The “Mielke” Market Weekly

Federal order final decision approved

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The U.S. Department of Agriculture published its Federal Order Final Decision. All 11 orders approved the final changes. USDA said: “This final rule amends the 11 FMMOs with implementation on June 1, 2025, except for the amendments to skim milk composition factors, which have a later implementation date.”

Increasing milk composition factors to 3.3% protein, 6% other solids, and 9.3% nonfat solids will be implemented Dec. 1, 2025. Barrel cheddar will be eliminated from milk pricing formulas and the Dairy Products Mandatory Reporting Program. The change will be instituted in June 2025. After this time, only block cheddar will be used to determine the monthly average cheese price.

Make allowances will increase and butterfat recovery in the Class III formula will be upped to 91% in June. The Class I mover returns to the higher of Class III or Class IV skim milk price and a rolling monthly Class I extended shelf life adjustment is included. Both will be implemented in June. Class I differentials will be altered in some regions, according to the USDA.

USDA lowered its milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates, citing lower milk cow numbers and lower expected milk per cow based on the recent milk production report. The 2025 forecast was also lowered due to slower growth in output per cow.

2024 production and marketings were projected at 225.8 and 224.8 billion pounds respectively, down 500 million pounds on both from last month’s estimate. If realized, both would be down 600 million pounds or 0.3% from 2023. 

2025 production and marketings were projected at 227.2 and 226.2 billion pounds, respectively, down 800 million on both. If realized, both would be up 1.4 billion pounds or 0.6% from 2024.

Class and product price estimates for 2024 were adjusted to reflect reported prices. Prices for 2025 cheese, butter, nonfat dry milk and whey were expected to be higher due to less milk production and supportive demand. The Class III milk price was raised, with higher cheese and whey prices. Class IV milk prices were also raised, due to higher butter and NDM price forecasts.

The 2024 Class III average was lowered to $19.89 per hundredweight, down a penny from last month’s estimate, and compares to $17.02 in 2023 and $21.96 in 2022. The 2025 average was projected at $19.70, up 90 cents from a month ago.

The Class IV price will average $20.75 in 2024, unchanged from last month’s estimate, and compares to $19.12 in 2023 and $24.47 in 2022. The 2025 average was projected to hit $20.80, up 40 cents from last month’s projection.

This month’s U.S. corn outlook calls for lower production, feed and residual use, exports, and ending stocks. Corn production was estimated at 14.9 billion bushels, down 276 million as a 3.8-bushel per acre cut in yield to 179.3 bushels is partially offset by a 0.2-million acre increase in harvested area. Total corn use was down 75 million bushels to 15.1 billion. Feed and residual use was reduced 50 million bushels to 5.8 billion. Exports were cut 25 million bushels to 2.5 billion reflecting lower supplies. Corn stocks were lowered 198 million bushels and the season-average corn price was raised 15 cents to $4.25 per bushel.

Soybean production was estimated at 4.4 billion bushels, down 95 million, led by decreases for Indiana, Kansas, South Dakota, Illinois, Iowa and Ohio. Harvested area was estimated at 86.1 million acres, down 0.2 million. Yield was estimated at 50.7 bushels per acre, down 1.0 bushel. Soybean ending stocks were projected at 380 million bushels, down 90 million. The U.S. season-average soybean price was projected at $10.20 per bushel, unchanged from last month, and soybean meal was increased $10 to $310 per short ton.

Dairy cow culling for the week ending Jan. 4 totaled 44,100 head, up 4,200 from the previous week, but 4,400 or 9.1% below a year ago.

Volatility hit the Chicago Mercantile Exchange cheese market the third week of 2025. The Cheddar blocks jumped 9 cents Monday, leaping to $1.91 per pound, then dropped 7.75 cents Wednesday, regained 6.75 cents Thursday, climbing back to $1.89, and stayed there Friday, up 7 cents on the week and 44.50 cents above a year ago.

