Butter Prices Soar 27% While USDA Slashes Dairy Forecasts.

Butter prices surge 27% while USDA slashes milk forecasts. Will your dairy operation profit or collapse in this contradictory market?

EXECUTIVE SUMMARY: Global dairy markets are sending conflicting signals: European butter prices have skyrocketed 27% year-over-year, while the USDA cut 2025 milk price forecasts by $1.00. Futures trading volumes hit 16,000 tonnes, signaling trader panic over volatility. Fat-rich products like butter and cheese command historic premiums, while protein values (SMP) struggle. The USDA’s surprise production forecast reduction raises concerns about shrinking margins and productivity. Producers must prioritize component optimization, risk management, and cost efficiency to survive these market contradictions.

KEY TAKEAWAYS

• Fat vs. Protein Divide: Butter (+27%) and cheese (+18%) dominate gains, while SMP prices lag (+1.7%)—optimize milk components for fat.
• USDA Warning: 2025 milk price forecasts slashed to $21.60/cwt (+0.1% production growth), signaling margin compression ahead.
• Europe’s Decline: France/Germany milk production drops (-1.7%/-2.2%), tightening EU supply as processors compete for shrinking volumes.
• Action Plan: Maximize butterfat, lock in risk strategies, slash input costs, and target high-value product streams.
• Critical Indicators: Watch WASDE revisions, futures volumes (>7,500t = volatility), and fat-protein price ratios.

While European butter trades at a staggering 27% premium over last year, the USDA has just cut its 2025 all-milk price forecast by a whole dollar to $21.60.

As futures contracts trade at dizzying volumes, The Bullvine cuts through the market noise to expose what these contradictory trends mean for your bottom line.

“While European butter trades at a staggering 27% premium over last year, the USDA slashed its milk price forecast by a full dollar. This isn’t a coincidence – it’s a warning.”

DAIRY FUTURES EXPLODE WITH TRADER PANIC

The dairy futures arena exploded with activity last week, with over 16,000 tonnes traded across European and Singaporean exchanges.

This wasn’t casual positioning – it was a feeding frenzy of uncertainty.

EEX reported 5,580 tonnes changing hands, with 1,850 tonnes traded on Tuesday alone. Meanwhile, SGX saw an even more aggressive 10,418 tonnes traded.

THE BULLVINE’S TAKE: When futures traders get this active, they’re not just hedging but panicking. The smart money is desperately trying to lock in positions because they see something brewing that average producers don’t.

This level of activity typically precedes significant market movements. Is your operation protected against the volatility these traders are expecting?

“When futures traders get this active, they’re not just hedging – they’re panicking. The smart money sees something coming that average producers don’t.”

FAT PROFITS VS. PROTEIN PROBLEMS: THE DIVERGENCE NOBODY’S TALKING ABOUT

The market is sending crystal clear signals about where the money is heading. EEX butter futures held firm, with the March-October strip averaging €7,427 (up 0.8%), while SMP plunged 1.8% to €2,501.

This isn’t just a random fluctuation – it’s a fundamental shift in demand patterns that’s being overlooked.

European quotations tell the same story:

• Butter: €7,407, a jaw-dropping +27.4% above last year
• Cheddar curd: €4,845, standing +18.5% above previous year
• Mozzarella: €4,246, representing a +15.7% year-over-year premium
• SMP: €2,453, down 1.4% week-over-week but still +1.7% above the previous year

Year-Over-Year European Dairy Price Comparison

Product	Current Price (€)	Change vs Last Year (€)	% Change
Butter	7,407	+1,594	+27.4%
Cheddar Curd	4,845	+755	+18.5%
Mild Cheddar	4,808	+726	+17.8%
Mozzarella	4,246	+576	+15.7%
Young Gouda	4,400	+419	+10.5%
SMP	2,453	+40	+1.7%
Whey	885	+185	+26.4%
WMP	4,372	+697	+19.0%

“The days of being paid for white water are numbered. The market is screaming for fat while protein values struggle.”

THE BULLVINE’S TAKE: The fat market shows remarkable resilience while protein values struggle. If your nutrition program is still focused on volume while the market screams for components, that approach could cost you thousands this year.

Progressive producers should maximize components through advanced nutrition and genetics focused on butterfat, not just volume.

USDA BOMBSHELL: MILK FORECAST SLASHED IN SURPRISE MOVE

The USDA dropped a market bombshell in its March WASDE report, cutting the 2025 milk production forecast to 226.2 billion pounds (102.60 million tonnes) – a substantial reduction from February’s estimate of 102.92 million tonnes.

More concerning is the rationale: “lower expected milk output per cow more than offsetting slightly higher cow inventories.”

This creates a puzzling contradiction: Why would milk per cow suddenly decline when producers invest in genetics and management designed to increase efficiency?

USDA March 2025 Forecast Revisions

Metric	February Forecast	March Forecast	Change
2025 Milk Production (mil MT)	102.92	102.60	-0.3%
Growth vs 2024	+0.4%	+0.1%	-0.3 pts
All-Milk Price ($/cwt)	$22.60*	$21.60	-$1.00
Class III Price ($/cwt)	$19.10*	$17.95	-$1.15
Class IV Price ($/cwt)	$19.70*	$18.80	-$0.90

*Previous forecast values derived from reported changes

“Are you basing your expansion decisions on government forecasts that change dramatically monthly? That’s a dangerous game few can afford to play.”

