Friday Midday Dairy Market Summary - Cheese Lower as Cheddar Blocks Fall Sharply

OUTSIDE MARKETS SUMMARY:

CORN:	1 Lower
SOYBEANS:	6 Higher
SOYBEAN MEAL:	$0.25 Lower
LIVE CATTLE:	$1.125 Lower
DOW JONES:	478 Points Lower
NASDAQ:	802 Point Lower
CRUDE OIL:	$2.71 Higher

MIDDAY MARKET UPDATE:

The block cheese price decreased by 13.75 cents to close at $1.5975 with three loads traded. There were two bids and two offers left at the close. The barrel cheese price was unchanged at $1.7250 with no loads traded. Dry whey increased by 2 cents closing at 84.0 cents with two loads traded. Class III futures are 8 to 29 cents lower. The butter price increased by 3.75 cents, closing at $1.3575 with 11 loads traded. Grade A nonfat dry milk increased 2.5 cents to close at $2.1125 with no loads traded. There were 10 bids and five offers left at the close. Class IV futures have not yet traded Friday. Butter futures are 0.1 to 2.2 cents higher. Dry whey futures are 0.125 to 0.875 cents lower. Cheese futures are 0.6 to 2.3 cents lower. Nonfat dry milk futures are 2.85 to 4.25 cents higher with expanded 8 cent limits Friday.

Fluid Milk and Cream - Western U.S. Report 44

In California, milk production is strong, with some reporting coops are not able to accept all the milk from handlers. Stakeholders note stronger-than-normal spot milk demand this week. According to the National Agricultural Statistics Service (NASS), in September 2026 milk production in California was stable year over year. Federal milk market order data shows producer butterfat tests increasing, rising from an average of 4.21 percent between September 2024 and September 2025 to an average of 4.25 percent between September 2025 and September 2026. 

Farm-level milk output is also stronger in New Mexico and Arizona. Some downtime at a Southwest cheese facility diverted milk to balancing plants this week. In contrast to other regions, September 2026 milk production in Arizona was reported down 4.9 percent year over year, totaling 350 million pounds. Regional contacts report herd sizes are being maintained and expected to remain stable into 2027. 

In the Pacific Northwest, milk production is steady. Additional farms in Washington reported positive Highly Pathogenic Avian Influenza (HPAI) tests in dairy cows. Producers are working closely with veterinary experts and regulatory agencies to ensure effective biosecurity measures to limit further transmission. No impact on overall milk output or availability is reported at this time. The Mountain States report balanced farm-level output. According to the latest NASS report, September 2026 milk production in Idaho increased 3.2 percent from September 2025. Idaho stakeholders indicate handlers plan to add cows and expand facilities in 2027. 

Holiday production is shifting demand across all classes. Class I eggnog demand is growing. Class II demand is increasing with stronger heavy cream and half-and-half sales. Class III production is moving towards cream cheese and Class IV butter demand is showing an uptick over the past week. Cream availability varies by region. Higher cream demand is reported in Arizona where spot supplies are minimal. Cream availability in California continues to improve week over week and Idaho reports plentiful supplies. Cream multiples moved slightly higher at the top of both regional ranges. Demand for condensed skim milk strengthened this week, highlighting limited availability.

Friday Morning Dairy Market Update - USDA to Announce Agricultural Prices

OPENING CALLS:

Class III Milk Futures:	Mixed
Class IV Milk Futures:	Mixed
Butter Futures:	0.5 to 1 Higher

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	1 to 2 Lower
Soybean Futures:	1 to 3 Lower
Soybean Meal Futures:	$1.00 to $1.30 Lower
Wheat Futures:	2 to 4 Higher

MILK:

Thursday's divergence from weak nearby trade and supportive buying in the deferred contracts shows the market's confidence in demand coming as we enter the new year. USDA's announcement to purchase $165.5 million in dairy products produced in America as well as many other commodities for a total investment of $472.5 million. The last time we had a program like this was from May 2020 through May 2021. It helped boost low prices coming out of COVID at that time. While this program is a much smaller investment, it should help with more dairy utilization.

CHEESE:

Cheese prices came under pressure on Thursday as it seemed like every other product found strength in the cash market, yet cheese traded lower for the first time this week. Futures saw weakness in the front months while the deferred contracts traded higher by the end of the day. Cheese futures are trading slightly higher this morning with both the October and November showing 0.1-0.2 cent gains. The deferred contracts have not yet been traded.

BUTTER:

Butter traded higher Thursday, gaining strength after a 3.5 cent higher spot market close. Butter has not yet traded on the overnights, but the market expects some follow through strength after Thursday. Butter was not called out as one of the dairy products to be purchased in USDA's announcement Thursday; however, there is speculation that it will be included.