The USDA announced the May Federal order Class III milk price at $18.57 per hundredweight (cwt.), up $1.09 from April, and 2 cents above May 2024. That put the five-month average at $19.04, up from $16.33 a year ago, and compares to $17.99 in 2023. Wednesday’s futures portended a June price at $18.71 and a peak of $19.26 in September before heading back down.

The May Class IV price is $18.13, up 21 cents from April, but 2.37 below a year ago. Its five-month average stands at $18.98, down from $19.99 a year ago, and compares to $18.66 in 2023.

Federal market order reform changes go into effect in June and, as StoneX put it: “For the first time in modern history the barrel cheese price will have no impact on the National Dairy Product Sales Report weekly/monthly pricing. With a flip of the calendar, the Cheese futures contract is now a block cheese futures contract.”

The May 30 Daily Dairy Report says the changes also included increased make allowances for processors and a return to the “higher of” Class III or IV milk price for Class I values. “Bottlers will pay producers based on updated geographic premiums, known as ‘location differentials’ meant to adjust for regional imbalances in the supply and demand of fresh milk. The new Class III formula will also assume that processors recover 91 percent of the butterfat in milk through the cheese making process, up from 90 percent previously,” according to the DDR.

“Milk pricing formulas will change once again in December,” the DDR adds, “When standardized component levels rise to better reflect the massive increase in butterfat, protein, and milk solids levels in the U.S. milk.”

Speaking in the June 9 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said the impact of the changes on dairy producers will be on a case-by-case basis, depending on location. The factor he’s most interested in is the impact of the removal of the barrel cheese price from the milk price equation. Barrel will still be traded, he said, but will its removal impact CME trading?

Meanwhile, dairy margins were flat to slightly stronger over the last half of May as movements in the milk and feed markets were largely offsetting, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. “The milk market continues to recover as strong domestic and export demand counteracts rising milk production,” the MW stated

The MW detailed the April Milk Production report, which I reported previously, stating that April saw the largest year-over-year gain since August 2022.

It was also the fourth consecutive month of increasing production, relative to the prior year, and the MW credited an expanding herd which was the largest reported since mid-2021, except for a single month in March 2023. The MW also detailed the April Cold Storage report which showed the butter inventory was below a year ago for the first time 15 months. “Fat tests increased to 4.36 percent in March, up 0.09 percent from a year ago, which suggests that strong demand was responsible. U.S. butter commands a $1.26 per pound advantage to European butter after adjusting for fat levels which is helping to support exports,” the MW stated. “Cheese inventories saw the 14th consecutive monthly decline but the smallest year-over-year difference in over 12 months.”

Another drop in the All Milk Price, a higher corn price, and a rise in hay pulled the latest milk feed price lower again. The USDA’s Ag Prices report shows the April ratio at 2.27, down from 2.46 in February, and compares to 2.13 a year ago.

The All Milk Price averaged $21 per cwt. in April, with a 4.32 percent butterfat test, down $1 from March which had a 4.36 test, and compares to $20.40 in April 2024, with a 4.24 percent test.

The national corn price averaged $4.62 per bushel, up a nickel from March, and 23 cents above a year ago. Soybeans averaged $10.20 per bushel, unchanged from March, but $1.60 below a year ago. Alfalfa hay averaged $180 per ton, up $13 from March, but $15 below a year ago.

The April average cull price for beef and dairy combined was $142 per cwt., up $2 from March, $12 above April 2024, and $70.40 above the 2011 base average.

Milk production margins moved lower for the fourth time in the past five months but remained at historically high levels and $1.31 per cwt. below March, according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo. “Income over feed costs in April were above the $8 per cwt. level needed for steady to higher milk production for the 18th month in a row. Feed costs were the 10th highest ever for the month of April and increased 31 cents per cwt. from March,” says Brooks.

“Milk income over feed costs for 2025, using May 30 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay, are expected to be $13.37 per cwt.,” according to Brooks, “A gain of 53 cents per cwt. versus last month’s estimate. Income over feed in 2025 would be above the level needed to maintain or grow milk production and down 2 cents 2024’s level.

“Looking at 2026, milk income over feed costs are expected to be $12.88 per cwt., a loss of 49 cents per cwt. versus 2025. Income over feed in 2026 would be above the level needed to maintain or grow milk production,” Brooks concludes.

Checking Chicago, dairy prices started June Dairy month mixed. The Cheddar blocks made it to $1.9550 per pound Monday, highest CME price since Oct. 3, 2024, but were trading Thursday morning at $1.92, after closing Friday at $1.9475. The barrels were trading at $1.86 Thursday, following their Friday finish at $1.87. May sales of block cheese totaled 136 loads, up from 132 in April. Barrel loads totaled 53 in May, down from 66 in April.

Cheese markets have steadied somewhat, according to Dairy Market News. Central cheesemakers say demand is strong from retail purchasers, but retail sales are somewhat muted. Export demand is steady. Milk is available but not as excessive this week as previous weeks. Vats are running busy schedules.

Class III milk is tighter in the West but cheese manufacturers say it’s adequate, especially with bottling demand lightening. Cheese output is steady and/or in balance with demand, while others say it’s outweighing demand. Demand varies from steady to stronger with respect to domestic and international buyers. European price upticks are keeping domestic prices competitive, says DMN.

Cash butter hit $2.56 per pound Wednesday, highest since Jan. 15, 2025, but was trading Thursday at $2.5575. There were 26 loads traded on Monday, 25 on Wednesday, and 24 Thursday. May sales totaled 123 cars, up from 116 in April.

Cream remains readily available in the Central region, but was more excessive last week following Memorial Day weekend. Contacts anticipate cream will decline in the coming weeks as temperatures rise. Butter makers are taking advantage of cream availability.