Price forecasts higher Class III, lower Class IV

The “Mielke” Market Weekly

The U.S. Department of Agriculture left its 2026 milk production estimate unchanged in this week’s World Agricultural Supply and Demand Estimates report but lowered its 2027 estimate. Based on the latest milk production report, cow inventories were raised for 2026 and were unchanged for 2027. Output per cow was reduced slightly for both 2026 and 2027.

2026 production and marketings remained at 236.6 and 235.6 billion pounds, respectively. If realized, both would be up 4.9 billion pounds or 2.1% from 2025.

2027 production and marketings were projected at 238.0 and 237.0 billion pounds respectively, down 100 million pounds on both. If realized, both would be up 1.4 billion pounds or 0.6% from 2026.

Commercial export forecasts for 2026 were lowered on a skim-solids basis, primarily on reduced shipments of lactose and nonfat dry milk, but increased on a fat basis on increased shipments of butter. Exports for 2027, on a skim-solids basis, were lowered on reduced shipments of NDM, while exports on a fat basis were raised on increased shipments of butter and cheese.

Imports were increased on both a fat and skim-solids basis for 2026 due to increased shipments of butter, cheese and milk proteins. Imports were also increased on a skim-solids basis for 2027 on increased shipments of milk proteins and prepared foods. Imports, however, were decreased on a fat basis on the expectation of reduced imports of butter in 2027.

Price forecasts for 2026 were decreased for butter and NDM but increased for cheese and whey. As a result, the Class III milk price forecast was raised, and the Class IV price was lowered.

The Class III price is now projected to average $16.25 per cwt., up a dime from last month’s report, and it compares to $18.01 in 2025 and $18.89 in 2024. The 2026 Class IV is estimated at $18.15, down 25 cents from a month ago, and it compares to $17.38 in 2025 and $20.75 in 2024.

Thursday’s Class III futures settlements had the August contract at $16.59 per hundredweight; September, $17.33; October, $17.51; November, $17.48; and December, $17.52. If realized, the 2026 average would be $16.45.

Dairy product price forecasts for 2027 were lowered for butter, increased for whey, and unchanged for cheese and NDM. Consequently, the Class III price was increased and the Class IV price was lowered.

The 2027 Class III is expected to average $17.25 per cwt., up 20 cents from last month’s estimate. The Class IV was projected at $17.20, down 20 cents from last month’s projection.

The U.S. corn outlook is for lower supplies, unchanged domestic use, larger exports and smaller ending stocks. Corn production was forecast at 16.0 billion bushels, up 13 million from last month with a 1.2-million-acre increase in harvested area that was largely offset by a reduced yield forecast.

This would be the second largest U.S. corn harvest on record. The season’s first survey-based corn yield forecast was down 2.3 bushels per acre from last month to 180.7 bushels per acre. Corn beginning stocks were lowered 75 million bushels to 1.9 billion, reflecting raised exports for 2025/26.

Total U.S. corn use for 2026/27 was forecast 75 million bushels higher to 16.3 billion. Exports were raised 75 million bushels to 3.3 billion, reflecting increased global demand and constrained exports for Ukraine. Ending stocks were lowered 137 million bushels to 1.7 billion. The season-average corn price was raised 10 cents to $4.50 per bushel.

Soybean production was projected at what would be a record 4.5 billion bushels, up 44 million due to a higher harvested area and a slightly lower yield. Harvested area was revised up 1.4 million acres from the July projection to 85.8 million. The first survey-based soybean yield forecast of 52.7 bushels per acre was 0.3 bushels below last month’s projection and last year’s record yield. Soybean supplies for 2026/27 were projected up 39 million bushels from last month as higher production is partly offset by lower beginning stocks.

Soybean crush was increased 30 million bushels to 2.78 billion, driven by robust crush margins and stronger demand for both soybean meal and oil. Soybean meal exports were raised by 0.7 million short tons to 22.7 million, reflecting strong global demand and increases to domestic use and imports for both 2025/26 and 2026/27 in several markets, including the Philippines, Mexico, Thailand, Turkey, the European Union and Ecuador.

Soybean exports were unchanged and ending stocks were raised 10 million bushels to 320 million on higher supplies. The season-average farm price was forecast at $11.40 per bushel; soybean meal and oil prices were projected at $310 per short ton and 70 cents per pound, respectively.

Meanwhile, the crop progress report showed 94% of U.S. corn was silking, as of the week ending Aug. 9, up from 90% the previous week, 1% ahead of a year ago and 1% ahead of the 5-year average. Sixty-one percent was in the dough stage, up from 43% the previous week, 5% ahead of a year ago and 6% ahead of the average. Sixteen percent was dented, 3% ahead of a year ago and 4% ahead of the average. Sixty-one percent was rated good to excellent, unchanged from the previous week and 11% behind a year ago.

Checking the beans, 93% were blooming, up from 88% the previous week, 3% ahead of a year ago and 2% ahead of the 5-year average. Seventy-four percent were setting pods, up from 62% the previous week, 5% ahead of a year ago and 5% above the 5-year average. Sixty-two percent were rated good to excellent, down 1% from the previous week and 6% behind a year ago.

The Daily Dairy Report’s Sarina Sharp wrote in the Aug. 7 Milk Producer Council newsletter, “Regular rains and a break from the heat dragged on crop values once again this week. This year’s harvest isn’t likely to top last year’s bumper crop; yields are expected to be the second highest ever. But exports are booming and, with Russia and Ukraine attacking one another’s export infrastructure and drought in Europe, the U.S. may be called upon to supply a greater share of the world’s grain.”

