Friday Morning Dairy Market Update - Strength Expected Ahead of Spot Trading

OPENING CALLS:

Class III Milk Futures:	3 to 8 Higher
Class IV Milk Futures:	10 to 30 Higher
Butter Futures:	2 to 3 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	Mixed
Soybean Futures:	3 to 5 Higher
Soybean Meal Futures:	$2 to $3 Higher
Wheat Futures:	1 to 2 Higher

MILK:

Milk futures certainly found support in recent weeks as underlying cash came to life. Class III futures moved to the highest level since early September, with Class IV futures at the highest level since early August. This has been an incredible counter-seasonal move and one that was completely unexpected. The current fundamentals do not suggest a change in trend of this magnitude. Milk production remains strong, with dairy product production outpacing that of a year ago. We hope demand will improve significantly, but there has been no solid evidence of that.

CHEESE:

Even though the cheese price has increased, it remains relatively low and is still a good buy for those who need it to fill orders and build inventory. There may be a level at which the market will plateau, but it is uncertain when buyers will be satisfied. Cheese is readily available for demand.

BUTTER:

The high volume of unfilled bids remaining in the spot market at the close of trading on Thursday suggests further price strength Friday. Buyers seem to be leapfrogging over each other to obtain supplies, creating a buying frenzy that is bringing more buyers in from the sidelines.

Thursday Closing Dairy Market Update - Butter and Cheese Production Increases

GENERAL OVERVIEW:

It was a very strong day for Class IV futures, with the March through June contracts over $1.00 higher. Class III futures diverged with closer contracts higher and later contracts lower. December butter and cheese production was higher than a year ago, according to the Dairy Products report.

MILK:

There have been many questions as to why milk futures and spot prices are seeing substantial strength. The quick answer to that question is, "I don't know". Strong milk production and the potential for it to remain that way for a while do not support the recent price increases. Cheese inventory at the end of the year was 2% higher than a year earlier. The increase in the butter price was justifiable due to a 7% lower inventory. The December Dairy Products report showed strong cheese and butter production compared to a year ago. Caution needs to be exercised as there could be a void developing under the market. Once the current buying runs its course, the fundamentals may not support the higher prices. Hopefully, there is more to this market than is currently seen, and higher prices will be maintained.

AVERAGE CLASS III PRICES:

3 Month:	$16.91
6 Month:	$17.41
9 Month:	$17.62
12 Month:	$17.60

CHEESE:

The December Dairy Products report showed American cheese production up 6.8% from December 2024, totaling 500 million pounds. Italian-type cheese output totaled 561 million pounds, up 7.4% above the previous year. Total cheese output reached 1.28 billion pounds, up 6.7% from December 2024. Dry whey production totaled 69.8 million pounds, up 1.2%. Lactose production increased 1.5%, totaling 94.8 million pounds. Whey protein concentrate increased 3.1% to 43.6 million pounds.

BUTTER:

Butter production totaled 204 million pounds, up 2.0% above December 2024, according to the Dairy Products report. Nonfat dry milk output totaled 127 million pounds, down 2.7%. Skim milk powder output totaled 43.6 million pounds, down 15.2%. Regular ice cream production totaled 48.9 million gallons, down 5.4% from December 2024.

OUTSIDE MARKETS SUMMARY:

March corn closed up 5.50 cents per bushel at $4.3500, March soybeans closed up 20.00 cents at $11.1225, and March soybean meal closed up $7.00 per ton at $303.20. March Chicago wheat closed up 8.50 cents at $5.3525. April live cattle closed down $6.20 at $235.60. March crude oil is down $1.85 per barrel at $63.29. The Dow Jones Industrial Average is down 593 points at 48,909, with the NASDAQ down 364 points at 22,541.

Fluid Milk and Cream - Western U.S. Report 6

California milk production is trending upward. Handlers indicate January 2026 milk output is up year over year and compared to December. Open processing time in the Central Valley is hard to come by. Some plant managers note it is challenging to manage milk volumes more than a few weeks ahead of time. Spot loads are available. Stakeholders indicate calf ranches are receiving some milk loads. 

Arizona and New Mexico handlers convey farm level milk output is steady. New Mexico processors indicate road closures, unplanned downtime, and distressed milk volumes have decreased. 

Milk production in the Pacific Northwest is steady. Some manufacturers are securing additional loads of milk for their production facilities. 

Milk production in the mountain states of Idaho, Utah, and Colorado varies from steady to stronger. Although some spot milk loads are available, manufacturers indicate milk volumes are decently balanced with production capacities. Class I and II demands are steady, while Class III and IV demands vary from steady to stronger throughout the region. 

Cream loads are generally available. Demand varies from steady to stronger. Cream multiples are higher at the bottom of both ranges. Sources report no changes in condensed skim milk availability and demand.