Cheddar barrels surge 1.75¢ as whey plummets; feed costs squeeze dairy margins—market braces for volatility amid global uncertainty.

EXECUTIVE SUMMARY: Today’s CME dairy markets saw stark divergence: cheddar barrels surged 1.75¢ on food-service demand, while dry whey plummeted 1.25¢ due to oversupply. Butter and nonfat dry milk edged higher despite thin trading, supported by tightening cream supplies and export inquiries. Rising corn (+4.5¢/bu) and soybean meal (+$4/ton) futures intensified margin pressures for producers, overshadowing modest Class III milk gains. Global dynamics—including EU regulatory constraints and New Zealand’s production decline—added complexity, while U.S. export competitiveness hung on powder pricing. Traders eye cheese spreads and whey stabilization as producers face tough cost decisions ahead of peak demand seasons.

KEY TAKEAWAYS:

• Barrel-Block Spread Widens: Cheddar barrels (+1.75¢) outperformed blocks (+0.50¢), signaling food-service prep for summer demand.
• Feed Costs Spike: Corn and soybean meal futures rose sharply, threatening producer margins despite stable milk prices.
• Whey Collapse: Dry whey fell 1.25¢ amid cheese-driven oversupply, denting overall cheesemaking profitability.
• Global Pressures Mount: EU output lags on regulations, while NZ’s seasonal decline tightens global supply.
• Cautious Sentiment: Traders balance cheese optimism against whey weakness and input cost risks.

Today’s dairy markets showed significant divergence across products, with Cheddar barrels posting substantial gains while dry whey experienced a notable decline. Butter and nonfat dry milk showed modest strength amid varied trading volumes. The combination of cheese strength and rising feed costs creates a complex outlook for dairy producers in the coming weeks.

Key Price Changes & Market Trends

Today’s CME cash dairy market exhibited notable product divergence, with cheddar cheese showing significant strength, particularly in barrels, while dry whey faced considerable downward pressure. Butter and nonfat dry milk posted modest gains, contributing to an overall mixed market picture.

The cheese complex finished higher with uneven gains across categories. Cheddar blocks settled with a modest half-cent increase, while barrels surged by 1.75 cents, pushing the barrel premium to 6.5 cents. This pronounced divergence likely reflects specific demand drivers, possibly from food service or process cheese manufacturers preparing for anticipated spring and summer demand increases.

Butter edged slightly higher despite no trading activity on the exchange, suggesting underlying support potentially stemming from seasonally tightening cream supplies or steady retail demand. Nearby April butter futures also showed slight strength (+0.40¢), reinforcing the stable-to-firm market undertone.

Grade A nonfat dry milk recovered from yesterday’s decline, gaining half a cent, which suggests the $1.15 level attracted buying interest, indicating good underlying support. This rebound may be linked to renewed export inquiries or steady domestic demand.

Dry whey experienced a significant decline, likely reflecting ample supplies in the market, possibly resulting from strong cheese production rates yielding whey as a co-product. Weaker-than-anticipated demand, potentially from export markets, could be a contributing factor.

Volume and Trading Activity

Today’s trading activity varied considerably across the CME dairy complex with moderate overall participation:

Nonfat Dry Milk: Most active product with five loads trading. The presence of 3 bids and three offers alongside the trades suggests good two-way interest and active price discovery occurring around the $1.15-$1.16 per pound level.

Cheese Blocks: Reasonable activity with three loads changing hands, alongside two bids and two offers, indicating a relatively balanced market where buyers and sellers found common ground.

Dry Whey: Two loads traded with no bids against three offers, aligning with the significant price decline and signaling that selling interest outweighed buying interest at prevailing prices.

Cheese Barrels: Only one load traded, yet this single transaction resulted in a substantial price increase (+1.75¢), suggesting firm buyer conviction meeting limited selling interest. An unfilled bid remained, indicating potential additional buying interest below the final traded price.

Butter: No trades executed. Two bids were posted, but no offers were filled at or below the closing price of $2.3125 per pound, signifying a current price disagreement between potential buyers and sellers.

The volume and price movement relationship provides an essential context for market conviction. The high volume in NDM supports reliable price discovery, while the significant barrel price move on minimal volume highlights aggressive buying interest.

Global Context

International dairy market developments continue to influence U.S. markets, affecting export opportunities and overall price direction.

Export demand appears mixed across product categories. Reports suggest steady, though not aggressive, demand from Mexico for U.S. NDM, providing baseline support for powder prices. However, Southeast Asian buyers appear cautious, particularly regarding whey products, potentially due to ample global protein supplies or regional economic factors affecting feed import requirements.

China’s import activity remains a critical market factor; recent indications suggest possible demand stabilization after weaker purchasing periods, though consistent large-volume buying has yet to reemerge fully.

