Cheese production higher, milk prices lower

The “Mielke” Market Weekly

A large heat dome covered much of the Midwest and Northeast, sending temperatures soaring, as the nation prepared to celebrate 250 years on July 4. The temperatures do not bode well for milk output or components.

Milk prices were chilling, however, as the U.S. Department of Agriculture announced the June Federal Order Class III milk price at $15.98 per hundredweight, down 94 cents from May and $2.84 below June 2025. It is the lowest Class III price since February and puts the 6-month average at $15.90, down from $19.00 a year ago, and it compares to $16.92 in 2024.

Thursday’s Class III futures settlements portended July at $15.55; August, $16.12; September, $16.79; October, $17.23; November, $17.56; and December, $17.53.

The June Class IV price was $20.96, down $1.36 from May but $2.66 above a year ago. The 6-month average sits at $18.71, down from $18.87 a year ago, and it compares to $20.17 in 2024.

You’ll recall May milk production was up 2.3% from a year ago. The USDA’s latest dairy products report shows where it was used. Cheese output hit 1.282 billion pounds, up 1.1% from April and 2.0% above May 2025. Output for the 5-month period totaled 6.3 billion pounds, up 2.7% from 2025.

Mozzarella production totaled 441.5 million pounds, up 6.2% from a year ago. Year to date, 2.1 billion pounds had been produced, up 3.3% from 2025.

American cheese, at 498.9 million pounds, was up 1.5% from April but down 2.6% from a year ago. YTD 2.4 billion pounds had been produced, up 0.1%.

Italian-style cheeses jumped to 559.6 million pounds, up 0.7% from April and up 6.5% from a year ago, pushing YTD output to 2.7 billion pounds, up 5.2%.

Cheddar output climbed to 350.5 million pounds, up 20.4 million or 6.2% from April, but it was down 4.2 million pounds or 1.2% from a year ago.

Butter production, at 224.3 million pounds, was down 32,000 pounds from April but up 7.6 million pounds or 3.5% from a year ago. YTD, 1.1 billion pounds had come out of U.S. churns, up 5.6% from a year ago.

Yogurt production totaled 463.8 million pounds, up 5.0% from a year ago, with YTD output hitting 2.3 billion pounds, up 5.5%. Hard ice cream came in at 69.2 million pounds, up 7.1% from a year ago, with YTD output hitting 312.9 million pounds, up 3.6%.

Dry whey production climbed to 82.6 million pounds, up 5.7 million pounds or 7.4% from April and up 9 million or 12.2% from a year ago. YTD, whey hit 383.1 million pounds, up 6.9%. Stocks jumped to 63.0 million pounds, up 2.1 million or 3.5% from April and up 6 million pounds or 0.9% from a year ago.

Nonfat dry milk output fell to 173.3 million pounds, down 6.9 million pounds or 3.8% from April, but up 16.2 million or 10.3% from a year ago. YTD output hit 832.7 million pounds, up 7.4%. Stocks inched up to 246.8 million pounds, up 1.1 million or 0.4% from April, but were down 10 million or 3.9% from a year ago.

Skim milk powder production dropped to 29.4 million pounds, down 6.1 million pounds or 17.4% from April and down 19.3 million or 39.7% from a year ago. YTD skim milk powder stands at 177.1 million pounds, down 3.5% from 2025.

China Customs Statistics’ May data shows dairy imports remain “fragmented,” said HighGround Dairy, “with fat outperforming while other key ingredients continue to struggle. New Zealand continues to be the big winner regardless as the country’s market share keeps expanding despite any slowdown in imports.”

According to HighGround, “Domestic milk oversupply is easing after years of capacity reductions, reportedly reducing pressure on local producers. However, domestic production is moving away from whole milk powder and more toward the ‘other category’ as well as skim milk powder.”

“Consumer caution remains a big concern for dairy imports. China has battled economy-wide deflation since 2023. Although price declines have moderated, consumers and businesses remain highly price sensitive,” HighGround said.

