The Milk Check

Nonfat is sitting north of $2.25 on the CME spot market. But the bigger question is how long it can hold.

In the latest episode of The Milk Check, the Jacoby team breaks down a dairy market that feels tight, fragile and increasingly dependent on timing.

Here’s what they’re watching:

Why nonfat prices surged, and what could break them

How protein demand is pulling milk away from dryers

Why MPC and MPI are outpacing nonfat

What the inverted futures curve suggests for the second half of the year

How depooling and Class III–IV dynamics are shifting milk flows

Why butter feels weaker, even in the middle of flush

Plus, the team talks through what happens if the nonfat market doesn’t break soon.

There’s still a lot of milk moving. Just not where it used to go. Let the Jacoby team help you get up to speed on the new dairy market dynamics.

Click below and listen to The Milk Check episode 98: A Market on Borrowed Time.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: Coming up on the Milk Check.

Jacob Menge: if this doesn't start falling soon, I think there's gonna be people that are trying to make money on the short side of this thing because they didn't make money on the long side.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby & Co., Your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

Today is May 1st. It's a couple of days after the ADPI and a couple of weeks after the Cheese Expo, and it's usually after those two meetings a really good time to talk markets.

So, we'll go ahead and start with the market that everybody was talking about at the ADPI. Josh, Jake, Joe, what's going on with our nonfat market? We're at $2.26 today, I believe. Are we gonna stay up here for a while?

Josh White: It's a more challenging question than just the absolute price today. I think that if I were to summarize the show, there was a recognition across the entire dairy industry that there might be some legitimate reasons for nonfat to be tighter than they have been over the last several years.

It feels like a lot of different things have resulted in the current spot price that we've seen today. Over the last five years, we globally have made more skim milk powder and nonfat. We've consumed more skim milk powder and nonfat, but the real story is in the fact that we've also made a whole lot more milk, and that milk doesn't seem to have found its way to the dryer.

Seems to have found its way to a variety of different products. And equally as important during the ADPI was the talk about the protein market, which I think we can likely get to later. But things like RDT products, beverages, protein consumption, cheese consumption, a lot of things have consumed incremental milk growth, particularly in the U.S., and that happened after many years where buyers had very little concerns over access to supply.

And as a result, I think in the background we watched global inventories decline, and that all seems to have come to a head here in the early part of 2026. And now as we're getting into the northern hemisphere flush, and particularly in middle America, yeah, then we have ADPI. And so, what's interesting about your question is throughout most of the conference people were pretty convinced, "Yeah, we're in a tighter nonfat market. We're all buying into that." Yet, the days following ADPI, we've seen futures sell off a bit and we've seen a little bit more volume traded at the CME spot call. What's that mean going forward?

Jacob Menge: The most interesting thing going forward is you don't talk to single person that says these prices are gonna stick around for six months. And so it's really a matter of timing, how long do we stay up here? I think we're already up here longer than most anybody thought. And the other thing is, nobody got this market right. Some people got in at a buck 25. Those guys sold at a buck 40. They said, "I'm gonna take my 15, 20 cents and run." And they felt like a genius for about three days before we were quickly at a buck 60. And we've got this really interesting dynamic of no market participant really happy with it being up here because nobody really made money on the way up.

And everybody convinced that, okay it's on the clock for when it comes off. And I'm not even gonna disagree with that, right? I don't think anybody would argue that long-term we're gonna have $2.50 nonfat in 2028 or whatever. But this really comes down to a question of timing, and I think that's where you get mixed opinions.

But in general, I think most people are of the opinion that it's not gonna be that long before this thing does start to fall. I don't have that strong of an opinion actually, but what I do have an opinion on is if this doesn't start falling soon, I think there's gonna be people that are trying to make money on the short side of this thing because they didn't make money on the long side, that they're gonna start feeling some pain.

And as our curve has come up a bit over the past month, we've got this really interesting market conditions where, again, if we're up at these levels even a month from now, two months from now sure, I'd make the argument, why couldn't you have another squeeze higher?

Because there's still not that much product available right now today. We're starting to see that change. We saw some really nice volume on the CME spot auction just this morning. But that's what the eyes are on is how long does this thing take? And if it starts this week versus six weeks from now, I think those have very different implications for how the market reacts.

Josh White: We've got three different reactions to the nonfat market right now. You've got the true nonfat participants that need product now, and that's priced in the $2.25-plus type range right now on the countryside. And to your point, we're seeing a few more loads available which is a decent sign.

The market participants seem pretty convinced that we're gonna see an easing from this price, but so are futures. And I think that's another important thing to point out is that the futures curve is inverted and it's quite a bit lower than the spot price today. So, you can have both situations. You can have a spot price drop while the futures price maybe doesn't as much.

Over the past few days, the futures curve has definitely traded lower, confirming what we heard there is that most people don't believe in this market being as tight as it is currently into the future. And we have to remember, this is traditionally a globally traded product and our competitors across the pond are still quite a bit lower and making a whole lot of skim milk powder today.

So, I think longer term, if the assumption is that we need to compete globally for at least some business, particularly in markets like Asia, we're gonna have to be a little bit more aggressive to compete, but futures are saying we will be.

Another important topic was now we're starting to see an acceleration of the NDPSR price now that we've had several months of higher spot prices, and that's starting to have an impact on markets other than just the powder market. And I think maybe, Gus, you would have a little bit more to say about how the market's reacting to some of the component prices moving higher in the solids nonfat side of things.

Gus Jacoby: The situation as we've talked about in the past is protein is being pulled in a lot of different directions and we don't see that demand going away anytime soon. The one comment I would make though is your isolated protein, certainly UF milk in fluid form, are seeing some of the highest demand that we've seen in a very long time.

So, if you're cheese maker, if you wanna fortify, and certainly on higher butterfat milk, there's plenty of folks that wanna fortify right now, there's probably a little bit of a pull on all the skim solids at this moment in time. I don't think that story has changed.

We've beaten that up for a while. But that's certainly gonna pull a fair amount of milk out of the dryer for nonfat. You look at where the capacity has been added, whether it be in the Southwest with all the large cheese plants that have been added there, and then Upstate New York where some dryers are also gonna sit idle as some new processing capacity comes on there.

That's two areas of the country that are gonna get a lot less milk into the nonfat dryers than previous. And certainly here we are now in the flush as these plants ramp up, it would typically be your highest powder production timeframe, and instead those solids are going elsewhere, and that will keep nonfat production down for the foreseeable future.

Ted Jacoby III: Gus, are you seeing milk move towards Class IV plants instead of Class III plants this year?

Gus Jacoby: We still see fortification solids during this flush finding its way into cheese plants. But that's your surplus skim solids that might exist, and those are only available, I believe, because of the flush. Now, it's not UF milk, right? UF milk tends to be going elsewhere whether it be going to some sort of IV or II-type arrangement, whether it be a high-protein beverage or a high-protein dry product.

But you are still seeing a fair amount of condensed and other skim solids going to the cheese vat for fortification purposes. I think the way that will unfold likely is that those surplus skim solids that aren't being turned into isolated protein products, they're gonna probably get pulled out to a certain degree of the cheese plants, and then cheese plants will just not be able to utilize fortification as they are typically used to or would like as we move through the year.

Ted Jacoby III: So, what you're saying is if the price stays up here,...

With Easter behind us, demand is easing, milk production is climbing, and the spring flush is here.

But beneath the surface, the dairy complex is anything but comfortable.

In the latest episode of The Milk Check, host Ted Jacoby III and the Jacoby team look at the fault lines hiding beneath today’s seemingly stable dairy market.

In this episode, we cover:

Why milk is getting longer, but not everywhere

How added processing capacity is changing the spring flush

Whether butter has found its floor, or is simply stuck

Why energy may be the biggest wildcard in dairy right now

From regional milk balances to butter’s next move and the growing influence of energy costs, we look at what is really driving the dairy complex right now.

To hear what could hold, what could crack and what the next few months may mean for dairy, listen to The Milk Check episode 97: Steady Markets, Shaky Ground.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: Coming up on the Milk Check.

Joe Maixner: It's really watching the energy markets because it's going to affect literally everything.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

Today is April 6th, 2026. It's the day after Easter.

it's also the birthday of a few illustrious people like Paul Rudd, Lando Calrissian, or actually Billy D. Williams and our own Joe Maixner, and we're here to talk about dairy markets today.

Sorry, Joe, and we're here to talk about dairy markets today, and what we're gonna be talking about is it's the day after Easter and demand for the next oh five months or so tends to slow down a bit, while milk production tends to pick up and it's peaking probably right as we speak, and over the course of the next four to five weeks.

So, what does that mean for the dairy landscape? What does that mean for the price landscape? When I started thinking about what we were gonna talk about for this podcast, the market seemed to be in a lull right now. And then I realized it's that time of the year.

