Market Reports

The butter market melted down. CME spot butter plummeted 19ȼ this week to $2.045 per pound, its lowest price in nearly four years. Last week’s Cold Storage report showed that inventories were not burdensome as of July 31.

Dairy producers continued to hold onto as many cows as possible, allowing for expansion despite the heifer shortage. The dairy herd reached 9.485 million head last month, up 159,000 from July 2024 and the highest head count since May 2021. The year-over-year increase is large enough for producers to send an additional 900 head to slaughter each week and maintain an annual cull rate below 30%, on par with the 2024 rate that fostered rapid expansion.

USDA’s Dairy Market News says milk is tight in the East. In the Central and West regions, output is declining seasonally, but there is more milk than there was a year ago. Cream production is slipping across the nation, but, as ice cream manufacturers wind down, there is plenty of milkfat left for butter churns. Cream multiples remain well below the historic average, incentivizing butter makers to crank out more product than they typically would at this time of year.

Cheese exports have soared to record high levels. After crossing the 50,000 metric ton (MT) threshold for the first time in May, U.S. cheese exports notched another record in June with shipments reaching 52,191 MT, or an equivalent of 115.1 million pounds. Stronger exports to key destinations like Mexico, South Korea, and Japan all supported the record high figure.

With most of the major dairy exporters – and especially the United States – in growth mode, global dairy supplies are on the rise. In the first few months of the year, combined milk output among the top five dairy exporters fell short of 2023 volumes. But since April, when the U.S. shifted into a higher gear, milk production among these major players has set new highs.

U.S. dairy producers are keeping cows in their barns rather than sending them to the slaughterhouse. Through mid-July, dairy producers culled 1.38 million milk cows. That’s 310,000 fewer than the 2020 through 2023 average, and it marks the lowest mid-July slaughter since 2008, when depressed cull rates fostered rapid – and ultimately unsustainable – expansion. Heifers are still in short supply.