Cheese imports totaled 37.3 million pounds, down 7.8% from May 2025 while up 21.2% YTD. Butter, at 23.2 million pounds, was up 38.3%.

Whole milk powder imports totaled 79.5 million, up 17.5%, while skim milk powder amounted to 40.4 million, down 5.8%. Whey product imports came in at 113.7 million pounds, up 0.7% but down 7.5% YTD.

Back home, planted corn was estimated at 95.3 million acres, down 3% from a year ago, according to USDA’s acreage report issued June 30; it represents the fourth highest in the U.S. since 1944. Acreage was down or unchanged in 40 of the 48 estimating states, according to USDA. June 1 corn stocks hit 5.29 billion bushels, up 14% from June 1, 2025, according to the grain stocks report.

Soybean plantings were estimated at 85.4 million acres, up 5%. Acreage is up or unchanged in 23 of the 29 estimating states. Soybean holdings totaled 1.06 billion bushels, up 5% from a year ago.

The latest crop progress report showed 9% of the U.S. corn crop was silking as of the week ending June 28, up 4% from the previous week, 2% ahead of a year ago and 3% ahead of the 5-year average. Sixty-seven percent of the corn was rated good to excellent, down 1% from the previous week and 6% behind a year ago.

Soybeans were 96% emerged, 3% ahead of a year ago and 1% ahead of the average. Nineteen percent were blooming, up from 9% the previous week, 3% ahead of a year ago and 4% ahead of the average. Sixty-five percent were rated good to excellent, down 1% from a week ago and 1% behind a year ago.

The markets were closed Friday in honor of the Fourth of July. Cash block Cheddar closed Thursday at $1.4325 per pound, up 1.25 cents on the week, 4.25 cents below where it was June 1 and 25.25 cents below where it was a year ago. The barrels finished at $1.4750, a half-cent lower, 3.50 cents above their June 1 print and 24.50 cents below a year ago. Sales totaled 36 loads of block on the week and 181 for the month of June, up from 133 in May. There were no barrel sales this week and nine for June, up from four in May.

Dairy Market News reports that Central region milk output is steady to lighter, as a few days of high temperatures negatively impacted production. Strong demand from Class II processors was keeping spot availability somewhat limited. Some cheesemakers were purchasing milk from nearby plants with scheduled downtime this week and at below-class prices. Spot prices at mid-week ranged from $3.00 under to 50 cents over class. Cheesemakers ran busy schedules through Thursday as some closed Friday for Independence Day. Domestic cheese demand from retail and food service was lackluster, said DMN, while export interest was unchanged but down from earlier in the year.

Milk and cream production continues to show seasonal decreases in the West, but needs are being met, according to DMN. Demand for spot milk loads from cheese manufacturers was moderate. Cheese production was stable. Domestic cheese demand is steady to lighter. Export demand is steady. Cheese manufacturers in the region report production is pacing well with demand.

Butter hit $1.70 Monday but closed Thursday at $1.6375, 1.25 cents lower on the week, 3.25 cents below its June 1 post and 96.75 cents below a year ago. Sales totaled 71 for the week and a whopping 390 for June, up from 380 in May.

Cream production is steady in the Midwest, but high temperatures were expected to have a negative impact in the coming weeks. Demand for cream was lighter, as some plants scheduled downtime at week’s end. Some butter makers purchased spot loads of cream at lower multiples this week and ran busy schedules before taking time off for the holiday. Plants continue to build inventory ahead of the baking season. Domestic butter demand is steady; international interest is strong, although some contacts said export demand was down from earlier in the year, according to DMN.

Grade A nonfat dry milk jumped 10 cents Monday, hitting $1.6975 per pound, a likely reaction to a fire over the weekend at a powder plant in Tempe, Arizona. It closed the shortened week, however, at $1.5050, down 9.25 cents on the week and 6.25 cents below its June 1 price, but it was 24.50 cents above a year ago. Sales for the week totaled 73 loads and 178 for the month of June, up from 116 in May.

Chicago Mercantile Exchange dry whey held all week at 68.50 cents per pound, a penny below where it was June 1 but 7.75 cents above a year ago. There were no sales on the week and 15 for June, down one from May.

