Cheese prices surge 7.5¢ as global dairy supplies tighten; butter defies weak trading. USDA vs. CME forecasts reveal market skepticism.
EXECUTIVE SUMMARY: Today’s CME dairy markets saw cheddar barrels rally 7.50¢—their largest single-day gain this month—driven by panic buying and record U.S. cheese exports. Butter edged higher (+1.00¢) amid global supply constraints, while nonfat dry milk dipped (-0.50¢) on weakened Chinese demand. USDA forecasts for Class III milk (.95/cwt) diverged sharply from CME futures (.18/cwt), reflecting trader skepticism amid rising feed costs. New Zealand’s production slump and EU inventory lows bolstered U.S. export opportunities, though weak Asian demand capped gains. Analysts recommend hedging milk production and targeting EU buyers to capitalize on tightening global inventories.
KEY TAKEAWAYS:
- Cheese barrels surged 7.50¢ due to domestic inventory shortages and unprecedented export growth (January volumes +22% YoY).
- Butter gained 1.00¢ despite zero trades, supported by reduced EU competition and New Zealand’s drought-driven production decline (-4% YoY).
- USDA vs. CME disconnect: Markets priced Class III milk 4.3% below USDA forecasts, signaling concerns over feed costs (corn +0.9%, soybeans +1.2%).
- Global pivot: U.S. cheese exports hit record highs in nontraditional markets (Japan, Bahrain), while EU cheese stocks reached 5-year lows.
- Action step: Producers advised to hedge at $17.18/cwt; exporters to target EU buyers amid supply gaps.
Today’s CME dairy markets saw robust gains in cheese categories, with cheddar barrels leading the charge amid tightening domestic supplies and steady export interest. Butter edged higher despite muted trading activity, while nonfat dry milk faced downward pressure from weaker international demand.
Key Price Changes & Market Trends
| Product | Closing Price | Change from Yesterday | Trades | Bids | Offers |
| Cheese (Blocks) | $1.7025/lb | +3.25¢ | 8 | 4 | 2 |
| Cheese (Barrels) | $1.7550/lb | +7.50¢ | 2 | 2 | 1 |
| Butter | $2.3100/lb | +1.00¢ | 0 | 4 | 1 |
| Nonfat Dry Milk | $1.1525/lb | -0.50¢ | 1 | 4 | 3 |
| Dry Whey | $0.4925/lb | Unchanged | 0 | 2 | 0 |
Commentary:
Cheddar barrels surged 7.50¢, outpacing blocks (+3.25¢), as processors scrambled to secure supplies ahead of spring demand. The barrel-block spread widened to +5.25¢, signaling acute tightness in barrel inventories. Butter gained 1.00¢ following yesterday’s 0.50¢ increase, supported by firm bids and reduced EU export competition. Nonfat dry milk dipped 0.50¢ as Chinese buyers remained sidelined, continuing the weekly downward trend from $1.1665/lb last week to today’s $1.1525/lb.
Volume and Trading Activity
Cheese blocks dominated trading with eight transactions, reflecting strong buyer interest that has grown significantly from yesterday’s three trades. Bid/ask spreads for blocks have tightened over the past week, moving from a 2.00¢ spread to complete market clearing today as all offers were purchased. Barrels saw limited trading volume (2 trades) despite their sharp price rise, with their bid/ask spread narrowing to 1.00¢ compared to 1.50¢ in previous sessions.
Butter markets remained static with no completed trades for the second consecutive day, though increased bidding activity (4 bids today vs. 2 yesterday) signals strengthening demand. NDM recorded a single trade at $1.1525/lb with a consistent 0.50¢ bid/ask spread maintained from previous sessions, reflecting cautious market participation.
Global Context
U.S. cheese export momentum has been exceptional, with January volume jumping 22% year-over-year to 46,680 MT—establishing a January record. Every month since July 2024 has set monthly export records for U.S. cheese suppliers, demonstrating remarkable international demand growth. Market diversification has been particularly noteworthy, with exports expanding beyond traditional strong markets like Mexico (+1% YOY) to reach destinations including Japan, Bahrain, and Panama.
Meanwhile, New Zealand’s milk production declined 4% year-over-year in March due to drought conditions, tightening global butter and whole milk powder supplies. EU butter prices have surged since July as milk production declined precipitously due to intense heat and animal disease. This created competitive opportunities for U.S. suppliers despite New Zealand’s butter export forecast growth to 475,000 tons in 2025. European cheese stocks have reached five-year lows, further supporting U.S. export prospects.
Forecasts and Analysis
- Milk production: 226.2B lbs (-0.7B vs prior forecast)
- Class III milk: $17.95/cwt (-$1.15 vs March)
- Class IV milk: $18.80/cwt (-$0.90 vs March)
CME futures diverged from USDA projections:
| Contract | CME April Settlement | USDA Q2 Forecast | Variance |
| Class III Milk | $17.18/cwt | $17.95/cwt | -4.3% |
| Class IV Milk | $17.86/cwt | $18.80/cwt | -5.0% |
| Cheese (Blocks) | $1.6950/lb | $1.8100/lb | -6.4% |
Markets appear skeptical of USDA’s bullish cheese price forecasts, with futures pricing in tighter margins from rising feed costs (corn + +0.9%, soybeans + +1.2% week-over-week). The significant futures premium for cheese ($1.8430/lb April futures vs. $1.7025/lb cash) indicates trader optimism despite this uncertainty.
Market Sentiment
A Midwest dairy broker noted:
“The barrel rally caught many off guard—we’re seeing panic buying from foodservice distributors trying to lock in Q2 inventory.”
An export analyst added:
“Despite cash market weakness last week, futures premiums for cheese and butter suggest traders anticipate a rebound as we move deeper into Q2.”
Overall sentiment leans bullish for cheese and cautiously optimistic for butter, with traders citing “whipsaw action” in cheese markets that “underscores the fundamental uncertainty about domestic demand” as we enter the spring buying season.
Closing Summary & Recommendations
Today’s markets highlighted the continued strength in cheese, mainly barrels, which have substantially outpaced blocks on inventory concerns. Butter found modest support from global supply constraints, while NDM remains under pressure.
Recommendations:
- Producers: Consider hedging milk production via Class III futures at current levels ($17.18/cwt), given the significant gap between CME futures and USDA forecasts.
- Processors: Secure barrel cheese inventories before seasonal demand peaks, as evidenced by the widening barrel-block spread.
- Exporters: Target EU cheese buyers to capitalize on five-year lows in European cheese stocks while monitoring New Zealand’s export growth strategy for potential competitive pressure.
Given New Zealand’s production challenges, monitor the upcoming Global Dairy Trade auction to confirm international pricing trends, particularly for butter and whole milk powder.
Learn more:
- Cheese Prices Surge Amid Active Trading; Class III Futures Remain Above USDA Q2 Forecast
This article analyzes the April 1 CME dairy market, highlighting significant cheese price increases and the disconnect between Class III futures and USDA forecasts. - Cheese Barrels Surge & Class III Milk Futures Trail USDA Forecasts
A March 24 report detailing the 8¢ surge in cheese barrels amid global supply shifts and the strategic implications of Class III milk futures lagging USDA projections. - CME Dairy Markets: Cheese Barrels Lead Gains as Butter Declines
This April 3 analysis explores the reversal in cheese prices and butter’s continued decline, offering insights into trading activity and buyer sentiment shifts.
Join the Revolution!
Join the Revolution!Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