The price forecast news is especially alarming. The average all-milk price is now projected at $21.60 per hundredweight, down from 2024’s average of $22.61.

Class III milk prices have been most severely impacted, with projections cut by $1.15 to $17.95 per hundredweight.

Class IV prices also face downward pressure, expected to average $18.80 per hundredweight, a $0.90 reduction.

THE BULLVINE’S TAKE: The USDA’s forecast reductions speak volumes about American dairy’s structural issues. The contradiction between expanding cow numbers and reduced productivity expectations raises serious questions about USDA’s forecasting methodology.

Are you basing your expansion decisions on government forecasts that change dramatically monthly? That’s a dangerous game.

EUROPE’S MILK PRODUCTION CRISIS DEEPENS

European production figures reveal troubling trends that could reshape global dairy trade flows.

France reported that January milk production was down 1.7% year-over-year to 2.02 million tonnes, with milk solid collection dropping even more sharply to 1.9%.

Germany, Europe’s dairy powerhouse, reported January volumes falling 2.2% year-over-year to 2.66 million tonnes, worse than expected.

Only Denmark bucked the trend, with milk production increasing 1.1% year-over-year to 478,000 tonnes. Impressive component levels (4.63% fat, 3.75% protein) drove a 2.0% increase in milk solid collection.

European January 2025 Milk Production Trends

Country	Volume (mil tonnes)	Y/Y Change	Milkfat %	Protein %	MS Change
France	2.02	-1.7%	4.25%	3.34%	-1.9%
Germany	2.66	-2.2%	*	*	*
Denmark	0.478	+1.1%	4.63%	3.75%	+2.0%

*Component data for Germany not yet available

Germany represents approximately 23% of EU milk production, making this decline particularly significant for European dairy markets.

THE BULLVINE’S TAKE: The decline of European production in key countries has created a complex competitive landscape.

European processors will fight aggressively for milk supplies in declining regions, while areas with production growth may face price pressure.

These geographic variations create both opportunities and threats for globally-minded producers.

5 MARKET INDICATORS SMART PRODUCERS ARE WATCHING

Don’t just react to these market shifts – anticipate them by monitoring these critical indicators:

1. Forward Price Projections: Watch for revisions in the following WASDE report.
2. EEX and SGX Futures Volume: When weekly volumes exceed 7,500 tonnes, volatility typically follows.
3. Fat-to-Protein Price Ratio: Component optimization becomes crucial when butter maintains a 27%+ premium over year-ago levels while SMP struggles.
4. Feed Cost Trajectory: Changes in feed costs could partially offset milk price declines.
5. Production Per Cow: The puzzling USDA forecast of lower productivity despite higher cow numbers needs close monitoring.

WINNERS AND LOSERS: ARE YOU POSITIONED TO PROFIT?

WINNERS:

• Component-focused producers: Those maximizing butterfat will capture premium prices while others struggle
• European cheese manufacturers: Tight milk supplies and substantial cheese premiums create favorable margins
• Forward-thinking hedgers: Producers who locked in prices ahead of recent volatility will outperform peers
• Efficiency-obsessed operations: Those with the lowest cost structures will weather the coming margin compression

LOSERS:

• Volume-chasing producers: Operations focusing on milk volume over components face declining returns
• Late adopters of risk management: Those without hedging strategies face full exposure to price volatility
• Input-heavy operations: Farms with high purchased feed costs will struggle most as margins tighten
• Reactive planners: Producers who fail to adjust strategies based on market signals will suffer most

“In this market, there’s no middle ground. You’re either strategically positioning for these contradictions or becoming another casualty of them.”

5 TOUGH QUESTIONS EVERY DAIRY PRODUCER NEEDS TO ANSWER TODAY

Take a hard look at your business and answer these critical questions:

1. Component Strategy: Given the current 27% year-over-year premium, are you maximizing butterfat production?
2. Risk Protection: What percentage of your 2025 production is protected against the USDA’s newly lowered price forecasts?
3. Feed Efficiency: Can you capture margin opportunities if feed costs decline?
4. Cash Flow Planning: Have you stress-tested your finances against the new $21.60 all-milk price scenario?
5. Strategic Focus: Does your expansion strategy make sense considering USDA’s reduced production value forecast?

YOUR STRATEGIC ROADMAP FOR NAVIGATING MARKET CONTRADICTIONS

The global dairy landscape is evolving rapidly, requiring producers to make tactical adjustments. The contradictory signals between robust European fat values and weakening U.S. milk price forecasts demand a strategic response.

Successful producers will:

1. Maximize component yields through precision nutrition and genetics
2. Implement aggressive risk management strategies to protect against volatility
3. Scrutinize all input costs with renewed vigor as margins potentially compress
4. Target your milk quality parameters to the most profitable product stream in your region

THE BULLVINE’S TAKE: This isn’t time for business as usual. The dairy market sends clear warning signals that only the prepared will heed.

The producers who thrive will recognize that these contradictions aren’t random—they’re predictable outcomes of global supply and demand fundamentals that can be leveraged for profit.

What changes will you implement today to ensure you’re among them?

“This isn’t time for business as usual. While others react to yesterday’s news, smart producers are already capitalizing on tomorrow’s market reality.”

Learn more:

• Fat Is King: Top Nutrition Strategies To Maximize Butterfat In Your Herd
• Dairy Risk Management in Uncertain Times: Expert Strategies To Protect Your Milk Check
• European Milk Crisis Deepens: What Production Declines Mean For Global Dairy Markets

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