Cheddar blocks defy bearish trends with 2¢ surge as butter plunges to 3-year lows amid oversupply and export hurdles.
EXECUTIVE SUMMARY: The April 29 CME dairy markets revealed stark contrasts: cheddar blocks rallied 2¢ on active trading despite bearish USDA forecasts, while butter prices collapsed 3.5¢ to a 3-year low due to bloated inventories. Nonfat Dry Milk and Dry Whey stagnated amid export challenges from China’s tariffs. USDA slashed 2025 price projections, signaling margin pressure for producers, while global trade imbalances and EU production constraints amplified volatility. Traders face fragmented signals, with blocks’ short-term strength clashing with butter’s structural weakness. Risk management and monitoring feed costs are critical as markets navigate policy headwinds and supply-demand mismatches.
KEY TAKEAWAYS:
- Block Rally vs. Butter Collapse: Cheddar blocks gained 2¢ on 12 trades; butter fell 3.5¢ to $2.24/lb, its lowest since 2021.
- Trade Barriers Dominate: China’s tariffs (up to 150% on whey) stifle exports, offsetting competitive U.S. pricing globally.
- USDA Lowers 2025 Forecasts: All-Milk price cut $1.95/cwt since January, reflecting oversupply and weak demand.
- Market Fragmentation: Active block trading contrasts with powder stagnation, highlighting sector-specific risks.
- Producer Advisory: Secure pricing during spot rallies but prioritize cost control amid bearish long-term outlooks.
Cheddar Blocks Surge on Active Trading, Defying Bearish Trends as Butter Plunges to Multi-Year Lows Amid Inventory Concerns
Key Price Changes & Market Trends
The Chicago Mercantile Exchange (CME) cash dairy markets displayed dramatic divergence today, with cheddar blocks showing remarkable strength while butter prices collapsed to levels not seen in over three years.
| Product | Closing Price | Change |
| Cheddar Blocks | $1.7200/lb | +2.00¢ |
| Cheddar Barrels | $1.7025/lb | -0.25¢ |
| Butter | $2.2400/lb | -3.50¢ |
| Nonfat Dry Milk | $1.1875/lb | Unchanged |
| Dry Whey | $0.5050/lb | Unchanged |
Cheddar blocks demonstrated significant resilience, gaining 2.00 cents despite recent bearish USDA price forecasts. This strength suggests processors may be securing supplies to meet immediate inventory needs or positioning ahead of anticipated seasonal demand improvements.
Butter prices experienced a substantial decline, dropping 3.50 cents to $2.2400 per pound-the lowest closing price since December 2021. This persistent weakness continues despite U.S. butter trading at a substantial discount to international benchmarks, indicating the dominance of domestic market factors, primarily ample inventories.
Nonfat Dry Milk and Dry Whey markets remained inactive with prices unchanged, reflecting ongoing market caution and challenges in export markets.
Volume and Trading Activity
Trading volume today was heavily concentrated in the cheddar block market, with 12 loads changing hands-a robust level of activity indicating significant market participation and price discovery. Trades occurred within a range from $1.68 to $1.72, with buying interest firming the market toward the end of the session.
In sharp contrast, both butter and cheddar barrels saw minimal engagement with just one trade executed in each market. At the close, the butter market showed one unfilled bid, while the barrel market had one uncovered offer.
The complete absence of trading in NDM and Dry Whey markets, with no trades, bids, or offers recorded, underscores the wait-and-see approach currently dominating these segments. This inactivity likely reflects trader hesitancy following lower USDA price forecasts and significant export challenges, particularly for whey due to prohibitive Chinese tariffs.
Global Context
The international dairy landscape continues to exert significant influence on U.S. markets, with divergent regional production trends and substantial trade policy impacts creating market distortions.
European Union milk production faces ongoing constraints, with forecasts pointing to a slight decline in 2025. Factors contributing to this include diminishing cow numbers, tight farmer margins, implementation of environmental regulations, and disease pressures. EU processors are reportedly prioritizing higher-value cheese production, potentially reducing the availability of butter and milk powders for export.
New Zealand is experiencing modest milk production growth, with volumes up slightly in March and for the season-to-date. This contrasts with Australia’s continued downward production trend.
International demand, particularly from China, remains a critical variable clouded by uncertainty. While China’s domestic milk production has faced challenges, significant economic headwinds are tempering purchasing power. Most critically for U.S. exporters, prohibitive retaliatory tariffs imposed by China (reportedly reaching as high as 84% overall and up to 150% on whey) effectively block access for many U.S. dairy products. New Zealand benefits from its Free Trade Agreement with China, holding a distinct advantage in this crucial market.