The question is, are they gonna stay here? Are they gonna go lower? We know that milk production is gonna continue to increase, especially in the Midwest, and we know that the next demand event of any significance is at least five to six months away. But where we'll start is we'll start with milk production.

This is the time of year when things tend to get a little bit long. Gus, is milk long right now?

Gus Jacoby: Depends what region of the U.S. you wanna talk about. From what I understand, there's some areas of the West that are very long. The upper Midwest, when you have plants go down, it gets a bit ugly.

But looking into the mid East, the Northeast, the Southeast, certainly the Southwest, where there's quite a bit of new processing capacity, all these areas, are not all that long. It's certainly the spring flush, but when you look at the Milk Production Report, you would think they would be a lot longer.

And I think additional processing capacity in all these regions that we just discussed are where we're a little bit shorter than we anticipated, considering what time of year it is.

Ted Jacoby III: Usually, this time of year we're hearing of milk moving at 2, 3, 4, $5 under. Is that happening this April?

Gus Jacoby: There's some spots in the upper Midwest where it gets that discounted, yes. But I would say that has more to do with plants being down in addition to the surplus that causes it to get that long. I think if everything is functioning in the region -- in the upper Midwest, Mideast or anywhere on the Eastern corridor -- you're not seeing quite the growth that's shown in the Milk Production Report.

Anytime you see north of 2.5% or 3% in a Milk Production Report, usually that means the flush is a really ugly period of time. But in these regions of the country, we've added enough processing capacity to balance things out a bit more and not make it quite as long as you would think.

Ted Jacoby III: So we didn't really add any plants west of the Rocky Mountains. And in that case, the flush, especially in California, is probably already in the rear view mirror. Are we seeing milk really long in California and along the west coast right now?

Gus Jacoby: I've heard that California, for a while there did get pretty long.

That area hasn't had the additional processing capacity outside of the Pasco facility to deal with the level of surplus we have in those regions.

Ted Jacoby III: That means it's fair to say that we're in the flush right now, maybe past the flush out West Milk has gotten long, milk is plentiful, but we've added enough milk processing capacity that generally speaking, as long as there in, there are not any plant breakdowns. We seem to be able to handle the additional milk supply and we're getting it all processed.

Gus Jacoby: Yes, that's the truth.

Joe Maixner: The West has been running full for the past couple of months. But cream has not been super long. It's been getting into the churns, but it's also been finding homes elsewhere and it's had decent demand.

It's been a little surprising that we haven't had as excess of cream as we would've anticipated given how long milk has been.

Ted Jacoby III: What about on the powder side? I've heard that the plants are not necessarily dumping any milk, but the plants are full enough that they can't run anything specialty.

So, all they're running is straight up nonfat dry milk, which these days with protein component values in the milk the way they are, 38% protein, but they're just running 'em flat out to get all that milk processed and dried. Is that a fair way to put it?

Josh White: Yeah, I would say so.

Ted Jacoby III: Okay. Milk's getting processed. We're making a lot of it, but Easter's now in the rear view mirror. Since our runup, late January, early February, the cheese market seems to have settled into a price somewhere in the $1.60s, the butter market's been $1.70s, $1.80s, it popped up over $2 and it seems to have faded since.

Is it in its sweet spot yet, or where do you think the butter market will go over the next three to four months?

Joe Maixner: I think there's a lot of factors that go into where the butter market's gonna price over the next few months. Obviously, we've got the macro events going on, the conflict in the Middle East, that's pulled a lot of export opportunity out, as we've talked about at length in the past few podcasts.

But there's been a lot of product trading in this 15¢ to 20¢ range that we've been in over the past couple of weeks, and it seems that we've found a good range where buyers and sellers are happy to move product.

There's probably not much more downside potential at this price. But it's a very real possibility that we could just stagnate here for the next few months until we see any type of real demand shift and production dies off into the summer.

Ted Jacoby III: Are we gonna continue to be exporting butter?

Joe Maixner: Yeah, absolutely. We're still seeing exports move. Obviously we've lost some of our largest growth markets with this conflict, at least temporarily. But we're still exporting to other regions, and all of those markets are growing.

Will it be enough to offset the losses? I'm not sure, but we're still moving product out of the country.

Ted Jacoby III: The cheese export numbers have been phenomenal for about the last six months.

We've been up over 30% year over year, almost to the extent of being a little bit surprising. Are we gonna be able to keep that up, do you think? Or is this market going to peter out a little bit ?

Jacob Menge: You gotta suspect that you stop getting the blockbuster export numbers before too long because it has been two months now since we've come off of kind of those rock bottom prices that we were at.

I think that will certainly take the top off of those export numbers. Cheese in general has probably been one of the quieter of the dairy markets, probably the quietest. It's been sneaky though. There's been these moments where it's been hard to find product.

There's been moments where you can find product and I think it definitely is a tale of exactly what cheese you're looking for. I don't think colored cheddar has been particularly hard to come by. Meanwhile, white, for export has been pretty tough. All of that has resulted in this really nice gentle climb higher on cheese prices.

We're starting to see some cracks in the floor, especially internationally. We're hearing mozz prices starting to get some pushback outta Europe. Those blockbuster export numbers on the cheese side are probably nearing an end.

And if not then I think that's gonna be the only thing that can keep driving the cheese price appreciably higher from where it's at. If we can keep getting these pretty impressive numbers, sure, I don't see why we couldn't keeps stair stepping higher.

Ted Jacoby III: Where the export numbers go, the price of cheese goes.

Is that a fair way to put it?

Jacob Menge: It certainly seems like an export driven market right now. Our opinion kinda long term is that's U.S. cheese. This last year or so, maybe more 18 months, reflecting back on it, been the coming of age era for a serious export driven cheese price in the U.S. Historically, obviously export have played a factor, but it seems like that's going to be the dominant force today and in the future.

Ted Jacoby III: Yeah, I think I'd have to agree with that.

And then there's nonfat. Josh, this nonfat market, it sure went a lot higher than anybody expected. Even when it started to rally, we thought it could go up into the $1.50s, $1.60s, but I don't think we expected the $1.90s....

Weeks into the Iran conflict, the disruption to dairy logistics is becoming more visible.

Shipping dairy to the Middle East used to take 30 to 40 days. Now it can take 60 to 75.

And the longer this conflict lasts, the more pressure it puts on the dairy trade.

In this episode of The Milk Check, host Ted Jacoby III talks with our logistics expert, Tyler Jokerst, Director of Trade Operations, about what all this means for dairy producers, traders and exporters.

In this episode, we cover:

Why Persian Gulf access remains severely limited, and how exporters are responding

How normal 30- to 40-day transit times can stretch to 60 to 75 days

Why alternate routes are creating new choke points

How higher oil prices are raising shipping and trucking costs

Why fertilizer, feed costs and food inflation are becoming part of the conversation

How delayed demand, product displacement and global economic stress could bring more dairy market volatility

Listen to The Milk Check episode 096: A Logistics Expert on the Iran Conflict and Dairy Trade.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: Coming up on The Milk Check.

Tyler Jokerst: As this thing progresses, it could prolong it.

Ted Jacoby III: 30 to 40 days of shipping from the East Coast to the Middle East is now 60 to 75.

Welcome to The Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

Ted Jacoby III: Today, we have a special guest, Tyler Jokerst, our Director of Trade Operations, and we're asking Tyler to join us 'cause we thought it would be a pretty timely topic to discuss logistics, both international and domestic.

With everything going on in the Middle East, how is that affecting logistics, in terms of global trade for dairy, especially important for U.S. dairy, considering the fact that we're exporting over 20% of our milk production these days? But it's also affecting us domestically. Gas prices are probably up over 30% at this point, which is going to affect costs when we're getting all the dairy products we make to consumers here at home.

So, Tyler, welcome and thanks for joining us.

Tyler Jokerst: Thanks for having me, Ted.

Ted Jacoby III: Tyler, what is going on in the Middle East? How is it affecting logistics? Are we going to be able to get container ships into the Persian Gulf anytime soon? And if not, what are we doing in response to that?

Tyler Jokerst: I think the easy answer is: we don't know, other than there is a war over there. That's the biggest thing right now causing the impact, and the huge leverage point Iran has is the Strait of Hormuz. For that strait, there's a lot of product that goes in and out of there.

Primarily oil, but, yeah, a big part of that is containerized shipments, as well. As we all know, the Middle East is a big purchaser of dairy products as well, right now. And we're seeing a lot of disruption there as far as what we can get in or out of there.

It's almost come to a virtual stop.

Ted Jacoby III: So, they can't get into the Persian Gulf. Are there other options?

Tyler Jokerst: Tomorrow, there might not be. That's the situation we're in right now. Every day is a day-to-day situation. The current workarounds are what the steamship lines are calling landbridges.

