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The U.S. dairy market witnessed a significant shift in May 2026 as the gap between Federal Milk Marketing Order (FMMO) Class III and Class IV milk prices widened to $5.40 per hundredweight (cwt), the largest spread since 2020. The development has renewed incentives for depooling within FMMOs, with Class IV milk emerging as the higher-valued class at $22.32 per cwt, supported by strong nonfat dry milk (NDM) and skim milk powder (SMP) prices.
According to USDA’s May Class and Component Prices report, the Class II milk price increased by $1.46 month-over-month to $20.28 per cwt, while the Class III price rose only 10 cents to $16.92 per cwt. In contrast, the Class IV price jumped $2.10 from April levels to reach $22.32 per cwt. Compared to May 2025, Class IV was up $4.19 per cwt, whereas Class III remained $1.65 per cwt below year-ago levels.
The widening Class III-IV spread is expected to encourage depooling of higher-valued Class IV milk from FMMO pools, potentially reducing blend prices received by dairy producers. The last time the industry experienced a larger gap was in 2020, when the spread reached $10.78 per cwt, although Class III was the dominant class at that time.
Component values also strengthened during May. Protein increased to $2.75 per pound from $2.52 in April, while nonfat solids climbed sharply to $1.82 per pound from $1.52. Meanwhile, butterfat declined 16 cents to $1.70 per pound, and other solids slipped 1 cent to $0.38 per pound.
Looking ahead, market fundamentals remain supportive. The June advanced Class I base price was announced at $22.18 per cwt, nearly $5 above the same month last year and the highest level since November 2024. CME futures as of June 2 indicated a June Class III price of $16.23 per cwt and a Class IV price of $22.10 per cwt, suggesting the spread could widen further to $5.87 per cwt. (Ag Proud)
Source: Dairynews7x7 05 June, 2026 Read story here
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