Nonfat is sitting north of $2.25 on the CME spot market. But the bigger question is how long it can hold.

In the latest episode of The Milk Check, the Jacoby team breaks down a dairy market that feels tight, fragile and increasingly dependent on timing.

Here’s what they’re watching:

• Why nonfat prices surged, and what could break them
• How protein demand is pulling milk away from dryers
• Why MPC and MPI are outpacing nonfat
• What the inverted futures curve suggests for the second half of the year
• How depooling and Class III–IV dynamics are shifting milk flows
• Why butter feels weaker, even in the middle of flush

Plus, the team talks through what happens if the nonfat market doesn’t break soon.

There’s still a lot of milk moving. Just not where it used to go. Let the Jacoby team help you get up to speed on the new dairy market dynamics.

Click below and listen to The Milk Check episode 98: A Market on Borrowed Time.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Podcast: Play in new window | Download (Duration: 20:59 — 28.8MB)

Subscribe: RSS

Ted Jacoby III: Coming up on the Milk Check.

Jacob Menge: if this doesn’t start falling soon, I think there’s gonna be people that are trying to make money on the short side of this thing because they didn’t make money on the long side.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., Your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I’m Ted Jacoby. Let’s dive in.

Today is May 1st. It’s a couple of days after the ADPI and a couple of weeks after the Cheese Expo, and it’s usually after those two meetings a really good time to talk markets.

So, we’ll go ahead and start with the market that everybody was talking about at the ADPI. Josh, Jake, Joe, what’s going on with our nonfat market? We’re at $2.26 today, I believe. Are we gonna stay up here for a while?

Josh White: It’s a more challenging question than just the absolute price today. I think that if I were to summarize the show, there was a recognition across the entire dairy industry that there might be some legitimate reasons for nonfat to be tighter than they have been over the last several years.

It feels like a lot of different things have resulted in the current spot price that we’ve seen today. Over the last five years, we globally have made more skim milk powder and nonfat. We’ve consumed more skim milk powder and nonfat, but the real story is in the fact that we’ve also made a whole lot more milk, and that milk doesn’t seem to have found its way to the dryer.

Seems to have found its way to a variety of different products. And equally as important during the ADPI was the talk about the protein market, which I think we can likely get to later. But things like RDT products, beverages, protein consumption, cheese consumption, a lot of things have consumed incremental milk growth, particularly in the U.S., and that happened after many years where buyers had very little concerns over access to supply.

And as a result, I think in the background we watched global inventories decline, and that all seems to have come to a head here in the early part of 2026. And now as we’re getting into the northern hemisphere flush, and particularly in middle America, yeah, then we have ADPI. And so, what’s interesting about your question is throughout most of the conference people were pretty convinced, “Yeah, we’re in a tighter nonfat market. We’re all buying into that.” Yet, the days following ADPI, we’ve seen futures sell off a bit and we’ve seen a little bit more volume traded at the CME spot call. What’s that mean going forward?

Jacob Menge: The most interesting thing going forward is you don’t talk to single person that says these prices are gonna stick around for six months. And so it’s really a matter of timing, how long do we stay up here? I think we’re already up here longer than most anybody thought. And the other thing is, nobody got this market right. Some people got in at a buck 25. Those guys sold at a buck 40. They said, “I’m gonna take my 15, 20 cents and run.” And they felt like a genius for about three days before we were quickly at a buck 60. And we’ve got this really interesting dynamic of no market participant really happy with it being up here because nobody really made money on the way up.

And everybody convinced that, okay it’s on the clock for when it comes off. And I’m not even gonna disagree with that, right? I don’t think anybody would argue that long-term we’re gonna have $2.50 nonfat in 2028 or whatever. But this really comes down to a question of timing, and I think that’s where you get mixed opinions.

But in general, I think most people are of the opinion that it’s not gonna be that long before this thing does start to fall. I don’t have that strong of an opinion actually, but what I do have an opinion on is if this doesn’t start falling soon, I think there’s gonna be people that are trying to make money on the short side of this thing because they didn’t make money on the long side, that they’re gonna start feeling some pain.

And as our curve has come up a bit over the past month, we’ve got this really interesting market conditions where, again, if we’re up at these levels even a month from now, two months from now sure, I’d make the argument, why couldn’t you have another squeeze higher?

Because there’s still not that much product available right now today. We’re starting to see that change. We saw some really nice volume on the CME spot auction just this morning. But that’s what the eyes are on is how long does this thing take? And if it starts this week versus six weeks from now, I think those have very different implications for how the market reacts.

