Cheese markets split: Blocks surge, barrels plunge. Class III futures jump 40¢ amid supply crunch. Export hopes fuel NDM rally.
EXECUTIVE SUMMARY: The April 17 CME dairy markets saw stark divergence, with cheese blocks rising 1¢ on tight Midwest milk supplies while barrels plummeted 3.5¢ due to profit-taking. Butter edged up 0.25¢ despite ample inventories, and powders firmed modestly as NDM futures surged 2.23¢, signaling export optimism. Class III milk futures rallied 40¢ to .27/cwt, contrasting with stable Class IV prices, as traders weighed strong cheese demand against rising feed costs. Global factors added complexity, including competitive U.S. cheese exports and EU/NZ production constraints. Stakeholders are advised to hedge milk prices, monitor block-barrel spreads, and track export data for NDM validation.
KEY TAKEAWAYS:
- Block-Barrel Spread Inversion: Blocks gained a 1.5¢ premium over barrels, reversing earlier trends and signaling supply tightness for retail formats.
- Futures vs. Cash Disconnect: NDM futures surged 2.23¢ despite a 0.5¢ cash gain, reflecting bets on Southeast Asian export demand.
- Global Pressures: U.S. butter trades at a 45% discount to EU prices, but tariffs and logistics curb export potential.
- Feed Cost Risks: Despite milk price gains, corn ($4.85/bu) and soybean meal ($295.80/ton) may threaten margins.
- Stakeholder Action: Producers should hedge milk prices, cheese buyers lock in blocks, and traders should watch for NDM export confirmations.
Dairy markets closed the week with mixed signals as cheese blocks continued their upward trajectory while barrels stabilized after yesterday’s sharp correction. Class III futures maintained their strength, reflecting optimism about milk values despite USDA’s recently lowered price forecasts.
Key Price Changes & Market Trends
Today’s trading session at the Chicago Mercantile Exchange saw continued divergence in dairy product performance, with cheese blocks extending gains while other products showed more stability.
| Product | Closing Price ($/lb) | Change from Yesterday (¢/lb) |
| Cheese (Blocks) | $1.8525 | +1.75¢ |
| Cheese (Barrels) | $1.8375 | -0.25¢ |
| Butter | $2.3450 | +0.25¢ |
| Nonfat Dry Milk (NDM) | $1.1750 | +0.25¢ |
| Dry Whey | $0.4825 | Unchanged |
Cheddar blocks continued their upward momentum, gaining 1.75 cents to close at $1.8525 per pound. This marks the third consecutive day of increases, with blocks now up 8.25 cents since Monday. The persistent strength reflects ongoing tightness in milk supplies available for cheese manufacturing, particularly in key Midwest production regions. Strong retail and food service demand continues to provide support, with buyers actively seeking products despite rising prices.
Cheddar barrels edged slightly lower, dropping 0.25 cents to settle at $1.8375 per pound. This minor adjustment follows yesterday’s significant 3.50-cent decline and suggests the market may be finding equilibrium after recent volatility. The block-barrel spread has now inverted, with blocks commanding a 1.50-cent premium over barrels, a more typical market relationship than the unusual barrel premium seen earlier in the week.
Butter prices rebounded slightly, gaining 0.25 cents to finish at $2.3450 per pound on moderate trading activity. This slight recovery follows yesterday’s modest gain and suggests the market may be stabilizing after recent weakness. Despite this firming, butter continues to trade at a substantial discount to international benchmarks, with European butter prices approximately 45% higher than U.S. levels.
NDM prices increased, gaining 0.25 cents to close at $1.1750 per pound, while dry whey held steady at $0.4825 per pound. The modest strength in NDM aligns with recent positive signals from global markets and continued export interest from key buyers in Mexico and Southeast Asia.
Volume and Trading Activity
Trading activity remained relatively subdued across most products today, though with some notable patterns:
Butter saw the most activity, with eight loads traded, down from yesterday’s 11 trades but still indicating reasonable liquidity. The session closed with balanced interest, showing two bids against two offers, consistent with the slight price increase and suggesting a market-finding equilibrium.
Cheese blocks traded four loads, up from yesterday’s three trades, with continued bidding interest evident at the close (3 bids, one offer). This pattern reinforces the narrative of strong underlying demand and limited available supply, supporting the continued price strength.
Cheese barrels saw reduced activity, with only three trades completed, compared to 7 yesterday. The session closed with one bid against two offers, suggesting slightly more selling interest but not overwhelming pressure, consistent with the minor price decline.
NDM trading was light, with just two loads changing hands. The modest price increase occurred despite limited activity, potentially indicating that even small buying interest can move the market when sellers are not aggressive.
Dry whey saw no trades executed today, with the price holding steady from yesterday. This lack of activity suggests participants may be waiting for clearer direction before committing to positions.
Overall, the trading patterns confirm continued strength in the block cheese market, stabilization in barrels after yesterday’s correction and cautious but steady interest in butter and powders.