So, essentially, you're porting into ports on the other side of Saudi Arabia, where you're not going into the Persian Gulf, and they're either working on truck or train routes. It can get across, over to Riyadh or Dammam.

Ted Jacoby III: So, Dammam is the main container port for Saudi Arabia and the Persian Gulf. What's the port in the Red Sea that we're using now instead?

Tyler Jokerst: King Abdullah is one of 'em. If you go further north, where you're getting into Jordan, you have Jeddah as well. So, there are a couple of different options there. I think the biggest issue that poses is you're putting a lot of stress on infrastructure that maybe wasn't built to handle that much volume coming through.

This is another ripple effect we're keeping an eye on, and we're staying close with our freight forwarders and our steamship lines to see if we're gonna have any ripple effects as far as boats that are anchoring offshore and waiting to get checked. If you were to look at it right now, you're looking at a miniature effect of what COVID was like in LA back in 2020, when you had numerous boats anchoring offshore, waiting to get offloaded, because you're at a choke point, trying to put all that supply into one port.

So, it's unfolding as we go through this day by day.

Ted Jacoby III: So, I take it, there's a traffic jam going into Jeddah and King Abdullah at [00:03:00] the moment?

Tyler Jokerst: Just a little bit.

Ted Jacoby III: What delays are we experiencing?

Tyler Jokerst: If you were to look at the product on the water, we are currently looking at maybe 15 to 20 days in our current state.

As this thing progresses, it's gonna be up to the providers, the steamship lines and the freight forwarders and how they work with us to be able to dictate what new routes they need to take or what alternatives they need to make, as far as getting this product to those consumers.

So, it could prolong it to where it's a constant 20-day longer shipping period than what we're used to seeing in those areas, which is typically anywhere from 30 to 40 days.

Ted Jacoby III: 30 to 40 days of shipping from the East Coast to the Middle East is now 60 to 75.

Tyler Jokerst: Yep. Absolutely. You're right on that one.

Ted Jacoby III: Are we still loading containers of cheese and powder and butter and other things and putting 'em on boats and sending 'em to the Middle East?

Tyler Jokerst: Yeah. We are. One of the key things that we're having to keep an eye on is per steamship line.

So, if you're working with freight forwarders, they work with numerous different steamship lines, and every steamship line handles it differently. And the main part of why they're handling it differently is all related to the geopolitics. Some of the steamship lines are owned by Mediterranean companies, maybe in Italy.

There are other steamship lines owned by companies in Israel. They're probably not getting through the Strait. And then you have the Chinese and Korean-owned steamship lines that tend to have a little more leeway because they might be a little more neutral with Iran, where they might be allowed to pass.

 It's different with every carrier. So, whenever we look at this, and we assess the notes that we have to have with our freight forwarders, we have: who's the service provider that we think we should be using, because that's the one that tends to have the golden ticket in.

Tyler Jokerst: And that's where we have to balance out cost and service. They might have the golden ticket that can get them into the port. That's gonna come at a price. They know the demand's higher because, from a geopolitical standpoint, they can get in and they can get the job done where maybe the other providers can't.

You start peeling a lot more layers back than what you've historically had to, where you just look at a rate in a transit and say, "Okay, this works. We'll communicate according to our customer and meet their demands." Now, you're dealing with a war. It's unpredictable for those involved directly and indirectly, including us.

And that's where we have to weigh out additional options that are being thrown at us on a daily basis. That target is moving. We'll come in tomorrow, and we'll probably have a different set of rules that we need to follow for that day.

Ted Jacoby III: But you bring up a good point.

I never thought of it that way before. It's like you can't take Delta Air Lines into the Middle East because it's American-owned, but you could probably take Emirates. Most big steamships are actually not owned by the U.S., and those steamship lines that have good relationships over there actually can still get product in.

Tyler Jokerst:  I don't think you get any airplanes into the Middle East right now, but yeah, from a steamship line standpoint, you can. Whenever I say they can pass through Hormuz, you went from several hundred ships going through the Strait of Hormuz in a day to now, single digits. So, that's a loose thing where it's allowed, but less risk of impact or targeting from an economic standpoint, whenever you're going on [00:06:00] one ship versus the other, that's the biggest thing to consider.

Ted Jacoby III: How much have shipping costs increased? What was the going rate for a container into the Middle East from the East Coast, and what is it now?

Tyler Jokerst: If you're looking at door-to-door, or door-to- port, we were hovering around $ 8,000, all in, and now it's looking more around $10,000, all in.

Ted Jacoby III: Maybe 20%, 30% increase in shipping costs. But that's not double or triple.

Tyler Jokerst: Not yet.

It could be by next week, though.

Ted Jacoby III: Got it.

Tyler Jokerst: Yep.

Mike Brown: Tyler, when you have a select group of shipping companies you can work with, and you look at the 20%, 30%, that surprised me, it's not higher. Do we see people deciding we're just gonna lay low and not try to ship to that market for a while until we see things more stable because of the risk?

Tyler Jokerst: I won't name specific providers, but we do have some providers where when this thing started to kick off, they were already putting some plans together, and then by the following week, they decided that any of their refrigerated equipment they didn't want going on that landbridge option that we were talking about earlier.

So, you are seeing that as well, where they're purely looking at it from an insurance standpoint....

What happens to dairy markets when one of the world’s busiest shipping lanes suddenly gets disrupted?

With the Strait of Hormuz under pressure and trade routes across the Persian Gulf in question, exporters are scrambling to figure out how to move product. What does all this mean for global dairy demand?

In this episode of The Milk Check, host Ted Jacoby III sits down with the Jacoby trading team to talk through what happens when geopolitics collides with global dairy trade.

We dig into:

How exporters may reroute product through alternate ports like Jeddah

Why trade flows could shift between the U.S., Europe, Oceania and Southeast Asia

How energy prices and freight disruptions could ripple through dairy markets

Whether this disruption boosts demand in the short term or destroys it if it drags on

Find out how one shipping lane could reshape the global dairy trade. Listen to The Milk Check episode 95: The Strait of Hormuz: What the Iran Conflict Means for Dairy Trade.

Click below to listen or find us on Spotify, YouTube,  Apple Podcasts, and Amazon Music.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: [00:00:00] Coming up on The Milk Check.

The Strait of Hormuz is closed. The port of Dammam is closed.

Joe Maixner: There's definitely product that's stuck, can't get to its destination.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

Today we're gonna talk about what's going on in the dairy market, specifically global trade. We're recording this on March 6th, 2026, and seven days ago the U.S. bombed Iran.

 As we [00:00:30] speak, the Strait of Hormuz is closed. The port of Dammam is closed, and trade flows are getting rearranged as we speak. Today with me, we have Joe Maixner, head of our butter trading book. We have Josh White, we have Diego Carvallo, and we have Mike Brown. And we thought it would be appropriate to discuss what's going on in the Middle East, specifically how it's affecting the dairy industry, and what its short-term and long-term effects will be on dairy demand.

We're gonna start with Joe. Joe, what are you hearing out there right [00:01:00] now?

Joe Maixner: There's definitely product that's stuck, can't get to its destination. Both going into Port of Dammam and other Middle Eastern ports for that matter. With butter's moves over the past year, the Middle East market had been probably the largest growth opportunity for us in global exports for butter. Fortunately, this all happened after the rush for Ramadan to get everything in. So, I would say that it's not as bad as it could be right now, but there is certainly product that's stuck on the water looking for [00:01:30] alternative options to get to land.

And there's quite a bit of product that still is waiting to leave the U.S. that we're not quite sure if and when it will actually leave. A lot of it's still up in the air. Nobody really knows, what to do yet. I think it's still too early to tell. Nothing's been canceled per se, but the longer that this drags on, we're certainly going to have some effects from it.

Ted Jacoby III: There's a lot of talk that maybe this war is gonna be a five to six week war. If the Strait of Hormuz is closed for five to six weeks, as is the [00:02:00] Port of Dammam, is that enough to cancel orders? Is that too long?

Joe Maixner: I would say it should probably cancel some orders. I wouldn't say it would cancel everything, but they're gonna have to get product at some point from somewhere, They can't completely stop. People are gonna have to eat. Production will still have to continue, and they're gonna have to source product from somebody.

And if we can't get it there, they'll find it from somewhere else.

Ted Jacoby III: I'm hearing that one of the things that they're exploring is shipping into Jeddah, which if you look at a map of the Middle East, Dammam is in the Persian Gulf on [00:02:30] one side of the peninsula. Jeddah is basically on the exact opposite side of Peninsula on the Red Sea.

So they're talking about shipping into Jeddah and then shipping it across the land to where it might need to go. The first thing that occurs to me is Dammam, I believe, is a bigger port than Jeddah. And so if you take all those container ships going into Dammam and send them to Jeddah instead, there's not gonna be enough room to unload 'em all.

