Butter plunges while cheese barrels rise in CME’s latest report – market contradictions emerge as Chinese tariffs bite and USDA forecasts turn bearish.
EXECUTIVE SUMMARY: The April 25th CME dairy market report reveals stark contrasts across product categories, with butter prices dropping sharply (-4.50¢) while cheese barrels gained moderately (+1.50¢), creating an unusual inversion over blocks. These divergent movements occurred against a backdrop of significantly lowered USDA price forecasts for 2025, driven by expectations of increased domestic milk production. Chinese retaliatory tariffs reaching up to 150% continue to severely restrict US export opportunities, particularly affecting whey markets and forcing US exporters to pivot toward Mexico and Southeast Asia. The disparity between immediate market behavior and the bearish long-term outlook creates both challenges and potential opportunities for industry stakeholders. Producers face the prospect of tightening margins throughout 2025, necessitating vigilant risk management strategies amid volatile feed costs and lower projected milk prices.
KEY TAKEAWAYS
- Product Divergence: Butter fell 4.50¢ to $2.2800/lb despite trading at a 45% discount to European prices, while cheese barrels rose 1.50¢ to $1.7050/lb, demonstrating how product-specific factors currently outweigh broader market trends.
- Trade Barriers Reshaping Markets: Chinese retaliatory tariffs up to 150% are effectively blocking US access to this critical market, particularly devastating for whey products and forcing exporters to pursue alternative destinations despite favorable global price positioning.
- USDA Forecast Turns Bearish: April’s WASDE report significantly lowered 2025 price projections across all dairy categories (All-Milk down $0.50 to $21.10/cwt), representing a dramatic $1.95/cwt reduction since January’s forecast.
- Volume Concerns Signal Uncertainty: Inconsistent trading activity (8 loads for blocks, 0 for NDM) suggests market indecision and potentially less reliable price discovery, highlighting the conflicting signals facing industry participants.
- Producer Margin Pressure Intensifies: The combination of lower milk price projections and volatile feed costs creates significant risk of tightening margins throughout 2025, emphasizing the critical importance of proactive risk management strategies.
Butter prices plunged under domestic market pressures, while cheese barrels firmed modestly, highlighting ongoing divergence within the dairy complex against a backdrop of broadly bearish long-term forecasts.
Key Price Changes & Market Trends
Dairy product prices exhibited mixed performance during today’s trading session at the Chicago Mercantile Exchange (CME). Butter experienced a significant decline, while cheese markets showed divergence between blocks and barrels. Powder markets were relatively stable but faced underlying pressures.
| Product | Closing Price ($/lb) | Change from April 24th (¢/lb) |
| Cheese (Blocks) | $1.7000 | Unchanged |
| Cheese (Barrels) | $1.7050 | +1.50 |
| Butter | $2.2800 | -4.50 |
| Nonfat Dry Milk (NDM) | $1.1875 | Unchanged |
| Dry Whey | $0.5050 | -0.50 |
Butter: The CME spot butter price experienced a sharp decline, settling at $2.2800 per pound, dropping 4.50 cents from the previous session. This marked decline occurred despite US butter trading at a substantial discount to international benchmarks, with European butter prices reportedly around 45% higher. The inability of potential export arbitrage to support domestic prices strongly suggests that internal market dynamics are the dominant force. Ample domestic butter inventories, seasonally strong production levels, and potentially softer food service demand compared to the previous year are likely contributing factors.
Cheese (Blocks): Cheddar blocks closed unchanged at $1.7000 per pound. This stability came amidst relatively active trading, with 8 loads changing hands. The flat close follows significant price erosion earlier in the week, as indicated by the weekly average price falling considerably from Monday/Tuesday levels ($1.7750). Today’s price pause may signal a temporary stabilization point after the recent sell-off.
Cheese (Barrels): In contrast to blocks, Cheddar barrels firmed by 1.50 cents, closing at $1.7050 per pound. This movement resulted in barrels settling at a slight premium to blocks, continuing a pattern of recent volatility and occasional inversions in the traditional block-barrel price relationship. The increase occurred on lighter trading volume (3 loads) compared to blocks. This upward momentum could indicate specific buying interest from the processed cheese sector or reflect continued tightness in spot barrel availability.
