Govt. Reports Grind to a Halt Following Shutdown
Published: Friday, October 17, 2025
The U.S. government shutdown has resulted in the loss of this month's Dairy Products report, the U.S. Dairy Trade report, the World Agricultural Supply and Demand Estimates, last week's Crop Progress and Crop reports, and many others, which meant less for the markets to feed on and less to report on.
There will not be another vote in the Senate until Tuesday, following the Columbus Day holiday Monday. It also put on hold any assistance to farmers, particularly soybean growers, hurting over the loss of export sales to China.
Meanwhile, "Dairy margins were relatively flat over the second half of September as milk prices stabilized following steep losses over the past six weeks," according to last week's Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.
"Dairy product prices may be finding value at current levels, although concerns remain over demand not keeping up with increased production," the MW warned. "USDA's monthly Milk Production report showed August output totaled 19.52 billion pounds, up 3.2% from last year and the eighth consecutive month of year-over-year increases. Milk output through the first eight months of this year is now 2.1% higher than during the same period in 2024.
"USDA also revised July's production estimate higher to reflect a 4.2% increase from last year, .8% above the initial estimate. The increase was due to an upward revision in cow numbers and milk yields. USDA added 25,000 cows to its initial July estimate, with the August figure pegged up another 10,000 from July to 9.52 million head which is 176,000 higher than last year and the largest herd size since 1993. August milk yields rose 1.3% from last year also to 2,050 pounds per cow as cheaper feed costs helped to boost productivity.
"USDA's Cold Storage report showed butter inventories at the end of August totaled 305.858 million pounds, down 7.7% from July and 5.7% below last year. The decline was more modest than the typical drawdown between July and August. Total cheese inventories of 1.42 billion pounds were up 1.7% from last year and down .8% from July. American cheese stocks of 818.182 million pounds were up 3.1% from last year though and .6% above July as they increased more than other varieties," the MW concluded.
Speaking of cow numbers, Reuters reported that Mexico's agriculture ministry has confirmed another case of screwworm, this time in Nuevo Leon, which borders the U.S., "marking the state's second case in about two weeks."
Last Thursday's Class III futures showed the October contract at $17.02; November, $16.64; December, $16.74; January 2026, $16.57; and February at $16.75.
Dairy prices in Chicago weakened last week. After jumping 16.50 cents last week to $1.79 per pound, the Cheddar blocks fell to $1.7350 last Tuesday, and closed last Friday at $1.70, down 9 cents on the week, and 18.75 cents below a year ago. The barrels, after gaining 14.75 cents last week, fell to $1.74 last Tuesday, and closed last Friday at $1.71, 6 cents lower, 17.75 cents below a year ago, and a penny above the blocks. CME sales for the week totaled 18 lots of block and no barrel.
Eyes are on Europe where milk is plentiful and cheese prices are dropping to compete with the U.S. Dairy Market News reports that Central region milk production is steady but remains up from previous months. Class I purchases are strong. However, downtime at some cheese plants in the region added some spot volume. Contacts were moving some loads to other regions where inventories are tighter, according to DMN. Mid-week Class III spot prices ranged flat to $3 over. Cheese production is strong, despite downtime at some plants reducing their schedules. Last week's increase in CME cheese prices contributed to an uptick in demand for bulk cheese, according to DMN. Retail cheese sales are steady to higher but remain light overall and food service sales are light.
Strengthening milk production in the West is providing plenty for cheese vats. Cheese production was steady to stronger. Cheese producers noted mixed availability of loads for spot buyers this week. Some report production is largely obligated to contractual sales. Distributors and traders convey that Mozzarella is somewhat tight, but other varietal cheese is widely available. Domestic demand is flat. The retail sector continues to be more robust than food service. Export demand varies from somewhat weaker to somewhat stronger, according to DMN.
After gaining 3 cents last week, hitting $1.75 per pound, CME butter dropped back to $1.6025 last Thursday, lowest price since Feb. 26, 2021's $1.47, but it closed last Friday at $1.6050, down 14.50 cents on the week, and $1.02 below a year ago. There were 47 loads that exchanged hands on the week at the CME.
Milk output and component levels are strong in the Central region, says DMN, and there's plenty of cream available. Demand is steady to light. Butter makers are utilizing internal cream for production rather than turning to the spot market. Churns are generally active in the region, but some plants scheduled downtime this week. Domestic butter demand was light. Retail sales are picking up but remain below some expectations. Spot loads of 80% butterfat butter are available but strong export demand is keeping inventories of 82% product tight, says DMN.
