Milk production is up 4.2% year over year, components are climbing and prices are falling.

As holiday orders wrap up and we head into the long winter, The Milk Check team digs into whether dairy markets have already found a floor, or if there’s still another leg down to go.

With milk products everywhere (except for whey), the Jacoby team shares where the market is and where we’re going.

They churn through:

• Butter at $1.50 and what heavy cream and higher components mean after the holidays


• Why cheese feels like a calm before the storm, and how far Class III could grind lower


• Nonfat and skim: long milk, growing inventories and buyers shopping the cheapest origin


• Why whey proteins are the outlier, with tight supply, strong demand and GLP-1 tailwinds


• Global milk growth, clustered demand (Ramadan, Chinese New Year, Super Bowl) and who blinks first between the U.S. and Europe

In this episode of The Milk Check, host Ted Jacoby III is joined by Joe Maixner, Jacob Menge, Diego Carvallo, Josh White and Mike Brown for a rapid-fire market session on butter, cheese, nonfat and proteins.

Listen now for The Milk Check’s latest market read on butter, cheese, nonfat and whey.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

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Ted Jacoby III: Welcome back, everybody, to The Milk Check podcast. Today we’re gonna have a market discussion.

It is November 10th.

We are in the last couple of weeks of the quote-unquote busy season, starting to get a feel for what we think is gonna happen to dairy markets as holiday orders are filled, and we transition into the long-term period of the year.

In the last few weeks, we’ve actually seen prices drop, but it feels like butter’s kind of dropped down to about a $1.50/lb and seems to find at least a brief floor. We’ll talk to Joe and find out if Joe thinks we’re gonna stick around here for a while. The cheese market was up in the $1.80s/lb.

It’s dropped to a little below $1.70, starting to hit a little bit of resistance. Jake will share with us a little bit about what we think is happening with cheese going forward. Nonfat dropped a little bit down to [00:01:00 ], about what Diego, about a $1.10/lb and had a little bounce off its floor. Meanwhile, the whey complex just continues to go up. We’ll check in with Josh and find out what’s going on there.

Well, let’s go ahead and start with milk production.

We just got released today, the September milk production, and it says it’s up 4.2%, which is a very, very big number. It’s November; milk is longer than it usually is this time of year. Usually, it’s quite tight, and it’s not quite tight, but I wouldn’t call it long. However, all the signs are there that once we get past the fall holiday order season, milk could get quite long. If September milk is up 4.2%, I think it’s safe to say that if that continues, we will be quite long milk as we transition from the typical seasonal tightness of the fall into the winter and the flush of the spring. 4.2% is a big number, and that’s not even taking into account the fact that the solids in the milk are up as well. That’s not the kind of tone that a dairy farmer wants us to set as we’re talking about what supply and demand looks like, but there’s a lot of milk out there, [00:02:00 ] Joe, does that mean there’s a lot of butter out there, too?

Joe Maixner: Well, there’s still a lot of butter out there; sounds like there’s going to be a lot more butter coming soon. If milk’s up 4%, cream was heavy all of last winter and into last Spring, extremely heavy.

If we have higher components, more milk, and we’ve got a full amount of milk coming outta California as well after coming off of bird flu last year, there’s just gonna be that much more cream in the system and more getting pushed back into the churns. So, it’s a very good possibility that we’re gonna go even lower than where we currently are.

Volume seems to be trading well. The cream demand has been fairly steady, going into cultured products and the shorter shelf-life products. Cream’s still long, but it’s not swimming yet.

Ted Jacoby III: Will we hold this $1.50 area through Thanksgiving, you think?

Joe Maixner: Yeah, it seems like we’ve hit a spot where buyers are willing to step in. So, there’s a good chance that we could hang around this $1.50 area for the next couple of weeks. Once the last little spurt of holiday demand is over, we’re gonna take another leg lower.

Ted Jacoby III: Okay. Jake, what about [00:03:00 ] cheese?

Jacob Menge: I think we had a little reprieve from some cheese bearishness with the holiday demand. It’s tough, though, especially with this wall of milk that’s headed our way.

Does it seem like the bottom’s ready to drop out? Probably not yet. But it still seems like it’s a possibility. It almost seems like the call before the storm.

Ted Jacoby III: What you’re saying is: we’ve already dropped quite a bit, but we’re in typical low points, but it’s possible, considering the amount of supply coming our way, that there’s still another cliff to negotiate, and we could go a lot lower when it comes to Class III milk and cheese prices.

Jacob Menge: If you zoom out a ways, going back to mid-2022, we’ve really not liked to go below that $1.55 level on futures.

We’re kind of at another support level at this $1.65. Those seem like our two support areas, historically, for the last 3, 4 years. So, it’s probably gonna be one of those grinds lower if we move lower from here, versus that $1.85 to $1.65 was almost an air pocket drop.

[00:04:00 ] It seems like the market’s gonna have to earn it if it moves lower from here, but it does seem like a possibility.

Ted Jacoby III: When we get down to these levels, this usually tends to form the floor, and if we have so much cheese out there and so much milk out there that we’re gonna go lower from here, it’s probably not an air pocket drop; it’s probably a grind lower from here.

Jacob Menge: Yeah, I think our lows, on the futures, for the past 4 years have been that $1.55. Don’t quote me on that, gimme a couple of cents on either side of that. But that means we got a dime from here to hit those five-year lows, you know, besides COVID. There’s a lot to be said for technical trading at those levels. So, it would take a big fundamental kind of wave supply to get us to crack that.

Ted Jacoby III: Got it. Thank you. Diego. What about nonfat? What’s the international market doing? We know we have a lot of milk in North America.

We have a lot of milk everywhere. And what does it mean?

Diego Carvallo: Customers are also seeing the data, and it seems like they’re in no rush to buy nonfat. Right. Nonfat seems to be the product that is 00:05:00 consistently available. We haven’t seen a very tight market in several years. So, it seems customers are more concerned about other products like WPCs or maybe cheese, other products besides nonfat. So, they’re staying very hand-to-mouth. They’re being very flexible when it comes to origin and just buying spot and from the origin that offers them the cheapest skim milk powder delivered price, which, in most cases, for the past few months, has been either European or New Zealand product because of the shipment time, transit time, and tariffs.

Ted Jacoby III: Has the inventory in the U.S. been building as a result?

Diego Carvallo: Yes, it has, Ted. Yep. Inventory has been building. I was looking into the milk production numbers for September. California was relatively stable compared to the previous year. I think we grew by 2.5% versus the previous year.

But the strong impact from avian [00:06:00 ] influenza was actually in October. So, that’s when we might see a big jump between California production for 2024 and California production for 2025. So, I thought the Milk Report was pretty bearish for nonfat. Next month could be as bearish or even more.

I still believe that we’re gonna see a lot of product going into the dryers, and that’s gonna add pressure, and that’s gonna increase inventories for U.S. products.

Ted Jacoby III: What does milk production look like in Europe?

Diego Carvallo: They’re actually up quite a bit. I think their September number was also stronger than expected. I can’t recall the exact number, but it was stronger than expected, even though they have cut down on the farmer price, the FrieslandCampina, which is the number one benchmark. It still seems like, with corn moving lower, there’s still a number that incentivizes more milk production. For the next few months until we see a stronger cotton price, we’re gonna see plenty of milk from the U.S. and from Europe.

Ted Jacoby III: [00:07:00 ] Okay, thanks. Appreciate it, Diego. Josh, so what about the protein market?

Jos