Butter’s slipping, cheese feels heavy, but the protein complex is flexing hard.

In this Milk Check market roundtable, Ted Jacoby III brings together Diego Carvallo, Jacob Menge, Joe Maixner and Josh White to unpack what’s driving the mixed messages in the markets.

Listen to hear:

• Why butter could fall below $1.50 before year-end
• How global health trends are powering whey protein demand
• Why cheese exports are getting harder to move
• Whether dairy’s bearish mood could trigger a short squeeze

It’s a classic Milk Check market roundtable. Listen now to The Milk Check episode 86: Bears in Butter, Bulls in Protein.

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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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Ted Jacoby III: Hey everybody, welcome to The Milk Check. We’re gonna have an old-fashioned market discussion today. We’ve got a lot going on in dairy markets right now.

It’s the middle of October. Markets are moving, but not in the direction that they usually move in October. It seems like everything wants to go down right now, and we’ll start with the product that seems to be most bearish today, the one we’ve been talking about a lot lately. Joe, what is going on with butter?

Joe Maixner: Butter is interesting today because we’re actually up. Long-term Sentiment really hasn’t changed. There’s not really a whole lot new to talk about on the butter. Markets aren’t linear, so we’re gonna have these choppy trades here and there where some buying comes in and things get pushed. But there’s plenty of butter still out there. There’s plenty of butter being offered out there. Right now, there’s a good amount of demand, but we’re anticipating that that’s fairly short-lived. We’ve got [00:01:00] holiday demand for another couple of weeks here, and then that should probably tail off. We’ll see what happens after that.

Ted Jacoby III: So we’re a $1.60 and a $1.65 today. It’s Friday, October 10th. Felt like a little bit of a dead cat bounce after really dropping pretty hard earlier in the week. Is that what it is? Is it a dead cat bounce?

Joe Maixner: I wouldn’t call a quarter of a cent on spot a dead cat bounce.

The moves on the futures are 3¢ to 5¢ moves with a 10¢ plus move intraday. There’s no shortage of volatility.

Ted Jacoby III: What do you think will be happening in the next month? You think maybe we’ll bounce off this, go up a little bit for the next couple of weeks? Then all the orders that need to get filled for the holidays get filled? And then what?

Joe Maixner: I think we take another leg lower. I think we’ll be sub $1.50 before the end of the year.

Ted Jacoby III: I agree. We’re at prices so low that a year ago it would’ve been really hard to imagine we’d ever get here.

And the idea that we could even go lower from here just seems unbelievable, but that’s the market we’re in right now.

Joe Maixner: Less than 24 months ago, we were all talking about $4 butter [00:02:00] coming, and there was not enough fat to keep up with demand. And now we’re potentially going to the $1.40s. There’s so much fat that we can’t consume it all. But we also have to remember that this is all cyclical, and at some point, these low prices are gonna cure the low prices.

Ted Jacoby III: Meanwhile, let’s talk a little bit about protein. The more bearish we get on butter, the more bullish the protein markets seem to get. What’s going on in the protein markets right now?

Josh White: I think we gotta define which we’re talking about with protein because if it’s protein with over 34% protein, it’s pretty hard to find, particularly with the whey proteins. If it’s 34% or under, most unstandardized non-fat dry milk is quite a bit above 34%, so maybe let’s say 40%, it seems like we can’t find a bottom. So, really, two very different markets at the moment. So, if we start on the high end of the market, we’ve experienced over the past two years now a continued move higher and the appreciation per unit [00:03:00] protein for whey protein products, in particular WPC 80 and WPI. We want to credit certain things as catalysts, like GLP-1 adoption in the U.S., but I think we gotta be even bigger than that.

 Health and wellness are worldwide. We’re seeing strong growth in demand. People are paying attention to what they eat. Clearly, they’re concluding that whey proteins supplemented in many, many products is a good way of increasing your protein intake. That doesn’t seem to be changing, and although we’re talking about very, very high prices in the U.S., Europe also has very, very high prices.

Josh White: And as of late, it’s leaving additional markets, other markets, the import markets for these products, wanting more. We’ll see an additional load or two of product available in the U.S., and it’s sold to a U.S. customer before the international customer even gets a look at the price.

