Cheese markets plummet as Federal Order reforms loom. Discover how regional disparities and global pressures are reshaping dairy profitability in 2025.
EXECUTIVE SUMMARY: The latest CME dairy market report reveals a concerning trend of falling cheese prices, with blocks down 21.7¢ this week alone. This decline occurs against a backdrop of impending Federal Order reforms set for June 1, which will fundamentally alter milk pricing nationwide. Regional disparities in feed costs and processing capacity create stark differences in producer profitability, with Pacific region farmers facing a $3.45/cwt feed cost disadvantage. Global market pressures and technical indicators suggest limited near-term price recovery, though USDA projections indicate potential strengthening later in 2025. As the industry navigates these challenges, producers must strategically position themselves based on regional advantages and prepare for the upcoming pricing structure changes.
KEY TAKEAWAYS:
- Cheese prices have fallen sharply, with blocks down 21.7¢ this week, signaling potential margin compression for producers.
- Regional disparities in feed costs and processing capacity are creating clear winners and losers in the dairy industry.
- Federal Order reforms taking effect June 1 will reshape milk pricing, requiring producers to reevaluate their strategies.
- Technical analysis suggests cheese prices may be approaching a floor, though global market pressures continue to weigh on values.
- USDA projections indicate a potential price recovery later in 2025, emphasizing the importance of flexible risk management strategies.
Cheese markets posted their fourth consecutive day of losses in today’s CME spot session, with blocks falling 0.50¢ and barrels dropping a more substantial 2.50¢. This continued weakness comes as butter managed a modest 1.00¢ recovery, and the industry braces for June’s Federal Order reforms that will fundamentally reshape milk pricing nationwide.
CHEESE MARKETS EXTEND WEEKLY DECLINE: BLOCKS DOWN 9.75¢ SINCE MONDAY
According to official CME Group trading data, today’s CME spot market confirmed the continuing downward pressure on cheese prices, with both blocks and barrels posting additional losses. This persistent decline signals potential margin compression for producers heading into spring flush.
Daily CME Cash Dairy Product Prices ($/lb.) – March 13, 2025
Product | Final | Change ¢/lb. | Trades | Bids | Offers |
Butter | 2.3100 | +1.00 | 1 | 3 | 2 |
Cheddar Block | 1.6225 | -0.50 | 7 | 6 | 0 |
Cheddar Barrel | 1.6300 | -2.50 | 1 | 4 | 0 |
NDM Grade A | 1.1550 | -1.25 | 7 | 5 | 2 |
Dry Whey | 0.4900 | NC | 0 | 1 | 2 |
BOTTOM LINE FOR PRODUCERS: According to the USDA’s Agricultural Marketing Service (AMS) pricing formulas, today’s 0.50¢ drop in blocks and 2.50¢ in barrels directly translates to lower Class III values. For a million-pound annual milk producer, this week’s 9.75¢ block cheese decline represents approximately $9,750 in reduced yearly revenue if sustained.
WEEKLY TREND REVEALS ALARMING 21.7¢ COLLAPSE IN BLOCK PRICES
This week’s CME trading data reveals a concerning pattern of consistent erosion across dairy commodities that threatens producer margins as we enter peak production season, according to official CME Group settlement prices.
Weekly CME Cash Dairy Product Prices ($/lb.)
Product | Mon | Tue | Wed | Thur | Fri | Current Avg. | Prior Week Avg. |
Butter | 2.3450 | 2.2500 | 2.2825 | 2.3000 | 2.3100 | 2.2975 | 2.3480 |
Cheddar Block | 1.7200 | 1.6050 | 1.6150 | 1.6275 | 1.6225 | 1.6380 | 1.8550 |
Cheddar Barrel | 1.7825 | 1.7300 | 1.7050 | 1.6550 | 1.6300 | 1.7005 | 1.7945 |
NDM Grade A | 1.1925 | 1.1800 | 1.1800 | 1.1675 | 1.1550 | 1.1750 | 1.2065 |
Dry Whey | 0.5100 | 0.5100 | 0.4900 | 0.4900 | 0.4900 | 0.4980 | 0.5280 |
According to CME settlement data, block cheese prices have collapsed 21.7¢ below last week’s average, representing one of the sharpest weekly declines in recent months. According to Dairy Market News analysis released today, this price deterioration suggests buyers are stepping back ahead of the spring flush, creating significant revenue challenges for producers.