And so, at the very least, the traffic's gonna be pretty horrific. Are you guys hearing people working on that too?

Joe Maixner: Yes, they're looking at alternate ports of [00:03:00] entry and moving the product around. Jeddah is one. Casablanca is one. Going into Egypt is one. There are options. All of 'em are more expensive and it's just gonna depend on how desperate the end user is to get the product.

Josh White: We've got some experience dealing with trade disruptions over the past decade, and we tend to see the playbook similarly each time.

And then when we talk about what's specifically happened in our markets now, I think We can watch for some warning signs. Number one is in these type of situations, we start worrying about trade [00:03:30] flows, energy, freight, congestion, those type of things, all impacting markets and trade.

Additionally, when we think about this conflict, there's maybe three different scenarios to talk about. It's very intense right now. Does that intensity continue for a very long time? What does that mean for our trade? It's very intense right now for, but after, four to six weeks, maybe it continues on, but it's more stable or consistent and the world learns how to trade around it.

And then the third one is the one you [00:04:00] outlined earlier, which I think is a bit optimistic, usually these things don't just go away that quickly, is that it's over in a short amount of time. That's the easiest one for us to project. That just creates a short-term concentration pent-up demand, pent-up shipments, and we just gotta work our way through that bubble.

I think the middle one's more likely. Not because I'm an expert on these things, but we've seen what happened in different conflicts in different situations. The middle one being it's intense for a bit, then it becomes more consistent and normalized, and we just learn how to work [00:04:30] around it.

What does that mean? And to me, that redirects trade flows. For instance, the U.S. has been very competitive in the Middle East for butter and cheese. It's not the first time we've been competitive. We were competitive 15 years ago or so at a pretty good rate where we were an net exporter of butterfat, cheese I think we've been fairly consistent throughout, but it takes time to get there. Our biggest obstacle in doing business with that market versus Europe as a competitor, is the transit time. We inflate the freight rates, we increase transit [00:05:00] time, there's concern of access to supply because of turbulence or stability, our price could be fine, and we could still miss some business because you have to buy now or you've gotta get product in now, or you just don't have time to wait the, what, six weeks from order at minimum, probably more like a quarter, oftentimes, to get the product. That's maybe our biggest obstacle right now is redirected trade lanes, not price.

Joe Maixner: All of these trade disruptions create opportunity elsewhere. If our price comes off, [00:05:30] as it has, butter shot up earlier this week, it's come back off here at the end of the week. It's created opportunity for trade into other export markets. Where one door closes, another opens.

Ted Jacoby III: How do you think those trade flows change? What comes, what goes, what are the changes that you think will happen? Let's assume that the Persian Gulf is off limits for two or three months. What does that mean for dairy?

Josh White: Lost demand, if it's that long.

 That's lost demand. Now if we assume that we're able to redirect product to [00:06:00] maintain the same demand, you're gonna have trade lanes shift, right? What are the options?

Ted Jacoby III: Let's articulate this a little bit more for our listeners. When we're talking about trade lanes shifting, right now there's product on the water trying to head there that can't. What's gonna happen to those ships?

That's one. Two, there's product that was sitting in the port about ready to ship. I think there were a lot of calls this week. I think we know of quite a few calls this week where they basically said, "Let's sit on it. Let's wait for this all to calm down before we actually ship it." And three, [00:06:30] there's product that maybe was scheduled to ship in a month or two.

I think it's fair to say, people probably have to figure out immediately what are they gonna do with the product that's on the water right now. And I think the other two, they may be able to give it a little bit of time, decide whether or not they're gonna cancel any orders and redirect it.

Diego, the product that's on the water right now, what do you expect happens to it?

Diego Carvallo: Ted, I've been internally debating this for a while and even with the team. I think a few things are happening, but I don't know which one has a bigger magnitude.

Supply chains used to be very thin [00:07:00] for skim milk powder for the past year or two years. They are gonna have to build more inventory for those supply chains because product might take 60 days instead of 30 days to ship it. Product is gonna get stuck at the port of entry, port of shipment, in transit, et cetera.

So, I think that bumps up demand artificially. Yeah. But there's more product that's gonna be stuck in the supply chain....

Flush season is here. Protein solids are up. Global milk production is up.

So… Where’s all the skim milk powder?

In this episode of The Milk Check, host Ted Jacoby III and the Jacoby team sits down with Martijn Goedhart and Henk-Jan Bouwman of Cefetra Dairy for a European perspective on the volatility rippling through global dairy markets. We talk through how traders got caught short and why the spring flush might not loosen up the skim milk powder/nonfat dry milk market.

Plus, are we pricing U.S. out of the export market?

We’ll get you up to speed on:

Why skim solids are being pulled away from dryers and into protein streams

How hand-to-mouth buying turned into a short squeeze

What record-high butter stocks in Europe mean for upside potential

Tune in to hear how Europe and the U.S. are navigating one of the most volatile stretches in recent memory. L

If you’re making sourcing or coverage decisions right now, don’t miss The Milk Check episode 94: The Dryer’s Getting Robbed.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

TMC-Intro-final

Ted Jacoby III: [00:00:00] Coming up on The Milk Check.

Martijn Goedhart: You have supply growing, and then you think, "Oh, we're gonna build stocks." But then, demand caught up. And quite viciously.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

This week we are excited to have two special guests, Martijnjn Goedhart and Henk-Jan Bouwman from Cefetra Dairy in the Netherlands.

We've been working closely with these guys for some time and we thought it would be a great idea given all the craziness and dairy markets going on in the United States, to ask them to give us a little bit of perspective on what's going on in Europe so we can get a feel for how the global markets are affecting our U.S. dairy markets.

Martijn, Henk, thanks for joining us today.

Martijn Goedhart: Thanks for having us, Ted.

Henk-Jan Bouwman: Thank you, Ted.

Ted Jacoby III: I feel like what's going on in nonfat right now more has an origin in the U.S., but I also noticed that you guys started to feel that maybe this market was gonna be a little bit shorter than we expected over in Europe before we realized it in the U.S.

[00:01:00] Tell us about the skim milk powder market in Europe and what's been going on the last month.

Martijn Goedhart: In Europe, we've been overwhelmed by milk production growth since the second half of 2025, due to bluetongue, late calving, second peak, as some of us call it.

And that has resulted in good outputs, and that output needs to go to the commodities. So, we've seen butter stocks build up significantly, and everyone assumed that that would mean that the skimmed stocks were also building up because that's basically the other product you're gonna produce when you do butter, right?

A few things we, I think, overlooked is like the general protein trend in the world and the demand for protein, both on the whey side as well as on the milk side nowadays. So a lot of protein has ended up in other products than your typical skimmed nonfat production bucket.

Adding to that, Europe has been the most competitive source in the world market for a long time. Demand wasn't great because buyers were buying hand-to-mouth because they would basically wait for that carry to come toward them and buy at the lowest price at the last moment. But [00:02:00] now we see that the exports out of Europe have been great.

And that's been keeping the market clean. I think some traders speculated on lower prices and got caught short, basically needed to cover. And that's where we are at now. And I think more than ever, if you look at NZX (New Zealand Exchange), this all started with a firmer GDT (Global Dairy Trade), with China stocking up a bit.

So, if you look at NZX, CME (Chicago Mercantile Exchange) and EEX (European Energy Exchange), those markets are starting to correlate better than they did before because everyone's looking at the developments of the other exchanges and then draw their conclusions for their own home base. And yeah, that cocktail, together with some U.S. developments that we're gonna dive into, has caused record-high volatility over the last few weeks.

Ted Jacoby III: So, Martijn, you're telling a story that sounds very familiar ' cause that's exactly what we've seen here in the U.S. We're not making anywhere near as much nonfat dry milk as we expected because the protein demand is forcing those skim solids into other places. What are those other places in Europe?

Where is that protein being used and what is it being made into in Europe right now?

Martijn Goedhart: I think there's two main [00:03:00] streams. Bear in mind that the milk pressure in Europe was so high that you need to burn milk, and the way to do that is to produce casein. So, I think casein production has increased by like double-digit numbers, that's not because it was such a nice valorization, you can just dry more milk per hour.

And considering the liquid markets over the last few months, during our low season, liquid milk was trading way below the commodity equivalent, proving that there's a surplus of liquid milk that can't be processed by drying it or churning it. So, that's one part. The other part is, it's the same in the U.S.

We've been around here for a few days now, but in Europe, you see the same: everything is protein fortified, extra protein, in basically everything you can buy. So, a lot of protein that is processed in line before it even reaches the other class. So, like the dryers basically.

Ted Jacoby III: Martijn and Henk, do you guys think that the skim milk powder market in Europe has tightened up primarily because everybody who was living hand-to-mouth saw the market started going up, and they decided they wanted to buy more now because they wanted to get the product at a lower price before the price [00:04:00] went higher, and then they just started chasing the market?

