dairy market analysis

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Archive for dairy market analysis – Page 2

CME DAIRY MARKET REPORT MAY 28, 2025: Cheese Rally Drives Class III Hopes Higher – But Market Veterans Sound Caution

Wednesday, May 28th, 2025

Stop trusting cash market rallies alone. Today’s 3¢ cheese surge masks June futures warning—smart hedging beats hope every time.

EXECUTIVE SUMMARY: The dairy industry’s biggest mistake? Believing cash market strength guarantees sustained profitability. Today’s explosive 3.00¢ cheese block rally to $1.9500/lb has producers celebrating, but June Class III futures declining $0.30/cwt tells the real story—this is an opportunistic wave, not a tidal shift. With feed costs dropping 7.50¢ on corn and milk-to-feed ratios approaching 2.44, the current 89% margin environment creates a golden hedging window before FMMO reforms reshape milk checks on June 1st. HighGround Dairy’s analysis confirms what forward-thinking producers already know: spot strength without futures support signals inventory building, not demand transformation. The winners? Operations implementing tiered hedging strategies now—60-70% coverage at current premiums while maintaining 25-30% upside exposure. Stop waiting for perfect market signals and start protecting profits while margins favor strategic positioning over passive hope.

KEY TAKEAWAYS

Strategic Hedging Opportunity: Current Class III futures trading $1.17/cwt above USDA forecasts create immediate risk management windows—hedge 60-70% of Q2 production at premium levels while feed costs decline 40% probability suggests upside protection worth $0.50-$1.00/cwt margin improvement
Component Revolution Accelerating: Butterfat production surged 3.4% year-over-year with average tests reaching 4.36% in March—new FMMO skim milk composition changes in December will further reward operations optimized for protein and fat over volume production
Cash-Futures Divergence Signals Caution: While Cheddar Block gained 3.00¢ today, June futures declined $0.30/cwt indicating processor inventory building rather than sustained demand—smart operations lock profitable prices now instead of chasing spot market momentum
Feed Cost Tailwind Continues: Composite feed costs at $9.02/cwt with July corn dropping to $4.5075/bushel creates favorable 2.44 milk-to-feed ratio environment—operations should hedge feed costs given 40% probability of price increases while building cash reserves during this margin-positive cycle
FMMO Reform Reality Check: June 1st “higher-of” Class I pricing and updated make allowances will reshape milk checks across all Federal Orders—producers must analyze their specific utilization patterns now and adjust hedging strategies based on Class III vs Class IV futures positioning

CME dairy markets, Class III milk prices, dairy market analysis, dairy hedging strategies, milk price forecast

Cheddar blocks surged 3.00¢ to $1.9500/lb while nonfat dry milk gained 1.50¢, signaling stronger May milk checks ahead. However, declining June futures and industry analysts warn the spring flush reality could hit farm gate prices hard – “more of an opportunistic wave than a tidal shift.”

Today’s Price Action & Farm Impact

Product	Price	Daily Change	Weekly Change	Impact on Farmers
Cheddar Block	$1.9500/lb	+3.00¢	+3.00¢	Significant boost to Class III outlook
Cheddar Barrel	$1.8650/lb	NC	NC	Stable support, but block-barrel spread widens
Butter	$2.5250/lb	+0.50¢	+0.25¢	Supports Class IV strength, component premiums
NDM Grade A	$1.2850/lb	+1.50¢	+1.50¢	Positive for Class IV, export demand is stable
Dry Whey	$0.5700/lb	+1.50¢	+1.50¢	Class III support, but supply pressures remain

Market Commentary: Today’s standout performer was Cheddar Block cheese, which jumped 3.00¢ to settle at $1.9500/lb with active trading of 16 loads. This represents the most significant single-day gain we’ve seen in months and directly translates to stronger Class III milk price expectations for May production. The robust NDM performance, gaining 1.50¢ to $1.2850/lb, indicates healthy demand for skim-solids products.

However, here’s the critical disconnect farmers need to understand: while cash markets rallied hard today, June Class III futures actually declined by $0.30/cwt to $19.34. HighGround Dairy captured this sentiment perfectly in their recent analysis: “While the recent rally has grabbed headlines, HighGround sees this move as more of an opportunistic wave for dairy producers—not a tidal shift in market direction.”

This suggests that while immediate demand is strong—likely driven by processors filling pipelines or seasonal inventory building—the market expects pressure ahead from the spring flush and upcoming Federal Milk Marketing Order reforms taking effect June 1.

Feed Cost & Margin Analysis

Current Feed Landscape (Futures Pricing):

Feed Component	May 28 Price	Daily Change	Risk Scenario Impact
Corn (July)	$4.5075/bu	-7.50¢	Favorable trend
Soybeans (July)	$10.7700/bu	-10.75¢	Margin supportive
Soybean Meal (July)	$293.80/ton	-$2.20	Cost pressure easing
Estimated Composite Feed	$9.02/cwt	—	Below $9.50 threshold

Milk-to-Feed Ratio: Based on the estimated May All-Milk Price of $22.00/cwt, the current milk-to-feed ratio sits at approximately 2.44. While this is just below the healthy 2.5 threshold, it represents a significant improvement from the 1.73 ratio we saw in January 2024.

Risk Scenario Analysis:

Scenario 1: Feed Cost Spike (40% probability)

Corn rises to $5.00+/bushel from the current $4.51 level
Estimated impact: -$0.50 to -$1.00/cwt reduction in milk price competitiveness
Producer action: Consider hedging 60-70% of feed needs at current favorable levels

Scenario 2: Continued Feed Decline (35% probability)

Corn stabilizing below $4.25/bushel
Estimated impact: Additional $0.25-$0.40/cwt margin improvement
Producer action: Maintain current purchasing strategy, build cash reserves

Market Fundamentals Driving Prices

Domestic Demand: Butter stocks in April were 7% lower than April 2024 despite active churning, indicating strong domestic and export off-take. The food service sector continues recovering, with stakeholders anticipating positive contributions from the upcoming holiday weekend.

Export Markets: January 2025 dairy export values surged 20% year-over-year to a record $714 million, primarily driven by butterfat exports up 41%. However, the Chinese situation remains challenging, with retaliatory tariffs of 84-125%, essentially shutting U.S. suppliers out of a market that accounted for 43% of lactose exports.

Supply Factors: The industry is investing over $8 billion in new processing capacity through 2026, adding roughly 55 million pounds per day of processing capability. These investments, particularly cheese-focused plants, drive demand for component-rich milk and create regional supply-demand imbalances.

Forward-Looking Analysis & Risk Assessment

Futures Reality Check:

Class III (June): $19.34/cwt (-$0.30) – Trading $1.17/cwt above USDA’s annual forecast
Class IV (June): $18.48/cwt (+$0.24)
Cheese (June): $1.9880/lb (-$0.0230)

The divergence between today’s strong cash performance and declining June futures signals market caution about the immediate future. This creates a strategic window for producers to evaluate hedging opportunities.

Risk-Weighted Recommendations: Based on current market conditions and probability assessments, implement tiered hedging strategies:

60-70% coverage at current premium levels for Class III milk
25-30% exposure to potential upside from export demand scenarios
Feed cost hedging for key input costs given a 40% probability of price increases

FMMO Impact Analysis: The June 1st reforms will fundamentally reshape milk pricing. Key changes include:

Return to the “higher-of” Class I pricing formula
Updated make allowances reducing Class III and Class IV prices initially
Regional variations based on fluid milk utilization patterns

Regional Market Spotlight: Upper Midwest Under Pressure

Wisconsin and Minnesota are experiencing the full force of the spring flush, with robust milk flow creating an oversupply situation. Spot milk prices trading $4.25/cwt under class indicate processors have ample supply relative to immediate demand.

