Class 3 Milk Price Projection Drops 15 Cents for 2025
Published: Friday, July 25, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Last week, I reported that the Agriculture Department raised its 2025 and 2026 milk production forecasts in the latest World Agricultural Supply and Demand Estimates based on higher cow numbers and increased output per cow.
The 2025 Class III milk price average was projected at $18.50 per hundredweight, down 15 cents from last month's estimate. The 2026 average was projected at $17.85, up a nickel from a month ago. The Class IV price is expected to average $19.05 in 2025, up 20 cents from last month's estimate, and the 2026 average was estimated at $18.60, up 40 cents.
This month's corn outlook is for smaller supplies, domestic use and ending stocks. Beginning stocks were cut 25 million bushels to 1.3 billion, reflecting an increase in exports that is partly offset by lower feed and residual use. Feed and residual use is down 75 million based on indicated disappearance in the June 30 Grain Stocks report. Exports were raised 100 million bushels to 2.8 billion based on current outstanding sales and, if realized, would be record high, says USDA.
Corn production for 2025-26 was estimated at 15.7 billion bushels, down 115 million bushels on lower planted and harvested area. The yield was unchanged at 181 bushels per acre. Total use was cut 50 million bushels with a reduction for feed and residual use based on lower supplies. With supply falling more than use, ending stocks are down 90 million bushels. The season-average farm price was unchanged at $4.20 per bushel.
Soybean production was projected at 4.3 billion bushels, down 5 million from last month on lower harvested acres and an unchanged yield of 52.5 bushels per acre. The crush was raised 50 million bushels to 2.54 billion, supported by higher demand for soybean oil for biofuel. Exports were lowered 70 million bushels to 1.75 billion. The U.S. season-average soybean price was projected at $10.10 per bushel, down 15 cents from last month.
StoneX reported, "Corn exports have been strong to-date. However, we export a lot of ethanol to Canada that will be impacted by the new tariffs Trump has put in place. The U.S.-Mexico border has also been closed for cattle trade with New World Screwworm reemerging in Mexico. Those cattle are going to still need to be fed, but it will be across the border now, which should help boost exports."
The latest slaughter report showed 40,200 dairy cows culled the week ending July 5, down 4,900 from the previous week and even with a year ago. Year to date, 1,328,100 were sent to slaughter, down 100,800, or 7.1%, from a year ago.
The USDA's latest Dairy Supply and Utilization report had encouraging news as May cheese use hit 1.26 billion pounds, up 1.2% from May 2024 and moved into the top five all-time utilization numbers, according to HighGround Dairy. "Other than American cheese exports set a record, and international usage for the month ranked No. 3 in the data back to 2011 (on a 30-day basis)."
Butter disappearance, at 193.2 million pounds, was down 3.6%, after marking a record-high April. Domestic consumption waned post the Easter holiday, explains HGD, however, exports climbed to 11.6 million pounds, up 132% as international buyers took advantage of cheap U.S. product along with a weak U.S. dollar.
Nonfat and skim milk powder use totaled 229.7 million pounds, up 10.9% from a year ago, first time to top year ago numbers since January 2024. HighGround credited elevated domestic and international demand.
Dry whey utilization, at 69.5 million pounds, dropped 10%, due to the loss of exports to China which were down 67%. "Tariff troubles began early in the year, and May's sales were likely booked in February, when the issues were escalating," said HGD.
Fluid milk sales looked a little better. USDA's latest data showed May packaged sales at 3.6 billion pounds, down .9% from May 2024, but that followed a 1.8% drop in April. Conventional sales totaled 3.3 billion, off .7%. Organic sales, at 252 million, were down 4% from a year ago.
CME block Cheddar closed last Friday at $1.6425 per pound, down 1.75 cents on the week, and 22.25 cents below a year ago. The barrels finished at $1.66, down 1.50 cents, 25.25 cents below a year ago, and an inverted 1.75 cents above the blocks. Sales totaled 36 loads of block on the week and one of barrel.
