Cheese market retreats while NDM finds support; global factors and domestic inventories create a complex chess match for dairy traders this week.
EXECUTIVE SUMMARY: The CME dairy markets on May 19, 2025, displayed notable divergence across product categories, with cheddar cheese prices declining significantly while nonfat dry milk showed resilience with modest gains. Cheese blocks fell 3.25¢ to $1.8975/lb and barrels dropped 2.50¢ to $1.8550/lb, suggesting buyer hesitancy following mid-May rallies, while NDM rose 0.50¢ to $1.2300/lb amid strong bidding interest despite minimal trading volume. Butter held steady at $2.3425/lb as ample domestic inventories offset the strength in international markets, where the Global Dairy Trade auction recently recorded significant increases for dairy commodities. The June Class III milk futures contract settled at .99/cwt, maintaining a premium over the USDA’s revised 2025 annual forecast of .70/cwt despite decreasing slightly in response to cheese weakness. These mixed market signals reflect product-specific fundamentals rather than a unified market direction, with international factors, particularly Chinese tariffs affecting whey exports and EU production shifts creating potential opportunities for U.S. butter and powder exports, continuing to influence domestic price formation.
KEY TAKEAWAYS
- Product-Specific Market Trends: Cheese prices declined while NDM strengthened, highlighting how different supply-demand dynamics and export opportunities create divergent price paths across dairy commodities.
- Global Influence is Critical: International factors significantly impact U.S. markets- Chinese tariffs continue to depress whey prices. At the same time, the EU’s strategic shift toward cheese production may create export opportunities for U.S. butter and powder producers.
- Futures Premium Persists: Despite today’s decline, June Class III futures ($18.99/cwt) still trade above the USDA’s revised annual forecast ($18.70/cwt), indicating market expectations for near-term strength despite the day’s cheese price weakness.
- Trading Activity Reveals Market Psychology: The strong bidding for NDM (6 bids vs. two offers) despite only one trade suggests underlying strength, while butter’s configuration (3 bids, two offers, zero trades) indicates a standoff between buyers and sellers that maintained price stability.
- Strategic Recommendations Vary by Role: Producers should evaluate hedging opportunities given the futures premium, traders might explore spread opportunities between cheese and NDM markets, and analysts should closely monitor upcoming GDT results and EU production trends for their impact on U.S. export competitiveness.
The Chicago Mercantile Exchange (CME) dairy markets opened the week with varied performance on Monday, May 19, 2025. Cheddar cheese prices retreated from recent gains, while nonfat dry milk demonstrated resilience with modest price improvement. Butter held steady despite international strength, and dry whey continued its downward trend.
Key Price Changes & Market Trends
| Product | Closing Price | Change |
| Cheese (Blocks) | $1.8975/lb | -3.25¢ |
| Cheese (Barrels) | $1.8550/lb | -2.50¢ |
| Butter | $2.3425/lb | Unchanged |
| Nonfat Dry Milk | $1.2300/lb | +0.50¢ |
| Dry Whey | $0.5400/lb | -1.00¢ |
Cheddar block prices declined by 3.25 cents to $1.8975 per pound, and barrels fell by 2.50 cents to $1.8550 per pound. This downturn suggests buyer hesitancy following recent rallies driven by tight supplies and anticipatory summer demand. The block-barrel spread narrowed to 4.25 cents from 7.75 cents recorded last week, potentially indicating adjustments in inventory balance between retail and foodservice channels.
Butter prices remained unchanged at $2.3425 per pound despite recent strength in global butter prices, as seen in the 3.8% increase at the May 6 Global Dairy Trade (GDT) event. The U.S. market continues to reflect the influence of ample domestic inventories, which appear to be capping upward price potential. The current cash price remains below the USDA’s May 2025 forecast for the 2025 average butter price of $2.460 per pound.
Nonfat dry milk prices increased by 0.50 cents to $1.2300 per pound. This modest increase is likely supported by consistent domestic and international demand and continued export interest noted in recent weeks. Today’s price is slightly below the USDA’s May annual forecast of $1.240 per pound.
Dry whey prices decreased by 1.00 cent to $0.5400 per pound. This movement is consistent with a recent pattern of weakness, largely attributed to ongoing Chinese retaliatory tariffs that continue to disrupt traditional U.S. export channels for whey products.
Volume and Trading Activity
Monday’s trading session showed varied activity levels across dairy products:
- Cheddar Blocks were the most actively traded product, with 11 loads changing hands. The session closed with two bids and three offers outstanding, reflecting the day’s bearish tone with more offers than bids.
- Cheddar Barrels saw moderate activity with four trades executed. Like blocks, the session closed with zero bids against two offers, aligning with the downward price movement.
- Butter recorded no trades for the day, with three bids and two offers outstanding at the close. This configuration suggests potential underlying support at current price levels despite no actual transactions occurring.
- Nonfat Dry Milk registered just one trade but showed significant buying interest with six bids against two offers at close. This strong bidding underpins the day’s modest price increase and suggests continued buyer interest.
- Dry Whey saw two trades with one bid and no offers at close, indicating sellers may have fulfilled their objectives for the day following the price decrease.
The varying levels of trading volume highlight differing degrees of liquidity across product categories, with cheddar blocks offering the most robust price discovery in today’s session.