I don’t see that changing. And the reason I can confidently say that is because we’ve got customers who are looking for purchases further out than they traditionally would. Normally, that’s a quarterly [00:04:00] traded product. About a month from now, in November, that’s typically when we’d be talking about Q1 prices, and as of today, we’ve got customers that are asking for any product available and willing to commit to the second quarter of 2026.

In addition to that, there are things that have disrupted the supply chain. In 2025, we had several new facilities coming online, and not all of them have come online as expected, so we’re anticipating some additional supply of WPC 80 and WPI. Some of it is materialized, and some of it has not yet. But this isn’t a supply-shortage-driven issue. This is truly a demand, new demand creation, and we’re seeing that in a lot of different areas. We’re seeing incremental growth in the normal segments like sports, nutrition, shakes, things like that.

We’re seeing inquiries on a weekly basis from consumer packaged goods products, looking to infuse protein into some of their traditional snack foods and products like that. Even this week, the headlines coming out like [00:05:00] Starbucks introducing new protein coffees. These are all new drivers.

This is all happening at the same time that we’re seeing increasing demand for acidified whey proteins going into beverages. There’s just more demand right now than we have supply. It’s gonna take the market a while to cure that issue. We have a lot of cheese production in the U.S., so it’s not an issue that we don’t have the whey solids available, but do we have enough processing of these high whey protein products?

Not yet. Also, when you’re in a very, very tight market, just like Joe mentioned, “low prices will cure low prices,” at some moment, lack of supply, high prices will cure high prices. I’m not sure how that’s gonna shake out as we go into 2026, but right now it feels like, at least for the first half of the year, we’re gonna remain very, very tight whey proteins.

Now let’s shift down the complex a little bit. Anybody who can’t afford to pay for WPI with these new applications is looking to trade down. WPC 80 is, as mentioned, very, very firm [00:06:00] and in very, very tight supply. Those that might have traditionally used WPC 80, maybe not instantized WPC 80, but regular WPC 80, are finding that they can’t compete with the new demand creation in that category, and they’re trading down. That’s already impacting alternative proteins. We’re seeing more inquiries for vegetable protein and other products in high concentration. The other half of that story right now is we are big producer in this country, traditionally of WPC 34 and then shifting out of the way complex into the milk protein complex, we are increasing our production of MPC 70s, MPC 85, MPI, but we still make a lot of non-fat dry milk, and that is a totally different story.

Diego Carvallo: When it comes to the non-fat complex, I think it follows the same story as most of the other products. There’s a lot of milk in the U.S. and in other milk sheds, and a lot of that product is ending up in non-fat or skim. We’re expecting that the price during the [00:07:00] first quarter of next year is gonna be heavily under pressure because the U.S. is probably gonna have 10% or 15% more nonfat production than it had in 2024 just because of what happened in California, right? It’s almost inevitable unless we go into a steep discount to European and New Zealand products that we start building inventory. Because Mexico itself cannot sustain the U.S. from building inventories if we have such growth. A lot of discussion around how much milk are the cheese plants gonna take out of that strong growth that we’re seeing?

And as a summary, the conclusion where we have arrived is that even with the cheese plants growing and taking 3% to 4% more milk this year, we’re still gonna have double digit growth in milk availability and milk going into the dryers. Yeah, definitely the picture is not bullish.

Prices could go and test the $1, maybe $1.05 during the flush [00:08:00] or maybe before the flush. And yeah, hopefully after that we see a demand reaction, demand creation, and some multi-nets, just building length, some traders building length and inventory starting to stabilize or move lower.

When it comes to the MPCs, what Josh has mentioned is something that we are already seeing. I was at a trade show in Mexico this week, Food Tech, and I had a very interesting interaction with a customer where they told me that they were in desperate need for WPC 80 and because nobody was able to offer a spot load, because most of the loads are staying domestic.

Because it’s easier obviously, to sell to a domestic customer than an international customer. They were desperately trying to buy something and when I mentioned that maybe there are some other options for them, maybe better protein or MPC, they immediately jumped and they were very proactive and very open to trying a new source.

That’s [00:09:00] the initial signal that we take for other products to start appreciating a substitute. Yeah, just very interesting conversations in Mexico where demand seems to be stable overall. But they’re seeing a little bit more milk around.

