Class 3 Milk Rises to Its Highest Price Since October 2024
Published: Friday, February 14, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The first benchmark milk price of 2025 headed higher following three consecutive declines. The January federal order Class III price was announced by the USDA at $20.34 per hundredweight, up $1.72 from December, $5.17 above January 2024, and the highest Class III price since October 2024.
Last Friday morning, futures prices portend a February price at $20.14; March, $19.56; and April at $19.30. USDA's World Agricultural Supply and Demand Estimates report forecasts a 2025 average at $19.70, up from $18.89 in 2024.
The January Class IV price is $20.73, down a penny from December, but $1.34 above a year ago. USDA projects a $20.80 Class IV average for 2025.
President Trump implemented threatened tariffs on Feb. 1. However, cooler heads prevailed and Mexico agreed to send troops to the border to help achieve Trump's demand to lower the inflow of migrants as well as illegal drugs like fentanyl. An understanding was also achieved with Canada, prompting Trump to delay the tariffs for 30 days.
The Feb. 4 Daily Dairy Report stated, "In 2023, the United States exported $1.09 billion worth of dairy products to Canada out of roughly $8 billion in total dairy exports, while Canada exported $293.3 million in dairy products to the U.S."
The DDR added, "A White House memorandum issued Jan. 20 directs stakeholders to begin studying the impacts of the United States Mexico-Canada Agreement (USMCA) on U.S. industries, particularly agriculture. Howard Lutnick, Trump's pick to lead the Commerce Department, said Canada was treating U.S. dairy producers unfairly, implying the U.S. would seek more access to Canada's dairy market when USMCA comes up for review next year."
Class III and cheese futures initially traded sharply lower last Monday in response to the tariff spat and cash dairy prices took notice, but the tariff postponements caused the markets to return to the main fundamentals.
CME block Cheddar dropped to $1.8625 per pound last Monday, rallied to $1.90 last Tuesday, then closed last Friday at $1.86, down 1.75 cents on the week, but 29 cents above a year ago.
The barrels closed last Friday at $1.78, down 3 cents on the week, lowest since Dec. 27, 2024, but 20.25 cents above a year ago, and a widened 8 cents below the blocks. CME sales totaled 17 loads of block on the week and seven of barrel.
Cheese demand has strengthened in the Midwest, according to Dairy Market News, with a pickup in nearly all styles, and a handful of processors were oversold. StoneX reported however, that component levels in the Midwest have "declined a bit for the first time in quite a while."
Cheese production was mixed in the West. Some manufacturers reported lighter schedules, others were either steady or busier. Retail cheese demand is steady to strong while food service is steady, according to DMN.
Cash butter continued its descent, falling to $2.38 per pound Friday, losing 5.25 cents on the week, lowest CME price since June 26, 2023, and 31 cents below a year ago. There were 14 sales logged on the week.
Central butter makers cite plentiful cream availability and are turning down offers daily. Butter demand is subdued but not outside the seasonal norm, says DMN. Cream is readily available in the West and multiples are lower. Sellers note that demand is lighter or steady, with some hesitation from buyers.
Grade A nonfat dry milk closed the week at $1.33, down 1.50 cents but still 13 cents above a year ago, on 12 sales for the week.
Dry whey finished last Friday at 58.75 cents per pound, down 5.25 cents on the week, lowest since Sept. 23, 2024, but 6.75 cents above a year ago on two sales.
You'll recall December milk production was down .5% from a year ago. The December Dairy Products report shows where the milk went. Cheese production totaled just under 2 billion pounds, down .7% from November but .7% above December 2023. Output for 2024 totaled 14.1 billion pounds, down .8% from 2023.
December American-type cheese output hit 470.2 million pounds, up 3.9% from November, but 3.9% below a year ago. YTD, 5.6 billion pounds had been produced, down 5% from 2023. Mozzarella totaled 417 million pounds, up 3.9% from a year ago, with YTD output at 4.7 billion pounds, up 2.8%.
Cheddar output climbed to 317.3 million pounds, up 3.5 million, or 1.1%, from November output, which was revised up 3 million pounds. It was down 20.4 million pounds, or 6.1%, from a year ago. Output for 2024 fell to 3.8 billion pounds, down a hefty 7% from a year ago.
Butter production jumped to 198.1 million pounds, up 23.3 million, or 13.3%, from November output, which was revised up 4 million pounds, and was up 4.4 million, or 2.3%, from a year ago. Output for 2024 hit 2.2 billion pounds, up 5%.
Production was down 13.7% in California where bird flu continued to take a toll on milk output, impacting butter and cheese totals.
NPR reported that USDA's Animal and Plant Health Inspection Service discovered a variant of the H5N1 bird flu dairy cows in Nevada. It has also led to several instances of severe illness in humans.
Yogurt totaled 375.9 million pounds, up 4.4% from a year ago, with output for the year at 4.8 billion pounds, up 4.5%. Hard ice cream, at 52.5 million pounds, was up 18.1% from 2023. YTD production hit 715.7 million pounds, up 2%.
Dry whey output, at 69 million pounds, was up 4.2 pounds, or 6.5%, from November, but was down 3.6 million, or 4.9%, from a year ago. Output for 2024 fell to 860.2 million pounds, down 8.3% from a year ago. Whey stocks grew to 60.2 million pounds in December, up 3 million, or 5.3%, from November, but down 9.1 million pounds, or 13.2%, from a year ago.
Nonfat dry milk climbed to 129.8 million pounds, up 10.5 million, or 8.8%, from November, but was down 17.1 million, or 11.6%, from a year ago. NFDM for 2024 came fell to 1.6 billion pounds, down 11.8%. Stocks grew to 253.6 million pounds, up 16 million, or 6.7%, from November, and up a heavy 55 million pounds, or 27.7%, from 2023.
Skim milk powder production, at 51 million pounds, was up 6.2 million pounds, or 13.7%, from November, but down 13.2 million, or 20.6%, from a year ago. SMP for all of 2024 fell to 555.5 million pounds, down 20% from 2023.
Speaking in the Feb. 10 "Dairy Radio Now" broadcast, HighGround Dairy's Curtis Bosma credited dairy farmer's feeding and breeding practices for high butterfat for the increase in butter production. He also pointed to the shift away from powders to milk protein concentrates and other similar products that are "higher on the value chain." He said the jump in dry product stocks, even with the switch away from the production of those products, is a bit concerning. He concluded, warning of the volatility ahead, as new cheese capacity comes on line and potential trade tensions rise with our trade partners and others.
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