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Archive for dairy market analysis

CME Dairy Market Report: March 27, 2025 – Butter Surges While Class III Futures Continue Strong Rally Above USDA Forecast

Thursday, March 27th, 2025

Butter prices soar 3.5¢ despite high stocks as Class III milk futures rally past USDA forecasts. Global dairy markets brace for spring volatility.

EXECUTIVE SUMMARY: CME dairy markets saw significant bullish momentum on March 27, 2025, with butter leading gains (+3.50¢) despite elevated inventories and cheese blocks rising 1.75¢. Class III milk futures surged to .67/cwt, exceeding USDA projections by 17¢, signaling trader confidence in tightening supplies. Global dynamics diverged sharply, with EU milk production declining (-0.2%) amid regulatory pressures while New Zealand output grew (+3.1%). The USDA revised its 2025 all-milk price forecast upward to .75/cwt, though nonfat dry milk faced headwinds from global price competition. Stakeholders are advised to monitor feed costs, export opportunities, and Federal Order changes expected June 1.

KEY TAKEAWAYS

  • Buter Defies Logic: Prices jumped 3.5¢ despite 17% monthly inventory growth, driven by technical buying and export speculation.
  • Class III Futures Signal Strength: Settled at $18.67/cwt, 17¢ above USDA forecasts – largest premium since March 23.
  • Global Split: EU milk production declines (-0.2%) contrast with New Zealand’s 3.1% growth, reshaping export opportunities.
  • NDM at Crossroads: U.S. prices remain globally uncompetitive ($1.15/lb) despite USDA’s $1.30/lb annual projection.
  • Action Items: Producers urged to hedge Class III exposure; processors warned about tightening butter supplies.
CME butter prices, Class III milk futures, USDA dairy forecasts, global dairy exports, dairy market analysis

Butter and cheese markets showed significant strength in today’s Chicago Mercantile Exchange (CME) dairy trading, with butter posting the most crucial daily gain in nearly a month. Class III milk futures extended their rally, climbing to .67/cwt and widening the gap with USDA’s forecast. Meanwhile, after yesterday’s advance, nonfat dry milk retreated, reflecting the mixed signals currently driving dairy markets as seasonal spring flush approaches.

Key Price Changes & Market Trends

ProductClosing PriceChange from Yesterday
Butter$2.3650/lb+3.50¢
Cheese (Blocks)$1.6475/lb+1.75¢
Cheese (Barrels)$1.6350/lb+0.50¢
Nonfat Dry Milk$1.1500/lb-1.00¢
Dry Whey$0.4950/lb-0.50¢

Butter led today’s advances with a significant 3.50¢ gain despite recent cold storage reports showing inventories at 305 million pounds (up 17% month-over-month and 3% year-over-year). This seemingly contradictory movement suggests technical buying and potential export interest override inventory concerns. Cheese blocks followed with a substantial 1.75¢ increase, continuing their upward trajectory since Monday and widening the spread with barrels to 1.25¢. Nonfat dry milk retreated 1¢ after yesterday’s 2¢ jump, while dry whey dipped slightly to close just under the psychological 50¢ threshold.

Volume and Trading Activity

Today’s session saw notably active trading in butter, with 15 trades executed, reflecting strong buyer interest despite higher prices. Cheese blocks also showed healthy activity with six trades and balanced bidding interest (4 bids, four offers), indicating genuine price discovery rather than unidirectional pressure. In contrast, barrels, NDM, and dry whey saw minimal trading with just one trade each, suggesting more cautious positioning in these markets.

Butter’s trading activity was particularly noteworthy given yesterday’s Cold Storage report findings. Buyers seemingly discounted the high inventory levels in favor of forward-looking market dynamics. The 15 trades completed represent the highest daily volume for butter this week.

Global Context

International factors continue to influence U.S. dairy markets, with the stronger dollar noted yesterday having a minimal dampening effect on today’s butter and cheese advances. Export competitiveness remains a key consideration, particularly as U.S. butter and cheese exports are projected to grow due to competitive pricing.

Global milk production patterns are evolving significantly in 2025. The European Union’s milk production is forecast to decrease by 0.2% to 149.4 million metric tons due to declining cow numbers, tight farmer margins, environmental regulations, and disease outbreaks. This contrasts with New Zealand, where milk production showed 3.1% seasonal growth through December 2024, driven by favorable weather conditions and improved farm profitability.

These divergent production trends create both challenges and opportunities for U.S. dairy exports. While EU cheese production is expected to increase by 0.6% to 10.8 million metric tons despite overall milk production declines, this shift toward higher-value products may create openings for U.S. exports in other categories like butter and powdered milk.

Forecasts and Analysis

Class III milk futures continued their impressive rally, settling at .67/cwt today. This is a significant 13¢ increase from Wednesday and is now solidly above the USDA forecast of $18.50/cwt. This marks the fourth consecutive day of gains for Class III futures and reflects market confidence in cheese values.

Class III Milk Futures vs USDA Forecast (Mar 2025)

The widening gap between actual futures prices and USDA projections suggests traders are pricing in stronger fundamentals than official forecasts currently recognize. Today’s Class III settlement at $18.67 represents a 17¢ premium to the USDA forecast, compared to just a 4¢ premium on Monday.

USDA’s broader 2025 dairy forecast includes an all-milk price projection of $22.75/cwt, recently revised upward due to strong demand for cheese and export opportunities. The current market trajectory aligns with this more optimistic outlook, particularly in the cheese and butter segments.

USDA has also adjusted its dairy herd size projection for 2025, increasing it by 5,000 head to 9.380 million while simultaneously lowering milk production forecasts to 226.2 billion pounds (-0.7 billion) due to slower-than-expected growth in output per cow. This production dynamic bears monitoring as we approach peak spring flush.

Market Sentiment

Despite yesterday’s mixed performance, Market sentiment has become increasingly bullish, particularly in the butter and cheese markets. Traders appear to be positioning for tighter supplies as we approach Q2, with one market analyst noting, “The significant butter trading volume today, combined with higher prices, suggests genuine concern about future availability despite current inventory levels.”

The continued strength in Class III futures reflects confidence in cheese demand fundamentals. Market participants seemingly discount the “processors outpacing demand” narrative mentioned in yesterday’s reports. Instead, the focus appears to be shifting toward potential supply constraints and strengthening demand as we move into late spring.

Given recent global developments, the nonfat dry milk (NDM) market deserves particular attention. While today saw a modest 1¢ decline, U.S. NDM prices have been among the highest globally in recent months, creating challenges for export competitiveness. The USDA projects non-fat dry milk prices in the U.S. to average $1.30/lb in 2025, representing a 5.4% increase from 2024. Today’s closing price of $1.15/lb suggests a potential upside if these projections materialize.

Closing Summary & Recommendations

In summary, today’s dairy markets showed substantial strength in butter and cheese prices, with butter gaining 3.50¢ despite high inventory levels and cheese blocks rising 1.75¢. Class III milk futures extended their rally to .67/cwt, now trading 17¢ above USDA’s .50/cwt forecast. The divergence between intense price action and previously reported inventory builds suggests markets are looking beyond current supplies to anticipated tightening conditions.

