Cheese prices dive 7¢ as butter weakens, while dry whey bucks the trend. Is this a buying opportunity or the start of a steeper decline?

EXECUTIVE SUMMARY: The March 18 CME dairy markets witnessed significant pressure on cheese values, with cheddar blocks plummeting 7.00¢ to $1.5750/lb and barrels falling 5.50¢ to $1.5700/lb, while butter continued its downward trend, dropping 0.75¢ to $2.2950/lb. Only dry whey provided positive movement, gaining 1.00¢ to close at $0.4600/lb amid improved export demand. Trading volume was light, with just 10 trades across all products, reflecting market hesitation, yet multiple offers on cheese suggest that further price pressure may be coming. Despite the current weakness, future markets and USDA projections indicate potential recovery later in the year, with experts noting that sharp corrections create potential buying opportunities for processors. At the same time, suggesting producers implement risk management strategies to protect against further declines. Global factors, including improved New Zealand production, constrained European output, and modest Chinese import recovery, continue to influence domestic price trends, highlighting the increasingly interconnected nature of dairy markets.

KEY TAKEAWAYS

• Cheddar blocks fell sharply by 7.00¢ to $1.5750/lb (a 4.3% single-day decline), continuing a concerning pattern. Blocks are now 21.7¢ below last week’s average—one of the sharpest weekly declines in recent months.
• The trading activity showed significant seller presence with four uncovered offers for blocks at close, suggesting potential for further price weakness, while the narrowing block-barrel spread to just 0.5¢ indicates processors are reassessing actual demand versus projections.
• Market sentiment has turned cautious, with multiple industry voices suggesting the current weakness creates buying opportunities, particularly with USDA projections indicating more substantial prices later in 2025.
• Both producers and processors should closely monitor upcoming Cold Storage and Milk Production reports while preparing for Federal Order changes that fundamentally alter milk pricing formulas.
• Regional variations in market conditions require stakeholders to develop market-specific approaches rather than one-size-fits-all strategies, with proximity to processing facilities becoming increasingly crucial for negotiating premiums.

Today’s CME dairy markets saw significant pressure on cheese values, with cheddar blocks and barrels posting substantial declines. Butter continued its downward trend, while dry whey provided the only positive movement in an otherwise bearish trading session. Nonfat dry milk remained unchanged amid moderate bidding interest but limited actual trading. This continues the bearish trend observed throughout March as the market contends with improving milk supplies, international market pressures, and growing competition from plant-based alternatives.

Key Price Changes & Market Trends

Daily Price Changes for Dairy Products – March 18, 2025

Cheddar block cheese took the hardest hit today, falling 7 cents to $1.5750/lb, representing a significant 4.3% single-day decline. This continues the concerning pattern established earlier this week, with blocks now falling 21.7¢ below last week’s average, representing one of the sharpest weekly declines in recent months. Market participants indicate this sharp drop stems from improved milk availability in key cheese-producing regions and slower-than-expected retail demand heading into spring.

Barrels followed blocks lower, dropping 5.50 cents to $1.5700/lb, narrowing the block-barrel spread to just 0.5 cents. This narrowing spread suggests processors are stepping back to reassess actual demand versus projected needs ahead of the spring flush.

Butter markets continued to show weakness, slipping 0.75 cents to $2.2950/lb amid reports of adequate cream supplies and continued pressure from imported butterfat. Current butter prices have declined for three consecutive sessions, falling below the psychological $2.30/lb threshold for the first time since early February. Higher butterfat supply had pushed some spot cream multiples below 1.00, with cream availability outpacing demand compared to last year when multiples were sold at premiums above the spot market.

Dry whey provided the only positive movement today, gaining 1 cent to close at $0.4600/lb, buoyed by improved export demand reports and some domestic protein shortages. This gain comes despite the overall weekly trend showing dry whey down from last week’s average of $0.4715/lb to $0.4550/lb.

Volume and Trading Activity

Today’s CME spot market displayed relatively light trading volume, with just 10 trades executed across all dairy products, representing a 42% decrease from the previous Monday’s session. This reflects hesitancy among market participants as prices continue to adjust lower.

Butter showed the most active trading, with six trades completed, indicating sellers were working to test market support levels. The session featured sellers willing to unload cheese inventory, with multiple offers appearing throughout.

Cheddar blocks saw limited activity with just two trades but had four uncovered offers at the close, suggesting potential for further price declines. According to the daily CME trading data, the bid/ask dynamics showed more selling interest for blocks with these four uncovered offers, while barrels traded once with balanced interest shown via one bid and one offer at the close.

