Milk prices lower again

The “Mielke” Market Weekly

Farm milk prices continue to fall. The U.S. Department of Agriculture announced the final class prices of 2025 this week. The December Federal Order Class III price is $15.86 per hundredweight, down $1.32 from November and $2.76 below December 2024. It is the lowest Class III price since April 2024 and put the 2025 average at $18.01, down from $18.89 in 2024, and it compares to $17.02 in 2023.

Late Friday morning, Class III futures had the January 2026 contract at $15.17; February, $15.40; March, $15.60; and April, $15.99, with a peak at $17.79 in October.

The December Class IV price is $13.64, down 25 cents from November and $7.10 below a year ago. The 2025 average came in at $17.38, down from $20.75 in 2024 and $19.12 in 2023.

A lower all-milk price and higher feed prices served to lower the November feed price ratio. The USDA’s latest ag prices report showed November at $2.38, down from $2.40 in October, and it compares to $2.89 in November 2024. 

The all-milk price dropped below $20.00 per cwt. for the first time since January 2024, and it is the lowest level of 2025, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Missouri. It averaged $19.70 per cwt. with a 4.46% butterfat test, down 30 cents from October, which had a 4.35% test, and it compares to $24.20 in November 2024, with a 4.39% test.

The national corn price averaged $3.98 per bushel, up a nickel from October but 9 cents below November 2024.

Soybeans averaged $10.50 per bushel, up 79 cents from October and 66 cents above a year ago.

Alfalfa hay averaged $159 per ton, down $9 from October and $5 below a year ago.

The November average cull price for beef and dairy combined fell to $159 per cwt., down $3 from October, after losing $2 the month before. It is $35 above November 2024 and $87.40 above the 2011 base average.

Quarterly milk cow replacements averaged $3,110 per head in October, up $100.00 from July and $510 above October 2024. Cows averaged $3,000 per head in California, up $100 from July and $550 above a year ago. Wisconsin’s average, at $3,360 per head, was up $70 from July and $510 above October 2024.

“Milk production margins decreased for the third month in a row and remained at historically high levels with a 26-cent per cwt. loss from October,” Brooks said. “Income over feed costs in November was above the $8 per cwt. level needed for steady to higher milk production for the 25th month in a row. Input prices were mostly higher in November, with two of the three input commodities inside of the top 10 for November all-time. Feed costs were the 10th highest ever for the month of November and decreased 4 cents per cwt. from October, while reaching a level not seen since November 2020’s $8.19.”

“Dairy producer profitability for 2024 in the form of milk income over feed costs was $13.40 per cwt.,” Brooks said. “Profitability was $5.40 above 2023 and $3.74 higher than the 2019-23 average. In 2024, the increase in milk income over feed costs was a result of the milk price increasing while feed prices dropped. Income over feed cost in 2024 was above the level needed to maintain or grow milk production.”

Milk income over feed costs for 2025 (using Dec. 31 Chicago Mercantile Exchange settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) is expected to be $12.36 per cwt., a gain of 3 cents per cwt. versus the previous estimate. Income over feed in 2025 would be above the level needed to maintain or grow milk production and down $1.04 from 2024, Brooks said.

Milk income over feed costs for 2026 is expected to be $9.64 per cwt., a loss of $2.72 per cwt. versus 2025, according to Brooks. “Income over feed costs in 2026 would be above the level needed to maintain or grow milk production and up 8 cents per cwt. versus the previous estimate,” Brooks said.

“Dairy margins were mixed to finish off the back half of December and close out 2025 as profitability weakened slightly in nearby production periods while strengthening further out on the forward curve,” said the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“USDA’s milk production report showed further expansion during November with October’s output adjusted downward modestly,” the MW said. “U.S. milk production in November totaled 18.79 billion pounds, up a hefty 4.5% from last year, with October’s production adjusted to reflect a 3.6% annual increase, which was down 0.1% from the initial forecast.”

“The dairy cow herd in November was estimated at 9.57 million head, which is up 211,000 from last year, although USDA indicated that producers reduced the herd size 11,000 head during September and October before holding it steady in November. Productivity rose to 1,963 pounds per cow during November, up 2.2% from 2024 with a huge increase in California, which was up 10.4% from last year’s HPAI-ravaged yield. Other notable increases were seen in Idaho, Texas, New York and Wisconsin, which saw yields increase 5.6%, 4.9%, 3.2% and 1.8%, respectively, from last year.”

“USDA also released the first cold storage report since September, which included a revision from August along with new data for September through November. Butter stocks declined 1.5% from last year to 210.5 million pounds despite record butterfat supplies as a 4-year low in prices encouraged strong domestic and export demand. Cheese inventories declined sharply in September, dropped more modestly in October and dropped significantly in November, with end of month stocks pegged at 1.36 billion pounds, up 1.8% from 2024,” the MW said.

CME block cheddar cheese climbed to $1.3850 per pound Tuesday, then gave back a penny Wednesday and closed the first Friday of 2026 at $1.39, up 5.50 cents on the shortened week, highest since Dec. 17 but 53 cents below a year ago. The barrels held at $1.40 per pound, where they’ve been since Dec. 23, 43 cents below a year ago. CME sales totaled 37 lots of block on the week and no barrel.

