Rocko before you do anything make sure it is WATER??? A high pressure internal leak can cause the oil to foam and look milky.
Take a glass quart jar.(really any glass jar with some depth to it. You want glass to be able to see through it) Fill it 3/4 full. Then you need to heat the oil up. I put a pan of water on the cook stove. Then set the jar of oil in the pan. Let the stove heat the water an that will heat the oil. It is much safer doing it this way. Less chance of a fire. If you just heat the glass you may break the jar and have fire start.
When the foamy/milky oil is warm it will separate out if it is water. If it is justed foamy the heat will purge the air bubbles out and it will clear up an look normal.
Doing this is a cheap way to save yourself the cost of replacing the oil to find you have hydraulic problem not a water issue. This is especially true since you have a loader on the tractor. A loader works the hydraulic system more. Plus if you have a valve plumbed into the SCV to run the loader, it is common for those valves to foam the oil. They usually are just simple spool valves. They depend on the fit in the bore to seal around the spool. As they wear they can leak internally and cause the foaming I am talking about.
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