In this week’s episode of The Milk Check, the Jacoby team convenes to dissect a dairy market that feels balanced – barely.

From milk still trickling in past the flush to range-bound commodity prices, this episode covers the major trends shaping the back half of 2025.

• Cheese exports are keeping Class III in check


• Culling numbers are down as producers are keeping heifers longer


• Global butterfat advantage fading with tighter GDT spreads


• WPC, WPI demand stable, but new production capacity looms

And what if prices fall off the edge? From trade risks to recession fears, the industry feels one light push from price chaos.

Listen now for insights on margins, milk flows and market forces.

Got questions?

Got questions for The Milk Check team? We’ve got answers. Submit your questions below and we’d be happy to get back to you or answer your question on the podcast.

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Intro (with music):

Welcome to The Milk Check, a podcast from TC Jacoby & Co., where we share market insights and analysis with dairy farmers in mind.

Ted Jacoby III:

Hello everybody, and welcome to this month’s version of The Milk Check podcast by TC Jacoby & Co. This week, we will have a classic market discussion. It is June 9th, so we’re approaching the midpoint in the month of June 2025, and joining me today are Diego Carvallo, our Director of Dry Dairy Ingredients Trading. Jacob Menge is our vice president of risk management and trading strategy. Josh White, our Vice President of Dairy Ingredients. Mike Brown, our VP of Market Intelligence. Joe Maixner, our director of dairy ingredients and resident butter expert, is also there.

I think we’ll go ahead and start with milk. It’s the middle of June. We’re past the flush, but milk is probably a little bit heavier than we expected. Milk production has been up. We know what is going on. The dairy farmers are making money, and they’re keeping cows. Their culling numbers are down, and so we’re seeing cow numbers up, maybe a little bit surprisingly, given what we know about the heifer replacement numbers, which means they’re keeping them for an extra lactation, that is keeping milk solids output maybe a little bit lower than we expected. But the solids are still up as well. So as a result, we’re seeing milk still on the long side, not too much out of what is normal for this time of year, and I wouldn’t be surprised as the weather in the upper Midwest starts to heat up, we start to see that milk production drop off a little bit and everything get a little bit tighter. We just haven’t quite reached that high temperature yet.

And so that’s what we’re seeing in milk. Jake, how does that translate into cheese? What are we seeing in the cheese market right now?

Jacob Menge:

It’s funny, I think from the last time we had a market discussion to today, the message will be very similar, which is a lot of mixed signals on the cheese side. You can talk to certain people who say, Hey, our orders are way down. And then you might talk to somebody else, saying, Hey, our orders look pretty good, meaning the demand is there. I think it’s a bit of a tale of two cities regarding how exposed you are to the export market.

Exports have been the thing that has been keeping us afloat on the cheese side. I think domestically, we’re not doing great. I would say that the prices that we’ve been seeing, this kind of upper 190s, mid to upper 190s, we’ve come off in the past week or two, but I think that mid to upper 190s did hurt demand on the export side. I think that’s kind of where we’re at. I would say good, not great. It just seems like we’re going to be range bound a bit on the cheese market just given this kind of pendulum swing of our prices move too high, which kills exports a little bit, but if we go down even just a little bit, you think the export market comes back in, so that’s the feel we’ve got right now.

Ted Jacoby III:

How is the dollar affecting exports?

Jacob Menge:

Yeah, I think it’s helped certainly. That is probably the biggest risk to hurting exports going forward, but we don’t have a particularly strong dollar. I wouldn’t say we’ve a particularly weak dollar, but yeah, I would say that has been a catalyst, if anything. If I had to pick a direction of whether it could hurt or help exports moving forward, I would say if the dollar strengthens, it’s much more likely to harm our exports than the dollar weakening further in helping.

Ted Jacoby III:

So, Mike, I have a question for you. You’ve been looking at some of our milk production numbers lately. Have we been seeing milk move from class four to class three with these new cheese plants, or even though we’ve built some of these new cheese plants, are we still seeing milk production remain in class four?

Mike Brown:

Well, more of it’s remained in class four I think, than some of us expected because some of the startups have been slower than expected, so you still have some class four plants, particularly in the south central US that are balancing some of that market. So I think that the opportunity to move more milk into cheese than we currently have exists. So much of this key is exports, and one thing we did see last week with the GDT is we saw how the spread between US and world cheddar prices get a little tighter, which makes me a little nervous about exports moving forward, but we have the opportunity to move more milk into cheese and that milk is basically ready to move into cheese when those plants demand it from what I’m understanding, talking to some of my powder friends in the Southwest.

I think that there is still some opportunity for that to happen. We’ve also seen the spread between three and four has remained relatively tight compared to some recent years, which means that the incentive to move milk one way or the other isn’t maybe quite as great. It will be demand-driven and in my mind, those cheese exports going to keep that milk moving into the cheese plants, because they have been the key to the growth of cheese sales.

Ted Jacoby III:

Thanks, Mike. So, Diego, on the other side of the coin, non-fat and our powder market, is there any reason to see powder prices strengthening in a way that would pull some of that milk away from cheese?

Diego Carvallo:

I doubt it, Ted, because of the investment and the medium—and long-term plans these companies have for those new facilities. My expectation is that milk will be pulled from class four.

Ted Jacoby III:

So, as milk tightens up, would you expect that the class four plants will lose milk and that the cheese plants will keep it?

Diego Carvallo:

Yeah, there’s going to be exceptions, but I think that’s a general rule.

Ted Jacoby III:

Okay. Have we seen any pickup or any strengthening of international demand for non-fat and skim milk powder?

Diego Carvallo:

Not right now, and it’s because Europe is significantly more competitive than the US, but whenever we see Europe, the market tightening up, we will probably see a market that could move higher fast. At the current moment, the Europeans are the most aggressive in Asia, and at the same time, demand hasn’t really picked up, so for that reason, we have been range-bound for the longest time.

Ted Jacoby III:

Joe, if we’re making skim milk powder, that means we’re usually making either butter or cream and the butter fat market in the US been the talk of the year with cream multiples getting down into the 70s earlier in the year. We’ve been having a fair amount of butter exports. What do you think this butter market’s going to do going forward?

Joe Maixner:

Well, I think we’re going to continue to have exports and we’re continuing to penetrate new markets with multiple products. It’s not just 82% anymore that a lot of these markets are taking. They’re taking 80%. AMF has been extremely strong in the export markets. As long as cream continues to be readily available, which it has been for the entire first half of this year, we’ll continue to be a player in the world market. That coupled with the massive discount from the rest of the world.

Ted Jacoby III:

So what would you expect the butter price to do? Are we going to stay right around here or you think we’ll get higher or are we going to have one of those classic years where everything stays right around here, but we have this one, two week spike sometime in September?

Joe Maixner:

It’s a hard question to answer, Ted. I think we’re probably looking at more of a traditional year only because of the amount of exports that we’re able to put on the books. Otherwise, I think that we would be significantly more flush with inventories because domestic demand has been good, but it hasn’t been great. I think that if we can continue to get product out of the country, we should have a relatively stable butter price.

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