The school bells are ringing in some changes for milk. Are you ready?

Tune in to The Milk Check as the Jacoby team churns through the latest supply and demand dynamics in the August milk market, including:

• Why the usual summer heat dip in milk production feels normal, despite 3.3% higher year-over-year numbers
• Why cheese prices are holding steady and how New Zealand’s production could impact exports
• Why protein products are powering ahead with strong domestic and international demand
• Why nonfat dry milk remains stuck in a flat market

Whether you’re a farmer, processor, or trader, tune in to The Milk Check to learn where we are and where we’re headed as we head into the holiday season.

Click below to listen to The Milk Check episode 81: From Summer Heat to School Coolers.

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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: Welcome, everybody, to The Milk Check. We’re recording this particular podcast on August 5, 2025. We’re having a classic market discussion today, and with us are Josh White, head of our dairy ingredients group; Greg Sheer, who heads up our milk marketing group; Mike Brown of Jacoby dairy market intelligence; Tristan Suellentrop, and me. We’re gonna just quickly speed through all the products and talk a little bit about what the demand and supply looks like as we transition from the heat of the summer into the fall. This time of year, what we’re usually watching: the weather is hot, milk is starting to get a little bit tight, and then school starts up in a couple of weeks, so the bottling plants start needing more milk.

We start shipping milk to the Southeast, and that tends to start a progression of tightness, not only in the milk supply, but in the supply of all dairy products as we get into the fall and the holiday season. So, we’ll go ahead and start with Greg. Hey, Greg, can you tell us a little bit about what’s going on with milk right now?

Greg Scheer: We do see seasonally tightening milk supply. Production has been hit by the summer heat like it usually does. Maybe a little more heat in the Northeast than normal. We’re seeing that in the Mideast and Midwest and all the way into the South and Southeast.

We have some comments from some of our producers that maybe a little bit older cow herd has caused the heat to be a little more significant than normal. But we don’t see an overabundance of that normal seasonal weakness in milk production. We’re seeing solid demand, and we’re starting to see a draw to the Southeast as schools will be starting up soon in the South and moving North when the schools start. So, that filling of the pipeline is going to really tighten the market, as it normally does seasonally at this time. So, tight spot markets and premiums throughout the Northeast, Mideast, and Midwest. We have the normal heat in the Southwest.

Maybe a little less than usual in California, in the very west, but seasonally we’re trending where we typically are this time of year, and we’re about to get to the tightest time of the year when schools start to fill that pipeline for the school milk. So, expect firm spot market prices going forward. Even though production may bounce back a little from recent heat as we move into the end of August and September, depending on the weather this month.

Ted Jacoby III: The Milk Production Report for June said we were up 3.3%. Does it really feel like we’re up that much in a lot of the parts of the country, Greg, where we’ve got milk, or does it just feel like a classic deep summer transition into fall tightness?

Greg Scheer: It felt like that in June that we were up that much. It doesn’t feel like that now, which is normal. We had a heat wave in June, all of a sudden it went from being kind of cool and rainy to a hot spell that kind of kicked off the summer.

That may have hit production a little earlier than normal, and it wasn’t really a gradual warmup. It just feels normal seasonally as we head into the rest of August. I just feel like it’s gonna be tight like it normally is, and it’s gonna be hard to come by spot loads once schools start filling for school needs.

Ted Jacoby III: It almost feels like what you’re saying is that the increase in milk production generally has been offset by the increase in heat this year. And it’s just setting us up to roll into the fall feeling pretty normal.

Greg Scheer: That’s what it feels like to me.

Most of the milk supply that we know the best is that of the upper Midwest, the Mideast, the Northeast, and even sending milk to the Southeast. So, in those areas, for sure, it feels like a classic seasonal pattern that we’re in.

Ted Jacoby III: Got it. Josh, what do you think that’s gonna do to the butter powder plants?

Do you think it’s going to tighten up our butter and non-fat supplies, or do we have plenty of inventory out there right now?

Josh White: I think it’s a complete tug of war, Ted, because we went into the year feeling like we’ve got a lot of extra cream. We’re clearly feeling the impact of dairy farmers learning how to manipulate the components in milk, particularly butterfat.

