The Downside and Upside of Increasing Exports

The prior posts covered how the U.S. is becoming a dairy exporter. The biggest change is in exports of cheese and butter. The impact on farmer protein and butterfat prices is significant. To become a dairy exporter, prices must be competitive with other international dairy exporters. To build these exports, lower prices than the competition are needed. Dairy products are exported when the domestic consumption is met and the remainder is exported. Since the supply for domestic consumption is satisfied before exporting, the wholesale prices are lower. The wholesale prices are the basis for setting component prices for dairy farms.

Chart I follows the price of wholesale butter. It is reaching a five-year low, down 40%.

Chart II follows the price of butterfat. It is reaching the same five-year low. The formula for pricing butterfat is tied directly to the butter wholesale price so Charts I and II are nearly identical. The make allowance was changed in June 2025, narrowing the gap between butter prices and butterfat prices.

Butterfat Price = (Butter Price – 0.2272) × 1.211

Chart III follows the Cheddar cheese wholesale price. It is a five-year low also.

The component price of protein is derived from the wholesale price of cheese (Chart III above). The formula is shown below and is complicated. The first part of the formula on the top line follows the normal process of taking the price of cheese less a make allowance and then multiplying the figure by 1.383, the amount that casein protein adds to the cheese value. In the second piece, the value of butterfat in cheese is calculated. There is more butterfat than protein in cheese, so the value is multiplied by 1.589.

The third part of the equation, as listed on the bottom line of the formula below removes the value of the butterfat which is paid separately.

Protein Price = ((Cheese Price – 0.2519) × 1.383) +

+ ((((Cheese Price – 0.2519) × 1.589)

– Butterfat Price × 0.91) × 1.17)

(The data above was first developed Dr. Van Slyke. The formulas were initially developed in the late 1800’s and refined over the years. They are key to the mix of whey protein, casein protein, and butterfat in cheese making.

There are different formulas for different cheeses. The numbers used above are for Cheddar cheese. Matching the required volumes of true proteins and butterfat for specific cheeses is a standard practice in the cheese industry. To balance the true protein and butterfat, true protein must be added or butterfat removed. True proteins are casein proteins and make up about 80% of milk proteins. The remaining proteins are whey proteins).

THE RESULT

The current effort to increase cheese and butter for exports has a downside and an upside for dairy farmers. Before dairy products are exported there must be an ample supply for domestic consumption. With an ample domestic supply, the wholesale price of cheese and butter is consistently lower. If this process is followed, it should reduce volatility in component pricing, but at a lower price.

Editor’s Note: John Geuss is a dairy consultant based in Florida. This information is originally published on Milk Price blog, https://milkpay.com/blogspot/ , sponsored by Adisseo and is published here with permission. He may be contacted at johngeuss@gmail.com.

Originally published at https://milkpay.com/blogspot/

The Downside and Upside of Increasing Exports

John Geuss