Increased feed prices in May offset another increase in the all-milk price and thus lowered the feed price ratio, following three consecutive gains. The USDA’s latest ag prices report had May at 2.21, down from 2.26 in April, and it compares to 2.25 in May 2025.

The all-milk price climbed to $21.30 per cwt., with a 4.31% butterfat test, up 50 cents from April’s $20.80 on a 4.34% test, and it was up for the fourth month in a row. The May price compares to $21.40 a year ago, which had a 4.24% test.

The national corn price averaged $4.48 per bushel, up 17 cents from April but still 16 cents below May 2025. Soybeans averaged $11.60 per bushel, up 40 cents from April and $1.20 per bushel above a year ago. Alfalfa hay averaged $195 per ton, up $10 from April and $4 above a year ago.

The May cull price for beef and dairy combined averaged $172 per cwt., up $4 from April, $25 above May 2025 and $100.40 above the 2011 base.

Milk production margins increased for the fourth straight month by gaining 9 cents per cwt., said dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Missouri; they were above the $11.00 per cwt. for the second month, running at $11.68.

“Income over feed costs in May were above the $8 per cwt. level needed for steady to higher milk production for the 33rd month in a row,” said Brooks. “Input prices were higher in May, with two of the three commodities inside of the top 10 for May all-time. Feed costs were the 10th highest ever for the month of May and increased 41 cents per cwt. from April.”

Milk income over feed costs for 2026 (using June 29 CME settling futures prices for Class III milk, corn and soybeans, plus the Stoneheart forecast for alfalfa hay) is expected to be $11.44 per cwt., a loss of 22 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 $1.00 per cwt. from 2025’s level and 73 cents higher than the 2021-25 average, Brooks said.

Milk income over feed costs for 2027 are expected to be $11.82 per cwt., according to Brooks, a gain of 38 cents per cwt. versus 2025. Income over feed costs would also be above the level needed to maintain or grow milk production, up $1.11 per cwt. from the 2021-25 average and up 9 cents from the previous month, Brooks concludes.

Meanwhile, Chicago-based Commodity and Ingredient Hedging LLC’s latest Margin Watch reported, “Dairy margins were flat to weaker the last half of June as milk prices continued moving lower, while feed costs remained relatively steady heading into the month-end USDA acreage and quarterly stocks reports.”

“Corn acreage was estimated to be largely unchanged from the March planting intentions,” the MW said, “while June 1 inventories were up 14% from last year at 5.29 billion bushels but below the average trade forecast of 5.392 billion. While the stocks figure suggests third quarter disappearance was stronger than expected and will likely lead to lower old-crop ending stocks in the July or August World Agricultural Supply and Demand Estimates reports, corn inventories remain ample heading into the new crop year.”

The USDA’s latest weekly slaughter report showed 47,200 cows sent to slaughter the week ending June 20, up 2,100 or 4.7% from a year ago. YTD, 1,304,000 had been culled, up 61,200 head or 4.9% from a year ago.

In politics, President Trump temporarily suspended countervailing duties on certain phosphate fertilizer imports this week. USDA said the action provides “immediate relief to American farmers while advancing the administration’s broader strategy to strengthen America’s fertilizer supply chain.”

Officials met this week to review the US-Mexico-Canada Free Trade Agreement. President Trump has indicated he will not agree to its extension, a trade agreement he approved in 2020.

Agriculture Secretary Brooke Rollins said the Strengthening Processing for U.S. Ranchers program that will provide temporary support for eligible beef processing establishments. Under SPUR, the USDA will provide up to $500 million in payments to eligible entities to support stronger and more stable market opportunities for American ranchers.

“America’s ranchers deserve a strong, competitive marketplace that rewards their hard work and preserves opportunity for generations to come,” Rollins said. “Today, historically tight cattle supplies, the Biden administration’s anti-cattle focus, consolidation in and foreign ownership of meat packing and the reemergence of New World screwworm created extraordinary market conditions that are placing significant pressure on our independent and regional beef processors.”