That’s put us in a situation where we’re out seeking international customers for our [00:04:00] butter fat in the U.S.. Then, all of a sudden, we enter these summer months, and there’s a lot of anticipation over major processing plants coming online, particularly in the Southwest. And it’s a giant question: how quickly do those plants finish their ramp-up?

Where are they in their ramp-up process? Are economics driving the ramp-up process over the next six months? And where is that milk coming from? If you look at the U.S. on a 12-month holistic view, it seems like we got a lot of milk. To Greg’s point, as we get into the third quarter here, it feels almost like we could experience a bit of a whiplash.

From what we’ve felt over the past 60 days. The heat set in in July. Maybe it’s seasonally normal. The processing plants that I mentioned are starting to bring in more milk intake. Where is that milk coming from? We’re at our seasonal low in milk production. Our comparables for milk against last year were impacted by the bird flu, which affected milk production. So, our comparables are maybe [00:05:00] a little distorting at times. And when you aggregate all of that together, I’m not so sure that we’re sitting on cumbersome volumes of dairy solids in the third quarter. Now, measure that against the demand climate, and I think that might tell a different story.

Greg Scheer: While we look at milk production as volume, we see lower components, which is normal during the summer, so definitely lower milk production, but also lower components. That leads into what Josh was saying, too, about reducing solids in dairy products.

Ted Jacoby III: So, to clarify, Greg, when you say ‘less components,’ you mean seasonally, not annually.

Greg Scheer: Yeah, the heat in the summer, it’s typical for butter, fat, and protein to drop, and that’s definitely what we’ve seen this summer as well. Alright, cool.

Ted Jacoby III: I was listening to Josh speculate about demand, Mike, and it made me think of a question I should ask you and ask you to harken back to your Kroger days.

How much of an increase in milk demand would Kroger and Kroger’s milk plant see when we would transition into the fall? What kind of bump is that from a Class I standpoint?

Mike Brown: Really, very little because Kroger doesn’t bottle any milk for schools. So, milk is fairly consistent. You will see some seasonal changes in spring in parts of the Southeast.

For the most part, they’re more stable than most. But, interestingly, you’re talking about this ’cause I was just looking at that from the standpoint of working on pooling strategies for a couple of our customers.

From July to September, your demand for Class I goes up roughly by around 10%. As far as total milk supply, you think schools are what, around eight or so? That’s kind of what you’d expect it would be. Okay. Of course, they fall back again in the summer, and they fall back a little bit over the holidays.

As far as consumer retail sales, most of the shift you see in late summer is due to the start of school. There isn’t so much for home.

Ted Jacoby III: So, is there much of a change in fluid milk demand at the home level when kids are home for the holidays versus when they go back to school?

Or do they consume cereal pretty much in the same [00:07:00] volume during the school year as they do when they’re off for summer break?

Mike Brown: They bump a little bit, but you also counter that with vacations. People take vacations in the summer, and they tend to eat out more; as a result, food service establishments don’t use as much milk.

Milk is a product that is definitely consumed at home, unlike some other dairy products, which have a huge part in food service. I’ll have more on that because, as I’m working on figuring out how pools are going to look, Ted, I’m getting into month-to-month changes.

So, ask me next month, I’ll have better information for you.

Ted Jacoby III: August is the transition month every year. Maybe everybody goes back to school in September, but all the milk plants get ready for everybody to go back to school in August.

Mike Brown: That’s definitely true. That prep is starting. To Greg’s point, what we’re seeing out West, talking to some of my cheese friends out there, is: milk is still strong relative to a year ago. It’s seasonally weaker; components are seasonally weaker; that’s normal. They haven’t had quite the heat wave that the Mideast and parts of the East have had, or even parts of the Midwest, but they’re still very strong year-over-year. Whether it’s still 3.3%, [00:08:00] no one’s willing to say, but they still say it is a strong year-over-year. So, we should have adequate milk. I think it gets back to the point that’s been brought up, which is consumer demand and domestic demand in particular. If we’re going to have a strong amount of production or exports, we can continue to cover the production that we are enjoying.

Ted Jacoby III: Well, that’s part of where my head goes too. We’ve got extra capacity. We’ve got additional capacity in the Southwest primarily, but some additional capacity in some other places in the country as well. And so, even though milk production may be up 3.3%, that doesn’t necessarily make everything feel like it’s up 3.3% when you have additional capacity to fill.

