In October 2023, butterfat hit a record high of $3.71 per pound and producers average milk revenue was $19.67 per cwt. for Class III and $24.37 per cwt for Class IV.
In January 2025, butterfat was down to $2.95 per pound, and producers’ average milk revenue was $24.10 per cwt. for Class III and $24.09 per cwt. for Class IV.
What does that say about dependence on butterfat prices? This post will have only one Table and two Charts to follow the money. The Table below looks complex but step by step, it can be explained.
BUTTERFAT
From October 2023 to January 2025, butter prices fell by 24%, so butterfat prices fell by 20% after the churning allowance. During this time, butterfat percent in milk increased by 8%, offsetting some of the decrease in butterfat prices. As a result, the impact on producer revenue for butterfat fell by $2.44 per cwt. of milk.
PROTEIN
During the time span in this analysis, protein’s revenue contribution to Class III increased by 129%! The increase is a combination of a 9% increase in cheese prices, a decrease of butterfat prices, and a 3% increase in the amount of protein in milk. Those items increased Class III protein revenue by $4.47 per cwt.
OTHER SOLIDS
The price of Other Solids is based on the price of dry whey which is primarily an export item. In October 2023 dry whey was valued at just $.32 per pound. By January 2025 it had increased in value by 125%! This is a huge increase, but Other Solids have a low price, and a relatively large percent of make allowance for drying the whey. This makes the income for Other Solids very volatile.
Over 40% of whey is exported and subject to international prices. The increase from October 2023 to January 2025 is adding $2.40 per cwt. to producer revenue. The percent of Other Solids in milk is very consistent, staying close to 5.8%.
NONFAT SOLIDS
The price of Nonfat Solids is based on the price of nonfat dry milk (NDM). The price of NDM is up 15%. There is also a small increase in the in the percent of nonfat solids in the milk due to the increase in protein levels. Lactose, the other major ingredient, does not materially increase or decrease as a percent of milk. Over 50% of the nonfat dry milk is exported and is subject to international prices. The increase in milk revenue from Nonfat Solids between October 2023 and January 2025 is $2.16 per cwt.
Chart I and II below show the changes illustrated in pie charts. In both pie charts as butterfat prices declined, revenue did not decline.
WHAT DOES ALL THIS MEAN?
Making money as a producer is complex. Producers have done an amazing job of increasing component levels. The price of Other Solids and Nonfat Solids are very dependent on exports of whey and NDM which can have very volatile pricing. The volatility of commodity prices used to price milk is not in the control of producers, but the USDA Agricultural Marketing Service and the U.S. Dairy Export Council can have some influence. Full speed ahead on increasing protein and butterfat. The best solution for producers is to consistently increase both butterfat and protein levels. Making changes to “play the market” or “chase the market” is impossible. There are just too many variables not in the control of producers.
