meta CME Dairy Market Report 03/03/25: Cheese Prices Tumble Amid Growing Supply Concerns | The Bullvine

CME Dairy Market Report 03/03/25: Cheese Prices Tumble Amid Growing Supply Concerns

Cheddar block prices plunged 5.50¢ to $1.7200/lb at the CME today while barrels gained marginally, nearly eliminating the traditional block premium. This dramatic market shift signals potential supply/demand imbalances as new processing capacity comes online. What strategies should producers consider? Full analysis inside.

Summary

The CME dairy market report for March 3, 2025, comprehensively analyzes today’s dairy product trading activity, highlighting significant price movements across cheese, butter, nonfat dry milk, and dry whey markets. The report details key price changes with corresponding trading volumes, analyzes market fundamentals driving these movements, examines global dairy market influences, including export demand and international production trends, presents relevant USDA and CME forecasts for future pricing, and offers actionable recommendations for producers, processors, and traders. This executive summary encapsulates the essential market data, expert analysis, and strategic guidance in the full report, enabling stakeholders to make informed decisions in response to current market conditions and anticipated future developments in the dairy sector.

Key Takeaways

  • Cheddar block prices dropped sharply by 5.50¢ to $1.7200/lb, experiencing the most significant movement in today’s market.
  • Cheddar barrels gained slightly (0.25¢), creating an unusual market inversion. Barrels ($1.7825/lb) traded at a 6.25¢ premium over blocks.
  • Active trading in cheese with 10 trades for blocks and 4 for barrels, indicating market participants actively repositioning
  • Butter prices held steady at $2.3450/lb with moderate trading activity (5 trades)
  • Nonfat dry milk declined 0.75¢ to $1.1925/lb, continuing its downward trajectory.
  • Current week averages show declines across all dairy products compared to the previous week, suggesting broader market weakness.
  • Futures markets reflect expectations of continued pressure on dairy prices in the near term.
  • Feed costs remain favorable, with March corn futures at $4.405/bushel, potentially supporting producer margins despite weaker milk prices.
  • Market sentiment has turned cautious in the cheese sector due to the unusual block-barrel relationship.
  • Defensive hedging strategies recommended for producers given current market uncertainty
  • Processors should monitor evolving block-barrel relationships for strategic purchasing opportunities.

The Chicago Mercantile Exchange dairy markets on Monday, March 3, 2025, revealed significant bearish pressure across cheese markets, with both blocks and barrels posting substantial declines. This market weakness comes amid concerns about increasing milk supplies and potential impacts from new cheese processing capacity coming online, creating a cautious atmosphere among market participants despite relatively favorable feed costs.

Key Price Changes & Market Trends

Today’s closing prices showed cheese markets under considerable pressure, with blocks and barrels moving lower. Butter remained unchanged with minimal trading activity, while dry whey also declined. The narrowing block-barrel spread points to fundamental shifts in market dynamics.

ProductClosing PriceChange from YesterdayTradesBidsOffers
Cheddar Block$1.7750/lb-9.50¢403
Cheddar Barrel$1.7800/lb-2.50¢201
Butter$2.3450/lbUnchanged012
Nonfat Dry Milk$1.2000/lbUnchanged022
Dry Whey$0.5100/lb-1.50¢014

Block Prices Fall Dramatically as Barrels Approach Parity

Cheddar blocks experienced substantial selling pressure, plummeting 9.50 cents to $1.7750/lb with four trades completed. This dramatic decline represents a concerning shift, bringing block prices down sharply from last week’s average of $1.8550/lb and continuing the downward trend that began late last week. Market analysts attribute this weakness to concerns about increasing milk supplies and new cheese processing capacity coming online.

Cheddar barrels also moved lower, dropping 2.50 cents to $1.7800/lb on two trades. The smaller decline in barrels compared to blocks has nearly eliminated the block-barrel spread, with barrels now holding just a $0.0050/lb premium over blocks. This minimal spread represents a significant shift from historical norms, where blocks typically maintain a premium over barrels. It suggests unusual market dynamics that warrant careful monitoring.

Trading Volume Reflects Market Uncertainty

Trading activity was notably lighter than in recent sessions, particularly for cheese. Four trades were completed for block cheese, with three unfilled offers and no bids at market close. This signals continued selling pressure and limited buyer interest at current levels. The absence of bids suggests buyers may wait for even lower prices before making significant purchases.

Barrel cheese recorded just two trades, with only one unfilled offer and no bids, indicating similar weakness but less aggressive selling pressure than blocks. The limited trading volume suggests market participants may take a wait-and-see approach amid the significant price volatility.

No trades were executed today on butter, but the market presence was maintained through 1 unfilled bid and two offers. Despite the unchanged price, this lack of trading suggests that market participants see limited opportunities for profitable transactions at current levels, reflecting uncertainty about the near-term direction of the butter market.