Global milk production trends show varied dynamics among major exporters. European Union output growth appears constrained by ongoing environmental regulations and persistent cost pressures. New Zealand is moving past its seasonal production peak, typically leading to gradually tightening global exportable supplies in the coming months. These factors could offer underlying support to global prices if demand remains firm.

The competitiveness of U.S. dairy products in international markets remains crucial. Today’s NDM price of $1.1575/lb (approximately $2,552/tonne) needs assessment against prevailing European and Oceania prices to determine export competitiveness. The significant drop in U.S. dry whey could be exacerbated if domestic prices remain above international benchmarks or global whey markets are generally oversupplied.

Forecasts and Analysis

Forward-looking indicators and underlying cost structures provide a critical context for market participants navigating the dairy landscape.

CME futures markets reflected some of today’s cash market themes. The April Class III milk contract settled slightly higher at $17.22 per hundredweight (+4 cents), drawing support from strength in the cash cheese market. In contrast, the April Class IV contract eased marginally to $17.84 per hundredweight (-2 cents), reflecting mixed signals from slightly higher butter prices but potential headwinds in broader powder markets.

A significant factor impacting producer profitability is rising feed costs. Today saw notable increases in key feed inputs, with May corn futures rising 4.5 cents to $4.7350 per bushel and May soybean meal futures climbing $4.00 to $294.10 per ton. These increases directly elevate milk production costs.

According to the USDA’s March 2025 Livestock, Dairy, and Poultry Outlook, the national dairy herd is projected to average 9.38 million in 2025, with milk production forecast at 226.2 billion pounds. The USDA projects Class III milk prices to average around $18.80 per hundredweight in 2025, while Class IV prices are projected at $20.40 per hundredweight. The all-milk price for 2025 is forecast at $22.55 per hundredweight.

The concurrent rise in feed costs, alongside only modest gains in milk price futures, highlights a potential margin squeeze for dairy producers. If feed expenses continue climbing without commensurate increases in milk prices, profitability will be challenged, potentially discouraging production expansion or leading to adjustments in herd sizes.

Market Sentiment

Today’s sentiment in dairy markets appears mixed, reflecting divergent product price action and underlying cost pressures.

Qualitative feedback suggests specific areas of firmness alongside broader concerns. As one trader noted, “The barrel market felt very firm today; buyers were willing to pay up to secure loads, suggesting some immediate needs are surfacing ahead of summer demand.” This observation reflects the aggressive buying seen in the barrel market.

Counterbalancing this optimism is concerned with input costs and specific product weaknesses. As an analyst commented, “While cheese provided support, the drop in whey and the rising feed costs are creating some nervousness about producer margins heading into the planting season.”

Sentiment appears cautiously optimistic regarding the cheese complex, buoyed by today’s gains (especially in barrels) and firming Class III futures. However, this optimism is tempered by significant weakness in dry whey and, perhaps more critically for producers, sharp increases in corn and soybean meal prices. Sentiment surrounding butter and NDM seems steady to slightly positive, supported by modest price gains but lacking firm directional conviction.

Closing Summary & Recommendations

In summary, today’s CME dairy markets were characterized by notable strength in cheddar barrels, which slightly outpaced block gains and helped modestly lift Class III futures. Dry whey experienced a sharp decline, indicating specific weakness in that complex, while butter and NDM posted small gains amid varied trading volumes. A key development impacting the broader sector was the significant rise in corn and soybean meal futures, signaling increasing feed cost pressures for dairy producers.

Recommendations & Outlook:

For producers: Closely monitor the evolving relationship between milk prices (particularly Class III futures) and rising feed costs to manage margins effectively. With USDA projecting an average Class III price of $18.80/cwt for 2025, current futures ($17.22) suggest potential upside if market fundamentals strengthen. The current strength in cheese is a positive signal, but vigilant cost control remains essential given feed price trends.

For traders: Pay attention to the cheddar block/barrel price spread for signs of continued divergence or potential narrowing. The weakness in dry whey warrants close observation – look for indications of price stabilization or further declines. The lack of activity in butter suggests monitoring for a breakout trade if bids or offers become more aggressive in coming sessions.

The near-term market direction likely hinges on the balance between sustained cheese demand pulling the complex higher versus headwinds from weak whey prices and rising production costs. Global market dynamics and the competitiveness of U.S. exports, particularly for powders, will remain critical factors influencing price discovery in coming sessions.

Learn more:

• CME Dairy Report March 6, 2025 – Butter Prices Surge While Barrels Crash – Provides historical context for the current cheese market divergence, with insights on how butter has performed against cheese in recent months.
• CME Dairy Report March 5, 2025: Butter Surges, Cheese Markets in Turmoil – Offers additional perspective on the block-barrel price relationship and its implications for producers.
• Global Dairy Market Dynamics: Navigating Volatility and Strategic Opportunities in 2025 – Provides broader international context for current market conditions, including Global Dairy Trade auction results and worldwide production trends.

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