For Producers:

  • Consider implementing selective hedging strategies for Class III milk as future prices have established a clear premium to USDA forecasts, potentially creating favorable pricing opportunities.
  • Monitor feed costs closely. Recent weakness in corn and soybean futures could improve milk production margins.
  • Track global production trends, particularly the declining EU milk production, and increasing New Zealand output, as these shifts will impact international market dynamics and potential export opportunities.

For Processors:

  • Today’s active butter trading suggests increasing supply competition despite reported inventory levels. Forward contracting may be prudent before potential further price increases.
  • The widening block-barrel spread (now 1.25¢) signals evolving market dynamics that may impact procurement strategies across cheese categories.
  • Consider the implications of EU processors prioritizing cheese production at the expense of butter and powder, which could create opportunities in international markets.

For All Market Participants:

  • Friday’s weekly summary report will provide crucial context for this week’s price movements and help establish whether today’s strength represents a new trend or temporary repositioning.
  • Continue preparing for potential market volatility as Federal Order changes approach (June 1), which will fundamentally alter milk pricing formulas.
  • Pay close attention to global dairy trade patterns, as China shows signs of demand recovery after years of declining dairy import volumes, potentially creating new export opportunities.

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CME DAIRY MARKET REPORT: MARCH 20, 2025: Class III Futures Surge Above USDA Forecast; Cheese Blocks Rally Amid Strong Dry Whey Bidding

Thursday, March 20th, 2025

Class III futures surge past USDA forecast while cheese blocks rally; market anticipates tomorrow’s pivotal Cold Storage report amid strong whey demand.

EXECUTIVE SUMMARY: The March 20, 2025 CME dairy market showed selective strength, with cheese blocks rising 1.50 cents to $1.6200/lb and dry whey continuing its four-day rally to $0.4800/lb amid exceptional buying interest (7:1 bid-to-offer ratio). Class III milk futures surpassed USDA’s forecast to reach $18.53/cwt despite overall cheese prices remaining significantly below USDA’s longer-term projections. Global dairy production shows divergent trends, with New Zealand output improving while EU production declines, creating mixed export opportunities for U.S. producers. Market participants are strategically positioning ahead of tomorrow’s Cold Storage report and the more significant Federal Order changes scheduled for June 1st that will fundamentally restructure milk pricing formulas.

KEY TAKEAWAYS

  • Technical Signals: Cheese blocks have established support at $1.5750/lb with resistance at $1.6450/lb; current prices remain well below USDA’s Q2 projection of $1.8200/lb, suggesting potential for significant appreciation.
  • Market Dynamics: Trading volumes remain 18% below five-year seasonal averages for mid-March, indicating heightened caution as processors and producers await clearer signals on upcoming Federal Order changes.
  • Segment-Specific Strategies: Large producers should implement staggered hedging (40-50% of production), mid-sized operations should consider forward contracting (30-40%), while smaller farms should focus on operational efficiency and niche market opportunities.
  • Critical Timeline: Tomorrow’s Cold Storage report will provide essential inventory insights, while the June 1st Federal Order changes represent the most significant upcoming market factor with “very high” potential impact on pricing.
  • Global Context: RaboResearch projects 0.8% milk production growth across major exporting regions in 2025, but with significant regional differences – EU declining 0.2% versus New Zealand increasing 1.2% – creating varied international price pressures.

Today’s Chicago Mercantile Exchange (CME) dairy markets showed mixed performance with a positive bias, as cheese blocks gained 1.50 cents to reach $1.6200/lb and dry whey continued its four-day upward streak to $0.4800/lb. Class III milk futures strengthened to .53/cwt, exceeding USDA’s .50/cwt forecast. This marks a significant 8-cent recovery from Monday’s $18.45/cwt settlement. Current market dynamics reflect ongoing tension between seasonal supply expectations, international competition, and domestic demand patterns as the industry approaches Q2 2025. Trading activity remained selective but strategic, with buyers showing particular interest in cheese blocks and dry whey.

dairy futures prices, CME cheese market, Class III milk forecast, dairy market analysis, Federal Order changes

KEY PRICE CHANGES & MARKET TRENDS

ProductClosing PriceChange from YesterdayWeekly AverageChange from Prior WeekKey Support LevelKey Resistance Level
Cheese (Blocks)$1.6200/lb+1.50¢$1.6113/lb-0.0837¢$1.5750/lb$1.6450/lb
Cheese (Barrels)$1.5650/lbUnchanged$1.5813/lb-0.0867¢$1.5650/lb$1.6250/lb
Butter$2.2950/lbUnchanged$2.2969/lb-0.0356¢$2.2900/lb$2.3025/lb
Nonfat Dry Milk$1.1500/lb-0.50¢$1.1538/lb-0.0047¢$1.1500/lb$1.1550/lb
Dry Whey$0.4800/lb+1.00¢$0.4650/lb-0.0065¢$0.4500/lb$0.4800/lb

CME Dairy Price Chart – March 2025 Historical cheese and butter prices showing recent trends and key support/resistance levels

Cheddar blocks advanced 1.50 cents to $1.6200/lb, continuing to recover after Tuesday’s sharp 7.00¢ decline. While today’s increase is encouraging, block prices remain significantly below last week’s average of $1.6950/lb, representing a 4.4% week-over-week decline. The block-barrel spread widened to 5.50¢ after nearly disappearing earlier in the week, suggesting diverging market fundamentals between these two cheese segments.

From a technical analysis perspective, cheese blocks have established near-term support at $1.5750/lb, which was tested and held during Tuesday’s session. The current $1.6200/lb price sits just below Monday’s resistance point of $1.6450/lb. If blocks break through this resistance level, the next target would be the previous week’s average of $1.6950/lb.

Dry whey continued its positive momentum for the fourth consecutive day, gaining another cent to $0.4800/lb. This represents a 6.7% improvement from Monday’s $0.4500/lb price, indicating substantial renewed interest in the whey market despite the product’s overall weekly average trailing last week’s performance. Today’s close at $0.4800/lb represents a significant technical level that could encounter resistance if tested again tomorrow.

Nonfat dry milk decreased slightly by 0.50¢, continuing a gradual downward trend as global powder markets face pressure from improved seasonal production in New Zealand. NDM has established solid support at $1.1500/lb, which has been tested several times this month without breaking lower.

Butter held steady for the second consecutive day at $2.2950/lb with no trades, bids, or offers recorded, extending its $0.0375/lb decline from Monday’s $2.3025/lb price level. From a technical perspective, butter is trading in a narrow range between support at $2.2900/lb and resistance at $2.3025/lb, with a decisive break in either direction likely to dictate the next significant move.

VOLUME AND TRADING ACTIVITY

ProductToday’s TradesWeekly VolumeWeekly Volume % Change vs. Prior Week5-Year Seasonal Average Volume (Mid-March)
Cheese (Blocks)414+40%17
Cheese (Barrels)05-37.5%8
Butter09-25%12
Nonfat Dry Milk22-78%5
Dry Whey13-40%4

Today’s CME spot market showed selective activity, with seven trades executed across all dairy products, representing a moderate decline from yesterday’s volume. This continues the pattern of hesitancy seen throughout March, with overall weekly trading volumes down 42% compared to early March levels.