This regional abundance contrasts sharply with capacity-constrained areas and highlights why some Upper Midwest producers feel pressure despite positive market fundamentals. The situation demonstrates the critical importance of transportation logistics in connecting surplus milk to processing demand.

Industry Intelligence & Market Sentiment

Processing Expansion: Major investments from Walmart ($350M), Fairlife ($650M), and Chobani ($1.2B) are creating new demand centers and competition for milk supplies. These facilities primarily focus on cheese production, reinforcing the component value trend.

Market Participant Insights: Industry analysts note the complexity of current market dynamics. While cash markets show strength, futures caution reflects deeper concerns about seasonal supply patterns and regulatory uncertainties.

Technology Integration: Smart dairy technologies are becoming profitability drivers rather than just efficiency tools, with AI-powered systems delivering measurable ROI within months of implementation.

Actionable Farmer Insights

Pricing Strategies: Today’s strong cheese performance creates an opportunity to forward contract portions of upcoming production. With June futures showing caution and trading at significant premiums to USDA forecasts, locking in profitable prices now provides revenue certainty.

Risk Management: The favorable margin environment makes this an ideal time to build cash reserves and explore risk management tools. Consider implementing the tiered hedging approach:

Immediate action: Hedge 60-70% of next quarter’s production at current premium levels
Feed strategy: Lock in corn and soybean meal prices, given 40% probability of increases
Long-term planning: Maintain 25-30% exposure for potential export upside

Component Focus: Continue optimizing genetics and nutrition for higher butterfat and protein content. The upcoming FMMO changes will further reward component-rich milk, and today’s strong cheese and NDM prices reflect this market preference.

The Bottom Line

Today’s cheese rally signals genuine demand strength, but smart farmers won’t ignore the warning signs from June futures and industry analysts. HighGround Dairy’s assessment that this represents “an opportunistic wave rather than a tidal shift” perfectly captures the need for strategic positioning.

The combination of strong cash markets, declining feed costs, and favorable margins creates opportunities—but the upcoming FMMO reforms and spring flush reality require strategic hedging rather than passive optimism. Current futures trading at premiums to USDA forecasts presents what analysts call a “golden window” for risk management.

Strategic Action Plan:

Hedge 60-70% of upcoming production at current premium levels
Lock in feed costs for 6-month coverage given a 40% spike probability
Build cash reserves during this favorable margin environment
Optimize components for the new FMMO reward structure

Focus on component optimization, build strategic processor relationships, and use this margin environment to strengthen your operation’s financial position. The dairy industry is rewarding forward-thinking producers while leaving volume-focused operations behind.

Ready to optimize your risk management strategy? Contact our market analysts to develop a hedging plan that maximizes profit potential while protecting against downside volatility in this transformed market environment.

Learn More:

Protecting Your Dairy’s Bottom Line: Essential Risk Management Approaches for 2025 – Discover comprehensive risk management strategies beyond hedging, including DMC layering techniques, biosecurity protocols, and automation investments that cut labor costs by 60%+ while protecting against HPAI and market volatility.
April 2025 Dairy Risk Management Calendar – Reveals strategic timing for risk management decisions during the spring flush, including component-focused culling strategies and export opportunity windows that help navigate the current margin squeeze with actionable monthly planning guidance.
The Future of Dairy Farming: Embracing Automation, AI and Sustainability in 2025 – Demonstrates how cutting-edge automation and AI technologies transform dairy operations for long-term profitability, featuring whole-life monitoring systems and robotic solutions that enhance both efficiency and component optimization strategies.

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Categories : CME Dairy Markets

Tags : Class III Milk prices, CME dairy markets, dairy hedging strategies, dairy market analysis, milk price forecast

CME Dairy Market Report – May 20, 2025: Cheddar Block Prices Inch Upward While Barrels, NDM, and Dry Whey Retreat

Tuesday, May 20th, 2025

Cheese blocks ↑0.25¢ amid mixed dairy moves: Barrels ↓2¢, whey plunges 1.5¢. Global tensions & feed costs shape volatile markets.

EXECUTIVE SUMMARY: The May 20 CME dairy session saw divergent trends, with cheddar blocks gaining 0.25¢ on active trading (11 deals) while barrels (-2¢), NDM (-0.5¢), and whey (-1.5¢) retreated. Butter held steady at $2.3425/lb despite zero trades, reflecting balanced bids/offers. Global pressures mounted as Chinese tariffs and EU production shifts countered strong U.S. cheese demand, while rising corn (+1.7%) and soybean meal futures signaled potential margin squeezes. Traders are eyeing wide block/barrel spreads and the USDA’s revised milk production forecasts, with analysts urging vigilance on export flows and summer demand signals.

KEY TAKEAWAYS:

Block/Barrel Divergence: Cheddar blocks rose 0.25¢ (11 trades) vs barrels’ 2¢ drop, highlighting market segmentation
Global Headwinds: China’s 84% whey tariffs and EU production growth challenge U.S. export competitiveness
Feed Cost Alert: July corn (+1.7%) and soybean meal futures (+0.4%) threaten dairy margins
Quiet Butter Equilibrium: Unchanged price at $2.3425/lb masks inventory pressures despite balanced bids/offers
USDA Optimism: Milk production forecasts revised upward (+0.4B lbs) despite price decline projections

CME dairy prices, cheese market trends, butter prices, milk futures, dairy market analysis

Today’s CME dairy session displayed divergent price movements across the dairy complex, with Cheddar blocks posting a modest gain while other products retreated or remained stable. Trading activity was concentrated in the Cheddar block market, which saw 11 trades completed, while the butter market remained quiet with no trades executed despite balanced bids and offers.

Key Price Changes & Market Trends

Today’s session at the Chicago Mercantile Exchange saw mixed movements across the dairy complex. Cheddar blocks posted a slight gain, while barrels, Nonfat Dry Milk (NDM), and Dry Whey experienced price declines. The butter market remained unchanged.

Product	Closing Price ($/lb.)	Change from Yesterday (¢/lb.)
Cheese (Blocks)	$1.9000	+0.25¢
Cheese (Barrels)	$1.8350	-2.00¢
Butter	$2.3425	Unchanged
Nonfat Dry Milk	$1.2250	-0.50¢
Dry Whey	$0.5250	-1.50¢

Cheddar Blocks edged up by 0.25 cents, suggesting firm demand or tighter spot availability for blocks. The 11 trades executed indicate active interest in this category.

Cheddar Barrels saw a more significant decrease of 2.00 cents. This could be attributed to a temporary offer increase relative to bids or processors finding ample supplies.

Butter prices held steady at $2.3425/lb. Although no trades were executed, two bids and two offers suggest a market currently in equilibrium at this price point.

Nonfat Dry Milk (NDM) prices softened by 0.50 cents. With four bids versus one offer, the price decline might reflect sellers adjusting to meet buyer interest at slightly lower levels.

Dry Whey experienced the most substantial drop of the day, falling 1.50 cents. This could indicate robust supplies or a dip in demand from domestic or international users.

Volume and Trading Activity

Trading activity was most robust in the Cheddar block market, with 11 loads changing hands. Dry Whey also saw moderate activity with five trades. Butter was quiet with no trades executed, though an equal number of bids and offers were posted. Cheddar barrels and NDM saw limited trading volumes, with two trades each.

Butter: 0 trades, two bids, two offers
Cheddar Blocks: 11 trades, three bids, three offers
Cheddar Barrels: 2 trades, one bid, three offers. The bid/ask spread here suggests sellers were more prominent
Nonfat Dry Milk (NDM): 2 trades, four bids, one offer. The higher number of bids compared to offers at the settled price indicates underlying support despite the slight price dip
Dry Whey: 5 trades, two bids, one offer

Notable trading patterns include the concentrated activity in Cheddar blocks, potentially signaling focused procurement efforts by buyers. Despite balanced bids and offers, the lack of trades in butter suggests the market is waiting for further signals before committing to new price levels.