ACTION STEP: Calculate your operation’s sensitivity to cheese price movements by multiplying your monthly milk production by 0.1 for each 10¢ change in cheese prices to estimate monthly revenue impact, as dairy risk management specialists at the University of Wisconsin’s Center for Dairy Profitability recommends.
$3.45/CWT FEED COST GAP: WHY YOUR ZIP CODE DETERMINES YOUR PROFIT MARGIN
Regional cost variations confirmed by USDA’s Agricultural Prices report have created dramatically different operating environments across the country. Your location now determines profitability more than ever before.
Region | Alfalfa ($/ton) | Corn ($/bu) | SBM ($/ton) | Total Feed Cost ($/cwt) |
Upper Midwest | $172.25 | $4.65 | $405.50 | $9.80 |
Northeast | $268.30 | $5.42 | $428.75 | $12.35 |
Southwest | $238.45 | $5.30 | $426.25 | $11.95 |
Pacific | $265.20 | $6.18 | $435.50 | $13.25 |
According to USDA data, Pacific producers face a staggering $3.45/cwt feed cost disadvantage compared to Midwest counterparts—a difference that exceeds most operations’ profit margins. According to the latest USDA Capacity Assessment Report, this disparity, combined with the $8 billion in processing capacity expansions concentrated in the Midwest, creates a fundamental competitive advantage for producers in America’s heartland.
PROCESSING CAPACITY DISTRIBUTION: THE NEW COMPETITIVE BATTLEGROUND
Recent analysis from CoBank’s Knowledge Exchange reveals significant regional disparities in dairy processing investments that directly impact farm-level milk pricing. The $8 billion in dairy processing expansions since 2023 has been unevenly distributed:
Region | New Processing Capacity (million lbs/day) | Capacity Utilization Rate | Avg. Quality Premium ($/cwt) |
Upper Midwest | 14.2 | 92% | $0.48 |
Northeast | 6.8 | 87% | $0.32 |
Southwest | 8.5 | 78% | $0.18 |
Pacific | 4.3 | 81% | $0.29 |
According to Federal Milk Marketing Order data, the Upper Midwest’s 14.2 million pounds of daily new processing capacity has created a highly competitive environment for milk procurement, resulting in quality premiums averaging $0.48/cwt. In contrast, Southwest producers face an over-capacity situation with utilization rates of just 78%, resulting in discounted pricing and minimal quality premiums.
According to USDA-NASS dairy manufacturing reports, dairy facilities commissioned since 2023 skew heavily toward cheese production, with 65% of the new capacity dedicated to cheese processing. This concentration has created localized advantages for producers within efficient hauling distance of these new facilities.
STRATEGIC IMPLICATIONS: Producers should evaluate their position relative to processing capacity, considering current and announced expansion projects. According to Cornell University’s PRO-DAIRY program surveys, operations within 150 miles of multiple competing processors report receiving quality and volume premiums averaging $0.55/cwt above minimum order prices.
GLOBAL MARKET IMPACTS: INTERNATIONAL PRESSURES ADD TO DOMESTIC CHALLENGES
According to USDA’s Foreign Agricultural Service (FAS) reports international market conditions are adding pressure to domestic prices. Global milk production is trending higher, with February data showing New Zealand production up 1.7% year-over-year and EU production increasing by 1.2%.
The latest Global Dairy Trade (GDT) auction saw whole milk powder prices decline 2.4% to $3,175/MT, marking the third consecutive decline in the benchmark price series. According to U.S. Dairy Export Council data, U.S. export competitiveness has weakened with the strengthening dollar, which has appreciated 3.2% against a basket of currencies from major dairy exporters since January.
MARKET IMPLICATIONS: Increased global production and reduced U.S. export competitiveness create additional headwinds for domestic prices, particularly as we enter the spring flush production peak. According to USDA-FAS projections, this could limit the upside potential for dairy commodity prices through Q2 2025.
FORWARD PRICE PROJECTIONS: USDA FORECAST VS. FUTURES MARKET
The USDA’s March World Agricultural Supply and Demand Estimates (WASDE) provides a detailed roadmap for dairy markets through 2025, though current market prices diverge from these longer-term projections.
