Cream prices have hit rock bottom, leaving dairy farmers in a squeeze. With milkfat flooding markets from coast to coast, what’s behind this buttery bust? Dive into our analysis of genetic breakthroughs, cheese plant expansions, and global pressures reshaping the U.S. dairy landscape. Is relief on the horizon, or is this the new normal?
Summary
U.S. cream prices have plummeted to decade-lows, driven by a perfect storm of factors reshaping the dairy industry. A 1.7% surge in milk production during late 2024 flooded markets with milkfat, while new cheese plants diverted cream from traditional butter manufacturing. Cream multiples—a key pricing metric—hit historic lows across all regions, with the West averaging just 0.95 in February 2025. Despite lower butter prices, manufacturers are capitalizing on cheap cream inputs, building inventories, and squeezing farmer margins. The glut is compounded by Canada’s increased butterfat production, adding cross-border pressures. As the industry grapples with this oversupply, stakeholders face a pivotal moment: adapting to shifting consumer demands, navigating policy changes, and balancing efficiency with sustainability concerns. While seasonal tightening may offer relief, long-term structural shifts suggest a new paradigm for U.S. dairy markets.
Key Takeaways
- Cream prices have hit 10-year lows across the U.S., and cream multiples have fallen below five-year averages in all major dairy regions.
- Milk production increased by 1.7% in late 2024, adding 160 million pounds of milk fat to the market.
- New cheese plants divert cream from butter production, disrupting traditional market dynamics.
- Butter prices dropped 22% year-over-year, but manufacturers benefit from cheap cream inputs.
- Dairy farmers face squeezed margins despite producing more milk fat, as feed costs rose 8%.
- Canada’s increased butterfat production is adding to cross-border market pressures.
- Seasonal demand may provide some price relief by June, but structural shifts in the industry suggest long-term challenges.
- USDA’s upcoming Federal Milk Marketing Order reforms will further impact pricing and production strategies.
- Climate regulations and sustainability concerns may accelerate herd consolidation, favoring more extensive operations.
- Stakeholders must adapt to changing consumer demands and market conditions to remain competitive.
Cream prices across the U.S. have collapsed to their lowest levels in over a decade, with milkfat supplies overwhelming markets from California to New England. Despite a 1.7% year-over-year surge in milk production during the second half of 2024—adding 160 million pounds of milkfat—weak demand and shifting processing priorities have created a supply glut. Cream multiples, a critical pricing metric, have languished below five-year averages since mid-January, squeezing dairy farmers even as cheese and butter manufacturers capitalize on cheaper inputs.
Regional Price Collapse Reflects Oversupply
Cream multiples—the ratio of cream prices to butterfat values—have hit historic lows across all major dairy regions. In the West, multiples averaged 0.95 during the week ending February 13, 2025, the lowest Week 7 figure since 2013. The Midwest and East followed closely, with midpoints of 1.05 and 1.11, respectively, marking their weakest seasonal performance since 2017 (USDA Dairy Market News, 2025). Analysts attribute the slump to a perfect storm of abundant milkfat supplies, mild winter weather, and lagging demand for Class II dairy products like ice cream.
Drivers of the Milkfat Boom
Genetic and Nutritional Advances
Due to component-based pricing models in Federal Milk Marketing Orders (FMMOs), dairy farmers now prioritize milkfat yields. Butterfat premiums averaged $2.91/lb in December 2024, incentivizing genetic selection and feed strategies that boost fat output (USDA Agricultural Prices Report, 2025).
Dr. Mark Stephenson, UW-Madison Dairy Economist:
“Farmers are paid for pounds of fat and protein, not just volume. This system rewards efficiency but also floods markets with components faster than processors can adapt.”
Seasonal and Structural Shifts
Unusually warm winter temperatures accelerated calving cycles in the Midwest and East, pushing milk volumes 3% above typical seasonal averages (CME Group Dairy Outlook, 2025). Simultaneously, new cheese plants in Wisconsin and Texas diverted 15% of U.S. milkfat away from butter production—a 50% increase from 2023 levels (IDF World Dairy Report, 2024).
