The post on September 25, 2026, finished with a comment that the increased volumes of cheese and butterfat being produced allows a more consistent and adequate domestic supply of components. The excess is being exported. That should reduce volatility in domestic component prices. This post will dig into the current increases and exports to see if volatility is getting reduced.
Protein prices are the most volatile (Chart I). The volatility charts list the monthly changes. One the most volatile months was August 2023 when the price increased by $.74 in one month. In October of 2023, the price dropped by $.55 in one month. in May of 2024, the protein price rose by $!.08 in one month.
Chart II follows the price of milk protein. From May 22, 2022, to April 2024 the price of protein dropped by $3.04 per pound and was then valued at $.83 per pound. The formula used to calculate the price of Protein was covered in the September 25, 2026 blog. It is a complex formula using the wholesale prices of Cheddar cheese and butterfat. Both have been volatile and compounding these as both prices go up and down have led to the extreme volatility in protein prices. The formula itself adds to the volatility. If both items can become less volatile, the price of protein will be less volatile. In 2026, Volatility per pound has stayed within $.40 range.
(The formula itself adds to the volatility. It identifies the value of protein and butterfat in cheese without the cost of making the cheese (the make allowance). That would be a formula consistent other USDA formulas. However, it then subtracts the cost of butterfat in the cheese which is valued at the formula using the wholesale price of butter. This will be covered in more detail in a future post.)
The extreme changes in protein prices make operating a dairy farm nearly impossible.
Butterfat prices have been very volatile (Chart III). However. The range of volatility is less than $.20 per pound except for two times in the six-year chart. In 2026, the volatility has been less than $.10 per pound per month with one exception.
Butterfat is priced by the wholesale price of butter. Butter has a cyclical domestic demand at the end of each year. Butter consumption increased in 2022 to 2025. Butterfat volatility has varied from $1.55 per pound to a high of $3.71 per pound, but the month-to-month volatility has been low compared to Protein prices. The formula used for pricing volatility is very simple.
Other Solids have much lower prices, with the highest price per pound at $.61. But the monthly volatility has reached a high of $.53. In 2026 the largest volatility has been under $.07 per pound.
SUMMARY
Volatility has been lower in 2026 as predicted in an earlier post. (Table I). The wholesale price of butter which is used to calculate the price of butterfat is more volatile in 2026 than the prior five years. Protein and Other Solids have significantly reduced volatility.
If the years were compared individually, the protein price volatility in 2026 is less than any of the prior four years.
With a more adequate and steady domestic supply for these three commodities, the price of each will be more stable. The major volatility is in the price of Protein, but it is improving. Butterfat is still very volatile in 2026, primarily in February and March. In the next six months of 2026, the volatility decreased. Other Solids is a small contributor, but the volatility is significantly lower in 2026.
