Federal Market Order Reforms Kick in for Milk Pricing
Published: Friday, June 13, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The Agriculture Department announced the May federal order Class III milk price at $18.57 per hundredweight, up $1.09 from April and 2 cents above May 2024. That put the five-month average at $19.04, up from $16.33 at this time a year ago and compares to $17.99 in 2023. Last Friday morning futures portend a June price at $18.74 and a peak of $19.45 in October.
The May Class IV price is $18.13, up 21 cents from April, but 2.37 below a year ago. Its five-month average stands at $18.98, down from $19.99 a year ago, and compares to $18.66 in 2023.
Speaking of milk prices and June Dairy Month, federal market order reform changes went into effect in June and, as StoneX put it, "For the first time in modern history the barrel cheese price will have no impact on the National Dairy Product Sales Report weekly/monthly pricing. With a flip of the calendar, the cheese futures contract is now a block cheese futures contract."
The May 30 Daily Dairy Report says the changes also included increased allowances for processors and a return to the "higher of" Class III or IV milk price for Class I values. "Bottlers will pay producers based on updated geographic premiums, known as 'location differentials' meant to adjust for regional imbalances in the supply and demand of fresh milk. The new Class III formula will also assume that processors recover 91% of the butterfat in milk through the cheese making process, up from 90% previously," according to the DDR.
"Milk pricing formulas will change once again in December," the DDR adds, "when standardized component levels rise to better reflect the massive increase in butterfat, protein and milk solids levels in the U.S. milk."
Speaking in the June 9 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said the impact of the changes on producers will be on a case-by-case basis, depending on location. The factor he's most interested in is the impact of the removal of the barrel cheese price from the milk price equation. Barrel will still be traded, he said, but will its removal impact CME trading?
Meanwhile, dairy margins were flat to slightly stronger over the last half of May as movements in the milk and feed markets were largely offsetting, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. "The milk market continues to recover as strong domestic and export demand counteracts rising milk production," the MW stated.
The MW detailed the April Milk Production report, which I previously reported, and stated that April saw the largest year-over-year gain since August 2022.
It was also the fourth consecutive month of increasing production, relative to the prior year. The MW credited an expanding herd, which was the largest reported since mid-2021, except for a single month in March 2023.
The MW detailed the April Cold Storage report which showed the butter inventory was below a year ago for the first time 15 months, suggesting strong demand. "Fat tests increased to 4.36% in March, up .09% from a year ago," the MW reported, and "U.S. butter commands a $1.26 per pound advantage to European butter after adjusting for fat levels which is helping to support exports." "Cheese inventories saw the 14th consecutive monthly decline but the smallest year-over-year difference in over 12 months," the MW concluded.
Another drop in the All-Milk Price, a higher corn price, and a rise in hay pulled the latest milk feed price lower again. The USDA's Ag Prices report shows the April ratio at 2.27, down from 2.46 in February, and compares to 2.13 a year ago.
The All-Milk Price averaged $21 per hundredweight in April, with a 4.32% butterfat test, down $1 from March which had a 4.36% test, and compares to $20.40 in April 2024, with a 4.24% test.
April milk production margins moved lower for the fourth time in the past five months but remained at historically high levels and $1.31 per hundredweight below March, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo. "Income over feed costs in April were above the $8 per hundredweight level needed for steady to higher milk production for the 18th month in a row. Feed costs were the 10th highest ever for the month of April and increased 31 cents per hundredweight from March," according to Brooks.
"Milk income over feed costs for 2025, using May 30 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $13.37 per hundredweight," Brooks said, "a gain of 53 cents per hundredweight versus last month's estimate. Income over feed in 2025 would be above the level needed to maintain or grow milk production and down 2 cents from 2024's level."
You'll recall April milk production was up 1.5% from a year ago. The latest Dairy Products report shows more milk was diverted to the churn and vat. Cheese output totaled 1.229 billion pounds, down .4% from March, but up 3.1% from April 2024. Total output for the first four months of 2025 stood at 4.8 billion pounds, up .5% from 2024.
Mozzarella production totaled 406.9 million pounds, up 1.1% from a year ago. American cheese, at 492 million pounds, was up 6.1% from a year ago. Italian-style cheeses totaled 517 million, up 2.2%.
Cheddar production, the cheese traded at the CME, fell to 338.1 million pounds, down 11 million pounds, or 3.2%, from March, but up a whopping 25.4 million, or 8.1%, from a year ago. Revisions added 1.4 million pounds to the March total. YTD Cheddar output hit 1.3 billion pounds, up 3.4% from a year ago.
Butter output fell to 215.8 million pounds, down 13.2 million pounds, or 5.8%, from March, but was up 8 million, or 3.9%, from a year ago. YTD butter hit 865.8 million pounds, up 3.9% from a year ago.
Yogurt production totaled 444.3 million pounds, up 6.4% from a year ago, with output for the year so far at 1.8 billion pounds, up 6.6%.
Dry whey output slipped to 69 million pounds, down 12 million, or 14.9%, from a year ago. Whey stocks slipped to 62.6 million pounds, down 1.6 million, or 2.6%, from March, and down 9.9 million pounds, or 13.7%, from a year ago.
