Global Milk Surge Threatens Q4 Checks: Can Calves Save Margins

The dairy industry is bracing for a challenging fourth quarter as a significant surge in milk production threatens to weaken milk checks for farmers. The United States has seen a more than 4% increase in milk production in recent months, marking the most robust growth since 2021. This surge is part of a global trend with key regions like the European Union and New Zealand also boosting output. New Zealand is experiencing what might be a record-breaking production season heading into October.

This expanded output has placed considerable downward pressure on dairy commodity prices. Both cheese and butter have seen prices slide, with the CME spot butter price falling below $2 per pound, marking its lowest point since 2021. However, dry whey prices have increased slightly thanks to strong protein demand, offering some positive outlook for Class III milk prices.

In response to declining milk revenues, the industry is heavily relying on the non-milk revenue streams fr om cow and calf sales, wh ere record-high prices for beef-on-dairy cross calves provide significant financial buffers. Analysts predict that it will take several months to balance the current excess supply, but a combination of low feed costs and high calf revenue is expected to support the dairy sector through 2026. The outlook on milk prices remains cautious, with farmers and industry stakeholders closely monitoring developments in the global dairy markets.