“Fertilizer prices are expected to remain above pre-Iran war levels through 2028,” said CoBank, “Creating sustained pressure on farmers and agricultural retailers as global conflicts and supply chain disruptions continue to reshape the nutrient market. Although prices have retreated from the historic highs seen at the start of the war, elevated fertilizer expenses remain a major headwind for the U.S. agricultural sector.”

A new report from CoBank says, “Geopolitical instability in the Middle East, constrained feedstock supplies and tightening phosphate availability will keep fertilizer costs elevated for ag retailers, farm supply cooperatives and farmers for at least another year and likely into 2028.”

“The ripple effect of the Middle East conflict, compounded with tight supplies, will create higher fertilizer prices and complicate sourcing well into 2027 and beyond,” said Jacqui Fatka, CoBank farm supply and biofuels economist. “Availability and affordability concerns have already triggered demand destruction and deferral, making the price outlook increasingly difficult to predict. Ultimately, market recovery will depend on stabilization in the Middle East, lower sulfur prices and shifts in global demand patterns.”

“The Middle East plays an outsized role in the international fertilizer market, supplying over 60 million tons of fertilizers and raw materials annually, with 45 million tons shipped via the Strait of Hormuz,” according to CoBank.

USDA’s weekly slaughter report showed 51,000 dairy cows sent to slaughter the week ending Aug. 1, down 400 or 0.8% from a year ago. Year-to-date data has 1,598,700 head culled from the herd, up 67,300 or 4.4% from a year ago.

Chicago Mercantile Exchange block cheddar gained a nickel Monday and added a half-cent Thursday, reaching $1.61 per pound, the highest since July 23, but it closed Friday at $1.60, 4.50 cents higher on the week, ending three weeks of declines but still 17.50 cents below a year ago. The barrels finished Friday at $1.5625, up 1.50 cents, the highest since July 28 but 21.75 cents below a year ago. Sales consisted of 14 loads of block for the week and one of barrel.

Central region contacts tell Dairy Market News that mild weather has improved cow comfort and helped stabilize milk output. Class I demand is strengthening as bottlers prepare for school openings, keeping spot availability limited. Spot milk was slightly long in some parts of the region, and a few loads moved at class price. At mid-week prices ranged from flat-class to $5.00 over. Cheesemakers noted strong demand, and some indicate milk availability is tight. Cheese production remains active, supported by firm demand.

Milk and cream production are mixed in the West, and production was being affected by hot weather, fires and smoke. Milk availability in the Northwest is tight, but contacts in the Southwest say availability is good, with some noting higher production than in previous weeks. Demand for spot loads from cheese manufacturers remains weak, but cheese production is robust. Domestic cheese demand ranges from steady to lighter, with cheese being the most advertised commodity in retail ads this week. Export demand is steady, but cheese manufacturers in the region report production is outpacing demand.

Lots of butter made its way to Chicago this week and saw some ups and downs price wise. It closed Friday at $1.46 per pound, down 5.25 cents on the week, the lowest since July 29 and 84 cents below a year ago. There were 121 sales on the week, the most for a single week since June 8.

Cream production is steady in the Midwest and spot loads are available. Class II processors continue to secure the bulk of spot cream. Overall, cream markets remain firm, supported by active Class II needs and steady churn operations. Churns remain busy, with some butter makers purchasing cream to maintain schedules. Butter demand is steady and export interest continues to show strength. Inventories of 80% butterfat butter remain ample, while 82% stocks are still tight. Spot loads of 80% salted butter were trading around the CME average.

Farm-level milk and cream output in the West is more than sufficient to meet butter production needs, says DMN. Some producers say there are few opportunities for spot sales and participants noted a noticeably weaker tone. Butter manufacturers indicate ample spot cream is available. Most facilities are using contracted volumes to keep churns full, with enough remaining to sell on the spot market. Buyer demand is steady, and inventory levels are balanced. Demand from domestic and international buyers remains steady.

Grade A nonfat dry milk had a good week, climbing to a Friday close of $1.7450 per pound, 16.75 cents higher on the week, the highest since June 15 and 47.50 cents above a year ago. There were 32 sales on the week.

Dry whey hit 69.75 cents per pound Tuesday, the highest in three weeks, but it fell back to 67 cents Thursday and closed Friday at 69 cents per pound, down a half-cent on the week and 9 cents above a year ago. There were two CME sales for the week.

In politics, the Senate Agriculture Committee failed to advance legislation last week brought by Chairman John Boozman, R-Ariz., which the International Dairy Foods Association says, “would have provided long-term authorization of the farm bill and made policy improvements that would broaden dairy nutrition incentives, strengthen key dairy programs and provide certainty in the agricultural economy. The failure of the committee to advance this legislation is a setback, but the need for long-term certainty provided by a 5-year farm bill remains.”

IDFA president and CEO Michael Dykes said, “IDFA supports the draft farm bill brought forth by Senate Agriculture Committee Chairman Boozman and appreciates his determination to craft a bipartisan farm bill. IDFA is disappointed that the Senate Agriculture Committee was unable to advance the farm bill legislation today, delaying action on policies that would benefit American families, farmers, food manufacturers and rural communities.”

This week’s Global Dairy Trade Pulse saw 6.6 million pounds of product sold, down from just under 7 million in the last July 28 Pulse. The price on anhydrous milkfat and butter slipped. Skim milk and whole milk powder saw modest gains.

StoneX says Singapore Exchange futures were pointing to 3% plus increases in whole milk and skim milk powder, with a roughly 2% decline for the fats at the Aug. 18 GDT event: “That works out to a 2.3% increase for the index.”