Global Context

Global dairy markets continue to present a mixed picture, influencing U.S. dairy dynamics.

Recent RaboResearch reports indicate the global dairy market is on track for modest growth in 2025, driven by steady supply expansion and rising export demand, despite evolving trade dynamics. Production growth is expected from most major exporting regions, with the European Union and the U.S. leading expansion efforts.

China’s milk production is projected to decrease by 1.5% year-on-year in 2025, with imports expected to improve by 2% after three years of declining volumes. This shift could support global dairy prices, particularly for milk powders and whey products.

As highlighted in recent market analyses, the U.S. dairy export landscape continues to face challenges from retaliatory tariffs, particularly China’s 84% duty on whey products. These trade barriers have created significant headwinds for certain product categories while creating opportunities in other markets.

European milk production has shown oscillation between growth and contraction in recent quarters, while U.S. production has stabilized after stagnation in recent years. These global supply dynamics influence price formation across all dairy commodity categories.

Forecasts and Analysis

Recent USDA projections and market analysis suggest a nuanced outlook for the U.S. dairy sector.

The USDA has recently raised its forecast for the average number of dairy cows by 5,000 head and milk per cow by 25 pounds for 2025. The national milking herd is projected to average 9.410 million head, with milk production forecast at 227.3 billion pounds, an increase of 0.4 billion pounds from the previous forecast.

Class III milk futures for June settled at .99/cwt today, maintaining the level from yesterday and continuing to trade at a premium to the USDA’s revised 2025 annual forecast of approximately .70/cwt. This premium suggests traders remain somewhat more optimistic about near-term milk prices than government forecasters.

Feed costs show some volatility, with today’s July corn futures settling at $4.5450/bu, up from yesterday’s $4.47, while July soybean meal settled at $292.40/ton compared to yesterday’s $291.20. If the trend continues, this modest increase in key feed ingredients could potentially pressure dairy producer margins.

The April 2025 WASDE report indicated a substantial downward revision in price forecasts across all major dairy commodities, signaling what some analysts describe as a “supply-driven price collapse”. Today’s mixed market performance suggests the industry is still navigating this recalibration process.

Market Sentiment

Market sentiment appears to be cautiously balanced, with pockets of strength offset by areas of price pressure.

“The mixed price movements we’re seeing today reflect the complex chess match happening in dairy markets right now,” noted one CME dairy trader. “Global factors and domestic inventories create product-specific trends rather than a unified market direction.”

A market analyst observed during today’s session: “The bidding activity in blocks suggests confidence in cheese demand continuing through summer, while the pressure on barrels highlights the ongoing divergence between retail and food service channels.”

One processor commented, “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.”

Overall, the sentiment is one of watchfulness. While domestic demand provides a solid base, particularly for cheese, international factors and feed cost volatility are key variables that traders and producers closely monitor.

Closing Summary & Recommendations

In summary, today’s CME dairy markets were characterized by a modest gain in Cheddar blocks, declines in Cheddar barrels, NDM, and Dry Whey, and a stable butter market. Trading volumes were led by Cheddar blocks, indicating specific buyer interest.

For producers, today’s declines in cheese barrels, NDM, and whey prices warrant careful attention. Consider evaluating hedging strategies given the continued premium of nearby futures contracts over the USDA’s recently increased annual forecasts. The strength in block cheese markets provides a potential bright spot for operations focused on retail-oriented production.

Traders should monitor the widening spread between blocks and barrels, which may present spread trading opportunities. Additionally, the impact of rising feed costs on production decisions and the continuing influence of global market dynamics, particularly from China and the EU, will be important factors to watch in the coming days.

Analysts should focus on upcoming cold storage reports and production data to gauge whether current price levels will find support or face further pressure. The divergence between product categories suggests market participants should maintain a product-specific approach to analysis rather than viewing dairy as a monolithic market.

In this environment of mixed signals and moderate volatility, strategic risk management and close attention to domestic and international demand indicators will be essential for all dairy market participants.

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Categories : CME Dairy Markets

Tags : butter prices, cheese market trends, CME dairy prices, dairy market analysis, milk futures

U.S. Dairy Supply Surge: USDA Forecasts Higher Production, Mixed Price Outlook Through 2026

Monday, May 12th, 2025

USDA forecasts rising milk production and changing export patterns through 2026. What’s driving the $21.60 milk price, and why might it drop? Find out now.

EXECUTIVE SUMMARY: The latest USDA Supply and Demand report signals significant shifts ahead for dairy markets, with expanding U.S. milk production expected to continue through 2026 despite slightly lower projected prices. While strong export demand is currently offsetting supply growth and supporting a $21.60/cwt all-milk price for 2025, farmers should prepare for potential challenges as fat-basis exports decline and imports rise in 2026, pushing prices down to $21.15/cwt. The double impact of growing dairy herds and increasing per-cow productivity creates a compounding effect on total milk supply that will fundamentally shape market conditions over the next two years, requiring strategic planning and robust risk management from producers looking to maintain profitability.

KEY TAKEAWAYS

Window of opportunity: Strong prices projected for 2025 ($21.60/cwt) provide a chance to strengthen financial position before potentially softer markets arrive in 2026 ($21.15/cwt)
Export dependency increasing: Current price strength is heavily supported by international demand for butter, cheese, and whey products, making your operation more vulnerable to global market shifts
Domestic consumption growth: Increasing U.S. consumption for both fat and skim-solids components provide a stable foundation even as international markets fluctuate
Component value divergence: Different export patterns for fat versus protein products mean optimizing your herd for higher components could provide advantages as markets evolve
Risk management critical: With expanding U.S. production meeting evolving international markets, implementing forward contracts and other protection strategies now could safeguard your operation from the volatility ahead

USDA dairy forecast, milk production increase, dairy export demand, milk price outlook, dairy market analysis

According to the USDA’s latest Supply and Demand report released yesterday, U.S. dairy farmers can expect expanding milk production, export growth, and moderate price declines by 2026. The May 12th update confirms the trend of growing dairy herds and increasing per-cow productivity, setting the stage for significant market developments over the next two years.

The USDA projects the all-milk price for 2025 at $21.60 per hundredweight (cwt), with a slight dip to $21.15 per cwt in 2026 as increased supply weighs on markets despite growing domestic and export demand.

Production Expansion Continues

U.S. dairy herds are growing, and that’s not slowing down anytime soon. The May report confirms what many producers have observed firsthand – more cows are entering production, and each cow is giving more milk.

This double-whammy of larger herds and better productivity creates a compounding effect on total milk supply, shaping market dynamics through 2026.

For producers making expansion decisions, this trend signals the need for caution. While prices remain relatively strong in the near term, the growing national herd suggests increased competition is coming.

Export Markets Providing Short-Term Support

International demand is currently the dairy industry’s best friend. The USDA has raised its forecast for exports fatally, pointing specifically to “competitively priced butter and cheese” driving international sales.

Exports of whey products, lactose, and cheese are all projected to increase, providing crucial market support that’s helping offset the production increases.

This export strength explains why the USDA raised its price forecasts for butter, cheese, nonfat dry milk (NDM), and whey from last month’s projections – international buyers are absorbing much of the additional production.

Long-Term Price Pressures Building

Looking ahead to 2026, the picture becomes more complex. Fat-basis exports are expected to decline compared to 2025, potentially adding pressure to butter and cheese markets.

Meanwhile, imports are projected to rise, with more butter and skim solids entering the U.S. market. Reduced exports and increased imports could create more challenging market conditions.

The forecasted milk price drop from $21.60 to $21.15 per cwt between 2025 and 2026 reflects this building pressure, though strong domestic consumption should prevent more dramatic declines.

Domestic Consumption Provides Foundation

A key bright spot in the report is the projection for domestic dairy consumption, which is expected to increase for both fat and skim-solids in 2026.