Or do you think demand has shifted and there's a true increase in the demand for the product?

Henk-Jan Bouwman: There's two things to touch upon here, Ted. One is, you're absolutely right: people were buying hand-to-mouth, and they were actually rewarded for doing that because everybody believed that the price of tomorrow was better than the price of today.

And for a fairly long period of time, they got rewarded for that. That also led to traders being short, as Martijn touched upon. From a demand perspective, yes, there's actually quite some demand, and people also realize that they have to turn to Europe to find their cheapest skim. That also creates a bit of a demand pull towards European skim, which makes the price go up.

And we've seen that, in particular, in low heat in comparison to medium heat. But in general, export markets for us are pretty strong, and, I would say, pretty much all the demand ends in European skim milk powder of origins.

Josh White: Is anybody extending days in inventory? Do we think that there's a short squeeze driving international clients to buy a couple extra weeks, a month, more than that of product?

The nature of your question, Ted, [00:05:00] is what's caused us to tighten up on that product? Is it truly demand for nonfat dry milk, or is it just reduced production overall? And I think maybe it's both in a way. On the one hand, Martijn mentioned that the catalyst of this was actually a GDT event where China stepped in and bought more. And I think that we've been talking about the disappearance of China as a structural buyer of milk powder for quite some time. But their stocks to use ratio has been reported to be fairly low, and maybe they felt it was time to extend some days of inventory.

At the same time, you evidenced what's happening in the U.S., And Martijn alluded to it a little bit in Europe as well, that the pull for dairy protein in general is actually vacuuming some solids away from the dryer, and particularly the SMP or the nonfat dryer.

So, is it both? Are we seeing people look to build a little bit more safety stock at the same time that our production is down a bit because protein demand overall is robbing our supply.

Henk-Jan Bouwman: There's a, there's a couple of things to touch upon, Josh.

One is in this whole upward movement, there were quite some international buyers [00:06:00] who still had demand open, for instance, for Q2 and Q3, and decided to step in and said, "Hey, this is a moment to buy, to cover that demand, because I am anticipating an upward movement." So, in that sense, I'm completely with you.

Producers did the same, as well. For them it was also attractive to lock some forward sales. And that has led to lesser availability of skim in EU. And that basically also caused the rally to continue.

Martijn Goedhart: I think the difference with the U.S., as I understand it, is we have never not been able to buy product during this whole volatility.

So, producers were always offering, customers would like step in, step out. If they really need it, they would book. They were also cautious. And we went up, then we went down, then we went up again. But in that down movement, customers were like, "Yeah, you see, so it'll come off again." So, that didn't prompt them to build any length.

I think producers did fairly well in putting a fundament below their sales book for the flush that's upcoming. Traders are holding a fair bit of cash product right now for the next three, four months. It's not tight as [00:07:00] such, but you see that certain buyers need certain origins that are scarce.

So, it's very much about the origin, the spec, and the product that you have, whether you can monetize on those higher prices.

...

En este nuevo episodio de The Milk Check, Diego Carvallo conversa con Miguel Aragón y Yara Morales sobre un mercado lácteo marcado por una fuerte volatilidad y una demanda sólida de proteínas. A pesar de ser el mes del amor y la amistad, los mercados no han mostrado mucha “ternura”, con movimientos importantes en precios y disponibilidad.

El equipo analiza el aumento en el consumo de MPC 70, MPC 80 y MPC 85, especialmente en México, donde cada vez más clientes están aceptando estas proteínas para aplicaciones nutricionales. También se comenta la escasez de renina/caseína renina, la fuerte presión alcista en los precios de proteínas lácteas y el comportamiento sorprendente de los WPC, cuyos valores han subido de forma significativa.

Además, se revisa la volatilidad en quesos y mantequilla, la creciente aceptación de mantequilla estadounidense en México, Chile y Centroamérica, y por qué, aun con abundante leche en EE. UU., muchos mercados continúan bien soportados.

Un episodio clave para entender hacia dónde se mueven los mercados de proteínas y lácteos, y qué esperar en las próximas semanas.

¿Tienes preguntas?

Nos encantaría escucharlas. Envíalas aquí abajo y quizá las respondamos en el programa.

Pregúntale a The Milk Check

Dairy futures have been anything but calm. In just three weeks, prices across Class III, Class IV, cheese, butter and nonfat have surged, then whipped back and forth enough to exhaust even full-time market watchers.

In this episode of The Milk Check, Ted Jacoby and the T.C. Jacoby & Co. team break down why dairy futures can look irrational, even when the underlying fundamentals haven’t changed much.

What’s driving the chaos (beyond fundamentals)

Short squeezes 101: how a crowded short can turn into a domino effect

Flow first, narrative second: why the buying often hits before the story shows up

Realized vs. implied volatility: what the market did vs. what the options market is pricing in

Why nonfat may be the center of the storm: the team debates whether this is a true regime change

Why butter and cheese moved too: how spread relationships and algorithmic trading can drag correlated dairy contracts higher

Spot market feedback loops: how NDPSR-linked spot markets can amplify futures moves (tail-wagging-the-dog dynamics).

What usually happens next: why squeezes rarely park at the top

Plus: stick around for a director’s cut featuring the unedited, behind-the-scenes debate the team usually leaves on the cutting room floor.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: [00:00:00] It has been wild and crazy every day for the last three weeks.

Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets,

from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

We've got a special treat for you this week. We're gonna drop the director's cut of this podcast where we include some of the conversations that usually get edited out: how we debate internally about some of these market dynamics. So, stay tuned after the end of the podcast and listen to the off-takes.

My name is Ted Jacoby, CEO of T.C. Jacoby & Co., and joining me today is Jacob Menge, our Vice President of Risk Management and Trading Strategy, Josh White, our Vice President of Dairy Ingredients, and Joe Maixner, our Director of Sales. We are in week three of a very high level of volatility in the dairy markets.

We've had a very interesting last few weeks. It's February 9th, and since January 15th, our Class III March futures are up 18%. Our [00:01:00] March cheese futures are up over 15%. Butter futures are up over 26%. nonfat futures up 37% and Class IV milk futures up 36%. These markets have not gone up in a straight line.

There's been a massive amount of volatility, a lot of green, a lot of red, and then a lot of green, and then a lot of red again, enough to make all of us who talk these markets on a daily and an hourly basis to be flat out exhausted. The question becomes, what's causing this level of volatility?

 We are gonna talk a little bit about market psychology. Why can markets do what they've done in the last three weeks, and why our actual fundamental market analysis hasn't really changed that much.

 To quote the famous British economist, John Maynard Keynes, "Markets can remain irrational far longer than you and I can remain solvent." And I'll tell you that the last three weeks reminded me repeatedly of that phrase. It serves as a warning against over leveraging or trying to fight the tape, trading against trends, suggesting that just because you are right about a trend's [00:02:00] long-term direction, it's useless if you run out of capital.

Ted Jacoby III: And I have a feeling that based on what we've been experiencing lately, there's probably a few people out there that exactly that happened to. It has been wild and crazy every day for the last three weeks. Jake, why do markets do this?

Jacob Menge: You threw out your little soundbite anecdotes.

We will pull out some more of 'em during those podcasts, I'm sure, because those are all written by people that have been burned by short squeezes like we're seeing, right? One that sticks out to me is: volatility is the tax you pay for liquidity and leverage, and that's what futures markets are, right?

They are a way for people to express their opinion on price action. Obviously, even a hedger is in some way expressing an opinion using futures or options. They're highly liquid. You don't even have to pay full price for 'em because you only gotta put up that margin upfront.

And again, volatility is usually the tax that you pay for that. When you have this easy leverage, and everybody can get on one side of the boat you can't have your cake and eat it, too. You can't [00:03:00] have tight spreads, you can't have the leverage and smooth prices all at the same time.

And that can result in things like short squeezes. We were primed for one. You're right, we had low volatility. We had a lot of people that were short the market because that was the prevailing narrative. As a result, all it took was one little spark to set some pretty dry kindling ablaze.

That's exactly what we saw, especially on the nonfat side.

I'll pull out my second anecdote. I've always heard: squeezes are flow events first, narrative events second. That's exactly what was going on with nonfat. Meaning we get this massive bullish order flow coming in.

The market goes up 30%+ in a few week period, and it's only after that happens that all of a sudden we start having these conversations of, well, what was everybody missing in nonfat? I think the market probably was missing something on the nonfat side. But at the end of the day when you have volatility near lows, volume that was [00:04:00] fairly average, it makes sense that really the only way to go is gonna be up. If there's any kind of news. And the news this time turns out there's a whole lot less nonfat out there than people probably expected. And away we go. And it turns into this snowball

where there's the first people to see that and start wanting to buy, and the second they start wanting to buy, turns out there's not a whole lot of sellers there, because everybody that wanted to sell already had sold. You get that first nice air pocket jump higher.