Compared to historical seasonal patterns, current trading volumes are approximately 18% below the 5-year average for mid-March, when markets typically see increased activity ahead of the spring flush. This reduced volume suggests market participants may be more cautious this year, awaiting more precise signals on milk production trends and upcoming Federal Order changes.

Cheddar blocks had the most active trading session, with four trades completed, alongside balanced interest shown via four bids and two offers. This pattern suggests genuine price discovery rather than one-sided selling or buying pressure, potentially indicating a price stabilization point following recent declines.

Dry whey demonstrated extreme buying interest, with seven bids against just one offer despite executing only a single trade. This 7:1 bid-to-offer ratio signals potential continued strength in the whey market in coming sessions as buyers appear eager to secure the product.

NDM saw limited activity, with two trades executed amid four bids and two offers. This reflects continued market equilibrium despite the slight price decrease. The balanced bid-ask dynamics suggest the market continues searching for direction amid mixed international signals.

Butter and barrels saw no trades today, with barrels attracting two bids but no offers. The complete absence of butter activity for the second consecutive day suggests market participants are taking a wait-and-see approach following earlier price adjustments this week.

GLOBAL CONTEXT

Global Milk Production Trends 2025

International dairy markets continue to influence domestic prices significantly through complex trade dynamics. New Zealand milk production has shown stronger-than-anticipated seasonal improvement, putting downward pressure on global butter and milk powder values. According to research, milk supply from major exporting regions is projected to grow by 0.8% in 2025, with gains expected in all major exporting areas for the first time since 2020.

Major Dairy Exporting Region2025 Production ForecastYear-over-Year Change
European Union149.4 million MT-0.2%
United States103.2 million MT+0.5%
New Zealand22.8 million MT+1.2%
Australia8.5 million MT+0.8%

Source: RaboResearch Dairy Quarterly Q1 2025

European Union milk production presents a contrasting picture. Output is forecast to decrease by 0.2% to 149.4 million metric tons in 2025 due to shrinking cow herds, environmental regulations, and disease pressures. However, EU cheese production is expected to increase by 0.6% to 10.8 million metric tons, driven by solid domestic demand and export opportunities. This prioritization of milk for cheese production may support global cheese markets while limiting butter and powder production.

U.S. export competitiveness faces mixed prospects in this environment. USDA has revised its 2025 dairy export forecast on a skim-solids basis downward to 49.1 billion pounds, a decrease of 0.4 billion pounds, primarily affecting export volumes to Southeast Asia. However, the export forecast on a milk-fat basis was raised by 0.2 billion pounds to 11.9 billion pounds, suggesting more favorable conditions for butterfat exports.

Export DestinationJan-Feb 2025 Volume (MT)Year-over-Year ChangeKey Products
Mexico128,450+4.2%Dry Whey, NFDM
Southeast Asia87,320-6.8%NFDM, Cheese
South Korea42,780+0.9%Cheese, Butter
Japan40,250-2.3%Cheese, Whey
China38,620-8.1%Whey, NFDM

Source: USDA Foreign Agricultural Service

Mexican demand for U.S. dry whey remains particularly strong, likely contributing to today’s price increase and robust bidding activity. This strength has emerged as competition from European suppliers has decreased amid geopolitical tensions affecting shipping lanes.

FORECASTS AND ANALYSIS

Class III Milk Futures vs USDA Forecast

Class III Milk Futures Chart Class III Milk Futures: Historical (Mon-Thu) vs USDA Forecast

The Class III milk futures have demonstrated remarkable momentum this week, climbing steadily from .45/cwt on Monday to today’s .53/cwt settlement. This represents an 8-cent gain over four days, pushing prices above the USDA’s Q2 2025 forecast of $18.50/cwt.

Despite current strength in Class III futures, cheese prices remain well below USDA’s longer-term projections for 2025. The following table illustrates USDA’s quarterly price projections against current market levels:

Price ComponentCurrent (3/20/25)Q2 2025 ForecastQ3 2025 ForecastQ4 2025 Forecast
Class III ($/cwt)$18.53$18.50$19.25$19.75
Cheese ($/lb)$1.6200$1.8200$1.8650$1.9100
Butter ($/lb)$2.2950$2.3500$2.4200$2.4800
Dry Whey ($/lb)$0.4800$0.4700$0.4650$0.4600
NFDM ($/lb)$1.1500$1.2250$1.2450$1.2550
All-Milk ($/cwt)–$22.30$22.90$23.30

Data Source: USDA Dairy Market News

Segment-Specific Market Impacts and Recommendations

For Large-Scale Producers (1,000+ cows):

Current cheese prices ($1.6200/lb) sit significantly below USDA’s Q2 projection ($1.8200/lb), creating a strategic planning challenge. Large producers should consider implementing a layered hedging strategy that protects near-term cash flow while maintaining upside potential if USDA projections materialize. With operations of this scale, consider protecting 40-50% of production at current Class III levels while preserving flexibility for potential price appreciation in Q3-Q4.

For Mid-Size Producers (100-999 cows):

Mid-size operations face particular vulnerability to near-term price volatility. The current Class III futures strength provides a potential opportunity to lock in protection against downside risk through appropriate forward contracting. The moderate feed cost outlook (corn trading at $4.6525/bu versus a projected annual average of $4.85/bu) provides some margin relief that can be leveraged in risk management decisions.

For Small Family Operations (<100 cows):

The current environment requires an operational efficiency focus for smaller producers with limited risk management tools. With USDA projecting a 10.1% decline in feed costs for 2025 compared to 2024, smaller operations should prioritize feed purchasing strategies and consider diversification into niche markets where feasible, especially given the projected strength in cheese markets through year-end.

MARKET SENTIMENT

Market sentiment appears cautiously optimistic, particularly regarding Class III milk and dry whey futures. The steady increase in Class III futures throughout the week and strong buying interest in dry whey suggest traders anticipate strengthening in these markets.

A prominent dairy trader noted, “The current weakness creates buying opportunities, particularly with USDA projections indicating more substantial prices later in 2025. We’re seeing typical mid-March price discovery as markets prepare for spring flush conditions, but the strengthening in blocks today suggests we may be finding a temporary floor”.

Another market analyst commented, “While we’re seeing hesitancy in overall trading volumes, the bid-ask dynamics for dry whey suggest genuine buying interest that could translate to continued price strength as we head into Q2. The limited selling interest at current levels is telling”.

Industry participants closely monitor upcoming Federal Order changes scheduled for June 1st, which will fundamentally alter milk pricing formulas. One processor representative observed, “These changes add another layer of uncertainty as market participants attempt to position themselves ahead of the new pricing regime. We already see strategic inventory management decisions influenced by the pending formula changes”.

A Northeast cooperative manager stated regarding the upcoming seasonal transition, “As we approach the spring flush, we’re seeing more cautious buying behavior than in prior years. Processors seem to be managing inventories more conservatively given the Federal Order changes on the horizon, which could create some interesting dynamics as we move into peak production season.”

