Block cheese climbs as barrels, NDM & whey retreat amid global pressures & rising feed costs. Key insights for dairy pros.
EXECUTIVE SUMMARY: The May 20 CME dairy markets saw diverging trends: cheddar blocks edged higher on active trading (+0.25¢), while barrels (-2.00¢), NDM (-0.50¢), and dry whey (-1.50¢) faced downward pressure. Butter held steady at $2.3425/lb amid balanced bids/offers. Rising feed costs (corn +1.6%, soybean meal +0.4%) threaten producer margins, while global factors like China’s whey tariffs and EU cheese production shifts loom. USDA forecasts suggest near-term Class III milk futures (.99/cwt) outpace annual projections, offering hedging opportunities. Traders eye block-barrel spreads, while end-users are urged to secure cheese supplies amid tightening block markets.
KEY TAKEAWAYS:
- Block-Barrel Spread Widens: Blocks rose (+0.25¢) as barrels fell (-2.00¢), signaling firm demand for spot blocks vs. weaker barrel fundamentals.
- Butter Stability Masks Inventory Glut: Unchanged prices hide ample cold storage stocks, with no trades executed despite balanced bids/offers.
- Feed Costs Squeeze Margins: Corn and soybean meal futures climbed, pressuring dairy producers ahead of summer forage challenges.
- Global Trade Headwinds: China’s 84% whey tariff stifles U.S. exports, while NZ/EU production shifts redefine international competition.
- Actionable Insight: Producers should hedge against feed cost volatility; traders monitor block-barrel arbitrage; buyers lock in cheese contracts.
The CME cash dairy markets exhibited mixed trends today. Cheddar blocks saw a modest price increase, supported by firm demand indications, while cheddar barrels, Nonfat Dry Milk (NDM), and Dry Whey experienced price declines. Butter prices remained unchanged in quiet trading. Rising feed costs, with notable increases in corn and soybean meal futures, are an emerging concern for producer margins.
| Product | Closing Price (May 20) | Change from Yesterday (May 19) |
| Cheese (Blocks) | $1.9000/lb | +0.25¢ |
| Cheese (Barrels) | $1.8350/lb | -2.00¢ |
| Butter | $2.3425/lb | Unchanged |
| Nonfat Dry Milk | $1.2250/lb | -0.50¢ |
| Dry Whey | $0.5250/lb | -1.50¢ |
Commentary:
- Cheese (Blocks): Prices for cheddar blocks increased by 0.25 cents, settling at $1.9000/lb. Active trading supported the gain, suggesting continued firm demand or tighter spot availability for blocks.
- Cheese (Barrels): Barrel cheese prices saw a more significant decrease, falling 2.00 cents to $1.8350/lb, indicating some weakness in this segment of the cheese market. The block-barrel spread widened to 6.50 cents from 4.25 cents yesterday.
- Butter: The butter price held steady at $2.3425/lb with no trades executed. While bids and offers appeared balanced, the underlying market sentiment suggests that ample inventories continue to weigh on the market.
- Nonfat Dry Milk (NDM): NDM prices eased by 0.50 cents to $1.2250/lb. Despite the price dip, bidding interest suggested some underlying support.
- Dry Whey: Dry Whey prices declined by 1.50 cents, closing at $0.5250/lb, potentially influenced by ongoing global trade dynamics, including tariffs.
- Feed Costs: July corn futures settled at $4.5450/bushel (up $0.0750 from Monday), and July soybean meal futures closed at $292.40/ton (up $1.20 from Monday). These increases signal rising feed costs, which could pressure dairy producer margins.
CME Futures Settlement Prices (June 2025 Contracts, Settled May 20, 2025):
- Class III Milk: $18.99/cwt (Unchanged)
- Class IV Milk: $17.70/cwt (Unchanged)
- Cheese: $1.9520/lb (+0.10¢)
- Butter: $2.3950/lb (Unchanged)
- Nonfat Dry Milk (NDM): $1.2250/lb (Unchanged)
- Dry Whey: $0.5403/lb (-1.47¢)
Volume and Trading Activity
Trading activity was most prominent in the cheddar block market today, with specific bid-ask dynamics providing insights into market sentiment.
- Butter:
- Trades: 0
- Bids: 2 / Offers: 2
- Bid-Ask Spread: Balanced with bids at $2.3400/lb and offers at $2.3425/lb (0.25¢ spread)
- The market found equilibrium with no spot transactions, reflecting a temporary balance in supply and demand.
- Cheese (Blocks):
- Trades: 11 loads
- Bids: 3 / Offers: 3
- Bid-Ask Spread: Tightened to 0.25¢ by session’s end with final bids at $1.8975/lb and offers at $1.9000/lb
- Active trading interest demonstrated significant market engagement, supporting the price increase.
- Cheese (Barrels):
- Trades: 2 loads
- Bids: 1 / Offers: 3
- Bid-Ask Spread: Widened to 1.25¢ with final bids at $1.8250/lb and offers at $1.8375/lb
- The higher number of offers relative to bids at the close suggests some selling pressure, contributing to today’s price decline.
- Nonfat Dry Milk (NDM):
- Trades: 2 loads
- Bids: 4 / Offers: 1
- Bid-Ask Spread: Narrowed to 0.50¢ with bids at $1.2200/lb and offers at $1.2250/lb
- The stronger bidding interest compared to offers indicates underlying support despite the price decline.