The barrels marched to $1.89 Thursday, highest since Oct. 30, and that’s where they also finished Friday, 4 cents higher on the week and 42.25 cents above a year ago. CME sales totaled 13 loads of block on the week and seven of barrel.

Football playoffs are underway with the Super Bowl less than a month away, the prime cheese consumption time of the year, but cheese demand may lessen after that. HighGround Dairy’s “Monday Morning Huddle” said, “New cheese capacity in Kansas has been in operation for over two months, but the quality spec is likely not yet ready to pass a grade at the CME, though HighGround believes it is close. Leprino Foods’ new Lubbock, Texas, plant should be running soon but will also have a ramp-up period.”

Meanwhile, StoneX said, “It will be some time before the U.S. cheesemakers can build inventories at a more normal pace. Last week’s weakness clearly did not make buyers step away but in fact encouraged them to buy the dip. The market is telling us demand for cheese, be it pipeline refilling or just building up some inventory, is still alive and well.”

“We’ve said that the $1.85-$1.95 cheese price average seems to be a good market clearing level for cheese.” European Union Cheddar has been trending higher which could lend some support as they continue to trade at a strong premium to U.S. block prices,” said StoneX.

Midwest cheese production continues to pick up following the holiday downtime by quite a margin, according to Dairy Market News. Cheese demand throughout the region is steady to seasonally lighter. A number of cheddar and Italian-style cheesemakers say demand is meeting or beating seasonal expectations. Milk availability quickly tightened following the holiday lulls. Spot milk prices were above the Class III baseline at mid-week.

Western cheese production is steady to stronger. Steady or strengthening milk production in the region is providing more milk to cheese vats and demand for milk from cheesemakers is reportedly healthy. Demand from domestic and international buyers is mixed, said DMN.

Cash butter climbed to $2.6125 per pound Monday, highest since Nov. 15, 2024, but it closed Friday at $2.53, down 7 cents on the week and 1.5 cents below a year ago. There were 31 sales logged for the week.

The U.S. fat test is substantial and made a new record in November, according to HGD. “Concerns about milk production in the nation’s top-butter state may provide near-term support, though cream multiples remain historically low with multiple regions reporting ample availability.”

The Jan. 13 “Daily Dairy Report” said “The United States exported nearly 6.8 million pounds of butter in November, a substantial increase relative to November 2023, as U.S. product remained competitively priced. Despite this, the U.S. was a net importer of butter in November, bringing a record 16.4 million pounds ashore. This suggests that Americans purchased 241.4 million pounds of butter in November, the most for any month ever and 22% more than November 2023.”

Butter plants are working on building stocks for later in the year, namely spring demand, and some are ahead of schedule, said DMN. Cream availability is aiding the effort. Spot cream values mid-week had rallied. Multiples below the 1.00 mark during the holiday weeks and last week had yet to be seen. That said, cream remains widely available and some contacts on both sides of the equation do not expect tightness in cream until the spring holiday season.

Plenty of cream remains available in the West. Retail butter output is steady to stronger. Bulk output is mixed. Sellers note that demand varies from somewhat quiet to somewhat strong, according to DMN.

Grade A nonfat dry milk closed Friday at $1.3725 per pound, up 0.75 cents on the week, and 19.75 cents above a year ago, with six sales reported.

Dry whey finished the week a quarter-cent lower, at 73.75 cents per pound, 31 cents above a year ago. There were four CME sales put on the board this week.

Checking demand, the latest Livestock, Dairy, and Poultry Outlook reports November’s restaurant performance index, which tracks the health of the U.S. restaurant industry, increased 0.8% compared to the previous month, suggesting that more people are dining out. The index indicates that restaurants have been experiencing growth since October 2024, marking the first expansion of the year. If this trend continues, it could benefit the dairy industry as well, said the Outlook. Dairy consumption tends to be higher when consumers dine out.

Super Bowl cheese demand will soon be behind us, while plenty of new cheese-making capacity has or is coming online. China has not reliably returned to the dairy market and U.S. global price competitiveness is in question, and President Trump’s threats of tariffs overhang the markets. We also have bird flu’s impact.