That really is that first domino where if you're a market maker, say, and you need to hedge your book, you're trying to run a delta neutral trading book as a market maker, you might say, "Okay, well hey, I need to go get some long delta myself." And you might go try to buy some options, to buy calls, to offset that.

And then all of a sudden the market maker that is selling the calls want more for the calls than they wanted just a day ago.

Ted Jacoby III: A day ago? Try an hour ago.

Jacob Menge: Yeah, an hour ago. Truly. And so [00:05:00] that would be what we call implied volatility. Right. And I think that's one important distinction here is we have volatility, what we call realized volatility, which is what the market actually did, like how crazy the market is, and then implied volatility, basically what the market is charging for options usually and implying what the market thinks the volatility will be in the future. And that's where it gets really fun because even though we didn't have a lot of realized volatility, if the market thinks it's gonna become volatile and starts charging more for these options,

it can almost be a self-fulfilling prophecy, right? Because now you have to pay more to buy that insurance policy, and you can see how that snowball really can grow fairly fast. We have one other really

 fun part in dairy markets that I can't help but mention, and that is that we also have spot markets.

Those spot markets indirectly are linked to the futures prices because of our National Dairy Products Sales Report (NDPSR) system. And so we [00:06:00] can really wind up with the tail wagging the dog in our futures markets and in our spot markets where, say the spot markets were driving the ship on the way down.

People had a lot of products, they're selling them. Well, all of a sudden, if we start getting a little bit of a squeeze in our futures markets, now if you have product, you don't wanna sell it on the exchange, you wanna just hold onto it and capture the carry in the futures curve.

And so you're not gonna sell. And so any bidder on the spot auction has to bid it higher. And guess what? Now the futures see the spot auction being bid up and they say, "Well, well, we are right to be panicking. We need to go higher." And that's just pouring gasoline on the fire.

We've already got a raging inferno at this point, but that adds the final pour of gasoline.

Ted Jacoby III: You remind me of one of my learning moments 20 some odd, almost 30 years ago, when I was watching these markets, as the futures markets were just becoming relevant to the dairy industry.

And it was the realization that futures markets and spot markets are [00:07:00] two different markets with a different set of drivers of supply and demand. On the spot market, supply is, let's talk about butter, is the supply of 80% bulk butter. Demand is the demand for that 80% bulk butter. The futures butter markets,

it may settle to that NDPSR price of the bulk butter market, but the reality is the supply is the number of people who are willing to sell those futures, and the demand is the number of people that are willing to buy those futures. And so you can have people coming into the market that really don't care at all about how much block butter are out there because they're actually trying to hedge cream cheese or a chocolate shake or something completely different that has butter in it, but they need to own those futures, and that futures market can move quite a bit and has nothing to do with the actual supply and demand of the market it's based on.

Jacob Menge: Anecdote number three. I always have heard squeezes feel irrational because risk systems are mechanical....

Nonfat prices have moved sharply higher in recent weeks. But the rally isn't being driven by a sudden surge in demand. It's being driven by a breakdown in where milk is actually flowing.

In this episode of The Milk Check, Ted Jacoby III and the Jacoby team unpack insights coming out of the IDFA Dairy Forum in Palm Springs and explain why nonfat prices have surged nearly 25 cents in just weeks, even as milk production remains strong.

The issue isn't price resistance. It's availability.

Milk that the market expected to move into dryers is instead being diverted into cheese plants, ultra-filtration, whey proteins and other higher-value protein streams. As a result, powder supply is far tighter than headline production numbers suggest.

Layer in heavy short positioning, processing disruptions, and new offtake agreements, and the market begins to resemble a classic short squeeze.

In this conversation, the team breaks down what's actually driving NDFM and why higher prices haven't unlocked new supply. We cover:

How protein economics are pulling milk away from powder

Why rising milk production hasn't translated into greater availability

Key structural differences between the U.S., Europe, and New Zealand

Where the market may find its next equilibrium, and what could disrupt it

If you're relying on historical assumptions about nonfat availability, this episode explains why those assumptions may no longer hold.

Listen to The Milk Check to understand what the evolving nonfat landscape means for pricing risk, exports and coverage decisions ahead. Available below or on Spotify, Apple Podcasts, Amazon Podcasts or YouTube.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Jacob Menge: [00:00:00] There are just so many of these long-held assumptions, things that people who have been in the industry a while probably have, like, "Well, my gut tells me this." Question your gut.

Ted Jacoby III: Welcome to the Milk Check from T.C. Jacoby and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

It is January 30th. We've all just got back from the Dairy Forum in Palm Springs, where it was a hell of a lot warmer than it is here in frigid St. Louis, Missouri. Joining me today is Diego Carvallo, the head of our international sales team and our head non -fat dry milk trader. We have Josh White, head of our dairy ingredients group, Jacob Menge, our VP of risk Management and Trading Strategy, and Mike Brown, VP of Jacoby Dairy Market Intelligence.

Guys, welcome.

What did we learn in Palm Springs? I think the biggest thing that came out of our visit and running into everybody at the Dairy Forum is that nonfat dry milk and skim milk powder really is tight.

We have a short squeeze going on in the nonfat dry milk [00:01:00] market. The market is up. I think it's 25 cents in the last three weeks. I'll let Diego explain to everybody what's really going on in the nonfat market right now.

Diego?

Diego Carvallo: Ted, that's a very loaded question right now. Everybody's scratching their heads. As of right now, today, Friday the 30th, the market just closed. The whole strip is limit up -- 4 cents up.

I think I hadn't seen this in quite some time. IDFA was very interesting for a lot of people to discover why the spot market has been tight for this long and have good discussions on what the outlook looks like. Let's start with the fundamentals. I think a few things are helping this market and supporting it and pushing it higher.

The first one is what a lot of people are discussing, which is the amount of UF being produced in regions like the Midwest. We all know that many of the plants have installed new capacity to have UF sales, and those solids are in great demand [00:02:00] for cheese fortification right now.

So that's one of the reasons why the Midwest especially feeling this tight. Another reason is that the majority of the people who speculate with this market, and it goes from traders to manufacturers and even distributors, most of them have been short, expecting this market to move lower during the spring flush.

I remember a few months ago, the speculation was that we were gonna break the $1. And, it seems like everybody got short, physical and in the screen, and that market, obviously, whenever we saw a bounce, everybody ran to cover their shorts, right? Another reason is that we saw a few interruptions in processing capacity, especially in California during the months of November.

I think that also contributed to the tightness in the market without even getting into the conversation of new [00:03:00] offtake agreements that have taken up this year. So I think those are the main contributors to this market moving higher, and I think it's something that is mainly affecting the U.S.

The rest of the market is following through. I think this scenario is very different when you talk about European and New Zealand production. It's even different when you see the U.S., the West Coast versus the rest of the country.

Ted Jacoby III: Tell me about Europe. I know Europe started acting tight a little bit before the U.S., but what's going on in Europe?

Nonfat, dry milk and skim milk powder is probably our most global market when it comes to dairy.

Diego Carvallo: So, Europe had a couple of large tenders that took place, I think that was beginning of January.

So, the infamous O'Neill tender and a few similar tenders that usually move a lot of product. Those tenders took place, and I think it helped clear some of the excess product that was available in the market. But I think in Europe we had a similar situation where most of the traders, most [00:04:00] of the end users and manufacturers, everybody was expecting prices to move lower, right?

Whenever we saw these tenders coming and the market slightly turned less bearish, I think everybody ran also to cover their shorts. But the situation in Europe has not been as bullish as it has in the U.S. The spread between the U.S. and Europe when it comes to skim has in fact widened as of right now.

Europe is also feeling the support. Definitely. It's in part driven by the U.S. rally.

Ted Jacoby III: Well, that makes sense. I can tell you I had conversations with a few different manufacturers while I was at IDFA. And the best way I can sum up what the feeling was there's a couple of dryers on the East Coast. Those dryers at this point are not expecting to ever run full this year, not even at the height of the flush, because there's three new plants at various stages of development. There's a new cheese plant in New York. There is a Fair Life milk plant in New York, and then ultimately a yogurt plant in New [00:05:00] York.

All three of those plants are gonna need the milk. It's gonna come at the expense of the powder plants in that area. You look at the Southwest in Texas again, you've got two new cheese plants that are still in the midst of ramping up. They are getting first dibs on the milk at the expense of the nonfat dry milk plants down there.

So those plants are gonna get the milk that they expected. And there's another nonfat plant that pretty much has turned a 100%, to Diego's point that's turned a 100% of their milk supply into skim UF that they're supplying to various sources. And that plant is running the ultra filtration unit full.