Disease Avoidance and Herd Health
Unlike Western states grappling with Highly Pathogenic Avian Influenza (HPAI) outbreaks, the Midwest and East avoided significant herd culls. This stability allowed milkfat output to grow steadily, with Midwest production rising 2.1% year over year in Q4 2024 (USDA Milk Production Report, 2025).
Economic Impacts: Winners and Losers
US Producer Price Index: Fluid Milk Manufacturing and Cream, Bulk Sales
| Date | Value (Index Dec 1991=100) |
| January 31, 2025 | 239.59 |
| December 31, 2024 | 242.10 |
| November 30, 2024 | 245.70 |
| October 31, 2024 | 258.86 |
| September 30, 2024 | 262.09 |
Source: Bureau of Labor Statistics
Butter Manufacturers
Butter prices fell 22% yearly to $2.45/lb in January 2025, yet churning margins remain healthy due to cheap cream. Cold storage inventories surged 11.4% in December 2024, signaling overproduction (USDA Cold Storage Report, 2025).
Cheese Producers
Cheese demand drove Class III milk prices to $19.45/cwt in 2024, with new Midwest plants absorbing 4.5 billion pounds of milk annually. “We’re seeing a structural shift toward cheese,” notes Haiping Li, USDA Dairy Program Analyst. “Every new plant reduces cream availability for butter long-term.”
Dairy Farmers
Despite higher milkfat yields, farmer revenues lagged. The 2024 all-milk price averaged $22.25/cwt, but feed costs rose 8%, eroding margins (USDA Economic Research Service, 2025).
Dairy Farmer in Fond du Lac, Wisconsin (Anonymous):
“We’re producing record fat, but cream checks barely cover hauling costs. We’ll have to cull cows if cheese plants don’t take more milk soon.”
Federal Milk Order Class Prices, 2024
| Month | Class II Price ($/cwt) | Class III Price ($/cwt) | Class IV Price ($/cwt) |
| Jan | 20.04 | 15.17 | 19.39 |
| Feb | 20.53 | 16.08 | 19.85 |
| Mar | 21.12 | 16.34 | 20.09 |
| Apr | 21.23 | 15.50 | 20.11 |
| May | 21.50 | 18.55 | 20.50 |
Source: USDA Agricultural Marketing Service
Global Context: Canada’s Oversupply Compounds Pressures
U.S. markets face additional strain from Canada’s dairy surplus. Ottawa’s 2024 decision to allow 2.8% more butterfat production under supply management has flooded North American markets with discounted cream (Agriculture and Agri-Food Canada, 2025). “Cross-border dumping accusations are rising,” warns Michelle McBain, Canadian Dairy Commission. “Without export growth, this glut could linger into 2026.”
Market Outlook: Will Prices Rebound?
Short-Term (Q2 2025)
Seasonal ice cream demand may lift cream multiples to 1.08–1.22 by June, but analysts caution that 2025’s spring flush could delay recovery (Rabobank Dairy Quarterly, 2025).
Policy Shifts
USDA’s June 2025 FMMO reforms will lower minimum pay prices by $0.30/cwt, pressuring farmers to optimize milkfat yields further.
Long-Term Risks
- Cheese Overproduction: Excess inventories may destabilize prices if export demand weakens.
- Climate Pressures: Methane regulations could accelerate herd consolidation, favoring large-scale farms with lower per-unit emissions (FAO Dairy Sustainability Report, 2024).
Strategic Recommendations
Farmers should prioritize feed efficiency and contract cream sales to blenders. Processors must balance fat/skim surpluses through butter-powder plants, while retailers could lock in cream contracts ahead of potential late-2025 price hikes.
The Bottom Line
The U.S. dairy sector faces a pivotal moment: record milkfat production has cratered cream prices, but shifting global demand and processing innovations offer pathways to adaptation. As markets brace for tighter margins and policy shifts, stakeholders must align with trends favoring efficiency and diversification. In the words of Tom Bailey, Rabobank Analyst: “The only constant in dairy is change—and fat.”