Nonfat dry milk output fell to 163.3 million pounds, down 10.6 million pounds, or 6.1%, from a year ago. Stocks grew to 274.4 million pounds, up 11.3 million, or 4.3%, from March, and up 31.3 million pounds, or 12.9%, from 2024.
Skim milk powder production, at 35.5 million pounds, was down 9.4 million, or 20.8%, from a year ago.
Checking Chicago, dairy prices started June Dairy Month mixed. The Cheddar blocks made it up to $1.9550 per pound last Monday, highest since Oct. 3, 2024, but closed last Friday at $1.8575, down 9 cents on the week and 1.25 cents above a year ago. The barrels finished at $1.86, a penny lower, 9.50 cents below a year ago, and an inverted quarter-cent above the blocks. Sales for the week amounted to 34 cars of block and seven of barrel. May sales of block totaled 136 loads, up from 132 in April. Barrel sales totaled 53 in May, down from 66 in April.
Central cheesemakers say demand is strong from retail purchasers, but retail sales are somewhat muted. Export demand is steady. Milk was available but not as excessive last week as previous weeks. Vats are running busy schedules.
Class III milk is tighter in the West, but cheese manufacturers say it's adequate, especially with bottling demand lightening. Cheese output is steady and or in balance with demand, while others say it's outweighing demand. Demand varies from steady to stronger with respect to domestic and international buyers. European price upticks are keeping domestic prices competitive.
Butter hit $2.56 per pound last Wednesday, highest since Jan. 15, but closed last Friday at $2.5550, up 8 cents on the week, fourth week of gain, but 53.75 cents below a year ago, on 102 sales. May sales totaled 123 loads, up from 116 in April.
Cream remains readily available in the central region, but was more excessive following Memorial Day weekend. Contacts anticipate cream will decline in the coming weeks as temperatures rise. Domestic demand is meeting expectations and exports are strong, thanks to competitive U.S. prices.
Cream is seasonally decreasing in the West, but remains sufficient for both butter producers and ice cream manufacturers. New butter manufacturing capacity in the region is set to begin. Schedules vary from steady to strong.
Grade A nonfat dry milk closed last Friday at $1.2625 per pound, a quarter-cent lower but 6.75 cents above a year ago, with 13 sales put on the board. Powder sales totaled 102 in May, up from 50 in April.
The Daily Dairy Report's Sarina Sharp reported in the May 30 Milk Producers Council Newsletter, "Some cheesemakers are fortifying their vats with nonfat dry milk to maintain protein and fat ratios. And Mexican buyers are stepping up purchases, allowing U.S. prices to rise even as international values falter."
Dry whey saw its close last Friday at 58 cents per pound, up 7.50 cents, highest since Feb. 10, and 11 cents above a year ago, on 12 CME sales for the week. There were 29 total in May, down from 33 in April.
Powder and cheese pulled the June 3 Global Dairy Trade weighted average down 1.6%, following a .9% slippage on May 20. Volume climbed to 36 million pounds, up from 33.5 million on May 20. The average metric ton price fell to $4,332, down from $4,589.
GDT Cheddar was down 4.2%, after dropping 9.2% on May 20. Mozzarella was up 2.3% after inching .7% higher last time. Whole milk powder was down 3.7%, following a 1% drop, and skim milk powder was down 1.1% after slipping .7%. GDT butter was unchanged, after slipping 1.5% on May 20, while anhydrous milkfat was up 1.4%, following a .9% gain on May 20.
StoneX says the GDT 80% butterfat butter price equates to $3.4565 per pound, virtually unchanged, after losing 7.6 cents last time, and compares to CME butter which closed last Friday at a bargain $2.5550. GDT Cheddar equated to $2.1587, down 11.3 cents, after dropping 23 cents, and compares to last Friday's CME block Cheddar at $1.8575. GDT skim milk powder averaged $1.2730 per pound, down from $1.2779. Whole milk powder averaged $1.8930 per pound, down from $1.9650. CME Grade A nonfat dry milk closed last Friday at $1.2625.
In other global news, U.S. dairy exports took a hit in April, totaling 220,673 metric tons, down 2.6% from a year ago and down 10.2% from March. HighGround Dairy said, "Exports to the U.S.' top three destinations, Mexico, China and Canada, decreased year-over-year; China's decline was a substantial 27%. Slower sales of nonfat dry milk, dry whey and whey protein concentrate drove the losses, and all three categories were down on a monthly and annual basis."
Butter exports were up 86.9% from a year ago but down 19.4% from March. HighGround said, "The significant decline was primarily driven by a decrease in smaller shipments to Canada, which fell by 34% month-over-month. The U.S.' northern neighbor may have purchased more butter for shipment in February and March ahead of tariffs, and sales for April may have lessened as a result."
Cheese exports marked an all-time high in April on a 30-day adjusted basis, up 6.7%. Sailings to Mexico were up .9% from the previous year, while larger gains were seen to Japan, up 28%, and Australia, up 42%.
Return to Top of Page