This growth in home market demand creates a more stable foundation for the industry even as international markets fluctuate. American consumers continue embracing dairy products across multiple categories, providing a reliable customer base.

For farmers concerned about market volatility, this domestic growth represents perhaps the most sustainable pillar of long-term demand.

What This Means for Your Operation

If you’re making plans for your dairy operation, the USDA report suggests a window of opportunity now, with potential challenges ahead.

The current price strength for 2025 offers a chance to strengthen your financial position before the projected softer markets 2026 arrive. Smart producers will use this period to reduce debt, invest in efficiency improvements, or build cash reserves.

Component values will likely increase divergence as different export markets favor fat versus protein products. Farms that optimize production for higher components may find advantages in this environment.

Risk Management Becomes Critical

Price volatility is almost guaranteed with expanding U.S. production, growing but uneven export markets, and changing import patterns. Now is the time to evaluate your risk management strategy.

Forward contracting, futures markets, and government programs should all be on the table as you plan for the next 24 months. The relatively strong prices projected for 2025 provide an opportunity to lock in margins while they’re available.

Remember that the entire industry sees these same projections, which means many producers may be expanding simultaneously, accelerating the supply growth beyond the forecast.

The Bottom Line

The dairy landscape is shifting beneath our feet. Growing U.S. production will meet evolving international markets and steady domestic consumption, creating opportunities and challenges.

Near-term price strength masks the pressure of expanding supply, giving smart producers a window to prepare. Those who understand these market dynamics and position their operations accordingly will navigate the coming changes most successfully.

What’s your plan for capitalizing on stronger 2025 prices while preparing for potential softening in 2026? Share your thoughts in the comments or contact our market analysts for personalized guidance.

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Categories : Dairy Markets

Tags : dairy export demand, dairy market analysis, milk price outlook, milk production increase, USDA dairy forecast

CME Daily Dairy Market Report: May 2, 2025 – Markets Surge Despite Bearish Forecasts

Friday, May 2nd, 2025

CME dairy markets surge across all products despite low volume-revealing a stark disconnect between spot market strength and bearish USDA forecasts.

EXECUTIVE SUMMARY: The May 2nd CME dairy markets displayed broad strength with all major products posting gains, led by butter (+2.00¢) and cheese barrels (+2.00¢), despite relatively low trading volumes. This spot market rally directly contradicts the USDA’s recently downgraded price forecasts for 2025, creating a significant disconnect between immediate market conditions and longer-term expectations. Current price strength appears driven by tight inventories (particularly for cheese), aggressive bidding meeting limited selling interest, and demand pull from new processing capacity. However, this optimism is tempered by fundamental headwinds including projected increased milk production (+0.7 billion pounds in 2025), ongoing trade tensions with China (including substantial retaliatory tariffs on whey products), and potential pressure from rising feed costs. This tension between immediate market tightness and bearish long-term indicators suggests dairy markets may face significant volatility as new data on supply, demand, and trade policy emerges in coming weeks.

KEY TAKEAWAYS

Market Dichotomy: A striking contrast exists between current spot market strength and bearish USDA forecasts, creating potential opportunities for short-term gains but warranting caution for longer-term commitments.
Component Focus Critical: Producers should prioritize optimizing milk component production (fat and protein) rather than just fluid volume, as this aligns with processor demand and available premiums in the current market.
Trade Policy Impact: Global trade dynamics, particularly U.S.-China tensions with tariffs up to 150% on whey products, are significantly reshaping export patterns, with Mexico emerging as an increasingly vital alternative market.
Risk Management Essential: The disconnect between current prices and forecasts, combined with production growth expectations, makes risk management strategies (futures, options, forward contracts) particularly important for protecting against potential price erosion later in 2025.
Processing Capacity Influence: New cheese processing facilities coming online are creating significant demand pull in certain regions while potentially increasing byproduct (whey, cream) availability that could pressure those specific markets.

CME dairy prices, dairy market analysis, cheese trading, butter market trends, dairy export forecasts

The Chicago Mercantile Exchange (CME) cash dairy markets exhibited broad strength on Friday, May 2, 2025, with gains across all major products. Butter and Cheddar Barrels posted the most significant increases, while Nonfat Dry Milk (NDM) and Dry Whey also firmed, despite limited trading activity in some categories. This positive momentum builds on gains observed in the previous session, suggesting strengthening near-term market conditions despite conflicting long-term forecasts.

Key Price Changes & Market Trends

The CME cash dairy markets closed the week with positive momentum across all products, notably in butter and cheese barrels, which both gained 2.00 cents. This price action comes amid reports of tightening inventories for some products and relatively strong demand signals.

Product	Closing Price ($/lb)	Change from Yesterday (¢/lb)	Weekly Average ($/lb)	Prior Week Average ($/lb)
Butter	$2.3300	+2.00	$2.2900	$2.3145
Cheese (Blocks)	$1.7600	+0.50	$1.7330	$1.7420
Cheese (Barrels)	$1.7550	+2.00	$1.7195	$1.7595
Nonfat Dry Milk	$1.1950	+1.50	$1.1850	$1.1850
Dry Whey	$0.5200	+1.75	$0.5060	$0.4940

Market Commentary:

Butter prices rose by 2.00 cents to $2.3300 per pound, marking a continued recovery through the week. This strength is notable given recent USDA Cold Storage data showing butter inventories 4% above last year’s levels. The current spot price action diverges significantly from the USDA’s latest forecast for the 2025 average butter price, which was recently cut by 7.0 cents to .445 per pound. This suggests immediate market factors such as strong retail or food service demand may outweigh longer-term inventory concerns.

The cheese complex also showed strength, with blocks adding 0.50 cents to close at $1.7600 per pound, while barrels posted a more substantial 2.00-cent gain to $1.7550 per pound. This movement dramatically narrowed the spread between blocks and barrels to 0.50 cents. The stronger performance in barrels today could suggest increased demand for cheese used in processing applications. This spot market strength aligns with reports indicating tighter cheese inventories – American-style cheese stocks were reported down 8% at the start of 2025, and total cheese stocks were down 4.3% year-over-year at the end of March.

NDM prices gained 1.50 cents to settle at $1.1950 per pound despite headwinds from the USDA’s lowered 2025 NDM price forecast ($1.220 per pound) and reports of sluggish export demand in key Southeast Asian markets. U.S. NDM exports to Mexico have remained strong, providing key underlying support.

Dry whey prices increased by 1.75 cents to $0.5200 per pound, which is notable because it occurred despite zero trades being executed, driven instead by unfilled bids. This underlying demand strength persists despite major challenges, including steep retaliatory tariffs imposed by China (reportedly up to 150%) on U.S. whey products.

Volume and Trading Activity

Trading activity on the CME cash markets was generally light on Friday, May 2, especially compared to the previous session.

Butter saw minimal activity, with only one load traded, despite the 2.00-cent price increase. At the close, two bids remained unfilled against one offer, suggesting continued buying interest slightly below the final traded price. This contrasts with the moderate activity (7 trades) observed on May 1.

The trading volume of cheese blocks was moderate, with three loads exchanged. No bids were posted at the close, but one offer remained, potentially indicating sellers were holding out for higher prices. This was lighter than the solid volume (8 trades) on Thursday.

Cheese barrels saw light activity, with just two loads traded, matching the previous day’s volume. Two bids and one offer remained at the close, suggesting a degree of balance near the settlement price.

NDM Grade A trading was light at two trades, a significant drop from the 12 trades executed on May 1. However, strong underlying demand was evident, with four unfilled bids remaining against zero offers at the close.

Dry whey had no trades completed, yet strong buying interest was signaled by three unfilled bids remaining at the close with no offers posted. This follows a light volume (4 trades) on Thursday.

Even as prices increased, the relatively low trading volumes across most products suggest that Friday’s gains were primarily driven by aggressive bidding meeting limited selling interest rather than broad-based market participation.

