The USDA published its Federal Order Final Decision. All 11 orders approved the final changes, obtaining the necessary two-thirds vote in favor of adoption. USDA stated: “This final rule amends the 11 FMMOs with an implementation date of June 1, 2025, except for the amendments to skim milk composition factors, which have a later implementation date.”

Increasing milk composition factors to 3.3 percent protein, 6 percent other solids, and 9.3 percent nonfat solids will be implemented Dec. 1, 2025. Barrel Cheddar will be eliminated from milk pricing formulas and the Dairy Products Mandatory Reporting Program. The change will be instituted in June 2025. After this time, only block Cheddar prices will be used to determine the monthly average cheese price.

Make allowances will increase and butterfat recovery in the Class III formula will be upped to 91 percent. These numbers will take effect in June 2025.

The Class I mover returns to the “higher of” Class III or Class IV skim milk price. A rolling monthly Class I Extended Shelf Life (ESL) adjustment is also part of this. Both updates will be implemented in June 2025. Class I differentials will be altered in some regions, according to the USDA.

Meanwhile, the USDA lowered its milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates report, citing lower milk cow inventories and lower expected milk per cow based on the most recent Milk Production report. The 2025 production forecast was also lowered due to slower growth in output per cow.

2024 production and marketings were projected at 225.8 and 224.8 billion pounds respectively, down 500 million pounds on both from last month’s estimate. If realized, both would be down 600 million pounds or 0.3 percent from 2023.

2025 production and marketings were projected at 227.2 and 226.2 billion pounds respectively, down 800 million on both. If realized, both would be up 1.4 billion pounds or 0.6 percent from 2024.

Class and product price estimates for 2024 were adjusted to reflect reported prices. Prices for 2025 cheese, butter, NDM, and whey were expected to be higher due to less milk production and supportive demand. The Class III milk price was raised, with higher cheese and whey prices. Class IV milk prices were also raised, due to higher butter and NDM price forecasts.

The 2024 Class III average was lowered to $19.89 per hundredweight, down a penny from last month’s estimate, and compares to $17.02 in 2023 and $21.96 in 2022. The 2025 average was projected at $19.70, up 90 cents from a month ago.

The Class IV price will average $20.75 in 2024, unchanged from last month’s estimate, and compares to $19.12 in 2023 and $24.47 in 2022. The 2025 average was projected to hit $20.80, up 40 cents from last month’s projection.

Volatility remained in the cash dairy markets the third week of 2025. The Cheddar blocks jumped 9 cents Monday, hitting $1.91 per pound, then headed lower, dropping 7.75 cents on Wednesday, but regained 6.75 cents Thursday, to close at $1.89 per pound, after finishing the previous Friday at $1.82.

The barrels gained 3 cents Monday, hitting $1.88, dropped to $1.84 Wednesday, then gained a nickel Thursday to also trade at $1.89, following a $1.85 finish on Friday.

Football playoffs are underway and the Super Bowl is less than a month away, the prime cheese consumption time of the year, but cheese demand may lessen after that. HighGround Dairy’s “Monday Morning Huddle” stated: New cheese capacity in Kansas has been in operation for over two months now, but the quality spec is likely not yet ready to pass a grade at the CME, though HighGround believes it is close. Leprino Foods’ new Lubbock, Texas, plant should be running soon but will also have a ramp-up period.”

StoneX says “It will be some time before the U.S. cheesemakers can build inventories at a more normal pace. Last week’s weakness clearly did not make buyers step away but in fact encouraged them to buy the dip. The market is telling us demand for cheese, be it pipeline refilling or just building up some inventory, is still alive and well. We’ve said that the $1.85-$1.95 cheese price average seems to be a good market clearing level for cheese and that continues to be the case so far this week.” Meanwhile, EU Cheddar has been trending higher which could lend some support as they continue to trade at a strong premium to U.S. block prices.

Midwest cheese production continues to pick up following the holiday downtime by quite a margin, according to Dairy Market News. Cheese demand throughout the region is steady to seasonally lighter. Some contacts relay curd and barrel sales are still sluggish after a less-than-noteworthy late 2024 season. A number of Cheddar and Italian style cheesemakers, though, say demand is meeting or beating seasonal expectations. Milk availability quickly tightened following the holiday lulls. Spot milk prices were above the Class III baseline at mid-week and market tones are somewhat stable, says DMN.

Western cheese production is steady to stronger. Steady or strengthening milk production in the region is providing more milk to cheesemakers and demand for milk from cheesemakers is reportedly healthy. Contractual obligations are being fulfilled as anticipated. Demand from domestic and international buyers is mixed.

CME butter hit $2.6125 Monday, highest since Nov. 15, 2024, but fell to $1.5350 Thursday, following a Friday close at $2.60.

The U.S. fat test is substantial and made a new record in November, according to HGD. “Concerns about milk production in the nation’s top-butter state may provide near term support, though cream multiples remain historically low with multiple regions reporting ample availability.”