Global Markets Create Complex Picture for U.S. Exports

International dairy markets continue to influence domestic prices, with shifting production patterns in key exporting regions creating a complex global supply picture. New Zealand’s milk production is forecast to drop slightly below its five-year average to 21.3 million metric tons in 2025, potentially limiting global supplies of certain dairy products. However, New Zealand producers are strategically pivoting from milk powder production toward higher-value dairy products such as cheese, butter, and infant formula, which could increase competition in these segments.

Australian milk production presents a different picture. It is forecast to reach 8.8 million metric tons by 2025, with modest growth of 1.1%. While not dramatic, this growth does contribute to the overall global supply. Australian cheese production is expected to stabilize at 375,000 metric tons after a temporary dip in 2024, though exports are projected to decline from 165,000 metric tons to 150,000 metric tons.

Futures Markets Signal Continued Pressure on Prices

The futures markets reflect the cash market weakness, with March Class III milk futures falling from .02/cwt at the beginning of last week to .71/cwt by Friday’s close. Similarly, March Class IV futures declined from $19.09/cwt to $18.64/cwt over the same period. These declining futures prices suggest market participants anticipate continued pressure on dairy product values in the near term.

The USDA has recently adjusted its 2025 milk production forecast downward to 227.2 billion pounds, about 0.8 billion pounds less than previously projected. This reduction reflects lower-than-expected milk per cow output, revised by 85 pounds to 24,200 pounds per cow, while the national dairy herd size projection remains unchanged at 9.390 million head. Despite this downward revision to production, the USDA has increased its all-milk price forecast for 2025 to $23.05 per cwt, up $0.50 from its previous estimate.

Feed Cost Relief Provides Silver Lining

Feed markets have shown significant weakness over the past week, with March corn futures declining from $4.8275/bu last Monday to $4.5300/bu by Friday’s close. Similarly, May soybean futures fell from $10.475/bu to $10.2500/bu over the same period. These lower feed costs should provide some margin relief for dairy producers facing weaker milk prices, potentially supporting milk production despite lower dairy product values.

Market Sentiment Turns Increasingly Bearish

Market sentiment has turned decidedly bearish in the cheese sector, with significant selling pressure overwhelming buyer interest. The dramatic drop in block prices with limited trading volume indicates sellers are increasingly willing to accept lower prices to move products. At the same time, buyers remain hesitant to step in despite the substantial discounts now available.

Industry analysts express concern about the impact of new cheese processing capacity on market balance. “Market participants remain concerned that new online cheese processing capacity could quickly boost U.S. cheese supplies,” notes one industry report, highlighting a potential structural shift in the cheese market that could maintain pressure on prices. This concern is amplified by recent discussions about potential retaliatory tariffs that could compromise export markets.

Despite the downward revision to milk production forecasts, reports indicate “more than enough milk for cheese vats, with spot milk trading at a discount in central cheese-producing states.” This regional surplus, combined with expanding processing capacity, suggests the cheese market may face continued headwinds in the coming months unless demand increases significantly or production moderates.

Producer Strategies: Defensive Positioning Recommended

In summary, today’s dairy markets, concentrated in the cheese complex, exhibited significant weakness. Blocks plummeted 9.50 cents, and barrels declined 2.50 cents, nearly eliminating the block-barrel spread. Butter held steady despite zero trades, while dry whey declined 1.50 cents amid persistent selling pressure. Feed markets have shown notable weakness, potentially providing some margin relief for producers facing lower milk values.

Dairy producers should consider defensive hedging strategies given the current market weakness and uncertain outlook. Increasing milk supplies, expanding cheese processing capacity, and potential export challenges create significant downside risks that producers should mitigate through appropriate risk management tools. The favorable feed market outlook provides an opportunity to lock in lower input costs, which could help preserve margins despite weaker milk prices.

Processors should closely monitor the evolving block-barrel relationship, which has shifted dramatically in recent sessions. The unusual market structure with minimal spread between blocks and barrels may create opportunities for strategic purchasing decisions, particularly for those with flexibility in the types of cheese they can utilize. Exporters should assess opportunities in international markets where significant price differentials exist, particularly for butter, though they should remain mindful of potential trade policy developments that could impact market access.

Looking ahead, all market participants should pay close attention to upcoming milk production reports and cold storage data to determine whether the current market weakness is primarily supply-driven or reflects demand challenges. The downward revision to the USDA’s milk production forecast suggests some potential moderation in supply growth, which could eventually help stabilize markets if demand remains resilient.

Learn more

Join the Revolution!

Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.

NewsSubscribe
First
Last
Consent
(T59, D1)
Send this to a friend