Nonfat Dry Milk (NDM): The NDM market closed unchanged at $1.1875 per pound, with no trades executed during the session. The lack of activity points to a state of equilibrium or indecision among market participants. Market narratives continue to emphasize solid export demand, particularly from Mexico and Southeast Asia, as a key supporting factor.
Dry Whey: Dry whey prices eased slightly, declining by 0.50 cents to close at $0.5050 per pound on minimal trading volume (2 loads). The whey market faces significant structural headwinds primarily due to substantial retaliatory tariffs imposed by China, reportedly reaching as high as 150% when combined with baseline tariffs.
Volume and Trading Activity
Trading activity varied across the dairy complex today, influencing the perceived reliability of price movements:
Summary of Trades: Butter: 3 loads; Cheese Blocks: 8 loads; Cheese Barrels: 3 loads; NDM: 0 loads; Dry Whey: 2 loads.
Analysis:
Butter: Activity was limited, with only 3 loads traded. The significant 4.50-cent price drop occurred on this relatively thin volume, which might have amplified the downward move. The presence of 3 bids versus 2 offers at the close indicates some buying interest emerged at the lower $2.2800 level, but it was insufficient to absorb the selling pressure.
Cheese Blocks: Blocks saw the most robust activity with 8 trades completed. This higher volume lends more credence to the price stability observed today. The balanced 2 bids versus 2 offers at the close further supports the notion of equilibrium at the $1.7000 price point.
Cheese Barrels: The 1.50-cent gain in barrels occurred on very light volume (3 trades). This low participation level makes the price increase potentially less representative of broad market sentiment. The tight 1 bid versus 1 offer at the close reinforces the impression of specific tightness at the settlement price.
Nonfat Dry Milk (NDM): The complete absence of trades (0 loads) underscores significant illiquidity and market indecision in NDM today. The single uncovered offer suggests potential selling interest remains just above the last traded price, but no buyers were willing to meet it.
Dry Whey: Minimal activity (2 loads) reflects ongoing market caution and potentially poor liquidity, likely linked to trade uncertainties surrounding Chinese tariffs.
Historical Price Comparison
Today’s closing prices represent significant changes from both recent highs and the weekly averages:
| Product | Today’s Close | Week High (Mon/Tue) | Change from High | Weekly Average |
| Cheese (Blocks) | $1.7000 | $1.7750 | -7.50¢ | $1.7420 |
| Cheese (Barrels) | $1.7050 | $1.8100 | -10.50¢ | $1.7595 |
| Butter | $2.2800 | $2.3250 | -4.50¢ | $2.3145 |
| NDM | $1.1875 | $1.1875 | Unchanged | $1.1850 |
| Dry Whey | $0.5050 | $0.5100 | -0.50¢ | $0.4940 |
The cheese complex has seen particularly steep declines from early-week highs, with blocks down 7.50 cents and barrels down 10.50 cents from their Tuesday peak, highlighting the significant volatility in these markets over a short timeframe.
Global Context
International factors continue to exert significant influence on the US dairy market landscape, with trade policy currently playing an outsized role:
Global Production Trends
While overall global milk production is forecast to grow modestly in 2025 (around 0.8%), driven primarily by anticipated gains in the US and EU, regional conditions differ significantly.
New Zealand: Milk production has shown strength for the season-to-date (+2.8% to +3.9% year-over-year), contributing to global supplies. However, there are indications that late-season growth might slow due to weather conditions. Critically, New Zealand benefits from a free trade agreement with China, providing duty-free access that gives its exporters a significant competitive advantage over US suppliers in that key market.
European Union: The EU outlook involves modest projected growth (+0.5%), but the sector faces considerable headwinds. Declining cow numbers, tightening environmental regulations, and the potential re-emergence of animal diseases like Bluetongue pose risks to output. These constraints could limit EU export competitiveness, potentially offering some support for US NDM prices.
China: Domestic milk production in China is forecast to decline (-2.6% year-over-year) in 2025, a reversal following years of expansion. This reduction is expected to stimulate import demand, though US products face significant barriers.
Trade Dynamics and Demand
Geopolitical friction and retaliatory tariffs are currently the dominant global factors impacting US dairy exports.