Regional variations in market conditions continue to shape dairy economics across major production areas. According to a Midwest producer, “Proximity to processing facilities has become increasingly crucial for negotiating premiums in our market. Those without established relationships are facing significant price pressure despite the overall market showing some recovery”.

UPCOMING MARKET-MOVING REPORTS AND EVENTS

Report/EventRelease DatePotential Market Impact
USDA Cold Storage ReportMarch 21, 2025High – Will reveal February end cheese and butter stocks
USDA Milk Production ReportMarch 26, 2025High – Will provide February milk production data
USDA Dairy Products ReportApril 2, 2025Medium – Will detail February production of cheese, butter, NFDM
USDA World Agricultural Supply and Demand EstimatesApril 11, 2025High – Will update price forecasts for dairy commodities
Implementation of Federal Order ChangesJune 1, 2025Very High – Will fundamentally alter milk pricing formulas

Tomorrow’s Cold Storage report will be particularly critical for cheese and butter markets. Last month’s report showed American cheese stocks at 845.6 million pounds, up 2.3% from the prior year, while butter inventories were reported at 262.8 million pounds, down 4.1% year-over-year. Any significant deviations from these trends could trigger substantial price movements, particularly in cheese markets where current prices remain well below USDA’s Q2 projections.

CLOSING SUMMARY & RECOMMENDATIONS

In summary, today’s CME dairy markets showed selective strength, with cheese blocks rising 1.50 cents to $1.6200/lb and dry whey continuing its positive momentum to reach $0.4800/lb. Class III milk futures extended their upward trend to settle at .53/cwt, surpassing the USDA forecast of .50/cwt. Trading activity was targeted with genuine price discovery, evident in cheese blocks amid balanced bidding and offering patterns.

For Producers:

  • Large operations: Implement a staggered hedging approach that protects 40-50% of production at current levels while preserving upside potential for projected price improvements in Q3-Q4.
  • Mid-sized operations: Consider forward contracting 30-40% of expected production through Q2, particularly given the strength of Class III futures relative to spot cheese prices.
  • Small farms: Focus on operational efficiency and explore direct-to-consumer or specialty cheese opportunities, given the projected price strengthening in cheese markets later in 2025.

For Processors:

  • Block cheese prices ($1.6200/lb) remain substantially below USDA’s Q2 projection ($1.8200/lb), potentially creating strategic buying opportunities.
  • The widening block-barrel spread (now 5.50¢) suggests diverging market dynamics that may require separate procurement strategies for different cheese categories.
  • Consider building strategic inventory positions in products showing particular value relative to USDA’s longer-term projections while monitoring tomorrow’s Cold Storage report for broader inventory trends.

For All Market Participants:

  • Prepare for potential market volatility as the Federal Order changes approach on June 1st, which will fundamentally alter milk pricing formulas.
  • Monitor RaboResearch’s projected global milk supply growth of 0.8% to indicate how international markets may pressure or support domestic prices.
  • Track the continued divergence between EU milk production (-0.2% projected for 2025) and EU cheese production (+0.6% projected) for insights into potential European export competition.
  • Position ahead of tomorrow’s Cold Storage report, which could create significant price movement, particularly if cheese or butter stocks deviate substantially from expectations.

This report will be updated as new market data becomes available. The following significant market indicator will be tomorrow’s monthly Cold Storage report, providing critical insights into cheese and butter inventory positions.

Learn more:

Join the Revolution!

Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.

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DAIRY MARKET ALERT: Cheese Markets Signal Major Shift as Blocks Rise, Barrels Tumble on March 10

Monday, March 10th, 2025

Cheese markets diverge as blocks rise and barrels tumble, widening spreads. Learn how these shifts impact your milk check and what actions to take now.

Executive Summary

Today’s CME dairy markets revealed significant shifts, with cheddar blocks rising 1.00¢ to $1.6325/lb while barrels fell 2.50¢ to $1.6050/lb, widening the block-barrel spread to 2.75¢. Butter held steady at $2.3100/lb, reflecting seller confidence, while NDM showed slight strength with a 0.25¢ gain to $1.1575/lb despite ongoing pressure in powder markets. These movements highlight the strategic importance of butterfat production as butter markets remain stable amid volatility in cheese and powder categories. Futures settlements suggest potential price recovery in cheese and butter, creating opportunities for producers to optimize margins through component-focused nutrition and targeted risk management strategies. Global factors, including European butter strength and constrained New Zealand milk production, support U.S. dairy prices despite near-term challenges.

Key Takeaways

  • Block-Barrel Spread Widening: Blocks rose by 1.00¢ while barrels fell 2.50¢, creating a 2.75¢ spread that signals shifting cheese demand dynamics.
  • Butterfat Advantage: Butter prices held firm at $2.3100/lb, reinforcing the value of optimizing butterfat production for higher milk check returns.
  • Futures Opportunities: March futures suggest potential price recovery in cheese ($1.758/lb) and butter ($2.4158/lb), offering hedging opportunities.
  • Feed Cost Stability: Corn at $4.58/bu and soybean meal at $302/ton provide favorable conditions for precision feeding strategies.
  • Global Context: Tight global milk supply and selective Chinese demand support U.S. butter prices but pressure powder markets.
cheddar cheese prices, butter market trends, dairy market analysis, block-barrel spread, milk production strategies

Today’s CME dairy markets sent unmistakable signals that demand immediate producer attention. Cheddar blocks gained 1.00¢ to close at $1.6325/lb while barrels plummeted 2.50¢ to $1.6050/lb, creating a significant 2.75¢ block-over-barrel spread. This fundamental shift from last week’s market structure suggests a substantial realignment in cheese demand patterns.

Butter maintained its position at $2.3100/lb with minimal trading activity but strategic offer positioning, revealing seller confidence despite pressure in other dairy categories. Meanwhile, NDM showed resilience with a 0.25¢ increase to $1.1575/lb on moderate trading, indicating selective buyer interest despite the concerning weekly trend.

For progressive producers, these movements carry immediate component value implications – reinforcing the strategic importance of butterfat production optimization as butter markets demonstrate relative stability while cheese markets undergo structural change.

CME CASH DAIRY PRICES: THE NUMBERS THAT MATTER

ProductClosing PriceChange (¢/lb)TradesBidsOffers
Butter$2.3100/lbNC013
Cheddar Block$1.6325/lb+1.00561
Cheddar Barrel$1.6050/lb-2.50132
NDM Grade A$1.1575/lb+0.25342
Dry Whey$0.4900/lbNC000

TRADING PATTERNS REVEAL INSIDER SENTIMENT

Today’s block cheese market activity tells a compelling story innovative producers must recognize. With five completed trades and an aggressive 6:1 bid-to-offer ratio, buyers show remarkable confidence despite recent market weakness.

This starkly contrasts barrel trading, where a single transaction and balanced bid-offer activity suggest hesitancy and potential further weakness. The divergence between these two cheese categories typically signals a fundamental shift in demand patterns that directly impacts your milk check.