Global Context
International factors continue to influence U.S. dairy markets as the week concludes:
The global dairy supply outlook remains constrained, with recent USDA forecasts reducing 2025 U.S. milk production expectations by 700 million pounds to 226.2 billion pounds, citing lower expected output per cow despite slightly higher cow inventories. Similar production constraints are evident in other major exporting regions, with European Union output limited by environmental regulations and New Zealand facing structural challenges.
Export demand continues to support U.S. dairy products, particularly NDM and cheese. Mexico remains a key destination for U.S. NDM, while Southeast Asian buyers have shown increased interest recently. However, the USDA recently lowered its dairy export forecast on a fat basis, primarily due to expectations of reduced cheese exports, and on a skim-solids basis, due to projected lower shipments of cheese, dry skim milk products, and lactose.
The significant price gap between U.S. and international butter markets persists, with U.S. butter trading at approximately $2.34/lb compared to around $3.40/lb for European butter. Despite this apparent export opportunity, U.S. butter exports remain limited by logistical challenges and domestic inventory levels.
Recent geopolitical developments also warrant attention, as U.S. tariffs on Canada and Mexico have been suspended until April 2 for products covered under the USMCA. However, Canada’s retaliatory 25% tariffs on numerous dairy products, including cheese, butter, yogurt, and whey products, remain in place and continue to impact trade flows.
Forecasts and Analysis
The May Class III futures contract settled at $18.30 per hundredweight today, slightly from yesterday’s $18.27 and continuing to build on this week’s gains. This strength in the near-term contract reflects market optimism about cheese values and milk prices despite the USDA’s recent downward revision of its 2025 Class III forecast to $17.95 per hundredweight.
The USDA’s March supply-demand report lowered price forecasts across all major dairy products, with cheese projected at .81 per pound (down 7.0 cents), butter at .515 per pound (down 13.0 cents), NDM at .255 per pound (down 4.0 cents), and dry whey at 52.50 cents per pound (down 8.0 cents). Despite these reductions, current CME cash prices for cheese and butter are trading above these forecast levels, suggesting the market may be more optimistic than official projections.
Feed costs remain a significant factor for producer margins. May corn futures have been trading around $4.85 per bushel, while May soybean meal has held near $295-296 per ton. These relatively stable but elevated feed prices continue to pressure producer profitability, especially considering the USDA’s reduced milk price forecasts.
The combination of constrained global milk production and steady, if not spectacular, demand could support dairy prices as 2025 progresses. However, domestic inventory levels, particularly for butter, may limit near-term upside potential until these stocks are worked through the system.
Market Sentiment
Market participants express cautious optimism as the week concludes, though with recognition of the challenges facing the sector:
A Midwest cheese trader noted, “The block market continues to show impressive strength despite limited activity. We’re seeing buyers become increasingly concerned about securing product, especially as we approach the summer demand season.”
A dairy economist commented, “The divergence between USDA’s lowered price forecasts and the current strength in Class III futures highlights the uncertainty in the market. While near-term signals are positive for cheese, the broader picture remains clouded by inventory levels and global economic concerns.”
The overall sentiment reflects a market searching for direction amid mixed signals. The strength in cheese blocks and Class III futures provides reason for optimism, but this is tempered by an awareness of ample butter inventories, uncertain export prospects, and the USDA’s recently reduced-price forecasts. The coming weeks will be crucial in determining whether current price levels are sustainable or if the market will realign with the more conservative USDA projections.
Closing Summary & Recommendations
In summary, today’s dairy markets showed continued strength in cheese blocks while other products stabilized after recent volatility. The block-barrel relationship has returned to a more typical structure, with blocks commanding a premium. Butter showed signs of finding support after recent weakness, while powder markets remained steady with modest positive movement in NDM.
Based on current market conditions and outlook, stakeholders should consider the following:
Producers should view the current strength in Class III futures as a potential opportunity for risk management, particularly given the contrast with USDA’s lower price forecasts. Implementing strategies to protect against feed cost increases while maintaining flexibility to capture potential milk price upside would be prudent.
Cheese buyers facing rising block prices should consider forward contracting needs, especially for summer when seasonal demand typically strengthens. The current inverted block-barrel spread suggests retail and food service formats may face continued upward price pressure.
Butter users may benefit from the current price levels, which remain well below international benchmarks and the USDA’s annual forecast. However, any significant increase in export activity could quickly tighten domestic supplies and push prices higher.
The dairy market landscape continues to be shaped by the interplay between constrained global milk production and uncertain demand growth. While near-term challenges persist, particularly regarding inventory levels and export logistics, the longer-term outlook suggests a potentially more supportive price environment as 2025 progresses.
Learn more:
- CME Dairy Market Report: April 14, 2025 – Cheese Prices Surge on Active Trading Despite Bearish USDA Outlook; Butter, Powders Remain Static Amid Market Pause
- Global Dairy Market in 2025: Production Shifts, Demand Fluctuations, and Trade Dynamics
- Global Dairy Market Analysis: Butter Strength, SMP Weakness Signal Strategic Opportunities (March 10, 2025)
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