Rabobank’s Lucas Fuess said in the Jan. 20 “Dairy Radio Now” broadcast that domestic dairy demand continues to be OK despite the negative economic drivers, if you consider how much milk we consume in the U.S. The overall upside potential on milk prices will no doubt be limited, he admitted, however offsetting that, feed costs this year will likely be the lowest in 4-5 years, so we expect OK margins for dairy farmers. “If we can maintain milk prices around that $20-$21 mark, there are still opportunities for profit, regardless of the seemingly negative headwinds that we’re facing,” he said.

The biggest wildcard may be President Trump’s impact, be it the tariffs or the deportations, which could limit the farm labor force. Bird flu is another concern, considering the huge impact it had on California in November, according to Fuess. It will be lessened over the winter, he said, “But we will watch that sharply into the spring as birds start migrating again. The USDA is testing several vaccines, so hopefully, we get some good news on that front.”

Fluid milk sales are seeing some ups and downs after topping year-ago levels in six out of 2024’s first nine months. USDA’s latest data shows November packaged sales at 3.6 billion pounds, down 1.5% from November 2023.

Conventional product sales totaled 3.4 billion pounds, down 2.2% from a year ago, while organic products, at 249 million pounds, were up 7.7%. Organic sales represented 6.8% of total sales for the month.

Whole milk sales totaled 1.3 billion pounds, off 0.4%, following an impressive 3.6% jump in October, and were up 1.9% year to date, representing 35.2% of total sales for the month. Skim milk sales, at 150 million pounds, were down 6.5% from a year ago, and down 10.4% year to date.

Packaged fluid sales in the 11 month period totaled 39.2 billion pounds, up 0.7% from 2023. Conventional product sales totaled 36.5 billion pounds, up 0.2% from a year ago. Organic products, at 2.8 billion pounds, were up 6.9%, and represented 7.1% of total milk sales in the 11 months. The figures represent consumption in Federal Market Orders, which account for about 92% of total fluid sales in the U.S.

“Dairy margins remained relatively flat over the first half of January,” said the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC., “With milk prices retreating slightly in nearby delivery months while the feed markets were mixed with corn continuing to move higher while soybean meal prices set back. Recent statistics have highlighted the impact of strong domestic demand for butter helping to support that market and Class IV milk prices. While U.S. production dropped 0.8% in November from a year ago, U.S. butter production rose 4.4% year over year as increased fat content in milk more than made up for lower milk production. November’s butter production figure was particularly impressive given that output in California declined 12.8% from 2023 due to the impact of avian influenza but was more than made up for by a 13.3% increase in the central region.”

“USDA’s monthly cold storage report showed butter stocks tightened considerably during November to end the month at 213.5 million pounds which was up only 0.4% from 2023 despite inventories reflecting 10% or more year-over-year gains from August-October. In addition, butter exports during November totaled almost 6.8 million pounds, up significantly from 2023 although the U.S. remained a net importer of butter during the month with a record 16.4 million pounds. This implies domestic butter disappearance of 241.4 million pounds, a record monthly high and up 22% from 2023,” the MW stated.

Dairy producers can enroll in the 2025 Dairy Margin Coverage program beginning Jan. 29 through March 31. Administered by USDA’s Farm Service Agency, the program provides help to offset differences between milk prices and feed costs. Check with your local USDA service center for complete details.

Tuesday’s Global Dairy Trade Pulse, Number 70, featured 4.4 million pounds of product sold, down from 4.93 million in the Dec. 31 Pulse. Prices on both skim milk powder and whole milk powder inched a little higher from the last Pulse.

In other global dairy news, Germany has confirmed its first case of foot-and-mouth disease, found in three water buffalo. It’s the country’s first outbreak in 40 years, according to HGD. Although not a threat to humans, foot-and-mouth disease is a highly contagious virus that impacts cattle, pigs, sheep and goats.

StoneX said it’s too early to know its effect on the market but it could change buying patterns given that Germany is responsible for nearly 16% of the cheese that Europe exports. No new cases have since been reported.

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