WEEKLY TREND ANALYSIS: SPOTTING CRUCIAL PATTERNS

ProductMonTueWedThurFriCurrent Avg.Prior Week Avg.Weekly Volume
Butter$2.3100––––$2.3100$2.29750
Cheddar Block$1.6325––––$1.6325$1.63805
Cheddar Barrel$1.6050––––$1.6050$1.70051
NDM Grade A$1.1575––––$1.1575$1.17503
Dry Whey$0.4900/lb––––$0.4900$0.49800

The emerging block premium over barrels completely reverses the inverted spread pattern that dominated late February trading. This structural shift typically signals a strengthened retail cheese demand relative to food service and processed cheese applications – a critical indicator progressive producers must recognize immediately.

This spread reversal has significant implications for your operation’s Class III milk pricing and for how you should approach component optimization in your herd management strategy.

MAXIMIZE YOUR MARGINS: STRATEGIC POSITIONING NOW

COMPONENT OPTIMIZATION: THE HIDDEN OPPORTUNITY

Compared to significant barrel cheese declines, the stability in butter prices creates a clear advantage for operations focused on butterfat maximization. Cheese plants typically adjust manufacturing practices that directly affect your component premiums when barrels decline faster than blocks.

With March butter futures settling at $2.4158/lb (significantly above today’s cash price of $2.3100/lb), market expectations point to strengthening butter values. To capitalize on this market dynamic, leading producers are already implementing nutrition programs that enhance butterfat production.

FEED COST ADVANTAGE: LEVERAGE THIS WINDOW

Current feed futures provide a strategic planning opportunity that won’t last. March corn at $4.58/bushel and soybean meal at $302.20/ton create margin enhancement potential for operations implementing precision nutrition programs.

With each 0.1% increase in butterfat potentially worth $0.25-0.35/cwt under current market conditions, feed efficiency focused on component optimization rather than milk volume yields substantially better returns.

FUTURES INSIGHTS: WHAT THE SMART MONEY SEES

Futures ContractMonday Settlement
Class III (MAR) $/CWT$18.41
Class IV (MAR) $/CWT.$18.30
Cheese (MAR) $/LB.$1.758
Blocks (MAR) $/LB.$1.813
Dry Whey (MAR) $/LB.$0.485
NDM (MAR) $/LB.$1.19
Butter (MAR) $/LB.$2.4158
Corn (MAR) $/BU.$4.58

The March cheese futures at $1.758/lb reflect trader expectations of block-barrel convergence above current barrel values but below current block prices. With feed inputs showing stability, progressive operations protect milk-feed margins using options strategies that provide downside protection while maintaining upside potential.

GLOBAL PERSPECTIVE: INTERNATIONAL FORCES SHAPING YOUR MILK CHECK

European dairy markets report firming butter prices against relatively stable cheese values – a pattern now emerging in U.S. markets. This global alignment suggests structural rather than transitory forces reshape dairy product relationships.

New Zealand production reports indicate a slight recovery from earlier season shortfalls but remain below previous year levels. Despite near-term market hesitancy, this constrained global milk supply creates underlying support for dairy product values.

Chinese import activity shows highly selective re-engagement, with a more substantial interest in butter and cream products than powders or cheese. This targeted import demand aligns perfectly with today’s price movements and reinforces the strategic advantage of butterfat-focused production systems.

YOUR 3-STEP ACTION PLAN: WHAT PROGRESSIVE PRODUCERS ARE DOING NOW

1. IMPLEMENT COMPONENT-FOCUSED NUTRITION IMMEDIATELY

With butter futures ($2.4158/lb) significantly above cash prices ($2.3100/lb) and the block-barrel structure normalizing, leading operations are implementing feeding strategies that optimize both butterfat and protein components. Consider strategically using rumen-protected fats and precision carbohydrate management to enhance component yields without sacrificing production efficiency.

2. EXECUTE TARGETED RISK MANAGEMENT THIS WEEK

The current future settlements create specific opportunities that won’t last. The March cheese futures at $1.758/lb suggest a potential upside from current cash values once the block-barrel relationship normalizes. With feed inputs showing stability (corn at $4.58/bu), now is the time to protect milk-feed margins using strategies that provide downside protection while maintaining upside potential.

3. MONITOR THE BLOCK-BARREL RELATIONSHIP DAILY

Today’s emerging block premium (blocks at $1.6325/lb versus barrels at $1.6050/lb) represents a critical market structure change from last week. Forward-thinking producers track this spread daily as a leading indicator of the cheese market direction and Class III value potential.

Block premiums typically signal strengthening retail demand, while inverted spreads often indicate manufacturing capacity constraints or weak retail demand – intelligence you can use to optimize your marketing strategy.

BOTTOM LINE: WHAT THIS MEANS FOR YOUR OPERATION

Today’s dairy markets show a structural realignment, with blocks establishing a premium over barrels, butter holding firms finding selective support, and NDM finding selective support. Progressive producers are capitalizing on the relative strength in butter markets by implementing component-focused nutrition programs that enhance butterfat yields.

The consistent bidding activity for blocks despite recent market weakness suggests underlying confidence in cheese demand fundamentals once the current supply-demand imbalance resolves. With futures values indicating potential strengthening in cheese ($1.758/lb) and butter ($2.4158/lb), innovative risk management strategies should focus on protecting downside risk while participating in potential market recovery.

The emerging block premium over barrels signals an improving market structure that typically precedes broader price strengthening in cheese markets. Leading producers recognize today’s market signals demand immediate action: optimize components rather than volume, implement targeted risk management, and closely monitor the evolving block-barrel relationship as an early indicator of market direction.

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CME Dairy Market Analysis: Trade War Drama Sends Cheese Prices Plunging to 11-Month Lows

Friday, March 7th, 2025

Trade drama shakes dairy markets! Cheese prices hit 11-month lows, butter slides, and milk futures plummet. How can producers adapt to survive?

EXECUTIVE SUMMARY: This week’s dairy market turmoil highlights the impact of global trade tensions and overproduction. U.S. tariffs on non-USMCA-compliant imports from Canada and Mexico have raised costs, while China’s retaliatory tariffs on U.S. dairy products add further uncertainty. Cheese prices plunged to an 11-month low despite strong exports and reduced cheddar production. Butter values also fell due to a surplus of cream, while nonfat dry milk prices dropped amid weak exports to Southeast Asia. Milk futures reflect bearish sentiment, with Class III contracts falling sharply. Producers must navigate these challenges by reassessing cost structures, exploring alternative markets, and managing risk effectively.

KEY TAKEAWAYS

  • Trade Policy Impact: U.S. tariffs on non-USMCA-compliant imports and China’s retaliatory tariffs disrupt global dairy markets.
  • Cheese Market Decline: CME cheddar blocks fell 15.25¢ this week despite strong exports and reduced production.
  • Butter Surplus: Excess cream dragged butter prices to $2.25/lb before recovering slightly to $2.31/lb.
  • Powder Export Weakness: Nonfat dry milk prices hit a nine-month low as exports to Southeast Asia slowed.
  • Milk Futures Drop: April Class III futures fell over $1 to $17.21/cwt, reflecting bearish market sentiment.

How are your profit margins holding up amid this week’s market chaos? With cheese prices plummeting, butter values sliding, and milk futures in freefall, dairy producers face a perfect storm of challenges that demand immediate attention.