Seasonally strengthening milk production and fat components were adding to already adequate cream availability in the West. Cream demand from butter makers was mixed and multiples were unchanged through Wednesday. Butter production was lighter to somewhat stronger.
Plant managers convey some unplanned downtime, mostly due to equipment maintenance. Some butter manufacturers indicate that inventories are decreasing. However, more than ample loads of salted and unsalted product is available. Retail demand is steady to stronger and ahead of food service sales. Export demand is strong says DMN.
Grade A nonfat dry milk closed the week at $1.1275 per pound, 3.25 cents lower, lowest since May 7, 2024, and 22.50 cents below a year ago, on seven CME sales.
HighGround Dairy's "Monday Morning Huddle" stated, "The U.S. is not the only place with milk flowing; New Zealand's season-to-date milk solids collections are up 4.2%, providing plenty of dairy commodity output. As such, Fonterra has increased its GDT whole milk powder offer volumes by 10,000 metric tons which will be allocated at events from October to February."
Dry whey ended last Friday and the week at 63.50 cents per pound, up a half-cent, and 4 cents above a year ago. There were 12 sales posted for the week.
The Daily Dairy Report's Sarina Sharp wrote in the Oct. 3 Milk Producers Council newsletter, "Immense demand for high-protein products is using up much of the whey stream, but as cheese production climbs, manufacturers will have to dry more and more whey into powder. Thankfully, whey exports are decent."
U.S. dairy cows are producing a lot more milk right now that is high in butterfat and protein, which is what U.S. dairy farmers are striving for. But that's causing some problems for dairy processors, according to a new report from CoBank.
Lead dairy economist Corey Geiger reported in the Oct. 13 Dairy Radio Now broadcast that the issue came to light especially in June, July and August when butterfat was up over 5% from year ago levels. With half of U.S. milk going into cheese, the protein to fat ratio is off and in processing circles, they want a protein to fat ratio closer to .80 or slightly higher, says Geiger. Anything significantly lower than that can reduce cheese quality and compromise production yields.
Protein is the foundation for cheese, he said, especially Mozzarella, and processors always had to pull butterfat off to make it or other Italian styles, but now even Cheddar, Colby and Pepper Jack producers need to pull butterfat or else add milk protein concentrate to the milk to raise the protein content.
That extra step increases production costs. Geiger adds, "If you're pulling cream off, it's going to the open market and lands up as butter, cream cheese or other products like that."
Farmers have been purposefully breeding and feeding to increase butterfat and protein and rightly so.
Geiger says, in eight of the last 10 years, there's been a strong call for more butterfat in particular with today's multiple component pricing, which makes up 90% of the pay price across the country.
There are some tools we can work on nutritionally to lower butterfat levels, he said in closing, and that will even save a little on the feed bill.
By the way, the situation in the EU and New Zealand, the two largest dairy exporters, is different, according to CoBank. The protein-to-fat ratio has remained far steadier, averting the issues that U.S. cheesemakers are facing.
The International Dairy Foods Assn. reported that U.S. dairy processors are responding to surging demand by investing more than $11 billion in new and expanded manufacturing capacity across 19 states.
"With U.S. milk production expected to grow 15 billion pounds by the end of the decade and dairy consumption and export demand rising as consumers seek out wholesome protein and nourishment, dairy processors have undertaken more than 50 individual building projects between 2025 and early 2028," the IDFA said. "These new and upgraded facilities add to the billions-of-dollars of new processing capacity that has come online in the past decade as consumers seek out foods and beverages that boost strength and endurance, enhance health and reduce illness."
"In October, American businesses celebrate the importance of U.S. manufacturing innovation and ingenuity to America's standard of living by recognizing Manufacturing Month. Dairy processing is one of the fastest-growing sectors in the U.S., and food manufacturing is the leading manufacturing sector in 19 states. The nation's dairy manufacturing industry is powered by 1,200 dairy processing plants that source wholesome milk from nearly 24,000 American dairy farming families," the IDFA stated.
Dairy Market News reports, "Milk production continues to rise nationwide. Decreasing temperatures are increasing cow comfort, leading to larger volumes of milk. Milk components remain high, higher than many contacts can remember in recent years. Class I demand remains strong."
Bottling demand is increasing in the Midwest while the rest of the country is in a steady state. Class II demand is seasonally increasing. Manufacturers are fulfilling holiday orders for dairy-based baking ingredients. Class III demand is steady to light nationwide."
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