StoneX July 18 Early Morning Update stated, "We've had 26 consecutive days of trades for CME blocks. The previous record since 2011 was 31 consecutive days set back in Sept./Oct./Nov. of 2019."
Mild temperatures in the Midwest contributed to a slight uptick in milk output, according to Dairy Market News, but remains down from June. Downtime at some plants enabled others to obtain spot milk at lower prices. Retail cheese sales were steady, food service was light, but export demand is strong.
Cheese production is steady in the West though some plants reported declining milk flows. Export demand is keeping inventories for some varieties tighter. Retail sales are steady, food service sales are light and down from a year ago.
Cash butter saw the week end at $2.5125 per pound, 7.75 cents lower and 56.25 cents below a year ago, with only seven sales put on the board for the week.
Milk components continue to decline throughout most of the Central region, but mild temperatures in recent weeks were improving cow comfort, leading to an uptick in milk output and components. Ice cream makers are purchasing significant volumes of cream. Retail butter demand is steady, but some say interest is down from last year. Food service butter demand is light. Export demand remains strong due to bargain U.S. prices.
Declining milk output in the West is contributing to reduced cream production. Multiples at mid-week were are up slightly. Butter makers were running steady output. Domestic demand is steady. Retail sales are up but food service sales are down. Strong export demand is keeping inventories from growing, says DMN.
Grade A nonfat dry milk got a little support from the GDT last week as well as some Mexican demand, and closed last Friday at $1.29 per pound, up 2.25 cents on the week, highest since Feb. 13, and 9.25 cents above a year ago, with 28 sales.
StoneX broker Dave Kurzawski said in the July 21 Dairy Radio Now broadcast, "There's so much in flux right now with tariffs being on again, off again." He said Mexican buyers may be front-loading purchases until the situation is resolved. He adds that domestic disappearance has been good on powder as well.
New plants are adding cheese and when asked if exports will keep up with the supply, he said, if U.S. prices stay at $1.70 or below, exports will remain strong as U.S. cheese has the lowest price globally. The big question is demand. Domestic demand has been "stable at best," he concluded, "But we don't have a huge overhang of stocks. We haven't had a chance to build those up."
Speaking of tariffs, President Trump is reportedly sending letters to over 150 countries notifying them that their tariff rates could be 10% or 15%.
Dry whey closed the week at 55.75 cents per pound, down a penny, but 4 cents above a year ago. There were five CME sales for the week.
The July 14 Daily Dairy Report said, "The Mexican government announced plans to spend 83.8 billion pesos ($4.1 billion) over the next five years to boost domestic milk production 13% by 2030. Amid uncertain trade relationships and complaints of food inflation, Mexico's Ministry of Agriculture and Rural Development hopes milk production growth will replace 30% of current milk powder imports.
"The ministry will offer subsidies, technical assistance and infrastructure upgrades to the 97% of Mexican producers who run small and medium-sized operations and provide funding to reopen and modernize processing facilities."
Mexico is the U.S. No. 1 dairy customer, but it remains to be seen how successful this venture will be. The effort could mean lower exports ahead. The DDR points out Mexico accounted for more than half of U.S. milk powder exports and more than one-third of cheese exports in 2023 and 2024, and "The past three years Mexico consumed more U.S. milk powder than the U.S. used domestically."
"Dairy margins fell in the first half of July as building cheese and milk supplies more than outweighed a fall in feed costs," according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
"New cheese processing capacity is drawing heavily on the growing milk supply," the MW stated. "The latest cash cheese prices have fallen from a high scored in late May and are 12% below a year ago. Cash butter prices continue to steadily climb higher but remain nearly 19% below this point a year ago."
The MW reported highlights from the WASDE and concluded, "From a feed perspective, corn prices fell as the market digests the prospect of a record large crop. All eyes are on yield updated in next month's WASDE. Soybean meal continues to fall to new contract lows as increased soybean oil used for biofuel in 2025-26 resulting from EPA's significantly increased mandate and additional policy incentives are expected to keep supply plentiful in the near term."
Return to Top of Page