Cheese markets split as blocks surge and barrels tumble; butter slides further while global signals flash warning signs for US producers.
EXECUTIVE SUMMARY: The April 16th CME dairy markets revealed sharp divergence as cheddar blocks jumped 2.50¢ to $1.8250/lb while barrels dropped by the same amount to $1.8750/lb, dramatically narrowing their unusual price spread to just 5¢. Butter’s downward slide continued, falling another penny to $2.3400/lb despite significant premiums in international markets. Trading volumes remained subdued across most products, suggesting market uncertainty as participants digest USDA’s downgraded milk price forecasts for 2025, which now project Class III at .95/cwt and Class IV at .80/cwt. The global context presents mixed signals, with the GDT Price Index rising 1.6% despite forecasts of constrained milk production in key exporting regions, while US futures markets remain cautious about near-term price prospects amid ample domestic butter inventories and ongoing export challenges.
KEY TAKEAWAYS
- Cheese Market Volatility Intensifies: The rapid correction in block-barrel spread (from a 10¢ to 5¢ barrel premium) highlights unstable dynamics between retail and processing channels, with block prices rising despite zero trades through strong bidding interest.
- Butter Discount to Global Markets Persists: US butter continues trading at substantial discounts to international benchmarks ($2.34/lb vs. ~$3.48/lb for EU butter), yet domestic inventories continue weighing on prices despite potential export opportunities.
- Low Trading Volumes Signal Uncertainty: Most products saw minimal trading activity, reflecting market hesitation as participants await clearer signals on seasonal demand trends and the impact of USDA’s lowered price forecasts.
- Feed Costs Creating Margin Pressure: Recent strength in corn and soybean meal futures adds pressure to dairy producer margins already facing lowered milk price projections, increasing the importance of proactive risk management strategies.
- Long-Term Supply Constraints Could Provide Support: Despite current bearish sentiment, forecasted production constraints in major exporting regions (EU and New Zealand) due to environmental regulations and structural factors could potentially support prices later in 2025 if global demand remains resilient.
The dairy market showed significant divergence today, with cheddar blocks climbing while barrels retreated, dramatically narrowing their unusual price spread. Butter continued its downward slide while milk powders remained stable. Class III futures settled slightly below the USDA’s revised annual forecast, reflecting market uncertainty amid mixed global signals and domestic inventory concerns.
Key Price Changes & Market Trends
Today’s CME session revealed sharp contrasts across dairy products. Cheddar cheese prices moved opposite directions, correcting yesterday’s unusual spread dynamics, while butter extended its decline and milk powders held steady.
| Product | Closing Price ($/lb) | Change from Yesterday (¢/lb) |
| Cheese (Blocks) | $1.8250 | +2.50¢ |
| Cheese (Barrels) | $1.8750 | -2.50¢ |
| Butter | $2.3400 | -1.00¢ |
| Nonfat Dry Milk | $1.1675 | Unchanged |
| Dry Whey | $0.4750 | Unchanged |
The cheese complex provided today’s most dramatic storyline. Cheddar blocks jumped 2.50 cents to $1.8250/lb, while barrels fell by the same amount to $1.8750/lb. This 5-cent swing narrowed the barrel premium over blocks to just 5 cents, correcting Tuesday’s unusual 10-cent spread. Tuesday’s barrel surge occurred on minimal volume (just one trade), making it vulnerable to today’s correction. The rapid shift highlights ongoing volatility in the relative valuation between cheese destined for retail/food service (blocks) versus processed cheese manufacturing (barrels).
Butter prices weakened further, dropping another penny to $2.3400/lb, continuing this week’s downward trend from Tuesday’s $2.3500/lb. Persistent concerns about abundant domestic inventories appear to be weighing on the market. The current CME cash price represents a substantial discount to global benchmarks, suggesting domestic supply factors dominate market dynamics.
NDM and Dry Whey prices remained unchanged at $1.1675/lb and $0.4750/lb respectively. This stability follows a period where NDM held steady while Dry Whey showed modest strength earlier in the week. The lack of movement could reflect balanced immediate supply/demand fundamentals or trader caution.
