August Brings Lower Milk Prices, Cooler Temperatures
Published: Friday, September 12, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The August federal order Class III milk price was announced by the USDA at $17.24 per hundredweight, down 8 cents from July, $3.42 below a year ago, and the lowest Class III since April 2024. The eight-month average stands at $18.57, up from $17.75 a year ago and $16.98 in 2023.
Last Friday morning, Class III futures portend September at $17.64; October, $16.87; November, $16.84; December, $17.15; and January 2026 at $17.13.
The August Class IV price is $18.50, down 39 cents from July, and $3.08 below a year ago. Its average stands at $18.82, down from $ 20.49 a year ago, and compares to $18.59 in 2023.
The U.S. Court of Appeals for the Federal Circuit ruled Aug. 29 that President Trump overstepped his presidential authority with tariffs on every country. Trump has appealed the ruling to the U.S. Supreme Court.
The National Milk Producers Federation says the ruling leaves most tariffs in effect until Oct. 14, allowing for an appeal. Meanwhile, Congress returned last week from its August recess and faces tough issues, including a funding bill that must be passed by Sept. 30 to avoid a government shutdown.
The markets were closed last Monday for the Labor Day holiday. CME block Cheddar closed last Friday at $1.69 per pound, down 8.50 cents on the shortened week, as traders anticipated the afternoon's July Dairy Products report. That's the lowest block price in four weeks and 58 cents below a year ago when it was trading at $2.27. The barrels closed at $1.70, 8 cents lower, 57.50 cents below a year ago, and a penny above the blocks. Trades totaled 21 loads of block and one of barrel.
Dairy Market News reports that cool weather in the upper Midwest was contributing to increased cow comfort and improved milk output while output was steady to lighter in the southern portion. The long holiday weekend contributed to increased spot milk availability and mid-week prices ranged $3-under to $1.50 over class. The holiday weekend also contributed to lighter cheese production, but plant managers said they would run busy schedules the rest of the week.
Bottling demand has picked up in the West, but spot milk was available and adequately meeting the needs of cheesemakers. Cheese output was steady and some manufacturers reported tight September availability for spot loads.
Butter sunk to $2.0125 per pound last Tuesday, lowest CME price since Dec. 3, 2021, but closed last Friday at $2.0225, 2.25 cents lower on the week, ninth consecutive week of decline, and $1.1525 below a year ago, on five sales.
Cooler temperatures in the Upper Midwest contributed to increased milk output and higher components, according to DMN. Cream was plentiful. Down time at some facilities over the long weekend enabled them to purchase cream at lower multiples and churns were spinning. Domestic butter demand is steady but some contacts say sales are lackluster. Export demand for 82% butterfat product is strong but production of it was lagging demand and inventories are tight.
Western butter manufacturers said spot cream is more than ample and demand is mixed. Some were not bringing in any additional cream beyond contractual intakes, despite their churns running under 100% capacity, says DMN.
Grade A nonfat dry milk fell to a Friday finish at $1.22 per pound, down 4 cents on the week, lowest since May 14, and 14.50 cents below a year ago. There were 12 CME sales on the week.
Dry whey closed last Friday at 56.50 cents per pound, a half-cent lower and 2.25 cents below a year ago, with no trades for the week.
Dairy margins deteriorated in the last half of August as milk prices declined while feed costs were mixed, with corn prices increasing and soybean meal prices decreasing, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. The MW stated, "A significant increase in milk output and a larger dairy milking herd revealed in the USDA's August Milk Production report was bearish, although not unexpected."
Milk futures succumbed to pressure from weaker dairy product prices, the MW stated. "Cash butter slumped 17% during the month of August despite lower inventories indicated in the latest Cold Storage report." "Butter prices have declined to their lowest values since late 2021, and while both domestic demand and exports year-to-date have been robust, higher components and increasing butterfat tests will likely keep building supply with more milk," the MW warned.
Cheese inventories at the end of July totaled 1.416 billion pounds, up .9% from last year with American-style cheese stocks up 2.1% from 2024 to 808.286 million, reflecting a large increase in Cheddar output recently, the MW concluded.