Central region cheesemakers told Dairy Market News that milk output was strong and spot volumes remained plentiful amid downtime during the New Year holiday week. Class I demand was light in recent weeks, as educational institutions are on holiday break, but some contacts said spot demand from bottlers was increasing with schools returning. Spot loads of Class III milk remained available, and plants reported spot prices as low as $9.50-under class this week. Cheesemakers had some scheduled downtime but were otherwise running busy schedules to work through available milk supplies. Contacts reported strong demand for cheese barrels. Export cheese demand is steady to stronger. Barrel inventories are somewhat snug, while the blocks remain available.

Cheese production was steady this week in the West despite the holiday. Spot purchases of milk were not common despite the availability. Contacts expected less milk to be available the following week as bottlers resume normal operations after the holiday. Retail demand was steady to lighter this week, with many buyers avoiding excess inventory. Export demand is providing an outlet for many producers, said DMN, and cheese inventories are “balanced.”

Cash butter climbed to $1.4050 per pound Tuesday, the highest since Dec. 18, but it closed Friday at $1.3750, 2.75 cents lower on the week and $1.1775 below a year ago, with 23 sales reported for the week.

Butter makers ran busy schedules this week, but some were not as active this week due to scheduled downtime for the New Year holiday. Domestic butter demand is light, but stakeholders say they anticipate retail interest to pick up as grocers look to restock inventories in January. Export butter demand is strengthening as international purchasers are ordering additional loads of 82% butterfat butter. Spot inventories are tight, while 80% butterfat butter is available.

Western contacts reported that downtime at some Class II and III plants was leaving more cream available for churning, said DMN.

Butter makers say demand for cream is mixed, as some processors had downtime planned for this week’s holiday. Butter production was up from last week, and plant managers say they plan to run busier schedules in the New Year. Retail butter demand is strong as some grocers are looking to replenish inventories after the holidays in December. Contacts said export demand re-mains strong. Spot purchasers suggest butter inventories range from snug to tight.

Grade A nonfat dry milk closed Friday at $1.1750 per pound, down a half-cent on the week and 19.25 cents below a year ago, with three sales put on the board this week.

Dry whey inched up to 73.50 cents per pound New Year’s Eve, the high-est since Dec. 16, but it closed Friday at 72.50 cents per pound, down a half-cent on the week and 2.50 cents below a year ago. There were three loads that exchanged hands on the short week.

In politics, Agriculture Secretary Brooke Rollins this week announced a number of coordinated actions to “Continue to emphasize American agricultural research and innovation by ensuring ideas stay in America or among our allies, not with hostile nations, and that we are putting American farmers and ranchers first in every USDA program, period.”

“As committed to under USDA’s National Farm Security Action Plan,” a USDA press release stated, “These historic actions strengthen transparency around foreign ownership of U.S. agricultural land and ensure federal programs and purchasing preferences do not support supply chains controlled by foreign adversaries.”

“Strengthening national security starts with knowing who owns our farmland and where federal dollars are flowing,” Rollins said. “These actions close long-standing gaps in oversight and enforcement by improving transparency around foreign land ownership and ensuring USDA programs support American farmers and manufacturers, while prioritizing domestic supply chains, not foreign adversaries.”

Tuesday’s Global Dairy Trade Pulse auction saw 5.8 million pounds of product sold, down from 6.1 million Dec. 23. The prices on both skim milk and whole milk powder were up slightly.

In other trade news, National Milk’s executive vice president of trade policy and global affairs, Shawna Morris, wrote in the Dec. 22 Hoard’s Dairyman, “The first mandatory review of the U.S.-Mexico-Canada Agreement will take place in 2026, bringing all three countries together to evaluate the agreement’s first five years and consider changes. For U.S. dairy producers, this review is a critical opportunity to finally secure the gains promised under USMCA.

“When USMCA was implemented in 2020, it was expected to deliver a limited yet important expansion into the Canadian market for U.S. exporters. The deal also established rules to limit Canada’s offloading of artificially low-priced dairy ingredients into global markets and to safeguard the ability of U.S. producers to use common names like ‘Parmesan’ in Mexico. Five years in, there are still shortfalls in each of these key areas,” Morris said.

The article can also be read on the National Milk Producer Federation’s website and is one of the key issues we need to watch closely. Speaking of NMPF, I would like to wish long-time friend and informant Chris Galen well in his retirement following nearly three decades of service and devotion to the dairy industry. It’s been a pleasure knowing Chris, and I’m grateful for his in-sights and understanding all these years.

As we step into 2026, I want to share some insight provided by StoneX Director of Dairy Market Insight Nate Donnay on how rapidly expanding milk production and evolving cost pressures shape risk for producers and traders in 2026.

Milk production rose at an estimated 5.5% pace in September and October, a rate that Donnay notes is running about three times the normal pace. This surge reflects strong farm profitability in preceding years and reduced disruption from earlier disease challenges, particularly in Europe and the U.S. The acceleration has created broad price weakness because output increases outpaced the capacity of processors and buyers to absorb new supply. Donnay emphasizes that supply more than demand can be blamed most of the price weakness as production growth overwhelmed market balance.

“As farmgate milk prices fall and margins compress, producers may begin dialing back output, creating the first meaningful bullish risk for prices later in the year,” Donnay said. He explained that the risk is that prices are weak in the first half of the year, and then we get a rally in the second half as production finally slows.

“The timing of that slowdown will determine how quickly markets can transition out of oversupply,” Donnay said. “Until then, traders must navigate a landscape where supply momentum exerts more influence on price behavior than marginal shifts in demand.”