Dairy markets face intensifying pressure as butter (-2¢/lb) and cheddar blocks (-4¢) decline amid soaring corn/soybean costs. Our analysis reveals critical price triggers, margin risks, and actionable strategies for producers and exporters navigating volatile supply chains.
Summary:
This report highlights the challenges in the dairy market as prices for key products like butter and cheddar blocks drop due to rising feed costs and low demand. On February 5, 2025, butter fell by 2.0¢/lb, and cheddar blocks dropped by 4.0¢/lb. Feed costs, like corn, increased significantly, climbing 12% month-over-month. Though nonfat dry milk and cheddar barrels remained stable, dry whey dropped by 1.0¢/lb due to weak export demand. Class III milk futures also slipped to $20.01/cwt midweek, posing risks to margins for producers. To handle these challenges, market players should focus on securing feed prices and shifting towards more stable markets like skim milk powder to manage risks related to oversupply and trade changes.
Key Takeaways:
- Bearing market sentiment is driven by decreasing prices in butter and cheddar blocks, with weak demand compounding the effects of increased feed costs.
- Feed costs for corn and soybeans are surging, exerting pressure on dairy margins and necessitating strategic cost management.
- There is a notable oversupply in the butter market, indicated by no bids and declining futures.
- Dry whey prices significantly decline due to stagnant export interest and increased inventory.
- Cheddar barrel-cheese spread is narrowing, highlighting balanced inventory levels amid declining futures.
- Stakeholders should focus on hedging feed costs, exploring product diversification, and targeting specific export markets to mitigate risks and maximize opportunities.
- Class IV Milk futures exhibit slight declines, reflecting ongoing challenges in milk component prioritization.
- Overall, a cautious approach to market participation emphasizing innovation and efficiency is essential for navigating the current bearish conditions.
Welcome to the Daily Dairy Market Report for February 5, 2025. Today, the market is under significant bearish pressure, primarily due to surging feed costs and lukewarm demand. Let’s delve into the latest data from the Chicago Mercantile Exchange (CME) and beyond, focusing on the key price movements and market dynamics shaping today’s dairy landscape.
1. Daily Cash Prices (CME)
| Product | Final ($/lb) | Daily Change (¢/lb) | Trades | Bids | Offers |
|---|---|---|---|---|---|
| Butter | 2.4100 | -2.00 | 0 | 0 | 5 |
| Cheddar Block | 1.8600 | -4.00 | 8 | 1 | 0 |
| Cheddar Barrel | 1.8050 | NC | 0 | 1 | 1 |
| NDM Grade A | 1.3400 | NC | 3 | 2 | 5 |
| Dry Whey | 0.6100 | -1.00 | 0 | 2 | 4 |
Key Trends:
- Butter: Prices fell 2.0¢/lb with no trades and five offers, signaling persistent oversupply.
- Cheddar Blocks: Saw heavy trading (8 trades) but dropped 4.0¢/lb, reflecting weak spot demand.
- Dry Whey: Declined 1.0¢/lb amid stagnant export interest.
2. Weekly Price Averages
| Product | Current Week Avg. | Prior Week Avg. | Weekly Change (%) |
|---|---|---|---|
| Butter | 2.4233 | 2.4745 | -2.07 |
| Cheddar Block | 1.8742 | 1.9005 | -1.38 |
| Cheddar Barrel | 1.8000 | 1.8490 | -2.65 |
| NDM Grade A | 1.3400 | 1.3460 | -0.45 |
| Dry Whey | 0.6167 | 0.6770 | -8.91 |
Analysis: Dry whey led weekly declines (-8.9%), while cheese products showed moderate losses.
3. Futures Market Dynamics
Class III Milk (Feb 2025):
| Day | Mon | Tue | Wed |
|---|---|---|---|
| Price | $20.06 | $20.34 | $20.01 |
- Corn (Mar 2025): $4.9325/bu (+3.6% WoW).
- Soybeans (Mar 2025): $10.5875/bu (+0.2% WoW).
Butter Futures (Feb 2025):
| Day | Mon | Tue | Wed |
|---|---|---|---|
| Price | $2.5153 | $2.5193 | $2.5050 |
Trend: Class III futures slipped midweek, while corn futures surged to $4.9325/bu, up 12% month-over-month.
4. Market Drivers
- Feed Cost Surge:
- Corn (Dec 2025) futures at $4.6800/bu, up 4.1% MoM, pressuring dairy margins.
- Soybean meal (Mar 2025) rose to $329.10/ton, adding $5/ton WoW.
- Cheese Weakness:
- Cheddar block futures (Feb 2025) fell to $1.8660/lb, down 1.4% WoW.
- Barrel-cheese spread narrowed to $0.0550/lb, reflecting balanced inventories.
- Butter Oversupply:
- No bids for butter cash markets, with futures down 0.6% WoW to $2.5050/lb.
5. Risk Analysis
| Risk Factor | Likelihood | Impact | Mitigation Strategy |
|---|---|---|---|
| Feed Cost Volatility | High | Severe | Lock in Q2 corn/soy contracts |
| Cheese Price Erosion | Medium | High | Shift production to specialty cheeses |
| Butter Inventory Glut | High | Moderate | Redirect output to NDM/SMP |
6. Stakeholder Strategies
Producers:
- Hedge feed costs using Dec 2025 corn futures ($4.6800/bu) to offset margin pressure.
- Prioritize milk components (fat) to align with Class IV pricing ($19.85/cwt).
Exporters:
- Target Southeast Asia for NDM (current price: $1.3400/lb), where demand remains steady.
- Monitor EU butter surpluses (futures at $2.5050/lb) for re-export opportunities.
Processors:
- Reduce dry whey exposure (spot price: $0.6100/lb) and pivot to lactose-free derivatives.
7. Forward-Looking Indicators
- Class IV Milk (Feb 2025): $19.85/cwt, down 1.2% WoW due to butter weakness.
- Cheese Futures (Feb 2025): $1.9030/lb, with bearish technical signals.
The Bottom Line:
Today’s data confirm broad-based bearishness across dairy commodities, driven by feed costs and tepid demand. To navigate sustained volatility, stakeholders should prioritize cost containment and product diversification.
Learn more:
- Is 2024 Shaping Up to Be a Disappointing Year for Dairy Exports and Milk Yields?
- Rising Milk Prices and Lower Feed Costs Boost Profitability: May Dairy Margin Watch
- Slow Global Dairy Price Recovery Anticipated, Rabobank Analysis Shows: Unpacking the Market Trends
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