Meanwhile, lower corn, soybean and alfalfa prices offset a lower All-Milk Price to nudge the July milk feed price ratio higher. The latest Ag Prices report showed the July ratio at 2.36, up from 2.34 in June, but that compares to 2.50 in July 2024. The index is based on the current milk price in relationship to feed prices for a ration consisting of 51% corn, 8% soybeans and 41% alfalfa hay. One pound of milk would purchase 2.36 pounds of dairy feed of that blend.
The All-Milk Price averaged $20.80 per hundredweight with a 4.13% butterfat test, down 50 cents from June, which had a 4.19% test, and compares to $22.80 in July 2024, with a 4.07% test.
The national corn price averaged $4.29 per bushel, down 18 cents from May, following a 17 cent drop in June, but is 6 cents above a year ago. Soybeans averaged $10.20 per bushel, down 20 cents from June, and $1.10 per bushel below a year ago. Alfalfa hay averaged $173 per ton, down $4 from June, and $10 below a year ago.
The July average cull price for beef and dairy combined hit $157 per hundredweight, up $7 from June, $15 above July 2024, and $85.40 above the 2011 base average.
Beef and cattle prices remain at all-time highs as the supply has fallen to multi-year lows, as I reported last week. The news is good for dairy producers. The Aug. 29 Daily Dairy Report said, "The significant increase in beef incomes leave dairy producers less exposed to margin pressures from lower milk prices. This means that milk prices must fall to exceptionally low levels before financial strain begins to reduce U.S. milk output."
"Milk production margins decreased for the second month in the past three but remained at historically high levels with a 22 cent per hundredweight loss from June," said dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo.
"Income over feed costs in July were above the $8 per hundredweight level needed for steady to higher milk production for the 21st month in a row," according to Brooks. "Input prices were lower in July with one of the three input commodities inside of the top 10 for July all-time. Feed costs were the 10th highest ever for the month of July and decreased 28 cents per hundredweight from June. The ratio was above the five-year average for the 17th month in a row," he said.
"Milk income over feed costs for 2025 (using Aug. 29 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $12.87 per hundredweight, a loss of 12 cents per hundredweight versus last month's estimate. Income over feed would be above the level needed to maintain or grow milk production, and down 52 cents per hundredweight from 2024's level."
"Looking at 2026, milk income over feed costs are expected to be $12.77 per hundredweight, a loss of 10 cents per hundredweight versus 2025," according to Brooks. Income over feed costs would be above the level needed to maintain or grow milk output and down 16 cents versus the previous month, Brooks concludes.
Checking slaughter numbers, the weekly update showed 51,300 head were culled in the week ending Aug. 23, down 300 from the previous week, and 200 head, or .4%, below a year ago. Year to date, 1,685,400 cows had exited the dairy business, down 106,800 head, or 6%, from a year ago.
Best news last week perhaps were USDA's latest export numbers. July dairy exports totaled 248,607 metric tons, up 9.6% from July 2024, but down 2.7% from June. HighGround Dairy said, "July's sales were likely booked in the April/May timeframe when tariffs were being rolled out and negotiations were taking place. While values backed off month over month, they are quite robust, and in the top 10 months since 2020. Furthermore, these big values indicate that the U.S. discount to global competitors continues to drive international interest."
Shipments to Mexico and China grew 3% and 1%, respectively, from a year ago. Mexico's total of 68,376 MT was the fourth-highest all-time, says HGD. Australia, while not a huge export market for the U.S., ranked ninth, as sailings of 7,526 metric ton were up 145% and a record high, according to HighGround.
Cheese exports totaled 114.9 million pounds, up 29.3% from a year ago, with Mexico the top destination country. Butter sailings amounted to 18.5 million pounds, up 206.4% and the highest since March 2013. Canada continued to be the No. 1 destination but shipments surged to Australia, according to HGD, and increased to the Netherlands as nontraditional buyers of U.S. butter took advantage of the U.S. lower prices.
Nonfat and skim milk powder exports totaled 131.9 million pounds, down 15.7%, but dry whey, at 36 million pounds, was up 18.6% from a year ago.
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