Volume and Trading Activity
| Final | Change ¢/lb. | Trades | Bids | Offers | |
| Butter | 2.3400 | -1.00 | 8 | 2 | 1 |
| Cheddar Block | 1.8250 | +2.50 | 0 | 3 | 0 |
| Cheddar Barrel | 1.8750 | -2.50 | 1 | 1 | 1 |
| NDM Grade A | 1.1675 | NC | 0 | 1 | 2 |
| Dry Whey | 0.4750 | NC | 2 | 0 | 0 |
Trading activity was generally subdued across dairy products today, particularly in cheese, with butter seeing the most transactions:
- Butter: Moderate activity with eight loads traded. At close, two unfilled bids and one unfilled offer remained, suggesting relatively balanced interest near the settlement price.
- Cheddar Block: No trades executed, but three unfilled bids and zero offers at close indicate significant unsatisfied buying interest at $1.8250/lb or higher. This reinforces the bullish price move despite the absence of transactions.
- Cheddar Barrel: One trade was executed with one bid and one offer remaining close, indicating limited but balanced interest around the $1.8750/lb settlement.
- NDM Grade A: No trades, with one bid and two offers at close, suggesting slight selling pressure but insufficient convergence for trades to materialize.
- Dry Whey: Two trades were completed with no bids or offers remaining, indicating the trades satisfied available interest at the $0.4750/lb level.
The overall light volume could signal market uncertainty. Participants may hesitate to commit to significant positions while awaiting clearer signals from upcoming supply/demand reports, confirmation of seasonal demand trends, or further developments in global markets.
Weekly CME Cash Dairy Product Prices ($/lb.)
| Mon | Tue | Wed | Thur | Fri | Current Avg. | Prior Week Avg. | Weekly Volume | |
| Butter | 2.3475 | 2.3500 | 2.3400 | – | – | 2.3458 | 2.3205 | 27 |
| Cheddar Block | 1.7700 | 1.8000 | 1.8250 | – | – | 1.7983 | 1.7130 | 11 |
| Cheddar Barrel | 1.8400 | 1.9000 | 1.8750 | – | – | 1.8717 | 1.7585 | 7 |
| NDM Grade A | 1.1675 | 1.1675 | 1.1675 | – | – | 1.1675 | 1.1605 | 0 |
| Dry Whey | 0.4650 | 0.4750 | 0.4750 | – | – | 0.4717 | 0.4830 | 4 |
Global Context
International dairy markets present a mixed picture, influencing US price direction and sentiment.
The most recent Global Dairy Trade (GDT) auction on April 15 showed continued overall strength, with the GDT Price Index rising 1.6%. However, results varied significantly by product. Fats (Butter +1.5%, Anhydrous Milk Fat +2.1%) and Whole Milk Powder (+2.8%) showed gains, alongside strong increases in Mozzarella (+5.4%) and Lactose (+22.0%). Conversely, Skim Milk Powder (-2.3%) and Cheddar (-1.8%) registered declines.
European Union milk supply forecasts continue to point toward tightening conditions, with projections suggesting a decline in milk production of 0.2% to 0.3% for 2024/2025. This trend stems from shrinking dairy herds, significant environmental regulations under the EU Green Deal, disease pressures, and persistent cost pressures on producers. European butter prices remain significantly higher than the US, creating a substantial market price gap.
New Zealand milk production forecasts for the 2025 market year are generally stable to slightly lower. FAS/Wellington projects a modest decrease to 21.3 million metric tons, slightly below the recent five-year average. New Zealand continues its strategic shift from WMP toward value-added products like butter and cheese, increasing competition in these global markets.
The export outlook for US dairy products faces headwinds. Competitiveness concerns persist, and muted demand from China, particularly for milk powders, remains a recurring theme. The USDA’s April WASDE report lowered its 2025 export forecasts for US cheese, dry skim milk products, and lactose.