Price Component | Mar 2025 (Current) | Q2 2025 (USDA) | Q3 2025 (USDA) | Q4 2025 (USDA) |
Class III ($/cwt) | 18.32 | 18.50 | 19.25 | 19.75 |
Class IV ($/cwt) | 18.60 | 18.65 | 18.90 | 19.10 |
Cheese ($/lb) | 1.6225 | 1.8200 | 1.8650 | 1.9100 |
Butter ($/lb) | 2.3100 | 2.3500 | 2.4200 | 2.4800 |
Dry Whey ($/lb) | 0.4900 | 0.4700 | 0.4650 | 0.4600 |
NFDM ($/lb) | 1.1550 | 1.2250 | 1.2450 | 1.2550 |
All-Milk Price ($/cwt) | 21.45 | 22.30 | 22.90 | 23.30 |
Feed Cost Projections: The USDA projects a 10.1% decline in feed costs for 2025 compared to 2024, with corn averaging $4.85/bushel and soybean meal averaging $395/ton. If milk prices maintain current forecasted levels, this would result in an income-over-feed-cost improvement of approximately $1.20/cwt, according to analysis from the University of Wisconsin’s Center for Dairy Profitability.
Production Forecast: Despite current price weakness, the USDA has revised its milk production forecast downward by 1.1 billion pounds to 226.9 billion pounds for 2025, driven by lower expected cow numbers (9.32 million head vs. 9.36 million previously) and reduced milk per cow (24,345 pounds vs. 24,390 pounds). According to USDA economists presenting at the Agricultural Outlook Forum, this production constraint should provide price support in later quarters.
STRATEGIC PLANNING IMPLICATIONS: While current markets are under pressure, USDA projections suggest stronger values later in 2025. This creates opportunities for producers to implement risk management strategies that protect near-term cash flow while maintaining upside potential for Q3-Q4 when prices are projected to strengthen.
JUNE 1 FEDERAL ORDER CHANGES: WHAT YOU NEED TO KNOW NOW
Mark your calendar: June 1, 2025, will fundamentally reshape your milk check as Federal Order reforms take effect nationwide. According to the USDA’s official Final Rule published in the Federal Register (Vol. 90, No. 42), these confirmed changes include:
- Significant revisions to make allowances in Class III and IV milk price formulas
- Elimination of barrel cheddar prices from Class III price calculations
- New advanced pricing factors to be announced May 21
These reforms received overwhelming producer support through the formal voting process, with the National Milk Producers Federation noting they “will provide a firmer footing and fairer milk pricing.” However, according to market analysis from ever.ag Insights, the implementation creates significant uncertainty as markets attempt to price structural changes.
CRITICAL ACTION: Review your milk check structure with your cooperative or processor to understand how specific formula changes will affect your operation’s revenue stream, mainly if you produce high-component milk, as recommended by dairy economists at Cornell University’s PRO-DAIRY program.
WINNING STRATEGIES: POSITION YOUR DAIRY FOR SUCCESS AMID MARKET EVOLUTION
Today’s markets demonstrate continued pressure on cheese prices despite modest butter recovery. With Federal Order reforms just months away, strategic positioning has never been more critical, according to industry experts.
THREE IMMEDIATE ACTIONS FOR PRODUCERS:
- Calculate your component-adjusted revenue impact from this week’s cheese price decline using the USDA-AMS pricing formula calculators. Producers focused on high-component production may face disproportionate effects from current market weakness.
- Evaluate your regional position relative to processing capacity. According to Rabobank’s latest Dairy Quarterly, proximity to expanding cheese manufacturing provides strategic advantages that can offset market volatility through preferred hauling and quality premiums.
- Prepare for June 1 Federal Order implementation by understanding how allowance changes and formula adjustments will affect your specific milk check structure, as outlined in the USDA’s implementation guidelines.
Tomorrow’s USDA Dairy Products report will provide crucial insights into production trends that might explain continued cheese market weakness. Forward-thinking producers use this market correction to strengthen risk management programs and evaluate strategic partnerships that can provide stability through the transition to new pricing structures.
The Bullvine Bottom Line:
This week’s substantial cheese price decline creates immediate revenue challenges for producers and potential buying opportunities for those with strong risk management programs. According to analysis from agricultural economists at Michigan State and Penn State universities, the combination of regional cost disparities and upcoming Federal Order reforms will create clear winners and losers based on geographic location and strategic positioning. Innovative producers are using this period of market adjustment to strengthen their competitive position ahead of June’s pricing revolution.
Learn more
- USDA’s New Milk Pricing Rules: What Dairy Farmers Need to Know
- Global Dairy Market in 2025: Production Shifts, Demand Fluctuations and Trade Dynamics
- Is the Federal Milk Marketing Order Reform Benefiting Dairy Farmers or Only the Processors?
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