US-China Trade Friction: Severe retaliatory tariffs imposed by China on US dairy products (reportedly up to 135% on most products and 150% on whey) are effectively blocking US access to this major market. This forces US exporters to increasingly rely on alternative destinations like Mexico and Southeast Asia, and is particularly damaging for the whey complex, which traditionally relied heavily on Chinese demand.
Competitive Positioning: While US cheese and butter prices remain competitive on the global stage, the realization of this advantage is hampered by tariffs and logistical challenges. NDM exports appear more resilient due to established demand from other regions.
Forecasts and Analysis
USDA April WASDE Outlook Chart If displayed graphically, this chart would show the Class III Milk price trajectory from January to April WASDE forecasts (declining from $19.55 to $17.60), contrasted with current May futures prices ($18.24), highlighting the significant disconnect between USDA projections and market pricing.
The USDA’s April WASDE report presented a significantly more bearish outlook for 2025 compared to previous months.
Production Increase: The forecast for 2025 US milk production was raised by 0.7 billion pounds to 226.9 billion pounds, attributed to expectations for higher cow numbers and improved milk yield per cow. This projection signals increased domestic supply, adding downward pressure on prices.
Price Reductions: Consequently, USDA made substantial downward revisions to its 2025 average price forecasts: All-Milk price was cut by $0.50 to $21.10/cwt (a stark $1.95/cwt decline since the January forecast), Class III milk by $0.35 to $17.60/cwt, Class IV milk by $0.60 to $18.20/cwt, Cheddar cheese by 2.0 cents to $1.790/lb, butter by 7.0 cents to $2.445/lb, NDM by 3.5 cents to $1.220/lb, and dry whey by 1.5 cents to $0.510/lb.
Feed Cost Considerations
Feed costs remain a critical variable for producer profitability.
Futures Market: Today’s CME settlements show May Corn at $4.7725/bu and December Corn at $4.5500/bu. May Soybean Meal closed at $289.90/ton, while December Meal settled higher at $304.70/ton.
While USDA’s longer-term view suggested potentially lower feed costs in 2025 compared to the peaks of 2022/23, recent market commentary highlights near-term price strength and volatility, particularly in corn. The slight premium in deferred soybean meal futures suggests the market anticipates potentially higher protein feed costs later in the year.
Market Dynamics and Implications
Margin Pressure: The combination of sharply lower official milk price forecasts from USDA and feed costs that exhibit near-term volatility creates a significant risk of tightening margins for dairy producers throughout 2025. This outlook increases financial risk and underscores the importance of proactive cost management and risk mitigation strategies.
Market Disconnect: A notable divergence persists between the deeply bearish USDA price forecasts (driven largely by increased supply projections) and the behavior observed in certain market segments. For instance, nearby futures contracts (e.g., May Class III at $18.24) continue to hold a premium over the USDA’s $17.60 annual average forecast. Furthermore, the firmness in cash NDM and the rise in cash barrels run counter to the overarching bearish narrative.
Retail vs. Foodservice Demand Dynamics
The current market performance reflects divergent trends between retail and foodservice channels. While specific April 2025 data isn’t conclusive, the pattern of block-barrel price movements provides insights into channel-specific demand dynamics.
The relative stability in blocks (primarily used in retail cheese) compared to the firmness in barrels (predominantly used in processed cheese for foodservice) suggests that foodservice demand may be showing comparative strength or facing tighter immediate supplies. This comes after the recent Easter holiday, which typically boosts retail demand temporarily but can lead to inventory adjustments afterward.
Industry analysts note that post-holiday retail demand typically experiences a lull, which may be contributing to the blocks’ recent price decline from early-week levels. Meanwhile, the processed cheese sector appears to be maintaining more consistent purchasing patterns, potentially due to steady quick-service restaurant performance.
Market Sentiment
Today’s market sentiment can best be described as mixed, leaning towards cautiously bearish, reflecting the divergent price movements and conflicting signals:
Overall Tone: The substantial drop in butter prices, coupled with the weight of the recent bearish USDA forecasts, casts a significant shadow over the market. However, the ability of NDM prices to hold steady and the modest gain in cheese barrels prevent a uniformly negative interpretation. Persistent concerns about producer profitability in the face of lower milk price projections and uncertain feed costs contribute to the cautious mood.