Nonfat dry milk saw no trades despite having six bids and three offers, indicating market hesitation and price discovery challenges. The lack of transactions suggests buyers and sellers remain apart on valuation expectations. Dry whey managed a single trade but showed strong buying interest with five bids compared to only two offers, potentially signaling further strength ahead. This reflects the improved export demand from Mexico as competition from European suppliers has decreased amid geopolitical tensions affecting shipping lanes.

Global Context

International dairy markets are providing mixed signals for U.S. producers. According to USDA’s Dairy Market News data, New Zealand milk production has improved seasonally, putting pressure on global butter and milk powder values.

Meanwhile, European milk output remains constrained by environmental regulations and higher production costs, preventing a global oversupply. The EU milk production is forecast to remain relatively stable in 2025, with an increased focus on cheese production despite overall milk production constraints.

China’s dairy imports, which have decreased in recent years, are projected to show modest improvement in 2025. This modest recovery in Chinese demand has primarily benefited Oceania suppliers due to freight advantages.

Recent strength in the U.S. dollar against major trading partners has dampened export opportunities, with dairy export forecasts revised downward. This lack of price competitiveness mainly affects export volumes to Southeast Asia. Mexican buyers support U.S. dry whey markets, likely contributing to today’s price increase.

Forecasts and Analysis

Near-term futures markets reflect today’s spot market weakness, with March Class III milk futures settling at .46/cwt despite the cheese declines. This disconnect suggests traders anticipate the current cheese market weakness may be temporary. Class IV futures settled lower at $18.42/cwt, influenced by ongoing butter market softness.

Looking ahead to Q2 and beyond, USDA projections indicate expectations for an improved balance between supply and demand as spring flush milk production modifies and food service demand increases with warmer weather and tourism activity.

Feed markets show continued stability, with corn futures showing minimal movement, settling at $4.6650/bushel for the March contract. Similarly, soybean meal has decreased modestly to $299.70/ton, potentially providing some margin relief for dairy producers in the coming weeks.

The cheese futures market is projecting a recovery from today’s significant drop. Later-month contracts show premiums to spot values, suggesting traders view the current weakness as potentially overdone.

Market Sentiment

“The speed of today’s cheese price correction caught many by surprise,” one veteran dairy trader noted. “We’re seeing processors step back to reassess actual demand versus projected needs, which is creating temporary indigestion in the market.”

A market analyst observed, “The cheese market appears to be adjusting to improved milk availability, though the fundamentals remain reasonably balanced for this time of year.” This view is echoed by traders at leading dairy risk management firms, with one commenting, “We’re seeing typical seasonal pressure on prices, but the long-term outlook remains constructive due to tightening milk supplies and strong domestic consumption.”

From the processor perspective, a representative noted that “current prices present buying opportunities for extending coverage, especially given projections for higher values later in the year.” This suggests that while the market is bearish, some industry participants view the significant price drops as potential buying opportunities.

Overall, market sentiment has turned cautious following several weeks of relative stability. Many market participants are waiting to see if today’s significant cheese price drop attracts fresh buying interest or signals the beginning of a more prolonged correction.

An emerging factor affecting market sentiment is the growing pressure from plant-based alternatives. Major coffee chains have eliminated surcharges for non-dairy options in many markets, potentially increasing the consumption of alternatives. Additionally, plant-based milk producers have expanded partnerships with major retailers, suggesting mainstream retail increasingly embraces these alternatives.

Closing Summary & Recommendations

Today’s CME dairy markets showed significant weakness in cheese, with blocks and barrels dropping substantially, while butter gradually declined. Dry whey provided the only positive price movement, gaining a penny on improved export interest. This bearish trend continues from yesterday’s session when blocks fell 4.75¢ and barrels dropped 6.50¢.

The block cheese price of $1.5750/lb sits significantly below USDA’s projections for Q2, creating potential buying opportunities for processors. For producers, the current price environment warrants consideration of risk management strategies given today’s price volatility, particularly for cheese production margins. With block prices falling below $1.60/lb, protection against further downside risk may be prudent.

Both producers and processors should monitor upcoming Federal Order changes, which will fundamentally alter milk pricing formulas and likely create market volatility requiring proactive planning. Additionally, all market participants should closely monitor upcoming Cold Storage and Milk Production reports for further direction on price trends in late March and early April.

Regional variations in market conditions and production capabilities continue to shape dairy economics across major production areas, requiring dairy stakeholders to develop market-specific approaches rather than one-size-fits-all strategies. Those within efficient hauling distance of new processing facilities may find themselves more favorable positions for negotiating quality and volume premiums.

Learn more:

• USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers
• Dairy Markets Under Pressure: Trade Tensions Reshape Export Landscape
• Global Dairy Trade Auction Hits 30-Month High: Key Takeaways for Farmers

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