U.S. dairy products, notably butter and cheese, remain competitively priced on the global stage compared to EU counterparts. However, the substantial trade barriers are preventing U.S. exporters from fully capitalizing on these price advantages.
Forecasts and Analysis
Forward-looking projections from the USDA’s April 2025 World Agricultural Supply and Demand Estimates (WASDE) report paint a challenging picture for U.S. dairy markets, with significant downward revisions from earlier forecasts.
The USDA raised its forecast for 2025 U.S. milk production by 0.7 billion pounds compared to March estimates, now projected at 226.9 billion pounds. This increase is attributed to expectations of higher average cow numbers and improved milk yield per cow.
Reflecting increased production forecasts and potentially weaker demand assumptions, USDA significantly lowered its 2025 average price projections:
| Category | April 2025 Forecast | Change from March |
| All-Milk Price | $21.10/cwt | -$0.50 |
| Class III Price | $17.60/cwt | -$0.35 |
| Class IV Price | $18.20/cwt | -$0.60 |
| Butter | $2.445/lb | -7.0¢ |
| Cheese | $1.790/lb | -2.0¢ |
| NDM | $1.220/lb | -3.5¢ |
| Dry Whey | $0.510/lb | -1.5¢ |
The magnitude of these downward revisions is striking, with the April All-Milk forecast of $21.10/cwt representing a $1.95/cwt decline from the outlook provided in January 2025. This indicates a rapid deterioration in price expectations over just a few months.
Meanwhile, feed futures markets saw sharp declines today, with May corn futures falling approximately 15 cents to settle near $4.61 per bushel, while May soybeans dropped around 11 cents to $10.41 per bushel. While lower feed costs generally support dairy producer margins in the longer term, their immediate impact on daily dairy product prices is often indirect.
Market Sentiment
The prevailing sentiment in U.S. dairy markets appears predominantly cautious, leaning toward bearishness. This mood is heavily influenced by the recent string of downward revisions in USDA’s price and production forecasts, coupled with persistent concerns surrounding international trade relations, especially the high tariffs impacting access to the Chinese market.
While today’s rally in the cheddar block market offered a localized bright spot, the concurrent plunge in butter prices to multi-year lows and the continued lack of activity in milk powders likely exert a stronger influence on the broader market psyche.
As one analyst might observe, “Despite the pop in blocks today, the underlying tone feels heavy. The latest WASDE numbers and the ongoing China tariff situation make it hard to be optimistic about prices holding these levels across the complex”. This reflects concerns about the sustainability of spot rallies against bearish fundamentals.
A trader focusing on the physical market could remark, “Butter finding new lows isn’t surprising given the inventory picture, but the lack of buying interest even down here is concerning. Blocks seem to be living in their own world today, likely driven by specific short-term needs”. This highlights the product-specific dynamics and the worryingly thin support for butter.
Closing Summary & Recommendations
In summary, the CME dairy cash markets on April 29th showcased significant divergence. Cheddar blocks advanced notably on strong trading volume, providing a counterpoint to the prevailing bearish narrative. However, butter prices suffered a sharp decline, reaching multi-year lows amid light trading and ongoing concerns about excessive inventories. Nonfat Dry Milk and Dry Whey remained dormant, reflecting persistent export market challenges exacerbated by significant trade tariffs.
For producers, the current strength in the spot block market presents a potential pricing opportunity, but it should be viewed with caution given the pronounced weakness in butter and the decidedly bearish outlook presented in recent USDA forecasts. Emphasis should be placed on diligent cost control and implementing robust risk management strategies to protect margins against potential further price declines. Closely monitor developments in feed costs and milk component values.
Traders should recognize the current market fragmentation and carefully assess the sustainability of the rally in blocks against the clear weakness in the butter market. Trade policy developments, particularly regarding China, and shifts in global supply/demand dynamics remain critical factors to watch, especially for export-oriented commodities like NDM and Whey.
The current environment, characterized by conflicting signals and significant external pressures, underscores the need for all stakeholders to adopt a comprehensive perspective rather than relying solely on single-day spot price movements, which can be misleading in this complex marketplace.
Learn more:
- April 28, 2025: Bearish Forecasts and Trade Headwinds
Explores the impact of bearish USDA forecasts and Chinese tariffs on CME dairy prices, providing context for recent market volatility. - Behind The Numbers of April’s Milk Production Report
Analyzes U.S. milk production trends, component values, and regional disparities, offering insight into the structural forces shaping dairy markets. - April 25, 2025: Butter Plunges While Cheese Barrels Rise
Reviews recent CME dairy market divergence, with butter prices falling sharply and cheese barrels gaining, highlighting ongoing supply and trade challenges.
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