The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Dairy margins continued to improve over the first half of May on a combination of higher milk prices and lower feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. "Nearby Class III milk futures posted a dramatic rally to new life-of-contract highs, completely reversing the steep selloff through Q1 while deferred contracts posted more modest gains," the MW stated.
"The corn market continues to decline on favorable planting weather across the U.S. Midwest, despite the USDA May WASDE report which revealed lower projected corn ending stocks than expected. The strong recovery in margins has led to increased milk and dairy product production. American-style cheese production of more than 1.4 billion pounds in Q1 was up 3.3% from 2024, with Cheddar production of 984 million pounds pacing the gain with a 2.8% increase from 2024. U.S. dairy producers have also increased butterfat by 82 million pounds in Q1, up 3.4% from 2024 with most of the increase going to butter production which at nearly 650 million pounds is up 5% from Q1 last year."
"Big discounts of U.S. cheese and butter in the global market compared to the EU and Oceania due to the weaker dollar have helped boost exports. According to the latest data from USDA's GATS, March cheese exports were down just 1.5% from the record set last year while shipments to Japan were an all-time high. After adjusting for leap year, Q1 cheese exports were at a record high, up 8.3% from last year. Q1 butter and milkfat exports were also the strongest since 2014. The export market will be increasingly important to clear inventory as production expands, particularly for cheese," the MW concluded.
Agriculture Secretary Brooke Rollins announced the suspension of live cattle, horse and bison imports through U.S. ports of entry along the southern border last week due to "the continued and rapid northward spread of New World screwworm (NWS) in Mexico, effective immediately. NWS has been recently detected in remote farms with minimal cattle movement as far north as Oaxaca and Veracruz, about 700 miles away from the U.S. border."
"The U.S. and Mexico continue efforts to interdict and eradicate NWS in Mexico and work in good faith," a USDA press release stated. "However, despite these efforts and the economic impact on both countries due to this action, there has been unacceptable northward advancement of NWS and additional action must be taken to slow the northern progression of this deadly parasitic fly."
The May 13 Daily Dairy Report said, "New World screwworm flies lay eggs on mammals, especially in wounds, eyes, noses and udders. When the eggs hatch, the larvae burrow or "screw" deep into the host's flesh. For nearly a century, the United States and Mexico have worked together to reduce the spread of the devastating pest by seeding Central America with sterile flies to ensure that female screwworms lay nonviable eggs. USDA estimates that the return of screwworm could cost the beef industry billions of dollars every year."
The tariff tit-for-tat took on another new look last week. Talks between the U.S. and China in Switzerland produced a temporary de-escalation. Beginning May 14, they have agreed to a 90-day pause, reports HighGround Dairy. "The U.S. will reduce tariffs on Chinese goods from a peak of 145% to 30%, while China will lower tariffs on U.S. imports from 125% to 10%. China has also halted and scrapped other non-tariff countermeasures, such as the export of critical minerals to the U.S., put in place in response to the initial escalation."
"The 30% levy that the U.S. is now imposing on Chinese goods includes an existing 20% tariff intended to pressure China into doing more to prevent the synthetic opioid fentanyl from entering the U.S. It also includes the same 10% 'baseline' tariff Trump slapped on imports from most of the world's countries. The 30% tax comes on top of other levies on China, including some left over from Trump's first term and kept by former President Joe Biden (such as solar panels and electric vehicles). On the Chinese side, retaliatory tariffs imposed in March on specific U.S. dairy exports remain in effect. These measures highlight that deeper trade frictions persist," said HGD. Walmart announced that it will raise its prices when tariff-affected merchandise arrives at its stores.
Meanwhile, the April Consumer Price Index was better than expected, according to StoneX. "Inflation increased .2% versus .3% expected month over month and appears to not be influenced by tariffs yet. However, if we look at the major categories of the CPI, we see that services did not cool, and energy is helping to keep commodities even on average. If rates are cut and the economy expands (instead of the expected recession), we would expect energy prices to come back, leaving commodities to inflate higher," said StoneX.
The Agriculture Department raised its 2025 milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates (WASDE) report, citing expectations of an increased cow herd and a faster growth rate in output per cow. The report also gave us our first preview of 2026 and looks for an expanding milk cow herd and slightly higher milk per cow.
2025 production and marketings were projected at 227.3 and 226.3 billion pounds, respectively, up 400 million on both from a month ago. If realized, both would be up 1.4 billion pounds, or .6%, from 2024.