- Dry Whey:
- Trades: 5 loads
- Bids: 2 / Offers: 1
- Bid-Ask Spread: Final spread of 0.75¢ between bids at $0.5175/lb and offers at $0.5250/lb
- Relatively active trading amid price declines suggests market participants are adjusting to changing fundamentals.
Global Context
International factors continue to have a significant influence on the U.S. dairy markets.
- Export Demand & Trade Tensions: U.S. dairy exports, while showing some rebound in early 2025, face ongoing challenges from retaliatory tariffs, particularly from China (e.g., an 84% tariff on U.S. whey products). This has led to a significant drop in whey exports to this key market. Conversely, New Zealand has benefited from duty-free access to China since January 2024, increasing its market share.
- Global Production Trends:
- New Zealand: Milk production grew season-to-date, although recent North Island weather may have tempered this. Overall, 12-month production is up slightly.
- European Union (EU): Milk supply is expected to be flat or slightly decline in 2025 due to regulatory pressures and shrinking herd sizes. EU processors are reportedly prioritizing cheese production, which could firm regional butter prices but potentially soften SMP and cheddar prices within the EU.
- China: Domestic milk production in China is projected to decrease by approximately 1.5% year-over-year in 2025. However, dairy imports are expected to see a modest recovery (around +2%) after previous declines, potentially offering support to global milk powder and whey prices.
- Global Dairy Trade (GDT): The GDT auction on May 6, 2025, registered a significant 4.6% increase in its overall price index, with Whole Milk Powder (WMP) prices rising 6.2% and butter prices increasing 3.8%. This global strength provides some underlying support to dairy values.
Forecasts and Analysis
Recent USDA forecasts (May 2025 WASDE) provide an updated outlook for the U.S. dairy sector in 2025:
- Milk Production: Forecast at 227.3 billion pounds for 2025, a slight upward revision, attributed to expectations of a modestly larger dairy herd and improved milk output per cow.
- Annual Average Price Forecasts for 2025:
- All-Milk Price: $21.60/cwt
- Class III Milk: $18.70/cwt
- Class IV Milk: $18.45/cwt
- Cheddar Cheese: $1.840/lb
- Butter: $2.460/lb
- Nonfat Dry Milk (NDM): $1.240/lb
- Dry Whey: $0.535/lb
Analysis: Current June 2025 Class III milk futures (.99/cwt as of May 20) are trading at a premium to the USDA’s revised 2025 annual average forecast of .70/cwt. This suggests that traders anticipate stronger prices in the near term than the yearly government projection, possibly due to current cheese market dynamics or seasonal demand. However, the projected increase in milk production later in the year and rising feed costs could temper price enthusiasm as 2025 progresses.
Key Actionable Insights from Forecasts:
- Hedging Opportunity: Current futures prices trading above USDA annual projections present a potential opportunity for producers to secure favorable forward margins.
- Regional Impact: The forecast for higher milk production may affect regional spot milk premiums, particularly in cheese-producing areas during the late summer and fall months.
- Inventory Management: End users should consider the USDA’s butter price projection ($2.460/lb), higher than current cash and futures values, when planning forward coverage strategies.
Market Sentiment
Market sentiment today appears to be one of cautious observation, reflecting the divergent price movements and the influence of both domestic and global factors.
- One dairy processor commented on the broader market: “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.”
- Regarding cheese, a Midwest-based cheese trader noted: “The block cheese market continues to feel exceptionally firm, driven by persistent inventory concerns and active buyer interest. We’re seeing robust demand from pizza makers ahead of summer.”
- A dairy export specialist at a central cooperative observed: “The ongoing tariff situation with China continues to depress U.S. whey export opportunities, forcing us to seek alternative markets at potentially lower returns. This pressure is likely to persist through Q3 at minimum.”
Overall, the market is navigating a complex environment characterized by tight supplies in some areas (like blocks), ample inventories in others (like butter), ongoing global trade uncertainties, and the recent uptick in feed costs, leading to a watchful stance among participants.
Closing Summary & Recommendations
In summary, today’s CME dairy markets saw cheddar block prices firm slightly on active trading, while barrel cheese, NDM, and dry whey prices declined. Butter remained unchanged. Rising feed costs are a key factor for producers to monitor. Global trade dynamics, particularly concerning China and EU production, influence U.S. market conditions.
Outlook & Recommendations:
- Producers should closely monitor rising feed costs and consider risk management strategies, especially given the current premium of near-month Class III futures over the USDA’s annual forecast. Opportunities may exist to lock in favorable margins, but volatility is expected.
- Traders: The divergence between block and barrel cheese prices, and the ongoing pressure on butter, may present spread opportunities. Attention to international trade developments and their impact on NDM and whey will be crucial.
- End Users: Securing cheese needs may be prudent given the firmness in the block market. Butter purchasers may find that current inventory levels offer some near-term price stability.
Disclaimer: This report is for informational purposes only and is not intended to provide financial advice. Market conditions are subject to change.
Learn more:
- CME Dairy Market Report: End of Day – May 19, 2025: Cheese Prices Retreat While NDM Shows Strength in Mixed Monday Market
- Weekly US Dairy Market Report: May 9, 2025 – Export Boom, Tariff Risks, and Market Volatility
- Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape
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