Josh White: We’ve got three different reactions to the nonfat market right now. You’ve got the true nonfat participants that need product now, and that’s priced in the $2.25-plus type range right now on the countryside. And to your point, we’re seeing a few more loads available which is a decent sign.

The market participants seem pretty convinced that we’re gonna see an easing from this price, but so are futures. And I think that’s another important thing to point out is that the futures curve is inverted and it’s quite a bit lower than the spot price today. So, you can have both situations. You can have a spot price drop while the futures price maybe doesn’t as much.

Over the past few days, the futures curve has definitely traded lower, confirming what we heard there is that most people don’t believe in this market being as tight as it is currently into the future. And we have to remember, this is traditionally a globally traded product and our competitors across the pond are still quite a bit lower and making a whole lot of skim milk powder today.

So, I think longer term, if the assumption is that we need to compete globally for at least some business, particularly in markets like Asia, we’re gonna have to be a little bit more aggressive to compete, but futures are saying we will be.

Another important topic was now we’re starting to see an acceleration of the NDPSR price now that we’ve had several months of higher spot prices, and that’s starting to have an impact on markets other than just the powder market. And I think maybe, Gus, you would have a little bit more to say about how the market’s reacting to some of the component prices moving higher in the solids nonfat side of things.

Gus Jacoby: The situation as we’ve talked about in the past is protein is being pulled in a lot of different directions and we don’t see that demand going away anytime soon. The one comment I would make though is your isolated protein, certainly UF milk in fluid form, are seeing some of the highest demand that we’ve seen in a very long time.

So, if you’re cheese maker, if you wanna fortify, and certainly on higher butterfat milk, there’s plenty of folks that wanna fortify right now, there’s probably a little bit of a pull on all the skim solids at this moment in time. I don’t think that story has changed.

We’ve beaten that up for a while. But that’s certainly gonna pull a fair amount of milk out of the dryer for nonfat. You look at where the capacity has been added, whether it be in the Southwest with all the large cheese plants that have been added there, and then Upstate New York where some dryers are also gonna sit idle as some new processing capacity comes on there.

That’s two areas of the country that are gonna get a lot less milk into the nonfat dryers than previous. And certainly here we are now in the flush as these plants ramp up, it would typically be your highest powder production timeframe, and instead those solids are going elsewhere, and that will keep nonfat production down for the foreseeable future.

Ted Jacoby III: Gus, are you seeing milk move towards Class IV plants instead of Class III plants this year?

Gus Jacoby: We still see fortification solids during this flush finding its way into cheese plants. But that’s your surplus skim solids that might exist, and those are only available, I believe, because of the flush. Now, it’s not UF milk, right? UF milk tends to be going elsewhere whether it be going to some sort of IV or II-type arrangement, whether it be a high-protein beverage or a high-protein dry product.

But you are still seeing a fair amount of condensed and other skim solids going to the cheese vat for fortification purposes. I think the way that will unfold likely is that those surplus skim solids that aren’t being turned into isolated protein products, they’re gonna probably get pulled out to a certain degree of the cheese plants, and then cheese plants will just not be able to utilize fortification as they are typically used to or would like as we move through the year.

Ted Jacoby III: So, what you’re saying is if the price stays up here, the milk that is going into the dryers making nonfat will continue to do so longer than usual, and they won’t lose the flush-specific skim solids?

Gus Jacoby: I don’t know if I’d agree with that, Ted. I think the flush, no matter where you’re at in the country, the surplus solids find its way to the dryer typically.

And as we come out of the flush, certainly less solids everywhere will go toward the nonfat dryer, just as it always does during those seasonality changes and we come out of the spring. It’s just that the areas I talked about, Southwest and Northeast, they’re not getting near as much as they used to in the flush, and so overall that production is going to be missed upon the market.

Ted Jacoby III: Do you sense any kind of competition right now between Class III and Class IV for the surplus milk, or is it just following its usual path?

Gus Jacoby: There’s some surplus condensed solids going to cheese plants that if a better price could be had into a powder plant, it would go there.

Ted Jacoby III: Okay.

Gus Jacoby: And that’s happening predominantly in the upper Midwest, and maybe a little bit in other areas. But certainly if you’re gonna get a higher return going into cheese than you could going into powder, you’re gonna go after it right now. And that’s where the demand I would say is.

But surplus is surplus, and you’re gonna sell it to the highest return you can.

Ted Jacoby III: Okay. That sounds good. Joe, anything to add on the nonfat side?