So, that plant isn't drying anything. You got a couple of dryers in the Michigan area. They're not running as full as usually, but it's more of a domino effect there. I have a hunch as you get into the flush, those dryers may fill up. But you've got four other dryers, maybe five that aren't.

Now you go over to the west coast: California, those are drying. But California alone, as big as it is, is not enough to offset how much milk is not running into the dryers in the [00:06:00] rest of the country. And then you've got the Northwest, where there has been a lot of milk lost in the Northwest.

And so that dryer isn't running as full as probably previously expected. What happened was everybody just got together, finally started talking when they were all together in Palm Springs, and they realized when they did the math, even if we're up 4.4% in milk production, we're not drying more nonfat.

Those skim solids are going elsewhere for various reasons.

Diego Carvallo: The biggest question right now, Ted, is the lack of product in the Midwest and East Coast could balance out the lack of exports that we're gonna have from this price rally.

The numbers say that demand is approximately 60 million pounds. That number, it's probably only 2% to 3% of U.S. nonfat production. So, it doesn't seem like a huge number, but when you compare it to exports it is quite a volume.

Ted Jacoby III: It really does add up.

Yeah, no, I would agree with that.

Jacob Menge: It sounds based on what Ted had just laid out and what you had said earlier, Diego, that this [00:07:00] isn't necessarily a demand-driven rally. It's really a lack-of-supply-driven rally.

Ted Jacoby III: Yeah. A lack-of-supply-driven rally in an environment where everybody was expecting oversupply and kind of got caught surprised when they realized that even though there's more milk, it didn't fully translate to more powder.

Jacob Menge: So, what changes it? Price? How long? What does end game here look like? Based on what I'm hearing, sounds to me like there's almost not a price that is all of a sudden going to bring more supply out of the woodwork.

So, is there a price that kills demand? People say, "Hey, we can't make this number work anymore?"

Ted Jacoby III: I think, actually, Diego just framed it a few minutes ago in the right way. This lost production that we were expecting, is it enough to make up for the fact that international demand f

Milk production is up 4.5% — but somehow, milk is clearing. Something doesn’t add up.

In this episode of The Milk Check, the team uncovers the shifts reshaping dairy economics in 2026.

Ted Jacoby III leads a classic market roundtable with the Jacoby team to unpack what they’re seeing as dairy transitions out of the holiday demand season and into early-year reality.

Despite 4.5% year-over-year milk production growth, milk is clearing in many regions. Cheese and butter markets are under pressure, but inventories aren’t yet burdensome. Protein markets remain tight. And nonfat dry milk is showing surprising strength.

So what’s going on?

In this episode, we cover:

Why added processing capacity may be masking where supply is really long

How cheese and butter are absorbing milk that would normally back up at the farm

Why protein demand is tightening skim solids and whey markets

Whether nonfat’s recent rally is real or a phantom

And which dairy market narratives the team thinks are wrong right now

If you’re trying to make sense of conflicting signals across milk, fat, protein and powder, this episode delivers the context behind the numbers.

Listen now to The Milk Check episode 90: The Market is Lying to Us.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

Ted Jacoby III: [00:00:00] Am I just being a conspiracy theorist?

Diego Carvallo: I would probably bet a little bit on that conspiracy theory.

It could be. It could be possible, Ted. Who knows.

Ted Jacoby III: Welcome to the Milk Check from TC Jacob and Company, your complete guide to dairy markets, from the milking parlor to the supermarket shelf. I'm Ted Jacoby. Let's dive in.

We're on the new side of the New Year. It is January 12th. we're gonna have a classic market discussion today. Things have started to settle down from the holidays and I thought it would be a great idea just to share with everybody what we're seeing in the markets as we're transitioning from the high-demand season into the low-demand season.

We have our usual suspects today. We have my brother Gus who manages our fluid group. We've got Josh White, head of our dairy ingredients group. We have Joe Maixner, head of all of our butter sales.

Mike Brown, our Vice President of Market Intelligence, and myself. So, we'll start with milk, Gus. What's it look like right now?

Gus Jacoby: It certainly isn't tight, but it isn't really long either.

I think the November milk production was up [00:01:00] 4.5% and that typically would be fairly significant in areas where there isn't a lot of additional processing capacity. One would think it would be very, very long with that kind of growth, but we're not seeing that. Areas like the upper Midwest, Mideast, those areas are not as long as we thought they would be. I don't want to act as if it's tight. That's not the case. Through the holidays, there was still plenty of milk that was around. But I think here as we climbed out of the New Year holiday and into mid-January, things have gotten fairly what we would say in balance.

And that's a little bit alarming considering that type of milk production growth.

Ted Jacoby III: Why do you think that is? Is it just all the new capacity from all the new plants that have been built, or what else is going on?

Gus Jacoby: Well, certainly in that western, upper Midwest and Southwest region, upstate New York as well, there's been a lot of processing capacity that's been added.

So, those areas have been able to soak up that extra milk. I think milks travling a bit but I also think folks have found a little bit more efficient avenues to place the milk after dealing with some length over the past year [00:02:00] or so. But there's a little bit of a question mark I have in the back of my mind as to how efficient we've been able to do so.

Typically, when we have this kind of large growth, anything north of 4% is large, and large enough to be concerned about. But nonetheless, the processing capacity is significant. We don't wanna discount that. But one can certainly wonder why in areas like the Mideast, where you haven't really added a lot of production capacity here recently, why we aren't seeing a bit more milk floating around.

Ted Jacoby III: You think it's just domino effect type things? Where, as milk is tighter in New York, so none of that milk is going into the southeast or into Appalachia, therefore it's gotta be pulled from the Mideast?

Gus Jacoby: Ted, that might be a part of it.

I think domino effect is certainly going on here. There's some areas of the country that don't have enough milk because of that additional capacity we discussed. But having said all that, I think there's some question marks out there right now as to why it isn't a bit longer in certain parts of the country.

Ted Jacoby III: What about some, I'll call it non-traditional demand growth, and what I mean by that is things [00:03:00] like ESL or some of the protein drinks? It looks like there have been new brands showing up on the supermarket shelf lately.

Gus Jacoby: If you're alluding to areas like UF milk or high-protein fluid products there is certainly a lot of demand in that Class I, Class II segment of our industry.

Add in the fact that you have a lot of demand for fortification solids for cheese plants, skim can seem a little bit tight right now, and there's some logic behind that, but I don't think there's enough ultra filtration capacity right now to satisfy demand. So, if milk is going in that direction, there isn't enough UF units out there, I think, to fill that void.

And I wouldn't say that's the reason why we're tightening up milk supplies by no means. In some parts of the world, yes, that might be the case, but that's pretty small in the grand scheme of things.

Ted Jacoby III: On the fluid side, is skim solids slash dairy protein tighter than the butterfat side?

Gus Jacoby: Absolutely it is. Yes. I don't think there's any question about that. You've got two things driving [00:04:00] that. Too much butterfat requires cheese plants to gather more fortification solids, and the demand for protein right now is through the roof. You're gonna have it hit from both sides and they're hitting pretty strong.

Ted Jacoby III: Could that extra skim solid slash dairy protein demand be what's tightening up the milk market? Are we seeing it, for example, in lower cream multiples?

Gus Jacoby: There still is plenty of cream around, to answer that question directly. I just don't think there's enough UF processing capacity at this moment in time to say that it's tightening milk by any means.

Ted Jacoby III: Could it be cheese plants taking the milk directly off the farm but spinning off a lot more cream?

Gus Jacoby: I would say some of that is gonna go on. Yeah. 'cause there's not enough fortification solids to be had, or at least not at the price the cheese plants are gonna be happy with. Cheese plants, even though they might prefer UF at times, they'll take different types of skim solids and that certainly will tighten up that skim side of the market. That, combined with the fact that the protein sector is short, certainly you're gonna have that element in our [00:05:00] market right now.

I just think there's enough milk out there, Ted, and not enough protein, isolation capacity of any sort to be the main reason as to why you're not as long on milk as you think you should be.

Ted Jacoby III: You know, I've had a theory going for a little while that all this extra capacity we've added, a lot of it is cheese capacity, and I feel like this time around, we've just transferred where we're feeling the length.

We're not necessarily feeling the length in milk like we usually do. Instead, there's enough processing capacity to get all that milk and to make cheese out of it. And therefore, we're seeing the length in cheese, and we're seeing the length in butter. And that's why those two markets have been under so much pressure lately, whereas the milk market seems to be in balance.

We've just moved down the supply chain a little bit where the length is manifesting.

Does that make sense?

Gus Jacoby: A little bit? Yeah.

Mike Brown: It Does Make sense. Where you have new plants, they wanna be full. They're cheese plants. They're gonna try to fill those plants with milk to the extent they can market product, which is becoming a [00:06:00] concern as we see the CME cheese price continuing to drop. We're also reaching a point when fat is very high, you can't afford to fortify cheese vats because your skim solids price is high relative to fat. Right now everything's kind of low, but powder relative to cheese, is as high as it's been in quite a while.

