store.”

“Ahead of the Fourth of July holiday, Americans are paying more than ever for beef. A pound of ground beef costs roughly 70% more than it did six years ago, while steak prices have nearly doubled since 2020. At the same time, the spread of New World screwworm has raised new concerns about cattle movement and supply disruptions,” according to Farm Action.

Confirmed NWS infestations in the U.S. now total 12, said the USDA, with 11 in Texas and one in New Mexico. Agriculture Secretary Brooke Rollins testified before Congress that they are taking all steps necessary to halt the spread; however, many remain skeptical that the current practice of releasing sterilized flies to mate with wild flies will be enough and in time.

The Food and Drug Administration issued an Emergency Use Authorization for generic Nitenpyram Tablets (nitenpyram) for treatment in dogs, puppies, cats and kittens that weigh at least two pounds and are at least four weeks old. This is the first generic animal drug authorized for use against NWS. If identified and treated properly, animals can often recover from NWS infections.

Prices fell again at this week’s Global Dairy Trade. The weighted average dropped 2.8%, following a 0.6% slippage June 2. Volume dropped to 28.5 million pounds, down from 31.7 million June 2. The average metric ton price came in at $3,979 U.S., down from $4,021 June 2.

Skim milk powder posted the biggest loss, down 3.6% after a 3.0% drop June 2. Whole milk powder was down 3.1%, following a 2.2% loss. Cheddar was down 3.4% after posting a 1.8% rise last time, and GDT Mozzarella was down 5.0%, which follows a 4.6% decline. Butter was down 2.4% after rising 1.2% last time, and anhydrous milkfat was down 1.0%, which followed a 5.3% jump. The one product in positive territory was lactose, up 4.2% following a 4.6% gain June 2.

StoneX said the GDT 80% butterfat butter price equates to $2.4412 U.S. per pound, down from $2.5375 June 2, and it compares to CME butter, which closed Thursday at $1. Cheddar equated to $2.0281, down from $2.0963 last time, and it compares to Thursday’s CME block cheddar at $1.45. GDT skim milk powder averaged $1.5275 per pound, down from $1.5682, while whole milk powder averaged $1.6280, down from $1.6809, CME Grade A nonfat dry milk closed Thursday at $2 per pound.

According to StoneX, “North Asia has reduced purchase volume again and remains at very low levels. Southeast Asia declined as well but maintains a greater market share compared to North Asia. The Middle East was able to increase volumes again as conditions in the region appear to be improving.”

On Thursday, in politics, the agriculture department welcomed new guidance from the Department of Homeland Security and Department of Labor clarifying that dairy operations may use the H-2A temporary agricultural worker program when they demonstrate a qualifying temporary or seasonal labor need under existing law.

According to a USDA press release, “The policy memorandum provides additional clarity regarding how U.S. Citizenship and Immigration Services will evaluate H-2A petitions for dairy-related work. Under the guidance, dairy operations will be subject to the same statutory and regulatory standards applied to all H-2A employers, with petitions evaluated on a case-by-case basis based on the employer’s demonstrated temporary or seasonal need.”

The National Milk Producers Federation gave it a thumbs up, stating, “The dairy industry has long sought access to the H-2A program, and this guidance will help open the door for dairies to begin using this program. We applaud secretaries Rollins and Mullin and acting secretary Sonderling for their proactive leadership on this issue and look forward to learning more about these important changes.”

“NMPF pledges to work with both Congress and the administration to secure long-term certainty for the dairy workforce, including solutions to transition to H-2A, which will ensure that dairies across the nation are set up to thrive.”