Ted Jacoby III: You know what, Diego, I had an interesting conversation with an expert I know earlier this week. He said, the reason there’s a bigger gap between whey protein prices and milk protein prices than you would expect is all of the nutritional research that was done was all done on whey proteins. And so, when they’re developing these high protein products using dairy proteins, because all the research has been done on the whey proteins and the whey complex, that’s what they want. They haven’t done the same level of research on the milk proteins, and his comment was: that research is coming. It’s started, and it’s coming, and that, longer-term, will contribute to narrowing the gap between the two as well.

Josh White: Let’s simplify it a bit and remind everyone that MPC does have whey protein in it.

Ted Jacoby III: But it’s [00:10:00] fascinating to me when you suggest, “Try milk protein.”

“What? What’s that? Milk protein?” In our business, you’re right, we tend to take it for granted that everybody knows that whey protein is a subset of milk protein.

So, the protein complex is strong, the butterfat complex is weak. The WPC 34 market is what, Josh, weak?

Josh White: Yeah, that’s a tough one to get your arms around today because there’s really two different classes of WPC 34 in the market. You have the infant grade class. And you have the calf milk replacer class of WPC 34.

And frankly, because of this draw on the liquid whey solids for WPC 80 and WPI, the calf milk replacer class of WPC 34 is on its way to extinction, it feels like today. There’s a certain portion of the market that’s always going to produce that, but, to be clear, if you’re looking for a 34% protein in the market today, the best buy is and [00:11:00] will continue to be non-fat dry milk or skim milk powder. We’ve seen over the last decade, a lot of the different feed applications that have been very willing to interchange those two products based on the best value per unit protein.

So, that’s why we think there’s really two segments of the market. There’s above 40% and below 40%. And when you say protein is strong, above 40% is quite strong. Below 40% is actually quite weak at the moment.

Ted Jacoby III: Mm-hmm. WPC 34 was originally developed to compete against non-fat dried milk and skim milk powder, which is 34% protein at a cheaper level. Well, as the whey complex and as whey proteins gained more and more demand, that ended up getting flipped on its head. And so for things like half milk replacer, financially, it just makes sense to use non-fat dry milk these days rather than WPC 34. What about cheese? Jake, I’ll go to you on cheese. What’s been going on in the cheese market?

Jacob Menge: Yeah, I don’t actually think [00:12:00] there’s a whole lot different than the last time we had one of these discussions involving cheese. It’s pretty hard market to move a lot of product in.

It just feels heavy, is the best word to use. In the immediate term, it’s not quite as doom and gloom on the surface as maybe the butter discussion we had, but it just feels like the storm clouds are over the cheese market for the foreseeable future, which is similar to butter.

All this really nice protein demand we’re seeing means we’re probably making cheese that otherwise we don’t necessarily need. Add on top of that a newly competitive export market.

For a while there we kind of had our run of exports. We could really get whatever cheese we needed to get out of the country fairly easily. We were the best price in the world for a while there. Not necessarily the case anymore. It’s becoming more [00:13:00] difficult to really make a nice bull case long-term for cheese.

Ted Jacoby III: This week seemed to be the week where the bears just really showed up in volume, in the cheese futures market, Class III market. My gut told me it was coming from two places.

One, there was a big trade show in Europe earlier this week, Anuga Food Fair 2025. Everybody was finding out that the Europeans were gonna get really aggressive on cheese prices. That spooked the market a little bit. The other is the time of year. This is harvest time. Dairy farmers are out there, and they’re harvesting their corn.

Corn yields are pretty good this year. Usually, at the same time they’re harvesting their corn, they’re usually starting to hedge their milk prices for next year. They already know milk production is up 3%. I think most people are talking about how that’s a sticky number; it’s not gonna suddenly go away anytime soon.

So, dairy farmers are a little bit desperate to make sure that they’re getting their milk hedged for next year, too. DRP programs are kicking in, and people are using those programs to get hedges on. So, there’s just a lot of sellers in the futures market, [00:14:00] and while they’re probably chewing through some of the layered in hedging programs for the buyers of cheese, it just seems like the sell side this week has been overwhelming the buy side.