Global Context
International market dynamics continue to influence the U.S. dairy sector significantly:
China remains a challenging destination for U.S. dairy exports, particularly whey products, due to retaliatory tariffs reported as high as 84% in April 2025. Even with reports of a potential “tariff truce” in May 2025, U.S. dairy still faces competitive disadvantages compared to suppliers with preferential access.
Mexico continues to be a cornerstone of U.S. dairy export demand, consistently ranking as a top destination and representing a significantly larger market for U.S. dairy products than China. Additionally, Southeast Asian markets are increasingly important alternatives given the difficulties in the Chinese market.
A recently signed U.S.-Indonesia Dairy Agreement (May 1, 2025) aims to strengthen trade relations and could create new opportunities for U.S. dairy exports.
On the supply side, milk production in New Zealand showed stable growth in early 2025, with seasonal production up 3.1%. Meanwhile, the European Union’s milk supply is projected to remain flat or slightly decline in 2025 (forecasts range from -0.2% to +0.4%), partly due to environmental regulations and a strategic shift toward cheese production.
The most recent Global Dairy Trade (GDT) auction on May 6, 2025, recorded a notable 4.6% increase in its price index, with whole milk powder prices rising 6.2% and butter prices increasing by 3.8%. This global strength contrasts with today’s more subdued U.S. market performance.
Forecasts and Analysis
Recent forecasts from the USDA provide an updated outlook for the U.S. dairy sector:
The USDA’s May 2025 Livestock, Dairy, and Poultry Outlook increased the 2025 U.S. milk production forecast to 227.3 billion pounds, attributed to expectations of a slightly larger dairy herd and improved milk output per cow.
In the May report, the forecast for the all-milk price in 2025 was revised upward by $0.50 to $21.60 per cwt. Component price forecasts for 2025 annual averages include:
- Class III Milk: $18.70/cwt (up from $17.60/cwt in April report)
- Class IV Milk: $18.45/cwt (up from $18.20/cwt)
- Cheddar Cheese: $1.840/lb (up from $1.790/lb)
- Butter: $2.460/lb (up from $2.445/lb)
- Nonfat Dry Milk: $1.240/lb (up from $1.220/lb)
- Dry Whey: $0.535/lb (up from $0.510/lb)
Notably, the June 2025 Class III milk futures contract, which settled at .99/cwt today, remains above the USDA’s revised 2025 annual average forecast of .70/cwt. This premium suggests that the futures market is pricing in somewhat tighter conditions in the near term compared to the USDA’s full-year outlook.
Dairy producers are expected to benefit from lower feed costs in 2025 compared to recent years. The May USDA report projected the 2025/26 season-average farm price for corn at $4.20 per bushel (down from $4.35 in 2024/25), though soybean meal price was projected slightly higher at $310 per short ton for 2025/26 (up from $300).
Market Sentiment
Today’s market participants express mixed views on current dairy market conditions:
“Today’s decline in cheese prices reflects growing caution among buyers who had been aggressively securing supplies throughout early May,” noted a CME dairy trader at today’s close. “The rapid run-up we saw last week simply wasn’t sustainable given current consumption patterns, despite the tighter supplies.”
“The bidding we’re seeing in NDM today is consistent with export interest remaining solid,” observed a market analyst during today’s session. “Buyers aren’t stepping back despite price increases, which suggests confidence in international demand continuing through summer.”
One processor commented today, “Butter inventories continue to weigh heavily on market psychology despite strong international prices. Significant upward price movement remains unlikely until we see meaningful drawdowns in cold storage.”
Market sentiment at the start of this week is best described as cautious, with traders and analysts recognizing the recent cheese market rally may have overextended itself, given current fundamentals. The strong bidding observed in the NDM market suggests continued positive sentiment for milk powders, while butter sentiment remains neutral to bearish, constrained by inventories. Dry whey sentiment is persistently negative due to unresolved trade issues with China.
Closing Summary & Recommendations
In summary, on May 19, 2025, U.S. dairy markets presented a mixed performance with cash cheese prices experiencing a notable decline, influencing a similar downturn in Class III milk futures. Nonfat dry milk firmed modestly on strong buying interest, while butter remained unchanged and dry whey continued its downward trend.
For producers, today’s declines in cheese prices and Class III futures warrant careful attention. Consider evaluating hedging strategies given the narrowed but still present premium of nearby futures contracts over the USDA’s recently increased annual forecasts. The strength in NDM markets provides a potential bright spot for operations focused on milk powder production.
Traders should monitor the divergence between weakness in the cheese complex and firmness in NDM, which may present spread trading opportunities. Additionally, the upcoming Global Dairy Trade auction on May 20 will be a key event to watch for fresh international price direction and could influence CME market sentiment in subsequent sessions.
The dairy markets are navigating a period of product-specific trends and varied external influences. This environment calls for diligent monitoring of market signals and proactive risk management tailored to individual exposures across the dairy complex.
Learn more:
- CME Dairy Market Report: May 15, 2025 – Cheese and Powder Markets Rally While Butter Retreats
- CME Dairy Market Report: May 13, 2025 – Markets Mixed Amid Lower Feed Costs
- Weekly US Dairy Market Report: May 9, 2025 – Export Boom, Tariff Risks and Market Volatility
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