Joe Maixner: Any milk that is making it to dryers, they’re prioritizing the milk to try to get into the milk protein concentrate (MPC) sector or milk protein isolate (MPI) as opposed to nonfat because the return is better.

Ted Jacoby III: Makes sense to me. Joe, Josh, are we seeing MPC prices rise faster than nonfat right now?

Josh White: Yeah, no, it has to be faster than nonfat because basis is appreciating. You’ve got an MPC market that likes to trade on a multiple of nonfat, and that has appreciated.

That has continued to increase. Now, again, I noted earlier we got an inverted forward curve, which means that basis can be going up and price could stay the same or even go down the second part of the year. So, that’s the dichotomy we’re dealing with right now, is that from a cost basis, it looks like it could be pretty okay the rest of the year.

And if there’s dry time available, you would think you’re gonna maximize that MPC. And when compared to whey protein concentrate (WPC) prices, MPC 85 is a bargain. But again, not everyone can easily substitute between the two, and that takes some time for the market to figure out which market participants may be able to switch between WPCs and MPCs, may take a little time for them to make that switch.

Ted Jacoby III: So, I just wanna clarify for the audience. There’s two different ways we can look at it. If we’re selling it forward into the second half of the year, from a market perspective, we may be selling it for a lower price because the futures curve is a lot lower than the cash price is today.

But if we’re selling MPC or nonfat today, you’re telling me that the nonfat price has effectively doubled in the last three months, and the MPC price has more than doubled because not only has its basis doubled based on the nonfat market, but the overage above that has also gone up.

Josh, you’re on mute.

Josh White: I thought you said clarify for the audience, so I didn’t realize it was a question for me.

Ted Jacoby III: Oh the answer is yes.

That’s exactly what’s happening.

Josh White: Yes.

Nailed it.

Ted Jacoby III: All right. So, basically what we’re saying is skim solids and protein are in high demand.

That’s loud and clear.

[Center commercial]

Ted Jacoby III: Mike, what about from a federal order perspective, how this all feeds through the federal order? Obviously, since it’s a higher market right now, Class IV is what’s driving Class I prices. Obviously, it drives Class II prices. Is there anything else that kind of shifts around in a market like this?

Mike Brown: There’s a couple things. First of all, a lot of your Class IV production is co-op owned. And what we’re seeing is depooling in Class IV, and to some degree Class II where it’s possible. So, rather than to go into the pool and get a blend price that’s below your class price, they’re electing to depool, just like we saw with cheese last fall when it was much higher than butter powder.

We’re seeing some of that. But if you’re pooled, you’re ambivalent because you’re gonna pull the pool draw out anyway, and it’s not gonna make a lot of difference. It’s markets like the Southwest where a lot of that milk is never pooled or rarely pooled, and even in the eastern part of Kansas, changes in central order, you less have to pool it because the differential is so much wider now from Kansas City than it used to be.

You may see more activity as you watch pool decisions being made since last June when the changes, people are getting a lot better at predicting whether or not they should be involved with the pool or not because it’s getting easier to predict because behavior is more what you’d expect. So, from my point of view, it has some effect, certainly, and if you’re trying to maximize a return to your owners and you have a plant with capacity and you get a higher value product, you’re gonna try to run the milk through that plant. Second part of that, of course, if you already have obligations, and some of these new cheese plants have supply obligations, they’re gonna get their milk regardless of the shift in price.

So, it has less effect than you might think, but there is still effect, particularly if you’re having to pool your IV. There’s certainly a lot of IV being depooled right now. Production isn’t much lower. It’s just regionally shifted some, a lot more in the West Coast right now than in the Southwest. The orders kinda mute what would be the normal market decision to maximize return on milk for a producer because if you’re gonna blend it anyway, you don’t have the incentive that you do if you don’t.

That said, right now, Class III guys, they’re pooled. The other part of this III-IV spread is, of course, what is the value of those solids into those cheese plants? I’m working on that today, Ted, trying to figure out how much does the high-WPC80 and WPI market bring to the value of buying outside Class IV solids to justify the price?

Just on the price of cheese, I got some numbers here in front of me, you’re looking at on a per-pound cheese yield basis, if you buy powder in the powder market right now, it’s 25 to 40 cents more per pound cheese yield than it would be if you’re getting it from Class III.

Mike Brown: You better either have a great margin or you’re really hitting up the whey market, and I’m gonna figure out exactly what that is. But that decision isn’t just a cheese decision, particularly with whey protein so high. There is a value of that nonfat dry milk whey protein that in the past didn’t matter as much as it does now. So, it may make that slightly more attractive or less unattractive than it would’ve in the past because your whey returns are so high on that protein compared to what they have been historically. So, it’s complicated, but it’s not just the value in cheese. It’s the value in cheese and in whatever your plant can make for whey.