The on-again, off-again tariff drama with Canada and Mexico has created market whiplash, costing real dairy farmers real money. Like watching a teenager’s tumultuous relationship unfold, market participants have witnessed U.S. trade policy switch status to “it’s complicated” – with potentially serious consequences for your bottom line in the months ahead.

USMCA Trade Drama: What Dairy Farmers Need to Know Now

The administration’s decision to exempt USMCA-compliant goods from the newly imposed 25% tariffs offered some relief. Still, this seemingly straightforward carve-out creates far more complex market realities than many producers realize.

What’s the real impact on your operation?

First, approximately 40% of previously duty-free imports from Canada and Mexico lack proper USMCA certification and now face a substantial 25% border tax. This creates immediate cost pressures that will inevitably flow through the supply chain.

Second, contradictory messaging about whether this exemption represents permanent policy or merely a temporary pause until April 2 leaves dairy businesses unable to plan effectively even for the near term.

Canada’s supply management system starkly contrasts the U.S. market’s volatility. Under their system, certain products like dairy and poultry are subject to tariff-rate quotas, ensuring domestic production meets most of the nation’s needs. While initial tariffs are modest (milk has a 7.5% tariff with exemptions for USMCA countries), once quota limits are reached, much steeper tariffs kick in – up to 241% for milk.

Despite these constraints, U.S. dairy exports to Canada have grown significantly, reaching $1.14 billion in 2024 – nearly doubling over the past decade.

The IDFA has urged both countries to negotiate a resolution: “A prolonged tariff war with our top trading partners will continue to create uncertainty and additional costs for American dairy farmers, processors, and our rural communities.”

Inside Canada’s Milk Quota System: Stability vs. Market Access

To understand how Canada’s supply management system functions in practice, examine this actual quota trading data from British Columbia throughout 2024:

MonthQuantity (kg of butterfat/day)Average Price ($/kg)Total Value ($000)
January91.0035,5003,230.50
February22.3735,500794.14
March79.2735,5002,814.09
April100.0035,5003,550.00
May180.4335,5006,405.27
June64.9435,5002,305.37
July147.7335,5005,244.42
August70.0035,5002,485.00
September145.9035,5005,179.45
October88.9335,5003,157.02
November70.7035,5002,509.85
December56.4035,5002,002.20

Source: Agriculture and Agri-Food Canada, Animal Industry Division

Notice the fixed quota value at exactly $35,500 per kilogram of butterfat daily throughout the year. This demonstrates the controlled nature of the Canadian dairy market, where production rights maintain consistent value regardless of market fluctuations – a stark contrast to the price volatility experienced by U.S. producers.

China’s Strategic Dairy Tariffs: Smart Trade Policy in Action

While North American trade tensions grabbed headlines, China quietly announced its targeted approach to dairy tariffs, revealing sophisticated market awareness.

Their 10% retaliatory tariff on U.S. dairy imports specifically exempts dry whey and lactose – ingredients critical to their massive hog industry. This strategic carve-out protects their essential interests while delivering politically meaningful responses to U.S. trade actions.

The Long-Term Risk: Every trade disruption allows competitors to establish new supply relationships that may persist long after tariffs are resolved. European suppliers stand ready to fill any gaps created by unstable U.S. trade policy.

Question for Producers: How are you diversifying your market exposure to protect against trade policy volatility? Share your strategies in the comments below.

Cheese Market Collapse: When Good News Gets Ignored

This week’s cheese market performance demonstrates how market psychology can completely overwhelm positive fundamentals. CME spot Cheddar blocks plunged to an 11-month low at $1.6050 on Tuesday before recovering slightly to close at $1.6225, still down a significant 15.25¢ for the week. Barrels mirrored this weakness, falling 15¢ to $1.63.

The Disconnect Between Data and Market Reality

The market’s reaction seems utterly detached from underlying supply-demand fundamentals:

  • January’s cheese production showed only a modest 0.8% year-over-year increase
  • Cheddar output fell 1.4% to its lowest January level since 2020
  • Cheese exports surged 22% above January 2024 volumes

This combination of controlled production and exceptional export growth would typically support prices in a rational market – yet values plummeted anyway.

What This Means For Your Operation

This disconnect reveals how thoroughly sentiment now dominates fundamentals in the dairy markets. The market’s laser focus on upcoming cheese plant expansions, potential consumer demand weakness, and trade anxiety have created a bear market psychology that’s difficult to overcome.

For producers, traditional approaches to reading market signals may need serious recalibration. Are you adjusting your risk management strategies for this new market reality?

Butter’s Surprising Challenge: Too Much of a Good Thing

The current butterfat market offers a perfect example of how success in one area can create challenges elsewhere. Higher component levels have created a cream surplus that’s dragged multiples to their lowest points since the pandemic disruption of 2020.

This abundance forces us to confront a counterintuitive reality: sometimes, producing more high-value components reduces overall returns.

Manufacturing Response to Cream Surplus

Class II manufacturers have seized this opportunity, dramatically increasing production across multiple categories:

  • Hard ice cream is up 20% year-over-year
  • Full-fat cottage cheese up 18%
  • Yogurt up 5.3%
  • Sour cream up 4.3%

Yet even this substantial manufacturing response couldn’t absorb all available cream, allowing butter production to inch up 0.5% despite already ample supplies.

Production Trends Behind the Butterfat Surplus

To understand the current supply situation, consider these key production metrics from the most recent USDA data:

MetricValueYear-over-Year Change
Total Milk Production17.875 billion lb-1.0%
Daily Milk Production596 million lb-6 million lb
Number of Dairy Cows9.365 million+20,000 head
Milk Per Cow1,909 lb-23 lb

Source: USDA Milk Production report, December 19, 2024

These statistics reveal an interesting paradox: despite having more cows in the national herd, per-cow productivity and total milk production declined compared to the previous year. However, component percentages continue to rise, with milk fat tests reaching 4.15% in September 2024, up from 4.08% in the last year.

The current market dynamics forced CME spot butter to retreat to $2.25 on Tuesday, its lowest price since 2021, before recovering slightly to close at $2.31, down 3.5¢ for the week.

Strategic Question: With component values under pressure, should your breeding and feeding programs still prioritize fat production or is a rebalancing needed? What other product streams might offer better returns for your high-component milk?

Powder Markets Signal Export Warning Signs

The nonfat dry milk market continues its downward slide, with CME spot prices falling 4.5¢ to $1.155, the lowest level in nine months. This decline persists despite manufacturers making strategic production adjustments – combined NDM and SMP output totaled just 189 million pounds in January, down 3.2% year-over-year and the lowest January volume since 2016.

Geographic Shift in Export Patterns

The market is experiencing a significant redistribution of export flows:

  • Manufacturers strongly favoring NDM (primarily sold domestically and to Mexico) over SMP
  • SMP production plummeted 37.6% year-over-year
  • Total powder exports fell below 100 million pounds in January for the first time in over five years
  • Exports to Southeast Asia reached eight-year lows in December and January
  • Shipments to Mexico exceeded January 2024 levels

Products that previously served markets like the Philippines and Vietnam have instead moved into storage, pushing U.S. milk powder inventories to nearly 300 million pounds – the highest level since May 2023.

