Butter dips amid quiet CME trading as USDA forecasts dairy slump; China tariffs squeeze exports.
EXECUTIVE SUMMARY: The CME dairy markets opened the week with minimal activity on April 28, 2025, as butter prices eased slightly (-0.50¢ to $2.2750/lb) amid ample inventories, while cheese, NDM, and whey held steady with zero trades. The USDA’s starkly bearish April outlook-projecting a 0.7B lb milk production surge and slashing 2025 price forecasts-dominated sentiment, compounded by China’s punitive tariffs (up to 150% on whey). Despite stable feed costs, futures prices for Class III milk (.30/cwt) and cheese (.888/lb) remain above USDA projections, signaling market skepticism. Global dynamics, including EU production cuts and New Zealand’s export growth, add complexity, while U.S. exporters pivot to Mexico and Southeast Asia amid trade headwinds. Stakeholders are urged to prioritize risk management as margins tighten.
KEY TAKEAWAYS
- Quiet trading masks structural risks: Butter’s dip reflects ample stocks, while stagnant cheese prices belie tighter inventories (-4.3% YoY).
- USDA’s bearish pivot: 2025 milk production forecasts raised 0.7B lb; all-milk price projected to plummet $1.95/cwt since January.
- China tariffs cripple whey: 150% tariffs erase U.S. competitiveness, diverting exports to alternative markets like Mexico.
- Futures disconnect: May Class III futures ($18.30/cwt) trade $0.70 above USDA’s 2025 average, hinting at unresolved demand optimism.
- Global shifts: EU prioritizes cheese, reducing butter/NDM exports, while New Zealand leverages trade deals to boost China sales (+19% YoY).
Butter prices eased slightly at the Chicago Mercantile Exchange today in exceptionally quiet trading, while all other dairy commodities held steady amid minimal market activity. The subdued session reflects continued cautious sentiment as stakeholders digest bearish USDA outlook projections and ongoing trade headwinds.
Key Price Changes & Market Trends
Today’s trading on the CME cash dairy markets was notably quiet, with butter being the only product to register a price change.
| Product | Closing Price | Change from Friday | Trades | Bids | Offers |
| Butter | $2.2750/lb | -0.50¢ | 7 | 2 | 2 |
| Cheese (Blocks) | $1.7000/lb | Unchanged | 0 | 0 | 0 |
| Cheese (Barrels) | $1.7050/lb | Unchanged | 0 | 0 | 0 |
| Nonfat Dry Milk | $1.1875/lb | Unchanged | 0 | 0 | 0 |
| Dry Whey | $0.5050/lb | Unchanged | 0 | 2 | 0 |
Butter’s slight weakness likely reflects underlying supply fundamentals, as the most recent USDA Cold Storage report indicated butter inventories were 4% higher than last year. This relatively comfortable supply situation continues to exert subtle downward pressure. In contrast, total cheese stocks were down 4.3% year-over-year at the end of March, with American cheese inventories specifically down 4.2%. This tighter supply backdrop may provide underlying price support for cheese, explaining why prices remained stable despite zero trading activity.
Volume and Trading Activity
Trading activity was extremely light across the CME dairy complex today. Only the butter market saw transactions, with just seven loads changing hands accompanied by two bids and two offers at the close. No trades were completed for Cheddar Blocks, Cheddar Barrels, or NDM; these products saw virtually no bidding or offering activity.
The Dry Whey market saw no trades but did attract two bids at the closing price of $0.5050 per pound, with no offers emerging. This suggests some underlying buying interest, but sellers were unwilling to engage or hold out for higher prices.
This low activity level is directly linked to prevailing uncertainty, including concerns about dairy demand amid broader economic headwinds and significant disruptions caused by trade policy, particularly steep tariffs impacting exports to China.
Global Context
International dairy market dynamics continue to influence U.S. prices and competitiveness:
European Union milk production faces headwinds, with forecasts for 2025 pointing towards a slight contraction (-0.2%), influenced by shrinking dairy herds (notably in Germany and France), tight producer margins, environmental regulations, and animal disease concerns. EU processors are expected to prioritize cheese production (+0.6%), implying reduced output of butter (-1%), NDM (-4%), and whole milk powder (-5%) available for export.
New Zealand milk production has shown modest growth, up 0.6% year-over-year in March and 2.6% for the season-to-date through March. New Zealand continues to leverage its trade agreements, particularly with China, boosting its export competitiveness, as evidenced by a 19% year-over-year increase in exports to China in March.
The U.S. faces a challenging export environment, with February 2025 data showing a 5% year-over-year decline in total dairy export volume, primarily driven by weaker sales of milk powders. A major impediment is China’s retaliatory tariffs, which are reported to be as high as 135% on most U.S. dairy products and 150% on U.S. whey.
Forecasts and Analysis
Recent USDA projections in the April 2025 WASDE report paint a significantly bearish picture:
The USDA raised its 2025 U.S. milk production forecast by 0.7 billion pounds to 226.9 billion pounds, driven by expectations of larger average dairy cow numbers (+25,000 head) and higher milk yield per cow.
Consequently, the USDA made substantial cuts to price forecasts: the all-milk price forecast was lowered by $0.50 to $21.10 per cwt, the Class III price forecast dropped $0.35 to $17.60 per cwt, and the Class IV forecast fell $0.60 to $18.20 per cwt.
Notably, the projected 2025 all-milk price has plummeted by $1.95 per cwt since the January 2025 forecast, characterized as the fastest decline since the trade war period in 2018.
Current CME futures are trading above USDA’s longer-term forecasts, with May 2025 Class III at $18.30/cwt, Class IV at $18.40/cwt, Cheese at $1.888/lb, and Butter at $2.48/lb. This disconnect suggests the futures market hasn’t fully incorporated the bearish implications of the USDA’s supply and demand outlook.
Market Sentiment
The prevailing sentiment can best be described as cautious and uncertain. The significant downward revisions in the USDA’s April forecasts have amplified concerns about trade disruptions and potentially weakening consumer demand.
One analyst noted, “The lack of engagement in today’s spot market reflects a wait-and-see approach as participants digest recent bearish forecasts and assess trade impacts. We’re seeing hesitancy among buyers, who seem to be awaiting clearer demand signals before building inventories”.
Producers have expressed significant concern following the USDA report release, with some stating it confirmed their “worst fears” and signaled a “serious market correction” was underway.
Closing Summary & Recommendations
In summary, today’s CME cash dairy markets were tranquil, characterized by minimal trading volume and unchanged prices for most products, with only butter registering a slight decline. This lull occurs against significant market developments, including bearish USDA forecasts projecting increased U.S. milk production and substantially lower prices for 2025, alongside persistent headwinds from international trade tariffs.
Producers’ significantly lower price projections and resulting margin pressure necessitate prioritizing rigorous cost control measures and actively evaluating risk management tools, including government programs and market-based hedging strategies.
Traders should monitor the divergence between current futures prices and the USDA’s longer-term fundamental outlook. At the same time, analysts should focus on tracking U.S. milk production data relative to USDA forecasts and shifts in dairy product inventories, particularly the differing year-over-year trends between butter and cheese stocks.
Learn more:
- Insights from USDA’s 10-Year Dairy Forecast
- U.S. Dairy Farmers Unlikely to Cash in on Chinese Demand
- CME Daily Dairy Market Report – April 25, 2025: Butter plunges while cheese barrels rise
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