Global Context

International factors significantly influence U.S. dairy markets, shaping export opportunities and competitive pressures. Exports remain a critical outlet for U.S. dairy solids, accounting for approximately 16% of production.

Export Demand Dynamics:

China remains a pivotal but complex market. Forecasts suggest a decline in Chinese milk production for the second consecutive year (-2.6% in 2025), which could theoretically increase import requirements. However, substantial retaliatory tariffs on U.S. dairy products, particularly whey (up to 150%), severely hinder U.S. access and divert trade flows. While overall Chinese dairy imports surged in March (+23.5% YoY), benefiting competitors like New Zealand, U.S. suppliers face significant hurdles. Demand for specific products like high-protein whey remains strong in Asia, including China.

Mexico and Southeast Asia represent increasingly vital markets for U.S. dairy exports. Mexico has shown strong demand for U.S. cheese, becoming a key destination as exporters pivot away from tariff-impacted markets. Southeast Asia presents opportunities, although recent reports indicated sluggish NDM demand in the region. New Zealand reported strong March export growth to Indonesia (+85% YoY) and Malaysia (+11% YoY), highlighting regional potential.

Global Production Landscape:

New Zealand milk production has shown stable growth through the recent season (+1.2% Feb/Mar, +0.6% March, +2.6% season-to-date), with forecasts projecting continued modest increases (+0.9% for 2025). Producers are increasingly focusing on value-added products like infant formula and specialty cheeses.

The European Union production outlook is mixed, with forecasts ranging from slight declines to modest growth (+0.5%). The region faces significant structural challenges, including declining herd sizes, stringent environmental regulations, and ongoing animal disease risks like the Bluetongue Virus (BTV) and recent Foot-and-Mouth Disease (FMD) concerns in Germany.

Australia is expected to see modest production growth (+1.1%) in 2025, supported by favorable weather and better margins, though higher feed costs remain a factor.

Geopolitical tensions, particularly the ongoing U.S.-China trade dispute and associated tariffs, remain a primary source of disruption and uncertainty for global dairy trade. The complex global dynamic means U.S. market performance will hinge heavily on its ability to maintain competitiveness in accessible export markets and adapt to evolving global supply trends.

Forecasts and Analysis

Market participants continue to grapple with evolving forecasts and underlying production trends. The latest projections from the USDA, primarily reflecting the April World Agricultural Supply and Demand Estimates (WASDE) and related outlook reports, present a more cautious view compared to earlier expectations.

USDA Price & Production Forecasts (April 2025 basis):

The USDA significantly revised its 2025 price forecasts downward. The all-milk price forecast now stands at $21.10 per cwt, a reduction of $0.50 from the March forecast. Similarly, the Class III forecast was lowered to $17.60 per cwt (down $0.35 from March), and the Class IV forecast fell to $18.20 per cwt (down $0.60).

Component price forecasts were correspondingly reduced: Cheddar cheese to $1.790/lb (-2.0¢ from March), Butter to $2.445/lb (-7.0¢), NDM to $1.220/lb (-3.5¢), and Dry Whey to $0.510/lb (-1.5¢).

The 2025 U.S. milk production forecast was increased slightly in the April update to 226.9 billion pounds (+0.7 billion lbs from March). This upward revision was attributed to higher expected cow numbers (+25,000 head) and a marginal increase in anticipated milk yield per cow (+10 pounds).

Feed Cost Trends:

CME futures for feed inputs showed some strength today, with May Corn settling at $4.7300/bushel and May Soybean Meal at $290.40/ton. While feed costs have generally been viewed as more favorable recently than previous peaks, supporting producer margins, any sustained rally in grain prices could pressure profitability later in the year.

Analysis & Market Implications:

A significant disconnect persists between the recent strong performance in the CME spot cash markets and the progressively bearish revisions in USDA’s official price forecasts. Dairy futures markets also reflect this tension; the May 2025 Class III futures contract settled today at $18.43 per cwt, considerably above the USDA’s projected 2025 average of $17.60.

The pattern of consistent downward revisions in USDA milk price forecasts during early 2025 signals an evolving assessment of the market balance, likely incorporating the growing potential for increased milk supply alongside perhaps a more cautious view on demand strength.

The underlying trend of milk solids production (fat and protein) growing faster than overall fluid milk volume is critical. This shift benefits processors focused on manufactured products like cheese and butter and aligns with the demand pull from new cheese plants.

Market Sentiment

Today’s market sentiment can be cautiously optimistic in the near term, buoyed by the firming spot prices across the dairy complex. However, this optimism is tempered by significant underlying uncertainty regarding the accuracy of bearish long-term forecasts, the potential impact of trade policy shifts, and broader economic conditions.

One industry source emphasized the current market tightness: “Spot markets feel well-supported right now, particularly cheese, driven by tight nearby inventories and demand-pull from new plants. Buyers are paying up for immediate needs.” This aligns with the observed price action, inventory reports, and the influence of new processing capacity.

Another perspective highlights the disconnect and risks: “There’s a definite disconnect between the cash market rally and the bearish USDA numbers. We’re closely watching export flows and trade policy – any disruption there, especially with China or Mexico, could quickly change the tone.” This captures the concern over conflicting signals and the high stakes of international trade dynamics.

Key risks frequently cited by industry sources include the potential for escalating trade wars and tariffs, ongoing impacts and uncertainty surrounding Highly Pathogenic Avian Influenza (HPAI) in dairy herds, potential labor disruptions or policy changes affecting farm labor availability, the state of the domestic and global economy influencing consumer spending, volatility in feed costs, and pressures from environmental regulations.

The prevailing sentiment reflects a market reacting strongly to immediate, tangible factors like tight spot supplies and current demand signals pushing prices higher. Simultaneously, there is considerable underlying caution due to future, less certain risks such as higher projected milk production, potential trade disruptions, and weaker official price forecasts.

Closing Summary & Recommendations

In summary, the CME dairy markets closed the week on a firm note, with butter and cheese barrels leading gains, while NDM and dry whey also strengthened despite low or zero trading volumes in some cases. This spot market strength continues to diverge from more bearish USDA price forecasts for 2025. Key drivers appear to be tight nearby inventories, particularly for cheese, aggressive bidding interest meeting limited offers, and potential demand pulls from new processing capacity coming online.

Recommendations:

For Producers: Continue to focus on optimizing milk component production (fat and protein) to capture available premiums, given the market’s clear valuation of solids. Utilize risk management strategies (futures, options, forward contracts) to protect against potential price erosion later in the year, as suggested by lower USDA forecasts and the prospect of rising milk production. Monitor feed cost trends closely, as recent gains in corn and meal could impact margins. Stay informed about HPAI developments and biosecurity measures.

For Traders: Acknowledge the current divergence between spot/futures strength and longer-term fundamental forecasts. Low trading volumes today may indicate thin market depth, potentially leading to heightened volatility. Closely monitor upcoming export data releases, paying particular attention to cheese and NDM shipments to Mexico and Asia. Any developments regarding U.S.-China trade relations or tariffs remain critical market movers.

For Analysts & Processors: Track the operational ramp-up of new U.S. processing facilities and analyze their impact on regional milk procurement dynamics, the availability and pricing of components like whey and surplus cream, and overall market balance. Assess the sustainability of current tight cheese inventories in the face of forecasts for increased milk production. Evaluate evolving global supply and demand balances, noting the significant regional divergences in production trends and market access.

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Categories : CME Dairy Markets

Tags : butter market trends, cheese trading, CME dairy prices, dairy market analysis

CME Dairy Market Report: March 27, 2025 – Butter Surges While Class III Futures Continue Strong Rally Above USDA Forecast

Thursday, March 27th, 2025

Butter prices soar 3.5¢ despite high stocks as Class III milk futures rally past USDA forecasts. Global dairy markets brace for spring volatility.