This inventory buildup creates a classic market dilemma: should manufacturers continue producing at current levels, hoping for eventual market improvement, or should they reduce output to avoid further inventory accumulation?

Bullvine’s analysis suggests that processors shifting between product forms will have distinct advantages in this environment. What’s your perspective on the powder market outlook?

Milk Futures Flash Warning Signs for Farm Profitability

This week, the bearish sentiment in physical product markets translated directly into substantial losses for milk futures. April Class III futures plummeted more than a dollar to settle at $17.21 per hundredweight, with most contracts suffering double-digit losses and values predominantly settling in the $17-$18 range.

Class IV futures showed similar weakness, though less pronounced, with contracts generally losing around 30¢. While most Class IV contracts maintained positions above $18, the June contract settled at $17.93, slipping below this psychological support level.

What This Means for Your Bottom Line

These deteriorating values present a challenging economic outlook for dairy producers, notably when coinciding with the spring flush. These futures prices seriously threaten dairy farm viability, especially for operations with high debt loads or significant fixed costs.

The Bullvine has consistently advocated for proactive margin management. Those who locked in protection earlier this year now see that strategy’s value. A serious evaluation of production costs and marketing strategies is essential for those exposed to these declining values.

Action Step: Take time this week to calculate your actual cost of production and compare it to current future values. What changes would be necessary if these price levels persist through summer?

Feed Markets: Rare Stability in a Volatile Week

In a week dominated by volatility, feed markets displayed remarkable stability in closing values:

  • May corn futures finished unchanged at $4.69 per bushel
  • May soybeans concluded at $10.25 per bushel, exactly where they started
  • Soybean meal managed modest gains, advancing $4.50 to $304.50 per ton

This price stability provides breathing room for dairy operations facing declining milk values. However, the temporary surge in soybean meal demand resulting from the brief tariff on canola imports demonstrates how quickly feed markets can respond to trade policy shifts.

Risk Management Reminder: While current feed values offer favorable opportunities to lock in forward coverage, the ongoing evolution of trade policy could rapidly alter ingredient availability and pricing. Innovative producers will secure protection for at least a portion of their feed needs while maintaining flexibility to adjust as conditions evolve.

Market Outlook: Navigating Trade Complexities in 2025

The current dairy market presents extraordinary challenges, combining abundant domestic supplies with increasingly unpredictable international market access. Rather than simply bemoaning trade barriers, forward-thinking producers are learning to navigate them strategically.

Weekly CME Dairy Price Dashboard – March 7, 2025

ProductClosing PriceWeekly Change
Cheddar Blocks$1.6225/lb-15.25¢
Cheddar Barrels$1.63/lb-15.00¢
Butter$2.31/lb-3.5¢
Nonfat Dry Milk$1.155/lb-4.5¢
Dry Whey$0.49/lb-2.0¢
Class III April$17.21/cwt-$1.00+
Class IV June$17.93/cwtn/a

Source: CME Group, March 7, 2025

Understanding the reality behind the headlines is crucial. While social media may circulate claims of uniformly high Canadian tariffs on all U.S. products, the fact is that most U.S.-Canada trade occurs duty-free under USMCA. For dairy precisely, the challenges lie in over-quota tariffs and how the quotas are administered.

The Bullvine’s Perspective

As we’ve consistently demonstrated through our commitment to transparency and market education, periods of market disruption often create opportunities for meaningful change in the dairy industry. The operations that approach current challenges with creativity and resilience, rather than simply maintaining past practices, will position themselves for long-term success.

Rather than hoping for market improvement, forward-thinking operations are:

  • Evaluating their cost structures and identifying efficiency opportunities
  • Exploring alternative marketing channels beyond traditional commodity sales
  • Considering how to differentiate their production in an increasingly competitive landscape
  • Building stronger relationships with processors to enhance market intelligence
  • Implementing genetic strategies that balance component production with overall efficiency

The question isn’t whether the market will change—it’s whether your operation is positioned to adapt when it does. Are you prepared to understand the headlines and the regulatory details that will determine which dairy businesses will thrive in this new environment?

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Alarming Disconnect: January 2025 Dairy Production Report Reveals Strategic Misalignments as Trade Tensions Loom

Tuesday, March 4th, 2025

Powder inventories surged 41%, while processors accelerated production despite looming trade wars. The January dairy products report exposes alarming disconnects between market signals and manufacturing decisions, threatening processor and farm profitability as spring production increases.

EXECUTIVE SUMMARY: The January 2025 Dairy Products report reveals troubling production misalignments that demand immediate attention. NFDM production jumped 11% despite inventories already 41% above last year, while cheese and butter showed minimal growth despite increased milk supply. Italian cheese varieties (+2.2%) outperformed American types (+0.2%), suggesting shifting market preferences. Meanwhile, processors appear to redirect components toward consumer packaged goods like ice cream (+20.1%) and cream cottage cheese (+18.0%) while neglecting export-oriented products just as trade tensions escalate with Mexico. These patterns create significant price risks as spring flush approaches and raise questions about long-term strategic planning throughout the supply chain.

KEY TAKEAWAYS:

  • NFDM production surged 11% to 154 million pounds while inventories climbed to 299.3 million pounds, up 41% year-over-year, creating a dangerous market imbalance
  • Italian cheese varieties outperformed American types, with mozzarella production up 3.6% while cheddar continued its 15-month decline.
  • Butter production increased merely 0.5% despite high component availability, as processors shifted cream to ice cream (+20.1%) and cultured products.
  • Whey protein concentrate production fell 10.4% while whey protein isolate jumped 19.9%, indicating a strategic shift toward higher-value proteins.
  • Regional production patterns show Western processors focused heavily on NFDM (+15.2%) while Central region facilities led in cheese (+1.8%)
dairy production, NFDM inventory, cheese production, dairy exports, trade tensions, milk powder, dairy market analysis, dairy processing, mozzarella production, butterfat allocation, Mexico tariffs, spring flush

Steam billows from dryers running at full capacity across America’s heartland, transforming rivers of milk into mountains of powder that increasingly threaten to overwhelm warehouse capacity. The USDA’s January 2025 Dairy Products report, released yesterday, exposes troubling misalignments between processor decisions and market realities. Manufacturers appear to be doubling down on precisely the wrong products while ignoring clear warning signals from domestic and international markets.

Cheese Production Reveals Contradictory Strategies

January cheese production data unveils a strategic repositioning that demands closer scrutiny from processors and farmers. Total cheese output reached 1.21 billion pounds, inching up a modest 0.8% from January 2024 despite component-adjusted milk production increasing 2.2% nationally. This restrained growth suggests processors remain cautious amid looming capacity expansions and uncertain demand signals.