Forecasts and Analysis
Recent USDA forecasts provide critical context for current market conditions, though they paint a more cautious picture than earlier projections.
The USDA has revised its milk price forecasts downward for 2025. The latest all-milk price projection is $21.60 per hundredweight (cwt), significantly reduced from February’s $22.60/cwt forecast and January’s $23.05/cwt outlook. The Class III price forecast was lowered to $17.95/cwt, and Class IV was reduced to $18.80/cwt.
Today’s May Class III futures settlement at $17.87/cwt aligns closely with the USDA’s lowered forecast. However, May Class IV futures settled at $18.32/cwt, notably below the USDA’s $18.80/cwt annual projection. This divergence suggests the futures market is currently pricing in greater weakness for Class IV components (butter and NDM) than anticipated in the USDA’s latest annual average forecast.
Feed costs remain a critical factor for producer profitability. Today’s CME futures settlements saw May Corn rise 2.00 cents to $4.8550/bushel and May Soybean Meal increase $2.30 to $296.70/ton. The recent strength in grain and meal futures pressures margins, which are already facing lower milk price projections.
Market Sentiment
The prevailing mood in dairy markets appears mixed and cautious, reflecting conflicting price signals, recent downward revisions to USDA forecasts, and ongoing global uncertainties.
Recent commentary has highlighted the high volatility in the cheese complex, particularly the rapid shifts in the block-barrel spread, signaling uncertainty regarding demand strength between retail/food service and processing channels. Concerns about ample domestic butter inventories continue to surface, often cited as a key factor weighing prices despite reports of stable retail movement or strength in global benchmarks.
One market analyst noted, “Volatility in the cheese complex remains elevated, with the block-barrel relationship shifting rapidly, reflecting uncertainty between processing and retail demand channels.” Another observed, “Butter continues to search for a floor, as ample domestic supplies appear to outweigh global price signals for now.”
Overall, sentiment leans cautious; while some anticipate seasonal demand improvement, the lower USDA price forecasts and ongoing global market uncertainties temper bullish conviction. The contrast between the cautious-to-bearish sentiment prevalent in the US market and the relative strength in the recent overall GDT index indicates a potential disconnect or lag.
Closing Summary & Recommendations
CME dairy markets exhibited sharp divergence today, as Cheddar blocks rose significantly while barrels reversed lower, narrowing the recent spread. Butter prices declined amid moderate trading, while NDM and Dry Whey held steady. Overall market sentiment remains cautious following recent USDA forecast downgrades amidst ongoing global market uncertainties.
For Producers: The volatile cheese spread directly impacts Class III milk values and warrants close monitoring. Given the lower USDA price forecasts for 2025 and the recent uptick in feed futures, evaluating risk management strategies (hedging, forward contracts) is crucial. Continued focus on operational efficiency, cost control, and potentially optimizing milk components remains advisable.
For Traders: The thin trading volume behind some of today’s significant price moves, especially the Cheddar block increase on zero trades, warrants caution regarding the sustainability of these levels. Confirmation of underlying demand trends is needed. While the US butter price discount to global markets exists, the persistent inventory overhang remains a significant headwind that needs to be cleared before sustained rallies are likely.
Near-term uncertainty is expected to persist, particularly in the cheese markets, as they seek equilibrium after recent volatility. In the long term, the constrained milk production growth forecast in major exporting regions like the EU and New Zealand could support global dairy prices if demand remains resilient, offering a potential counterpoint to the current bearish domestic sentiment and forecasts.
Learn more:
- USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers
Explore the USDA’s latest 2025 dairy forecast, including supply constraints, evolving price dynamics, and strategies for producers to stay profitable. - Global Dairy Markets April 7th, 2025: Regional Divergence Amid Trade Tensions
Dive into global dairy market trends, regional supply shifts, and how trade tensions are reshaping export flows and pricing opportunities. - US Dairy Market in 2025: Butterfat Boom & Price Volatility—How Farmers Can Protect Profits
Analyze the impact of butterfat surpluses and price swings on U.S. dairy, with actionable insights to help farmers safeguard their margins.
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