Where are the big places where milk tends to shift around this time of year? It’s usually in the Mideast, but with the additional capacity online in other parts of the country, it is feeling quite normal. And so, they’re not feeling like they’re up 3.3%.

The result is they’re going through this summer and transitioning from summer to fall in an environment that feels pretty normal.

Mike Brown: The [00:09:00] overages on Class III last week, USGA reported a range of minus two to plus three. Keep in mind that Class III is more affordable, relatively speaking, because the price is lower due to the change in Federal Order pricing.

Mm-hmm. That kind of range is simple; the average is 0.5, or 50¢, which is not an indication of a really tight milk supply, at least yet.

Ted Jacoby III: Makes sense to me. I got a cheese question again for you, Mike.

Going back to your Kroger days, does cheese consumption at the retail level change significantly as we transition from summer to fall, or is it relatively consistent year-round?

Mike Brown: It goes up during holidays, as people consume more. We used to joke that people eat cheese in November and December, then they eat skim yogurt in January to shed all the extra dairy fat they enjoyed over the holidays.

Cream cheese is more seasonal. Butter, of course, is very seasonal. But cheese sales are — of the major dairy categories — closer to fluid milk in being more consistent; it doesn’t vary quite as much, but it does vary. It’s easier to plan for because your shelf life [00:10:00] on cheese is a little longer. But it’s pretty stable. It definitely goes up. You build for that. The cuts and wraps are being made now to sell in October. I can guarantee you that they’ll make the product in October to sell in November. That’s somewhat normal, but it is not extreme.

For example, with butter, you’ll see Q4 sales will be double what they are in some other quarters. With cheese, it’s 10-15%. Still significant, but not a huge number. Got it.

Ted Jacoby III: And then you also have the longer shelf life, so they can just move that.

Mike Brown: Yes. Yeah. And that’s getting longer with technology. You can sell in pretty much all package cheeses, six months, and summer, stretching that a little farther.

Ted Jacoby III: Thanks, Mike. I’ll go ahead and talk a little bit about cheese for everybody. Retail sales are flat. Food service sales are flat, at best, and possibly even slightly below flat. Cheese production is up due to the extra plant capacity and increased milk supply. Exports have been ensuring that everything continues to clear.

And that has left us in a position where cheese right in this range, we’ve been [00:11:00] in for a while, 15¢, 20¢ on each side of a $1.75. Cheese has been performing relatively well in that range for a while. The big question I think we’ve been asking ourselves is, as New Zealand milk production comes back online, are we gonna be able to keep all of our export sales?

I think that remains to be seen, but we are sensing that there may be some weakness at some point, not today. Today, if anything, the cheese market feels very mildly tighter. And I say it that way because it feels tighter, but again, it’s the first week in August. It always feels tighter in the first week of August as we transition and milk is pulled away from cheese vats to go back to school. But it actually feels, if anything, less tight than usual for this time of year. We’re anticipating the fall bump in cheese prices to be relatively muted this time of year.

And then we are watching closely the domestic demand [00:12:00] side of the ledger and the export demand side of the ledger as we transition into the fall. We have concerns about the market’s ability to maintain cheese prices, let’s say in the $170-$180 range. What about the protein side, Josh?

Josh White: Maybe we should work through all of ’em, but let’s start with the popular ones. The whey protein side is remarkably firm still. I think we’ve discussed the various demand drivers in previous podcasts. One thing I failed to consider is the seasonal dip in milk and its implications for cheese processors across the country, as well as the impact on effective yield for whey proteins. On the supply side, the plants coming online and the expected production from those facilities have, in some ways, been a little slower or disrupted from expectations, and that’s all happening in a climate where demand is very strong. We’ve experienced remarkable new demand creation for acidified or clear proteins in beverages, along with significant new product development. That then pushes the higher value products, forcing others to compete for the remaining whey protein isolate production.

That then feels like it’s cascaded and made WPC 80 still feel quite firm right now in the market, not just domestically, but also internationally. We have received some really nice inquiries for the entire third quarter. I think it’s starting to have quite an impact on the milk protein.

Every segment that uses higher-protein products seems to be doing pretty well right now. Even the snack foods and CPGs they’re all ordering slightly more than they did before. Even if those are low-inclusion-rate items, it aggregates to a noteworthy amount of product.