2026 production and marketings were projected at 227.9 and 226.9 billion pounds, respectively. If realized, both would be up 600 million pounds, or .3%, from 2025.
Butter, cheese, nonfat dry milk and whey price forecasts for 2025 were raised from last month, based on recent prices and increased export demand for the second half of the year. The Class III and IV price forecasts were also raised.
The Class III average was projected at $18.70 per hundredweight, up $1.10 from last month's estimate, and compares to $18.89 in 2024 and $17.02 in 2023. The 2026 average was projected at $17.50.
The 2025 Class IV is expected to average $18.45, up 25 cents from last month's estimate, and compares to $20.75 in 2024 and $19.12 in 2023. The 2026 average was estimated at $18.10.
Commercial exports for 2026 were forecast to be lower than in 2025 on a fat basis, but higher on a skim-solids basis due to additional exports of whey products. Commercial imports were forecast to increase on a fat basis due primarily to increases in imports of butter. Imports on a skim-solids basis were forecast to increase slightly. Domestic use in 2026 is expected to increase on both a fat basis and skim-solids basis, according to the WASDE.
Dairy product prices in 2026 were forecast to be lower for butter, nonfat dry milk, cheese and whey, compared with 2025, primarily due to increased milk supplies. As a result, Class III and Class IV milk prices were also forecast lower.
This month's corn outlook included record supplies and total use, and higher ending stocks. The corn crop was projected at a whopping 15.8 billion bushels, up 6% from a year ago on increases to both area and yield. Planted area of 95.3 million acres, if realized, would be the highest in over a decade, says USDA. The yield projection of 181 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. With smaller beginning stocks partially offsetting the increase in production, total corn supplies were forecast at 17.3 billion bushels. Total U.S. corn use was forecast to rise over 1% from a year ago on higher domestic use and exports. Food, seed and industrial use was forecast at 6.9 billion bushels. Corn used for ethanol was unchanged from a year ago at 5.5 billion bushels.
The soybean outlook showed slightly lower supplies, higher crush, reduced exports, and lower ending stocks from a year ago. The soybean crop was projected lower, at 4.34 billion bushels, with trend yield and lower area. With higher beginning stocks but lower imports and production, soybean supplies are down less than 1% from 2024-25. The U.S. crush was projected at 2.49 billion bushels, up 70 million from the 2024-25 forecast, with higher soybean meal disappearance and exports. Domestic disappearance was forecast to increase 2%. Soybean meal exports were forecast at 18 million short tons, a 20% global trade share, compared to the prior 5-year average of 19%.
U.S. soybean exports were forecast at 1.815 billion bushels, down 35 million from 2024-25. Ending stocks were projected at 295 million bushels, down 55 million from the revised 2024-25 forecast. The U.S. season-average soybean price was forecast at $10.25 per bushel, compared with $9.95 per bushel in 2024-25. The soybean meal price was forecast at $310 per short ton, up $10 says the WASDE.
The CME Cheddar blocks closed last Friday at $1.93 per pound, 11.25 cents higher on the week, highest since Jan. 30, but 1.25 cents below a year ago. The barrels finished at $1.88, up 11 cents on the week, highest since April 15, and 24.50 cents below a year ago. There were 24 sales of block on the week and seven barrel.
Retail cheese sales remain strong in the Central region, according to Dairy Market News, but contacts report food service sales continue to soften. Export demand is strengthening. Milk output is at or near its seasonal peak however, some cheesemakers noted that it was more difficult to obtain in some parts of the region. Class III milk was available as low as $7 under class. Cheese production is active and inventories are somewhat tight, according to DMN.
Milk production is seasonally ticking down for some parts of the West, but cheese manufacturers indicate supplies are meeting needs. Cheese output is generally steady. Demand from domestic and international buyers is somewhat stronger as domestic prices continue to retain competitiveness against international levels.
Cash butter saw its Friday close at $2.3425 per pound, up 1.25 cents on the week, but 72.75 cents below a year ago when it gained 8 cents on the week and closed at $3.07 per pound. There 16 CMW sales last week.
Cream is plentiful throughout the Midwest, though contacts in the southern part say increasing temperatures are having a negative impact on milk components. Ice cream makers are purchasing a greater volume of cream, but butter makers say cream remains sufficient to run busy schedules. Some are at capacity and unable to
purchase additional cream even at favorable pricing. Butter makers continue to freeze butter for the fall and winter months. Domestic butter prices remain competitive internationally and are contributing to increased export interest, according to DMN.