The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The July Class III benchmark milk price took a tumble, dropping to $17.32 per hundredweight, down $1.50 from June, a whopping $2.47 below July 2024, and the lowest level since April 2024. It put the seven-month average at $18.76, up from $17.33 a year ago, and $16.95 in 2023.
Last Friday morning, Class III futures portended an August price at $17.18; September, $17.71; October, $18.10; November, $18.26; and December $18.15.
The July Class IV price is $18.89, up 59 cents from June, but $2.42 below a year ago. Its seven-month average stands at $18.87, down from $20.33 a year ago, and compares to $18.55 in 2023.
Speaking in the Aug. 4 Dairy Radio Now program, StoneX broker Dave Kurzawski cited the growing milk supply as the dominant factor for the decline. Domestic dairy demand has been basically flat, he said, while exports are good, especially for cheese. Butter has better domestic demand and nonfat dry milk has been "wonky."
The good news is that the economy is doing pretty good, he said, and we have trade deals getting done and that could be a buoyant factor going into the bigger demand time period in the fall.
When asked if any of the trade agreements stood out as strong for dairy, he said no. However, as more deals are made, pressure mounts on the other countries to complete one, including China. We're moving in the right direction, he concluded, perhaps the most important ones for dairy are those with Mexico and Canada.
Meanwhile, to the chagrin of President Trump and no one's surprise, the Federal Reserve left interest rates unchanged last week. And, as the president's Aug. 1 tariff deadline approached, Trump announced a new trade agreement with the EU. EU goods will face a 15% tariff rate, with some exemptions, and the EU agreed to purchase $750 billion of energy and invest $600 billion more in the U.S.
Officials from the U.S. and China resumed negotiations in Sweden last Monday. An agreement was made with South Korea. Talks with India were not successful. Mexico was given another 90 days to reach an agreement but, Trump threatened a 35% tariff on Canadian imports not covered by the U.S.-Mexico-Canada trade agreement, because of its recognition of Palestinian statehood.
Back home, June butter stocks remained below those a year ago while cheese was slightly higher, according to the latest Cold Storage report. Strong exports and perhaps some good domestic demand kept product out of the cooler.
The June 30 butter inventory slipped to 354.5 million pounds, down 10.2 million pounds, or 2.8%, from May, and down 22.4 million, or 5.9%, from June 2024. May stocks were revised up 3.1 million pounds.
American-type cheese stocks slipped to 805.1 million pounds, down 2.6 million, or .3%, from the May level, but were up 3.6 million, or .4%, from a year ago.
The "other" cheese category holdings climbed to 584.1 million pounds, up 5 million pounds, or .9%, from May, but down 9.2 million, or 1.6%, from a year ago. The May total was revised down 3.2 million pounds.
June's total cheese inventory stood at 1.41 billion pounds, up just 2.6 million pounds, or .2%, from May, but down 5.1 million, or .4%, from a year ago. The May total was revised down by 3.1 million pounds. Cheese stocks typically decline from May to June, but they grew this year as increased supply from new plants coming on line stayed ahead of demand.
CME block Cheddar closed last Friday at $1.7050 per pound, up 6.50 cents on the week, highest since June 30, but 14.50 cents below a year ago. The barrels finished at $1.71, 8.50 cents higher, but 22 cents below a year ago. There were 38 sales of block on the week and 130 for the month of July, down from 178 in June. Barrel sales totaled five for the week and 21 for July down from 33 in June.
Central region milk output is seasonally declining, reports Dairy Market News, but some producers in the Midwest say cool overnight temperatures are keeping milk volumes somewhat steady. Class III prices mid-week ranged $3-under to $1-over. Spot volumes are tightening, though some plants say milk was available due to downtime at nearby facilities. Cheese production is steady to lighter.
Milk output is keeping up with contractual needs in the West, according to cheesemakers, but demand is steady. Domestic demand is lighter. Export demand is steady to stronger, according to DMN.
Butter started the week with a 3.50 cent jump to $2.50 per pound, but the rally was short lived and it closed last Friday at $2.4450, down 2 cents on the week, and 66 cents below a year ago. There were 11 sales for the week and 64 for the month, down from 286 in June.
