Indicators Signal to Produce More Protein

Milk markets have shifted quickly and decisively and the message is clear: the future rewards higher milk protein.

A Market Flip Few Saw Coming

For more than three years, butterfat led the way in driving milk check value. From July 2022 through August 2025, butterfat was the highest-priced component in all but two months. An incredible run fueled by strong domestic demand and record export growth.

But by fall of 2025, the markets flipped. Protein prices began climbing rapidly, and by November, protein was valued at $3.01 per pound, while butterfat fell to $1.71 per pound. That $1.30 spread represents a dramatic change in pay price dynamics for producers selling into multiple-component priced (MCP) markets which account for over 90% of U.S. milk.

The cause wasn’t weakened butterfat demand, in fact, consumer appetite for butter and whole milk remains robust, but rather an oversupply situation created by exceptional dairy productivity.

Butterfat: Still Strong, but Oversupplied

According to data from Dairy Management Inc. and Circana, butter sales climbed 4% year-over-year, and butterfat exports through August were already 59% higher than the entire 2024 total. Yet, even with strong domestic and export movement, production growth simply outpaced demand.

• 2023: +1.4% butterfat production
• 2024: +1.9%
• 2025: +3.3% (Jan–Mar), +4.1% (Apr–Jun), +5.6% (Jul–Sep), +5.9% (October)

As a result, the butterfat market has moved into oversupply.

Protein Demand Surges Across the Board

At the same time, demand for dairy protein has expanded far beyond traditional channels. Consumers are reaching for high-protein yogurts, ready-to-drink protein shakes, and cottage cheese, while food manufacturers are incorporating dairy protein into an ever-growing range of products.

A new source of demand has also emerged from cheesemakers. As butterfat levels in farm milk have climbed, American-style cheese processors are now standardizing their milk by removing excess fat or by adding protein to optimize yield and texture. With over 40% of U.S. milk flowing into cheese vats, this trend represents a structural, long-term driver for protein use.

Meanwhile, whey protein markets are red-hot. Whey protein isolates (WPI) with 90% or higher protein content are commanding $12.50 per pound, up from $10 just a year ago — and buyers report they could purchase every available pound if supply allowed.

New Composition Standards Reinforce the Shift

Adding to this market transition, the fifth and final Federal Milk Marketing Order (FMMO) amendment takes effect this December. It resets baseline milk composition factors, further emphasizing protein yield:

• Protein: 3.1% → 3.3%
• Other solids: 5.9% → 6.0%
• Nonfat solids: 9.0% → 9.3%

These adjustments reflect the evolving composition of U.S. milk and align pricing formulas more closely with current production realities effectively rewarding farms that emphasize protein production efficiency.

What This Means for Dairy Producers

The economics have shifted. Butterfat remains valuable, but the clear price and demand signals point to a new era where milk protein drives profitability.

At Nobis Agri Science, we believe producers who proactively adapt feeding and management strategies to enhance milk protein will position themselves at the forefront of this next market phase. Optimizing rumen balance, amino acid supply, and carbohydrate synchronization will be key to unlocking greater protein yield and capturing more value per hundredweight.

Our Takeaway

The markets are speaking loudly:

• Butterfat is abundant.
• Protein is scarce and increasingly valuable.

All indicators signal to produce more protein.

For help evaluating how your nutrition program can maximize milk protein yield and capture these new opportunities, contact your Nobis Agri Science consultant or email us at getmoremilk@nobisagri.com