Jacob Menge: I’ll just say all of the above. It is just really hard to even find somebody to have a bullish conversation with, almost across the board of our dairy products. It’s notably bearish out there for different reasons for different commodities. Probably the single most bullish thing that I can personally point to is just that so many people are on one side of the boat right now.

All it’s gonna take is one little flash in the pan to really set this thing off. That could be a black swan, it could be something that isn’t a black swan that we’re just all missing. But as far as I’m concerned right now if you are bullish and you really wanna make that bull case, I would love a phone call from you.

Josh White: Talking about cheese, Joe mentioned it earlier, when the price lowers for cheese [00:15:00] across the world, there is additional demand to be captured. So what price accomplishes that for cheese today? What finally drives more cheese consumption to consume the supply that’s available, particularly out of Europe and the U.S.?

Ted Jacoby III: I asked a major marketer of cheese this week. The way I phrased it was, “If the price of cheese on the CME goes below a $1.50 and stays below a $1.50 for six months, would we find new demand? Could we expect demand for cheese to go up two to 3%?” They said absolutely. They said if you’re under a $1.50, but you have to be under there long enough for people to start adjusting their formulations, for people to start maybe adjusting their sku prices on the shelf, the demand is there to be had. One of the challenges I think in the dairy industry is that you can get a wholesale price, go really low, but it has to stay down there for a while before those prices feed all the way through the system and the [00:16:00] end users start adjusting. Six months tends to be kind of that number.

Jacob Menge: A $1.50 CME spot market is a lot different than a $1.50 futures, as well. How our futures curve reacts to any drop we may or may not see is really the million dollar question. Right now, we’re inverted, we’re at least flat on our futures curve.

And that futures curve is really the thing that these export markets are looking at more closely than anything. If we get to a $1.50 on a futures curve lookout, you know, if somebody could go book that for the next six months, that’s gonna probably bring a lot of demand to the table.

Now, if our futures decide to hang out at a $1.65, even if our CME spot market goes to a $1.40, that’s tougher for the export markets to really capitalize on.

Josh White: We all know the supply chain takes a while and it takes a while for prices on the commodity level to filter through to the retail shelf in particular. Is it happening at the right time of year?

Are we doing enough [00:17:00] right now? Because this is the budget time of year from all the way through the complex into the consumer-facing markets. This is that time of year where there’s a lot of budgets. Are we showing enough of a signal today to potentially stimulate demand in 2026?

Ted Jacoby III: I will go on a limb and say, we’re there in butter. Those discussions are happening. We’re not quite there yet in cheese, but we may be there very soon. All right. I’m gonna ask another question, are we so bearish right now as an industry that we’re setting ourselves up for a short squeeze? Jake?

Jacob Menge: We need some catalyst for it to be more than just a one or two week, somebody playing a game with the market kind of thing. If we get an actual kinda sustained short squeeze where there’s actual panic of, “Hey, I might not be able to get that product that I thought I’d be able to get,” I think there’s gonna need to be some catalyst that we don’t know about.

Okay.

Ted Jacoby III: Makes sense.

Markets that get this bearish where everyone, and I mean everyone is on the same [00:18:00] side of the boat, what ends up happening is people just fail to position themselves to deal with the fact that the market’s going the other way.

You can get the smart money that’s short, you can get the big money that’s short, but in a market like this, you’ll also tend to get the weak money is short. And weak money can’t stand a short squeeze, and so the minute the market pops, everybody who’s not in for the long haul just gets spooked right out of the market.

 Dairy products in general are relatively inelastic products because it’s food.

Ted Jacoby III: So it doesn’t take a big change in supply to create a big change in price. And this year, we hit the tipping point where we literally flipped from a fat-deficit nation to a butterfat-surplus nation, and we’re probably gonna be there for a long time. We’re in the middle this year of what I would call a generational shift in market dynamics when it comes to butter and butterfat.

Well, I’ll sum up the discussion as this. We’re bearish butter and butterfat. We’re bearish [00:19:00] cheese, we’re bearish anything with carbohydrates. We’re bearish with anything less than 40% protein, and we’re really, really, really bullish anything above 40% protein. Does that sum it up? Fairly well. Alright, guys.

Take care, everybody.