Just one year ago, butter was experiencing some record moments. Still, dairy industry insiders with the American Butter Institute (ABI) warn that the picture is much different right now.

“It’s a matter of supply and demand — we’ve seen a rebound of milk production, and I think that’s continuing,” ABI Executive Director Chris Galen told AgInfo.net. “More important than just overall milk output, what’s really been happening is that the milk coming from the cows here in America has much more protein and butter fat in it than maybe a decade ago.”

Galen said dairy producers now have an ample supply of butterfat. However, he notes that prices could experience some fluctuations in the coming weeks as the holiday season begins to gain momentum.

“What has really been increasing has been the amount of protein and fat in that milk,” Galen said. “The cows are more efficient in turning grain and feed into the things that are really valuable in milk, which includes protein, and that also includes the cream or the butter fat.”

With constrained beef-cow numbers and a gradual rebuild, price breaks are more likely to come from demand or imports than from a surge in domestic cattle. Previously, the USDA raised milk production forecasts through 2026 but trimmed Class III, Class IV, and all-milk price projections, citing continued heavy supply pressure. Those forecasts proved accurate.

The latest Milk Production Report (PDF Version) from the U.S. Department of Agriculture (USDA) for August shows output continuing to climb as both cow numbers and productivity increased.

The USDA reports milk production rose in August as herds expanded, and yields improved. Output in the 24 central states reached 18.8 billion pounds, a 3 percent increase from last year. Nationally, cow numbers exceeded 9.5 million, with California, Wisconsin, Idaho, Texas, and New York leading the way in production.

Production in the 24 major states reached 18.8 billion pounds, up 3.3 percent from August 2024. The national total was 19.5 billion pounds, a 3.2 percent year-over-year gain. Production per cow in the 24 states averaged 2,068 pounds for the month, 28 pounds higher than last year.

Cow numbers also rose, with 9.08 million head in the 24 major cattle-producing states, 172,000 more than a year earlier and 7,000 more than in July. Nationally, cow numbers reached 9.52 million, 176,000 higher than in August 2024. The July estimate was also revised upward, adding 139 million pounds to the previously reported output.

California, Wisconsin, Idaho, Texas, and New York remained the top five milk-producing states. Together, they continue to account for a large share of total production, with year-over-year gains driven by strong yields and larger herds.

The U.S. Department of Agriculture (USDA) Dairy Market Report for September (PDF version) shows U.S. milk production climbed three percent year-over-year this summer, with milk solids up nearly four percent.

Despite growth, prices slipped as July’s all-milk average fell to $20.80 per hundredweight, down $2.00 from a year earlier. Feed costs also eased, but the Dairy Margin Coverage margin narrowed to $10.94.

On the demand side, domestic commercial use of all dairy products rose 2.2 percent, driven by yogurt and skim milk powders, though cheese use dropped two percent. Exports accounted for 17.8 percent of milk solids, the highest share since 2023, with butter shipments up 144 percent and cheddar exports up 83 percent. Imports remained below four percent, with butter and cheese both down sharply.

We’re getting a closer look at the long-awaited changes now in place to the Federal Milk Marketing Order (FMMO). American Farm Bureau Federation economist Danny Munch explains how it gives dairy farmers more clarity.

“The five major changes were increases in make allowances, which represent the portion of the milk formulas that account for processors costs to convert fluid milk: a switch back to the higher-of fluid milk formula; removal of barrel cheese from the protein price survey; increases the fluid milk differentials to reflect modern transportation costs; and increases to composition factors, which reflect how much protein and other solids are in milk.”

According to Munch, the overall impact on farmers has been mixed, with one significant negative change.

“Dairy farmers were most concerned about the impact of increased milk allowances because they reduce the price farmers receive, and were based on incomplete data during the hearing process. So far, in the first three months of implementation, dairy farmers have lost $337 million in pool revenues solely due to this change. The other changes have been either more neutral or beneficial to farmers.”

The final amendment, updated composition factors, will take effect on December 1. Composition factors represent the assumed levels of butterfat, protein, and other solids in milk.

Source: RFDTV.com / Tony St. James