Key Takeaways:
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Never underestimate the American farmer’s ability to make more milk! US milk production was up 3.4% in July, with components climbing even higher. The result has been stronger output of butter and cheese, with butterfat in particular weighing on milk prices. International markets are also flush with milk, and prices globally are beginning to weaken. As the gap between US and international values narrows, especially for cheese, exports could face challenges ahead, adding further pressure to butter and cheese values.
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While milk prices seem to be in freefall, feed costs remain low, providing some relief to farmers. USDA’s September WASDE report projected reduced yields but higher harvested acres for both corn and soybeans. As farmers begin harvest, upcoming weather and crop reports will be critical in shaping the market outlook over the next month.
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Although the milk price outlook has deteriorated substantially from a month ago, low feed costs and historically strong beef values are helping to support margins. With feeder cattle futures currently historically elevated, HighGround estimates cull cows and beef-on-dairy calves could contribute more than $4.00/cwt in added revenue over the next year. Further, producers who have been proactively managing their margins and monitoring the markets likely have strong milk positions for Q3 and Q4 2025, which could help cushion profitability. HighGround continues to encourage producers to remain proactive, with tools like LRP and cash feed contracts offering valuable protection to offset weaker milk prices in the months ahead.
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