September Class III Fell to $16.16 Per Hundredweight While U.S. Dairy Output Keeps Climbing. Here Is What That Means for Your Cooperative.

The numbers from the week of August 31 were not encouraging.

September Class III settled at $16.16 per hundredweight, down 31 cents from August. Cheese barrels closed at $1.5325 per pound and 40-pound blocks at $1.4650, both lower than the prior week. Grade AA butter closed at $1.4400 per pound, with a weekly average of $1.4260.

Meanwhile, U.S. dairy processors made 2.1% more cheese and 5.5% more butter in July compared to July 2025. Total cheese output (excluding cottage cheese) reached 1.26 billion pounds. Butter production came in at 189 million pounds.

More milk processed, lower prices received. If that sentence describes your cooperative's situation heading into Q4, you are not alone.

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Why Prices Are Falling While Production Rises

The short answer is that supply is outrunning demand on multiple fronts.

Domestic consumption has not kept pace with the increase in output. Exports are not absorbing the surplus either. The U.S.-Canada tariff escalation has added friction to cross-border dairy trade. Canada's counter-tariffs on U.S. dairy products took effect September 8, adding 25% on imported cheese and 50% on whey, milk and other dairy categories. That closes off one of the U.S. industry's traditional overflow markets at exactly the wrong time.

The herd is not shrinking to match. The U.S. dairy herd sits at 9.71 million cows, and heifer inventory has been recovering. More cows plus higher per-cow output means more milk going to processors who are already running well above year-ago volumes.

The result is a pricing environment that puts pressure on every layer of cooperative operations, from producer payroll calculations to milk scheduling decisions to margin planning.

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What This Means for Cooperative Payroll

Class III is the benchmark most cooperative payroll systems use for cheese-market pricing. When it falls to $16.16 per hundredweight, the downstream effect shows up in producer pay statements within one to two pay cycles.

That lag creates a communication problem. Producers see strong milk production on their end and do not always connect it to why their per-hundredweight check came in lower than expected. Your payroll communications need to explain the connection clearly: more milk produced nationally, prices under pressure, and the pay calculation reflects the market, not the farm's performance.

Cooperative operators should also review any pooling arrangements that average Class III and Class IV exposure. With Class IV at $17.36 per hundredweight for August and Class III trailing significantly, the blend matters more than it did six months ago.

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What This Means for Milk Scheduling and Routing

When prices compress, milk placement decisions carry more weight. A route that was marginally efficient at $18 per hundredweight becomes a real cost problem at $16.16. The same applies to any hauling arrangements with demurrage risk built in.

Scheduling under price pressure requires tighter visibility into where your milk is going, which plants are performing and which routes have hidden cost exposure. That is not a spreadsheet problem. It is a data problem.

Cooperatives that have invested in real-time milk tracking and scheduling tools are better positioned to make placement decisions quickly when the market moves. Those still working from static route sheets and manual reconciliation face a harder road.

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Three Things to Review Before the End of September

First, run your Q4 payroll projections at $16.16 per hundredweight for Class III and stress-test at $15.50. That range is not impossible given current market direction.

Second, audit your hauling cost exposure. Identify any routes where demurrage risk has not been formally quantified. A one-hour average detention at $50 per hour across 30 routes is $1,500 per day in hidden cost.

Third, review how quickly your scheduling system can respond to a plant intake change. If a processor trims their intake window because of inventory pressure, how fast can your team reroute? The answer should be in hours, not days.

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How Milk Moovement Helps

Milk Moovement handles over 20% of U.S. milk production. Our platform gives cooperative operators real-time visibility into milk flows, route performance and producer payroll calculations, so decisions are based on current data rather than last week's spreadsheet.

When prices move quickly, the cooperatives that respond fastest are the ones with the right tools. We would like to help yours be one of them.

Ready to talk through how Milk Moovement can support your cooperative's Q4 planning? Reach out at sales@milkmoovement.com or book a demo at milkmoovement.com/book-a-demo.

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