Trader and Analyst Perspectives: “Buyers seem hesitant to build inventory at current cheese prices, waiting for clearer demand signals or further price concessions,” noted one market analyst in recent CME commentary. This cautious approach aligns with today’s modest trading activity.
“The butter market feels well-supplied; buyers are patient,” observed a dairy broker earlier this week, a sentiment reinforced by today’s significant price decline despite the global price advantage US butter holds.
“We continue to see consistent inquiries for NDM from Southeast Asian buyers, keeping the export pipeline active and supporting domestic prices,” reported a trader specializing in powder markets, explaining the stability in NDM despite zero trades today.
Supporting Observations: The lack of trading in NDM points to significant market indecision. The relatively low trading volumes in butter and barrels suggest market participation might be thinner amidst the current uncertainty, potentially leading to less robust price discovery. Market commentary from other regions also notes a “wait and see approach” from buyers dealing with confusing global signals.
Upcoming Market Catalysts
Several key events and data releases in the coming weeks could significantly impact market direction:
- USDA Dairy Products Report – May 6, 2025 (3:00 PM ET): This monthly report will provide crucial production data for butter, cheese, and dry milk products, offering insights into how manufacturers are responding to current market conditions.
- The Saudi Food Show – May 12-14, 2025: This international food exhibition could influence global dairy trade patterns, especially given Saudi Arabia’s significant dairy import needs.
- IFCN Dairy Conference – May 20-23, 2025 (Netherlands): This major global dairy industry conference will likely produce significant market outlook information and international production forecasts.
- The Great Canadian Cheese Festival – May 24-25, 2025: While primarily consumer-focused, this event showcases North American dairy industry trends and could provide insights into Canadian-US dairy trade dynamics.
- Next WASDE Report – May 12, 2025: The USDA’s monthly update to its World Agricultural Supply and Demand Estimates will be closely watched to see if the bearish outlook for dairy prices continues or is revised.
Closing Summary & Recommendations
In summary, CME dairy markets exhibited divergence today. Butter prices fell sharply under domestic supply pressure, while cheese barrels edged higher despite overall market headwinds and stable block prices. NDM held steady amid export hopes but lacked trading activity, and whey saw minor losses. The session highlighted the competing influences of domestic inventories, specific product demand, export uncertainties, and overarching bearish supply forecasts.
Recommendations/Outlook:
Producers: The significantly lower USDA price forecasts necessitate vigilant margin management. The gap between current futures levels and USDA’s projections, combined with feed cost volatility, highlights the need to evaluate risk management strategies for milk prices. Close monitoring of milk component values is advised, as they may offer relative support compared to fluid milk prices. Prepare for potential margin pressure throughout 2025 and consider necessary operational adjustments.
Traders: Confirmation of NDM export sales will be crucial to potentially break the current market deadlock and provide direction. The block-barrel spread requires close monitoring for insights into relative demand strength between natural and processed cheese channels. Be cognizant of low liquidity in some contracts, which can exaggerate price movements.
Analysts: Key areas for focus include tracking domestic inventory levels (particularly butter), verifying actual export volumes against anecdotal reports, and assessing demand resilience across different channels amidst economic pressures and significant trade barriers. Quantifying the real impact of tariffs on trade flows versus market sentiment remains critical.
Mark your calendar for the upcoming USDA Dairy Products Report on May 6th, which will provide essential production data that could significantly influence near-term market direction.
Learn more:
- Behind The Numbers of April’s Milk Production Report – This April 22nd analysis explains the paradox of expanding dairy herds (+72,000 head YoY) paired with stagnant productivity, providing context for the supply factors driving current CME prices.
- USDA Slashes 2025 Milk Price Forecast By $1: What Dairy Farmers Need to Know – Published March 17th, this article details how USDA’s dramatic price forecast reductions impact producer economics, potentially reducing annual revenue by $125,000 for a 500-cow dairy operation.
- CME Dairy Market Report: March 17, 2025: Cheese and Butter Prices Fall – This earlier market report reveals how seasonal supply increases, bird flu impacts, and plant-based competition have been pressuring cheese and butter prices, providing valuable context for current market trends.
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