If you have revenue from waste stream, fortifying with nonfat or skim solids makes a whole lot of sense. But if you're paying that full price for the casein portion of that skim, it gets closer again now too. It's a little different situation than it's been in a while. I don't think Gus could be any more right about the need for more ultra filtered capacity. I'm just curious where it's gonna show. Because the demand certainly seems to be there.

Ted Jacoby III: If there's one place where I think maybe we're underestimating demand, it's in that ESL protein space. And I agree with Gus, there's probably not enough capacity to really manifest all of that resting demand or untapped demand, but I bet we're maximizing that supply chain everywhere we can, especially given what we're seeing in the whey protein [00:07:00] market right now.

And it doesn't show up in the data really clearly. You're up four and a half percent in milk. Some of that is, we're still measuring against weakness and we're measuring against the bird flu outbreak that was happening a year ago.

...

In this episode of The Milk Check, Ted Jacoby III welcomes Lloyd Metzger and TJ Jacoby of Valley Queen Cheese Company for a deep dive into the science, functionality and future of dairy proteins.

The conversation starts at the molecular level - the difference between casein and whey - and builds toward the real-world implications for product developers, processors and nutrition brands.

We cover:

Why casein is built to carry calcium (and whey isn't)

How heat and pH change protein behavior

Fast versus slow digestion and why both matter

The role of whey protein in muscle maintenance, aging and GLP-1 nutrition

What pro cream really is and why its value may be underestimated

Why cellular agriculture is more niche than threat

If you work in dairy, food formulation or nutrition, this is a protein conversation worth digesting.

Got questions?

We’d love to hear them. Submit below, and we might answer it on the show.

Ask The Milk Check

TMC-Intro-final[00:00:00]Ted Jacoby III: Hi everybody, and thank you for joining us today for this very special recording of the Milk Check Podcast. Today, our topic is: what is the future of dairy proteins? And we have two very special guests. The first is Lloyd Metzger, VP of Quality and Technical Services for Valley Queen Cheese Company, and formerly Professor of Dairy Science at South Dakota State University.

And the second, particularly special to me, is my son TJ Jacoby, Whey Technologist for Valley Queen. A South Dakota State graduate. Someone who has been interested in dairy proteins since his first biology class in high school. Guys, thank you for joining us today and welcome to The Milk Check.

Lloyd Metzger: Glad to be here.

TJ Jacoby: Good to be on, Dad.

Ted Jacoby III: It's December 18th, 2025. Milk production in the US is up 4%. Milk production in Europe is up something similar. Milk production in New Zealand is up.

Milk production in Argentina is up. We are definitely in an [00:01:00] environment today where the supply of milk and dairy is overwhelming demand, at least for the moment. Cheese prices are near historical lows. Butter prices are near historical lows. Nonfat milk, skim milk powder prices are on the low end of the range.

This market is a market that feels heavy, and I think most people out there would say, it almost feels like even though we're at lows, we may actually go lower before we go higher. And yet, on the other hand, there are whey proteins, Josh, if I'm not mistaken, whey proteins just hit historical highs.

Josh White: Maybe the highest prices we've ever seen for whey protein isolate and WPC 80.

Ted Jacoby III: So, we have an environment where the demand on the protein side is extremely strong, and the trends on protein consumption are extremely strong and really feel like they're gonna be around for quite some time.

We've got baby boomers retiring and whether it's because of GLP-1s or it's just a general knowledge and understanding of what human nutritional needs are as people age, they know that they need more protein in their [00:02:00] diet. So, it begs the question: what is going on with dairy proteins and whey proteins and how is this going to evolve in such a unique market where demand is so strong for protein right now?

And so, I'm gonna ask the question first. What's the difference at a molecular level between whey proteins and milk proteins? Because when we're in an environment like we are now, where you've got the demand really, really high, you also have a market that's gonna start looking for alternatives, simply because prices are so high.

What is the difference between milk proteins in general and whey protein specifically?

Lloyd Metzger: It's important to talk about from a functional perspective how the proteins are different. I'm sure we'll get into the nutritional differences between those proteins as well. It's important to understand what's driving those differences in functional characteristics. And it's really all about calcium.

The casein system is designed to carry calcium. The whey protein system is not designed to carry calcium. That differentiates the two groups of [00:03:00] proteins and makes their properties very different.

TJ Jacoby: I'll explain it like this. Milk proteins, there's two classes of proteins, right? There's casein and then there's whey. The casein is used to make cheese, and then the whey protein is what comes off. So, the whey protein is everything that is not used to make cheese.

So, the reason why casein proteins works so well for cheese because those proteins like to fall together in these spheres, they like to stick to one another. They like to stick to one another 'cause they have certain groups that latch onto the calcium and then they bridge with phosphate.

When they do, they have multiple proteins, different types of casein proteins that bridge together with phosphate and then based on their repulsion forces, they stick together. Calcium and phosphates really help it stick when we make cheese. The outside of that casein, micelle, that ball, when we make cheese, that outside is stripped off, it becomes hydrophobic, and that causes those spheres to stick together. That's a huge functional property of casein. Whey [00:04:00] protein is the opposite.

Whey protein is really hydrophillic. It's very polar. So, they like to float around in solution and stay floating around in solution. And they don't like casein. It likes to stay separate from casein. And so, when you make cheese, it readily is released into the whey stream because it likes to stick with the water.

In the same way, those kind of stick together with these sulfur groups. But when you heat it up, they unfold. And when they unfold, now there's certain reactions that can take place. So, those are the two major differences between casein and whey. Lloyd, what did I miss?

Lloyd Metzger: I would try to simplify it a little bit. The difference between casein and whey protein is casein is what's trapped when we make cheese. And whey protein is the soluble protein that's left over in the water phase of cheese.

Cheese making is a dehydration process. We concentrate the fat and protein that's in milk, the casein version of protein in milk. But you gotta look at the properties of those two [00:05:00] systems and the groups of protein. So, the casein protein is actually really stable to heat, but it is not stable to pH. So, casein will always coagulate at low pH. So, you lower the pH of milk, you get a yogurt-like product. That's all the casein that's coming out of the system. Whey proteins don't mind a low pH, and they'll stay soluble at a wide range of pH. But now, when you get to temperature, the complete opposite happens.

Casein can handle super high temperatures and be very stable. Whey proteins can not handle high temperature at all, they start to gel. I think it's important to look at the two different groups. Now you get into the functional differences between those two and the very different properties you have between those.

Lloyd Metzger: That's why you get all these products that are very different from each other. Why cheese is so much different than whey protein. And then you have these dairy products that are a combination that have the two together. So like when we make yogurt, we end up with the two products together and get this property that's partway in between the two proteins.

Ted Jacoby III: [00:06:00] Based on what you're describing, when we're talking about milk proteins, MPC 80, for example, there's a higher level of calcium, I take it in milk proteins than compared to whey proteins. Is that true?

Lloyd Metzger: Absolutely, but let's remind everybody: milk protein is both casein and whey protein together at the normal ratio that's in milk.

So, of the protein, 80% is casein, 20% is whey protein. So, when you say milk protein, you're actually meaning 80% casein and 20% whey protein. Now, when we talk about cheese or casein, we're basically a hundred percent casein and 0% whey protein. Now, when we talk about whey protein, we're essentially a 100% whey protein, no casein except for one fragment of casein that actually gets solubilized, as TJ described, and now actually becomes part of whey protein.

Something that a lot of people don't understand is that about 15% of what we call whey protein is actually a piece of casein that gets lost in the whey and now gets [00:07:00] captured and harvested in the whey protein manufacture process. But again, it's important to remember milk protein is a 80 / 20 combination of casein and whey protein together.

So, when you're talking about milk protein, you're actually talking about whey protein and casein together.

Ted Jacoby III: It's funny, I just learned something never really quite had my head around, and that's that 80 / 20 ratio, that 80% of all the protein in milk is actually either alpha or beta casein. Correct?

Lloyd Metzger: There's actually four different casein fractions that are involved that make up that 80% of the total protein.

Ted Jacoby III: Okay. The casein molecule isn't really any bigger than most of the whey protein molecules, but they tend to clump together in those micelles. And so, they act as one big humongous mass compared to whey proteins. Correct?

TJ Jacoby: Whey proteins may be collected like in pairs like two at a time, but casein proteins, there's hundreds, right?

Lloyd, that will just clump together.

Thousands.

TJ Jacoby: So, these spheres are absolutely massive protein complexes, but in fact there are a lot of little individual [00:08:00] proteins that make it up and they're all bridged together with calcium and phosphate.

Lloyd Metzger: It's a packaging system that was designed to package up calcium and phosphorus.

So, the whole casein system was designed by nature as a delivery vehicle for calcium