That’s the fun story in dairy right now: we have robust demand for dairy proteins. Now, as you go down below those higher concentrations of proteins and you get to the 34% and sweet whey powder and some of those products, the demand isn’t [00:14:00] quite as robust, but the solids aren’t there.

The pull to process in the WPC 80s and above is extremely strong. The storyline that really hasn’t been as much fun is non-fat dry milk. That’s just been a flat, flat market. It appears that globally, the demand for non-fat products is stagnant. That doesn’t mean global demand for dairy is stagnant. People, I believe, are just moving up the value chain and ordering more of the products they want and less of the commoditized version of it. We’ve seen a little price volatility in non-fat. It’s August 5th today. I think over the past week, the non-fat market has given up a nickel or so, 5¢ a pound. But that doesn’t mean demand has weakened.

I think that’s currency. You can tie it directly to the value of the dollar and the movement you’ve seen against our most significant competitor, the euro, in the global skim business. I think that the non-fat story has been a bit boring, while the higher concentrations have been a lot better. I’m not sure that will change much in the coming months.

Mike Brown: As we look at prices and some downside risk on some [00:15:00] markets, the revenue from beef on the farms remains very high, which is giving our producers a little more room to remain profitable with slightly lower milk prices.

The whey side, certainly helping on the Class III, as well, and Class IV remains fairly robust despite a little weaker butter. We just want to remember that when we’re looking at profitability at the farm, it’s more than just income over feed costs.

That beef revenue is affecting producer incomes in a very positive way right now. And that should keep them a little healthier. Prices are lower than we might have thought otherwise.

Josh White: You know, Ted, we didn’t really spend a lot of time on butterfat, and I think probably a large percentage of the market was paying a lot of attention to what’s happening there. Maybe unaware of the global situation on butter fat, but it should be noted that butter fat remains very, very tight in Europe. Europe is trading at a significant premium to the US. When we can put all of these storylines together in the international market, you have to think that that’s going to influence the product [00:16:00] mix out of Oceana and New Zealand’s new season coming up. I think most people who are listening to The Milk Check know that they’re entering their spring season over the next few months. The New Zealand milk production base, at least, is off to a nice start, but it is still a few months away from the truly important milk production months. And so, we’ll have to see, 1.) Does New Zealand continue the strong start into the big volume portion of their season? Number 2.) What product mix do the New Zealand processors favor?

And then what do we see happening in terms of any other disruptions that have gone a little bit quiet in terms of global trade and tariffs?

Ted Jacoby III: That makes sense, and I agree with everything you’re saying. There’s a lot to watch in the butter space right now, and it feels so much different in the U.S. and everything we’re talking about in the U.S. than it does in Europe. And then you’ve got New Zealand out there starting up, and they kind of sit in the middle, whereas they’re gonna have a much bigger effect on the global butter price.

Probably affect how much [00:17:00] butter the U.S. will export. But at the same time, they also have probably an even greater opportunity to export into Europe or into the places where Europe traditionally has exported and take some of that business because they’re not gonna be competitive where they’re at.

Josh White: Exactly. And their product is a little different. Our product is different than theirs, and when you talk about retail consumption globally, it’s a little bit easier of a fit to displace European product with New Zealand product than it is at the retail shelf of displacing a darker, higher fat, core product with a whiter, lower fat, based product out of the U.S.

Ted Jacoby III: Exactly. All right. We had a quick discussion today, but it was a good one.

Thank you, everyone, for joining us today. We’re at a point in time where we haven’t reached the stage of seeing a significant amount of milk moving to the Southeast yet.

And so, while things are starting to tighten up a little bit, we don’t necessarily know how tight they’ll get. Milk production’s been up quite a bit this year, and so we’re watching that closely. And then on the demand [00:18:00] side, it’s just been a weird year, and I think you can tell by the way people are talking, domestic demand is very flat, but exports have been pretty good in the umbrella of a whole bunch of conversations about tariffs, which has brought a lot of uncertainty to the marketplace, to say the least. Overall, prices are holding steady. Prices are still at a level where dairy farmers are making a profit, which means we don’t expect milk production to drop significantly anytime soon.

We’ll keep an eye on it for everybody as we move forward.