If you can make WPC80, you can pay more for those nonfat solids, obviously, than you can if you don’t.

Ted Jacoby III: So to clarify, usually when you ship fluid into a Class III plant, you pay the Class III solids price.

Mike Brown: That’s correct.

Ted Jacoby III: If you use powder, you’re gonna have to pay whatever the prevailing nonfat price is.

And most everybody running a cheese plant right now would really like their skim solids in fluid form so they can pay those Class III values instead of the Class IV values.

Mike Brown: Oh, absolutely. But if they’ve got excess fat, and a lot of our American-style cheese plants now do have excess fat, what’s your market for that fat, and does it make sense to pay a little more for that protein from the Class IV side so that I can get a better price for that fat?

Although we all know multiples this year aren’t near as horrible as they were a year ago. Yeah. So it’s a little better market. If you’re gonna get right down to dollars and cents, really you gotta look at your whole product mix out of your cheese plant and figure out what can you really afford to pay for those solids . And plus the opportunity of running your plant more full. What’s your fixed cost savings by running more product through your plant even if the cost is a little higher?

Ted Jacoby III: Speaking of butterfat, Joe, this butter market just feels like it’s gone a lot lower than we expected it to go.

Joe Maixner: Yeah, it’s weak. Cream’s not sloppy. It sure doesn’t seem like it’s super long in the market.

But there’s still plenty of butter being made, and I think that this market’s also pricing in the fact that we’re anticipating that export reports are gonna decrease in the amount of butter that will get out monthly moving forward until this Middle East conflict gets resolved.

And we’re basically peak flush through east of the Rockies, so this is the highest production point we’re gonna see through the rest of the year until we get past the holidays.

Ted Jacoby III: Gus, are cream multiples poor right now as well?

Gus Jacoby: We’re still on the flush, right?

But they’re much, much tighter and higher than they were a year ago this time. It just goes to show that the additional churn capacity we’ve seen around the country and some better preparation by a lot of folks in dealing with excess butterfat has made this market a fair amount healthier when it comes to cream.

Not near as sloppy as it was a year ago. Multiples have held at or better than even the year previous for flush times. So, I would imagine that what we’re gonna see here going forward is representative of this new marketplace.

Ted Jacoby III: Josh, anything to say about the whey protein market?

Josh White: Maybe some early signs of a market trying to figure out if it wants to continue on the trajectory it’s been on. WPC80, the general consensus out of ADPI is it remains tight. Seen a few extra spot loads trade this week though, so maybe some people were waiting for that information to let go of a little excess inventory or some incremental loads.

WPI feels like it’s pretty stable. And the market came to the conclusion, I believe, during the ADPI conference, that, okay, it seems to be priced right. It doesn’t feel like WPI needs to go up at the moment. And we’ve definitely seen more offers since the show. Not ready to conclude that’s going lower because of where the WPC80 price is and how tight the WPC80 market is.

So, those two have really converged at the moment, almost to a point that doesn’t make a lot of sense, the price spread between the two, so the market’s going to figure that out. So, yeah, that would be the only changes. Other than that, maybe just reiterating that we are constantly talking to new customers about new demand creation, and also outside of the traditional sports nutrition category, a lot of new CPG product launches and things like that are absolutely still in motion and consuming a lot of dry protein.

Ted Jacoby III: Makes sense to me, and I would agree. And then, what I would say about cheese is it was easily the most boring market at the ADPI. I’d start by saying that. It feels like a market where a lot of people are complaining that the price isn’t low enough for them to get new sales on, but they also can’t find a ton of product out there.

There is some spot product trading around, but there’s not massive quantities of it like you sometimes see in the height of the flush, which just makes me feel that right now the cheese market is in balance. In balance in a way that maybe we’re not getting a huge amount of additional export sales on the books, but we are continuing to export at a pretty high rate , especially considering there’s a lot of sales on the books that were put on the books earlier in the year that are gonna continue to ship.

And it’s kept this market, this cheese market, I think, relatively well cleaned up considering we’re in the height of the flush. So, we don’t see a lot of movement going forward, at least in the next few months in cheese. You’re gonna trade in a 30 cent range, 20 cent range around where the current price is. That would be my take on the cheese market.

All right. To all our listeners, I really appreciate you guys listening to us. I hope this information is helpful, and we look forward to talking to you soon. Take care.

[Ending credits]