EXECUTIVE SUMMARY: CME dairy markets saw significant bullish momentum on March 27, 2025, with butter leading gains (+3.50¢) despite elevated inventories and cheese blocks rising 1.75¢. Class III milk futures surged to .67/cwt, exceeding USDA projections by 17¢, signaling trader confidence in tightening supplies. Global dynamics diverged sharply, with EU milk production declining (-0.2%) amid regulatory pressures while New Zealand output grew (+3.1%). The USDA revised its 2025 all-milk price forecast upward to .75/cwt, though nonfat dry milk faced headwinds from global price competition. Stakeholders are advised to monitor feed costs, export opportunities, and Federal Order changes expected June 1.

KEY TAKEAWAYS

Buter Defies Logic: Prices jumped 3.5¢ despite 17% monthly inventory growth, driven by technical buying and export speculation.
Class III Futures Signal Strength: Settled at $18.67/cwt, 17¢ above USDA forecasts – largest premium since March 23.
Global Split: EU milk production declines (-0.2%) contrast with New Zealand’s 3.1% growth, reshaping export opportunities.
NDM at Crossroads: U.S. prices remain globally uncompetitive ($1.15/lb) despite USDA’s $1.30/lb annual projection.
Action Items: Producers urged to hedge Class III exposure; processors warned about tightening butter supplies.

CME butter prices, Class III milk futures, USDA dairy forecasts, global dairy exports, dairy market analysis

Butter and cheese markets showed significant strength in today’s Chicago Mercantile Exchange (CME) dairy trading, with butter posting the most crucial daily gain in nearly a month. Class III milk futures extended their rally, climbing to .67/cwt and widening the gap with USDA’s forecast. Meanwhile, after yesterday’s advance, nonfat dry milk retreated, reflecting the mixed signals currently driving dairy markets as seasonal spring flush approaches.

Key Price Changes & Market Trends

Product	Closing Price	Change from Yesterday
Butter	$2.3650/lb	+3.50¢
Cheese (Blocks)	$1.6475/lb	+1.75¢
Cheese (Barrels)	$1.6350/lb	+0.50¢
Nonfat Dry Milk	$1.1500/lb	-1.00¢
Dry Whey	$0.4950/lb	-0.50¢

Butter led today’s advances with a significant 3.50¢ gain despite recent cold storage reports showing inventories at 305 million pounds (up 17% month-over-month and 3% year-over-year). This seemingly contradictory movement suggests technical buying and potential export interest override inventory concerns. Cheese blocks followed with a substantial 1.75¢ increase, continuing their upward trajectory since Monday and widening the spread with barrels to 1.25¢. Nonfat dry milk retreated 1¢ after yesterday’s 2¢ jump, while dry whey dipped slightly to close just under the psychological 50¢ threshold.

Volume and Trading Activity

Today’s session saw notably active trading in butter, with 15 trades executed, reflecting strong buyer interest despite higher prices. Cheese blocks also showed healthy activity with six trades and balanced bidding interest (4 bids, four offers), indicating genuine price discovery rather than unidirectional pressure. In contrast, barrels, NDM, and dry whey saw minimal trading with just one trade each, suggesting more cautious positioning in these markets.

Butter’s trading activity was particularly noteworthy given yesterday’s Cold Storage report findings. Buyers seemingly discounted the high inventory levels in favor of forward-looking market dynamics. The 15 trades completed represent the highest daily volume for butter this week.

Global Context

International factors continue to influence U.S. dairy markets, with the stronger dollar noted yesterday having a minimal dampening effect on today’s butter and cheese advances. Export competitiveness remains a key consideration, particularly as U.S. butter and cheese exports are projected to grow due to competitive pricing.

Global milk production patterns are evolving significantly in 2025. The European Union’s milk production is forecast to decrease by 0.2% to 149.4 million metric tons due to declining cow numbers, tight farmer margins, environmental regulations, and disease outbreaks. This contrasts with New Zealand, where milk production showed 3.1% seasonal growth through December 2024, driven by favorable weather conditions and improved farm profitability.

These divergent production trends create both challenges and opportunities for U.S. dairy exports. While EU cheese production is expected to increase by 0.6% to 10.8 million metric tons despite overall milk production declines, this shift toward higher-value products may create openings for U.S. exports in other categories like butter and powdered milk.

Forecasts and Analysis

Class III milk futures continued their impressive rally, settling at .67/cwt today. This is a significant 13¢ increase from Wednesday and is now solidly above the USDA forecast of $18.50/cwt. This marks the fourth consecutive day of gains for Class III futures and reflects market confidence in cheese values.

Class III Milk Futures vs USDA Forecast (Mar 2025)

The widening gap between actual futures prices and USDA projections suggests traders are pricing in stronger fundamentals than official forecasts currently recognize. Today’s Class III settlement at $18.67 represents a 17¢ premium to the USDA forecast, compared to just a 4¢ premium on Monday.

USDA’s broader 2025 dairy forecast includes an all-milk price projection of $22.75/cwt, recently revised upward due to strong demand for cheese and export opportunities. The current market trajectory aligns with this more optimistic outlook, particularly in the cheese and butter segments.

USDA has also adjusted its dairy herd size projection for 2025, increasing it by 5,000 head to 9.380 million while simultaneously lowering milk production forecasts to 226.2 billion pounds (-0.7 billion) due to slower-than-expected growth in output per cow. This production dynamic bears monitoring as we approach peak spring flush.

Market Sentiment

Despite yesterday’s mixed performance, Market sentiment has become increasingly bullish, particularly in the butter and cheese markets. Traders appear to be positioning for tighter supplies as we approach Q2, with one market analyst noting, “The significant butter trading volume today, combined with higher prices, suggests genuine concern about future availability despite current inventory levels.”

The continued strength in Class III futures reflects confidence in cheese demand fundamentals. Market participants seemingly discount the “processors outpacing demand” narrative mentioned in yesterday’s reports. Instead, the focus appears to be shifting toward potential supply constraints and strengthening demand as we move into late spring.

Given recent global developments, the nonfat dry milk (NDM) market deserves particular attention. While today saw a modest 1¢ decline, U.S. NDM prices have been among the highest globally in recent months, creating challenges for export competitiveness. The USDA projects non-fat dry milk prices in the U.S. to average $1.30/lb in 2025, representing a 5.4% increase from 2024. Today’s closing price of $1.15/lb suggests a potential upside if these projections materialize.

Closing Summary & Recommendations

In summary, today’s dairy markets showed substantial strength in butter and cheese prices, with butter gaining 3.50¢ despite high inventory levels and cheese blocks rising 1.75¢. Class III milk futures extended their rally to .67/cwt, now trading 17¢ above USDA’s .50/cwt forecast. The divergence between intense price action and previously reported inventory builds suggests markets are looking beyond current supplies to anticipated tightening conditions.

For Producers:

Consider implementing selective hedging strategies for Class III milk as future prices have established a clear premium to USDA forecasts, potentially creating favorable pricing opportunities.
Monitor feed costs closely. Recent weakness in corn and soybean futures could improve milk production margins.
Track global production trends, particularly the declining EU milk production, and increasing New Zealand output, as these shifts will impact international market dynamics and potential export opportunities.

For Processors:

Today’s active butter trading suggests increasing supply competition despite reported inventory levels. Forward contracting may be prudent before potential further price increases.
The widening block-barrel spread (now 1.25¢) signals evolving market dynamics that may impact procurement strategies across cheese categories.
Consider the implications of EU processors prioritizing cheese production at the expense of butter and powder, which could create opportunities in international markets.

For All Market Participants:

Friday’s weekly summary report will provide crucial context for this week’s price movements and help establish whether today’s strength represents a new trend or temporary repositioning.
Continue preparing for potential market volatility as Federal Order changes approach (June 1), which will fundamentally alter milk pricing formulas.
Pay close attention to global dairy trade patterns, as China shows signs of demand recovery after years of declining dairy import volumes, potentially creating new export opportunities.

USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers
Explains USDA’s revised milk production forecasts ($22.75/cwt all-milk price) and strategies for navigating tightening supplies and export dynamics.
Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape
Analyzes EU’s 0.2% milk production decline vs. U.S. growth, aligning with today’s discussion of international price pressures.
Good News for Dairy in 2025: Higher Milk Prices, Lower Feed Costs Ahead
Contextualizes today’s bullish Class III futures rally with USDA’s $52.1B milk receipts forecast and 10.1% feed cost reduction projections.

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Categories : CME Dairy Markets

Tags : Class III milk futures, CME butter prices, dairy market analysis, global dairy exports, USDA dairy forecasts

CME DAIRY MARKET REPORT: MARCH 20, 2025: Class III Futures Surge Above USDA Forecast; Cheese Blocks Rally Amid Strong Dry Whey Bidding

Thursday, March 20th, 2025

Class III futures surge past USDA forecast while cheese blocks rally; market anticipates tomorrow’s pivotal Cold Storage report amid strong whey demand.

EXECUTIVE SUMMARY: The March 20, 2025 CME dairy market showed selective strength, with cheese blocks rising 1.50 cents to $1.6200/lb and dry whey continuing its four-day rally to $0.4800/lb amid exceptional buying interest (7:1 bid-to-offer ratio). Class III milk futures surpassed USDA’s forecast to reach $18.53/cwt despite overall cheese prices remaining significantly below USDA’s longer-term projections. Global dairy production shows divergent trends, with New Zealand output improving while EU production declines, creating mixed export opportunities for U.S. producers. Market participants are strategically positioning ahead of tomorrow’s Cold Storage report and the more significant Federal Order changes scheduled for June 1st that will fundamentally restructure milk pricing formulas.

KEY TAKEAWAYS

Technical Signals: Cheese blocks have established support at $1.5750/lb with resistance at $1.6450/lb; current prices remain well below USDA’s Q2 projection of $1.8200/lb, suggesting potential for significant appreciation.
Market Dynamics: Trading volumes remain 18% below five-year seasonal averages for mid-March, indicating heightened caution as processors and producers await clearer signals on upcoming Federal Order changes.
Segment-Specific Strategies: Large producers should implement staggered hedging (40-50% of production), mid-sized operations should consider forward contracting (30-40%), while smaller farms should focus on operational efficiency and niche market opportunities.
Critical Timeline: Tomorrow’s Cold Storage report will provide essential inventory insights, while the June 1st Federal Order changes represent the most significant upcoming market factor with “very high” potential impact on pricing.
Global Context: RaboResearch projects 0.8% milk production growth across major exporting regions in 2025, but with significant regional differences – EU declining 0.2% versus New Zealand increasing 1.2% – creating varied international price pressures.

Today’s Chicago Mercantile Exchange (CME) dairy markets showed mixed performance with a positive bias, as cheese blocks gained 1.50 cents to reach $1.6200/lb and dry whey continued its four-day upward streak to $0.4800/lb. Class III milk futures strengthened to .53/cwt, exceeding USDA’s .50/cwt forecast. This marks a significant 8-cent recovery from Monday’s $18.45/cwt settlement. Current market dynamics reflect ongoing tension between seasonal supply expectations, international competition, and domestic demand patterns as the industry approaches Q2 2025. Trading activity remained selective but strategic, with buyers showing particular interest in cheese blocks and dry whey.

dairy futures prices, CME cheese market, Class III milk forecast, dairy market analysis, Federal Order changes

KEY PRICE CHANGES & MARKET TRENDS

Product	Closing Price	Change from Yesterday	Weekly Average	Change from Prior Week	Key Support Level	Key Resistance Level
Cheese (Blocks)	$1.6200/lb	+1.50¢	$1.6113/lb	-0.0837¢	$1.5750/lb	$1.6450/lb
Cheese (Barrels)	$1.5650/lb	Unchanged	$1.5813/lb	-0.0867¢	$1.5650/lb	$1.6250/lb
Butter	$2.2950/lb	Unchanged	$2.2969/lb	-0.0356¢	$2.2900/lb	$2.3025/lb
Nonfat Dry Milk	$1.1500/lb	-0.50¢	$1.1538/lb	-0.0047¢	$1.1500/lb	$1.1550/lb
Dry Whey	$0.4800/lb	+1.00¢	$0.4650/lb	-0.0065¢	$0.4500/lb	$0.4800/lb

CME Dairy Price Chart – March 2025 Historical cheese and butter prices showing recent trends and key support/resistance levels

Cheddar blocks advanced 1.50 cents to $1.6200/lb, continuing to recover after Tuesday’s sharp 7.00¢ decline. While today’s increase is encouraging, block prices remain significantly below last week’s average of $1.6950/lb, representing a 4.4% week-over-week decline. The block-barrel spread widened to 5.50¢ after nearly disappearing earlier in the week, suggesting diverging market fundamentals between these two cheese segments.

From a technical analysis perspective, cheese blocks have established near-term support at $1.5750/lb, which was tested and held during Tuesday’s session. The current $1.6200/lb price sits just below Monday’s resistance point of $1.6450/lb. If blocks break through this resistance level, the next target would be the previous week’s average of $1.6950/lb.

Dry whey continued its positive momentum for the fourth consecutive day, gaining another cent to $0.4800/lb. This represents a 6.7% improvement from Monday’s $0.4500/lb price, indicating substantial renewed interest in the whey market despite the product’s overall weekly average trailing last week’s performance. Today’s close at $0.4800/lb represents a significant technical level that could encounter resistance if tested again tomorrow.

Nonfat dry milk decreased slightly by 0.50¢, continuing a gradual downward trend as global powder markets face pressure from improved seasonal production in New Zealand. NDM has established solid support at $1.1500/lb, which has been tested several times this month without breaking lower.

Butter held steady for the second consecutive day at $2.2950/lb with no trades, bids, or offers recorded, extending its $0.0375/lb decline from Monday’s $2.3025/lb price level. From a technical perspective, butter is trading in a narrow range between support at $2.2900/lb and resistance at $2.3025/lb, with a decisive break in either direction likely to dictate the next significant move.

VOLUME AND TRADING ACTIVITY

Product	Today’s Trades	Weekly Volume	Weekly Volume % Change vs. Prior Week	5-Year Seasonal Average Volume (Mid-March)
Cheese (Blocks)	4	14	+40%	17
Cheese (Barrels)	0	5	-37.5%	8
Butter	0	9	-25%	12
Nonfat Dry Milk	2	2	-78%	5
Dry Whey	1	3	-40%	4

Today’s CME spot market showed selective activity, with seven trades executed across all dairy products, representing a moderate decline from yesterday’s volume. This continues the pattern of hesitancy seen throughout March, with overall weekly trading volumes down 42% compared to early March levels.

Compared to historical seasonal patterns, current trading volumes are approximately 18% below the 5-year average for mid-March, when markets typically see increased activity ahead of the spring flush. This reduced volume suggests market participants may be more cautious this year, awaiting more precise signals on milk production trends and upcoming Federal Order changes.

Cheddar blocks had the most active trading session, with four trades completed, alongside balanced interest shown via four bids and two offers. This pattern suggests genuine price discovery rather than one-sided selling or buying pressure, potentially indicating a price stabilization point following recent declines.

Dry whey demonstrated extreme buying interest, with seven bids against just one offer despite executing only a single trade. This 7:1 bid-to-offer ratio signals potential continued strength in the whey market in coming sessions as buyers appear eager to secure the product.

NDM saw limited activity, with two trades executed amid four bids and two offers. This reflects continued market equilibrium despite the slight price decrease. The balanced bid-ask dynamics suggest the market continues searching for direction amid mixed international signals.