Milk production and component levels are declining seasonally in the Central region, contributing to lighter cream production. Demand for cream from ice cream makers is declining, leaving a greater volume for steady butter output. Food service sales are down while export demand remains strong, says DMN.
Fat components in milk are decreasing in the West and milk output is seasonally lower, but contractual cream to butter manufacturers was being filled. Spot loads are tighter and multiples were rising. In a few cases, churns were quiet for much of third quarter due to equipment replacement. Others were running heavily but not at capacity. Some cite prices for spot cream as the reason. Domestic butter demand is steady to lighter. Exports steady to strong, according to DMN.
Grade A powder hit $1.2925 per pound last Monday but saw its Friday finish at $1.2875, unchanged on the week, and 4.75 cents above a year ago, with 13 sales on the week and 90 for the month, up from 32 in June.
StoneX says Mexican buyers have stepped back a bit after some buying in early July. "A stronger U.S. dollar and the potential of a weaker GDT would put short-term pressure on nonfat prices," StoneX warned.
Dry whey finished the week at 55 cents per pound, up a penny, but 6 cents below a year ago, with 10 CME sales reported on the week.
Lower corn and alfalfa prices resulted in the June milk-feed-price ratio heading back up, ending fourth months of decline. The Ag Prices report shows the June ratio at 2.34, up from 2.24 in March, and compares to 2.36 in June 2024.
The All-Milk Price averaged $21.30 per hundredweight with a 4.19% butterfat test, unchanged from the May price which had a 4.24 test, and compares to $22.80 in June 2024, with a 4.10% test.
The national corn price averaged $4.47 per bushel, down 17 cents from May, and a penny below a year ago. Soybeans averaged $10.40 per bushel, unchanged from May, but $1.40 below a year ago. Alfalfa hay averaged $177 per ton, down $14 from May, and $18 below a year ago.
The June average cull price for beef and dairy combined was at $150 per hundredweight, up $3 from May, $12 above June 2024, and $78.40 above the 2011 base average. Quarterly milk cow replacements averaged $3,010 per head in July, up $140 from April, and $650 above July 2024. Cows averaged $2,900 per head in California, up $200 from April, and $800 above a year ago. Wisconsin's average, at $3,290 per head, was up $160 from April, and $640 above July 2024.
Milk production margins moved higher for the second month in a row and remained at historically high levels with a 44 cent per hundredweight gain above May, says dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo. "Income over feed costs in June were above the $8 per hundredweight level needed for steady to higher milk production for the 20th month in a row. Input prices were mostly lower in June with one of the three input commodities inside of the top 10 for June all-time.
"Feed costs were the 10th highest ever for the month of June and decreased 44 cents per hundredweight from May, The June All-Milk price stayed in the top 10 for the month, at the fourth highest ever for the month.
"Milk income over feed costs for 2025 (using July 31 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.99 per hundredweight, a loss of 13 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 40 cents per hundredweight from 2024's level.
"Milk income over feed costs for 2026 are expected to be $12.93 per hundredweight, a loss of 6 cents per hundredweight versus 2025. Income over feed costs would be above the level needed to maintain or grow milk production and up 41 cents versus the previous month," Brooks concluded.
Meanwhile, the July 25 Daily Dairy Report stated, "On July 1, 3.5 million heifers were available for milk-cow replacement, the lowest midyear total since USDA began estimating heifer counts in 1989. The agency did not publish its semi-annual cattle inventory report in 2024 due to budget cuts, so year-over-year comparisons were not unavailable. However, in July 2023, USDA pegged the inventory of dairy heifers weighing 500 pounds or more at 3.65 million head, the lowest count since 2004. In today's report, USDA revised its July 2023 estimate downward to 3.5 million head. So, while the agency's revised figures show no change in dairy heifer inventories in the most recent 24 months, USDA's estimate is much lower than it was two years ago," according to the DDR.
The USDA's latest weekly slaughter report showed 51,100 dairy cows were sent to slaughter the week ending July 19, up 1,700 from the previous week, but down 1,100, or 2.1%, from a year ago. Year to date, 1,428,600 head had been culled, down 105,000 head, or 6.8%, from a year ago.