Producer Pay Forecast: August 11, 2025

Markets have begun experiencing further volatility on the heels of new tariff headlines, stronger-than-expected cheese and butter production for June, and softer domestic dairy consumption. USDA butter and cheese production numbers may support earlier concerns that product is building as demand cools. As we know, U.S milk production was robust in June, lending to rumors that cream is readily available and butter churns are busier than expected this late in the season. Cheese capacity additions are also lifting output. The most recent CME markets saw spot cheese rally on export strength due to continued competitive U.S pricing in the global market, although U.S cheese prices inching toward the 1.90's will likely erode that advantage. Despite solid growth for butter exports, and firmer domestic butter usage, spot butter prices have eased.

Over the last week: CME spot block cheese prices climbed $0.08/lb., while spot butter fell more than $0.10/lb. over the same period. The increase in spot cheese prices has driven class III futures up $0.12/cwt, while Class IV futures prices eased with weaker spot butter and spot NFDM prices.

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What the data tells us:

U.S butter production was up 10.4% in June year-over-year (+17,463 million lbs.)

U.S cheddar production was up 8.3% in June (YoY) (+25,196 million lbs.)

U.S butter stocks were down 5.9% in June (YoY)

U.S total cheese stocks were down 0.4% in June (YoY)

The U.S milking herd grew 1.7% in June (YoY)

U.S cheese exports were up 34.5% in June (YoY)

U.S butterfat exports were up 100% in June (YoY)

U.S NFDM exports are down 11.6% YTD

Domestic butter usage is up 7% YTD

The record-breaking year-over-year export gains for June did not lead to the anticipated level of stock depletion. This, combined with higher than projected milk, butter, and cheese output for June could mean inventories are building more than seasonal norms. This may point to additional downside risk for Class III and Class IV prices. Continued export growth in the coming months is needed to support Class III  and Class IV if production continues at unseasonable levels.

August will be the first month that we will see the results of the WNY State Order taking on the FMMO changes implemented on June 1, 2025. July forecast values reflect the prices estimated under both the new FMMO rules and the current WNY State Order rules. The PPD for July 2025 has yet to be announced. Please remember, forecasted PPD's remain provisional as we gauge how the Federal Order 1 pool responds to the amendments.

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Please be encouraged to reach out to Allee with any questions, concerns, or discussion!

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