Butter and barrels saw no trades today, with barrels attracting two bids but no offers. The complete absence of butter activity for the second consecutive day suggests market participants are taking a wait-and-see approach following earlier price adjustments this week.

GLOBAL CONTEXT

Global Milk Production Trends 2025

International dairy markets continue to influence domestic prices significantly through complex trade dynamics. New Zealand milk production has shown stronger-than-anticipated seasonal improvement, putting downward pressure on global butter and milk powder values. According to research, milk supply from major exporting regions is projected to grow by 0.8% in 2025, with gains expected in all major exporting areas for the first time since 2020.

Major Dairy Exporting Region	2025 Production Forecast	Year-over-Year Change
European Union	149.4 million MT	-0.2%
United States	103.2 million MT	+0.5%
New Zealand	22.8 million MT	+1.2%
Australia	8.5 million MT	+0.8%

Source: RaboResearch Dairy Quarterly Q1 2025

European Union milk production presents a contrasting picture. Output is forecast to decrease by 0.2% to 149.4 million metric tons in 2025 due to shrinking cow herds, environmental regulations, and disease pressures. However, EU cheese production is expected to increase by 0.6% to 10.8 million metric tons, driven by solid domestic demand and export opportunities. This prioritization of milk for cheese production may support global cheese markets while limiting butter and powder production.

U.S. export competitiveness faces mixed prospects in this environment. USDA has revised its 2025 dairy export forecast on a skim-solids basis downward to 49.1 billion pounds, a decrease of 0.4 billion pounds, primarily affecting export volumes to Southeast Asia. However, the export forecast on a milk-fat basis was raised by 0.2 billion pounds to 11.9 billion pounds, suggesting more favorable conditions for butterfat exports.

Export Destination	Jan-Feb 2025 Volume (MT)	Year-over-Year Change	Key Products
Mexico	128,450	+4.2%	Dry Whey, NFDM
Southeast Asia	87,320	-6.8%	NFDM, Cheese
South Korea	42,780	+0.9%	Cheese, Butter
Japan	40,250	-2.3%	Cheese, Whey
China	38,620	-8.1%	Whey, NFDM

Source: USDA Foreign Agricultural Service

Mexican demand for U.S. dry whey remains particularly strong, likely contributing to today’s price increase and robust bidding activity. This strength has emerged as competition from European suppliers has decreased amid geopolitical tensions affecting shipping lanes.

FORECASTS AND ANALYSIS

Class III Milk Futures vs USDA Forecast

Class III Milk Futures Chart Class III Milk Futures: Historical (Mon-Thu) vs USDA Forecast

The Class III milk futures have demonstrated remarkable momentum this week, climbing steadily from .45/cwt on Monday to today’s .53/cwt settlement. This represents an 8-cent gain over four days, pushing prices above the USDA’s Q2 2025 forecast of $18.50/cwt.

Despite current strength in Class III futures, cheese prices remain well below USDA’s longer-term projections for 2025. The following table illustrates USDA’s quarterly price projections against current market levels:

Price Component	Current (3/20/25)	Q2 2025 Forecast	Q3 2025 Forecast	Q4 2025 Forecast
Class III ($/cwt)	$18.53	$18.50	$19.25	$19.75
Cheese ($/lb)	$1.6200	$1.8200	$1.8650	$1.9100
Butter ($/lb)	$2.2950	$2.3500	$2.4200	$2.4800
Dry Whey ($/lb)	$0.4800	$0.4700	$0.4650	$0.4600
NFDM ($/lb)	$1.1500	$1.2250	$1.2450	$1.2550
All-Milk ($/cwt)	–	$22.30	$22.90	$23.30

Data Source: USDA Dairy Market News

Segment-Specific Market Impacts and Recommendations

For Large-Scale Producers (1,000+ cows):

Current cheese prices ($1.6200/lb) sit significantly below USDA’s Q2 projection ($1.8200/lb), creating a strategic planning challenge. Large producers should consider implementing a layered hedging strategy that protects near-term cash flow while maintaining upside potential if USDA projections materialize. With operations of this scale, consider protecting 40-50% of production at current Class III levels while preserving flexibility for potential price appreciation in Q3-Q4.

For Mid-Size Producers (100-999 cows):

Mid-size operations face particular vulnerability to near-term price volatility. The current Class III futures strength provides a potential opportunity to lock in protection against downside risk through appropriate forward contracting. The moderate feed cost outlook (corn trading at $4.6525/bu versus a projected annual average of $4.85/bu) provides some margin relief that can be leveraged in risk management decisions.

For Small Family Operations (<100 cows):

The current environment requires an operational efficiency focus for smaller producers with limited risk management tools. With USDA projecting a 10.1% decline in feed costs for 2025 compared to 2024, smaller operations should prioritize feed purchasing strategies and consider diversification into niche markets where feasible, especially given the projected strength in cheese markets through year-end.

MARKET SENTIMENT

Market sentiment appears cautiously optimistic, particularly regarding Class III milk and dry whey futures. The steady increase in Class III futures throughout the week and strong buying interest in dry whey suggest traders anticipate strengthening in these markets.

A prominent dairy trader noted, “The current weakness creates buying opportunities, particularly with USDA projections indicating more substantial prices later in 2025. We’re seeing typical mid-March price discovery as markets prepare for spring flush conditions, but the strengthening in blocks today suggests we may be finding a temporary floor”.

Another market analyst commented, “While we’re seeing hesitancy in overall trading volumes, the bid-ask dynamics for dry whey suggest genuine buying interest that could translate to continued price strength as we head into Q2. The limited selling interest at current levels is telling”.

Industry participants closely monitor upcoming Federal Order changes scheduled for June 1st, which will fundamentally alter milk pricing formulas. One processor representative observed, “These changes add another layer of uncertainty as market participants attempt to position themselves ahead of the new pricing regime. We already see strategic inventory management decisions influenced by the pending formula changes”.

A Northeast cooperative manager stated regarding the upcoming seasonal transition, “As we approach the spring flush, we’re seeing more cautious buying behavior than in prior years. Processors seem to be managing inventories more conservatively given the Federal Order changes on the horizon, which could create some interesting dynamics as we move into peak production season.”

Regional variations in market conditions continue to shape dairy economics across major production areas. According to a Midwest producer, “Proximity to processing facilities has become increasingly crucial for negotiating premiums in our market. Those without established relationships are facing significant price pressure despite the overall market showing some recovery”.

UPCOMING MARKET-MOVING REPORTS AND EVENTS

Report/Event	Release Date	Potential Market Impact
USDA Cold Storage Report	March 21, 2025	High – Will reveal February end cheese and butter stocks
USDA Milk Production Report	March 26, 2025	High – Will provide February milk production data
USDA Dairy Products Report	April 2, 2025	Medium – Will detail February production of cheese, butter, NFDM
USDA World Agricultural Supply and Demand Estimates	April 11, 2025	High – Will update price forecasts for dairy commodities
Implementation of Federal Order Changes	June 1, 2025	Very High – Will fundamentally alter milk pricing formulas

Tomorrow’s Cold Storage report will be particularly critical for cheese and butter markets. Last month’s report showed American cheese stocks at 845.6 million pounds, up 2.3% from the prior year, while butter inventories were reported at 262.8 million pounds, down 4.1% year-over-year. Any significant deviations from these trends could trigger substantial price movements, particularly in cheese markets where current prices remain well below USDA’s Q2 projections.

CLOSING SUMMARY & RECOMMENDATIONS

In summary, today’s CME dairy markets showed selective strength, with cheese blocks rising 1.50 cents to $1.6200/lb and dry whey continuing its positive momentum to reach $0.4800/lb. Class III milk futures extended their upward trend to settle at .53/cwt, surpassing the USDA forecast of .50/cwt. Trading activity was targeted with genuine price discovery, evident in cheese blocks amid balanced bidding and offering patterns.