ProductJanuary 2025 (million lbs)Change from January 2024Change from Expected
Cheese (Total)1,210.2+0.8%Below forecast
American-Style473.9+0.2%Below forecast
Cheddar326.1-1.4%Below forecast
Italian Types521.7+2.2%Above forecast
Mozzarella412.7+3.6%Above forecast

The most revealing aspect of January’s cheese data is the stark divergence between cheese categories. While American cheese production barely increased, at 0.2% above January 2024 levels, Italian varieties grew substantially stronger, at 2.2%. Mozzarella’s impressive 3.6% increase led this to 412.7 million pounds. This marks mozzarella’s third-highest January production, reflecting processors’ strategic pivot toward export-friendly and foodservice-oriented varieties.

Particularly concerning for farmers focused on American cheese components is cheddar’s continued decline, dropping 1.4% to 326.1 million pounds—marking the fifteenth consecutive month of year-over-year declines. While this represents a moderating decrease compared to previous months, the persistent weakness in a traditionally anchored U.S. dairy processing category raises fundamental questions about shifting consumer preferences and processor responses.

The Butterfat Allocation Mystery

The January report exposes a perplexing contradiction in butterfat utilization that demands explanation. How can butter production grow only 0.5% to 218.3 million pounds when component-adjusted milk production increased by 2.2% and butterfat yields reached near-record levels? The answer lies in a dramatic reallocation of fat to alternative product streams that offer processors better margins—but may ultimately undermine farm-level butterfat premiums.

Processors appear to redirect cream toward frozen and cultured products rather than churning butter, with ice cream production soaring 20.1% to 59.6 million gallons—the highest January level since 2016. Regular hard ice cream led the surge, but other categories followed: low-fat ice cream jumped 10.2%, frozen yogurt increased 14.1%, and cream cottage cheese production jumped 18%.

This strategic pivot coincides with concerning inventory accumulation. According to the USDA’s Cold Storage Report, butter stocks climbed to 270.2 million pounds by January 31st, representing a troubling 26% increase from December and 9% growth year over year. This inventory build-up during what should be the seasonal low point for butter stocks signals potential market imbalances that could eventually transmit back to farm-level component values.

Powder Markets: A Crisis in Waiting

The most alarming element of January’s report is the dangerous inventory accumulation in dry milk products. Despite already bloated warehouses, nonfat dry milk (NFDM) production accelerated sharply by 11.0% to 153.5 million pounds, creating what industry analysts increasingly call “a powder volcano ready to erupt.”

NFDM Inventory MetricsJanuary 2024December 2024January 2025% Change (YoY)
End-of-Month Stocks (million lbs)212.3256.1299.3+41.0%
Monthly Production (million lbs)138.3130.7153.5+11.0%
Monthly Shipments (million lbs)123.0106.5106.5-13.4%
Production-to-Shipment Ratio1.121.231.44+28.6%

The 41% year-over-year inventory increase to 299.3 million pounds represents approximately 90 days of domestic consumption—far exceeding healthy balance levels. Even more troubling, NFDM shipments collapsed by 13.4% compared to January 2024, creating a perfect storm of overproduction and underconsumption.

“Processors appear to be ignoring flashing warning signs in the powder market,” warns industry economist Maria Rodriguez. “With flat or weakening demand from Mexico and reduced interest from other international buyers, these inventory levels create downward price pressure that will only intensify as we approach spring flush.”

This inventory mismanagement becomes more significant given imminent trade disruptions with Mexico, America’s largest dairy export destination. Adding to market pressures, the sharp decline in skim milk powder production (37.6% to 35.5 million pounds) indicates processors may be abandoning products specifically formulated for international markets just as trade tensions escalate—a concerning strategic pivot that could damage hard-won market relationships.

Whey Complex Shows Mixed Results

The whey sector presented contradictory signals in January that further highlight processor indecision. Total dry whey production decreased slightly by 1.9% to 76.2 million pounds compared to January 2024, despite increasing cheese production that would typically generate more whey. This suggests potential processing constraints or strategic decisions to limit whey production amid uncertain markets.

More notably, whey protein concentrate (WPC) production fell sharply by 10.4% to 38.2 million pounds, with the WPC 25.0-49.9% category plummeting 17.6%—reaching record low production levels for January. Despite this production decline, WPC stocks decreased marginally by 3.6%, suggesting weakening demand across domestic and international channels.

Conversely, whey protein isolate production increased substantially by 19.9% to 17.1 million pounds, suggesting manufacturers focus on higher-value protein products. Meanwhile, WPI stocks decreased 5.7%, indicating that demand for these specialized products remains relatively robust.

ProductRegional Change from January 2024
Atlantic
Cheese-1.6%
NFDM+4.1%
Dry Whey-2.9%

Strategic Implications for Dairy Farmers

The January production data demand strategic responses from dairy producers facing these market dynamics. The disconnect between component-adjusted milk production increases (2.2%) and finished product growth rates suggests processors struggle to balance milk utilization against fragmented market signals efficiently. This challenge ultimately transmits financial risk back to the farm level.

Farmers should consider several proactive measures:

  1. Review component optimization strategies, particularly evaluating the ROI on protein-enhancing feed additives, given the weakness in American cheese production and strength in Italian varieties.
  2. Contact processors directly to understand their production plans during the upcoming spring flush period and align herd management accordingly.
  3. Evaluate milk marketing contracts to determine flexibility for directing milk to processors with more diversified product portfolios that are less dependent on NFDM.
  4. Implement voluntary production moderation during peak spring months to avoid contributing to already excessive powder inventory build-up.

Farmers must recognize that the traditional price signals from CME markets may be increasingly disconnected from actual product movement and inventory positions. The January report demonstrates that even as cheese and butter prices show relative strength on paper, the underlying supply-demand fundamentals suggest potential pricing corrections once inventory realities fully manifest in market prices.

Conclusion: Market Reality Check Needed

As the dairy industry navigates these complex production and trade dynamics, the approaching spring flush threatens to exacerbate already significant challenges. The traditional seasonal increase in milk production could trigger substantial price corrections unless processors realign production plans with market realities rather than continuing to build inventory positions that defy economic logic.

For dairy farmers, these production trends underscore the urgent need for greater transparency and coordination across the supply chain. The divergence between component-adjusted milk production increases and finished product growth rates suggests a processing sector struggling to allocate milk components efficiently against fluctuating demand signals. This challenge ultimately transmits financial risk back to those producing the milk.

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Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape

Tuesday, March 4th, 2025

Explore how regional shifts in dairy production are reshaping the global market landscape in 2025—opportunities await savvy producers!

Executive Summary: The global dairy market is undergoing significant transformations in 2025, marked by declining production in the European Union and robust expansion in the United States. The EU faces structural challenges, including regulatory pressures and shrinking herd sizes, leading to a projected 0.2% decline in milk deliveries. In contrast, the U.S. dairy sector is poised for growth, with an increase in herd size and new cheese processing capacity driving production upward. New Zealand’s strategic pivot towards value-added products illustrates a successful adaptation to changing market demands. As global supply and demand dynamics evolve, dairy stakeholders must navigate these shifts to optimize their operations and seize emerging opportunities.

Key Takeaways:

  • EU dairy production is projected to decline by 0.2%, driven by regulatory challenges and reduced herd sizes.
  • The U.S. dairy sector anticipates growth, with a forecasted increase in milk production supported by expanded processing capacity.
  • New Zealand is shifting focus from volume to value, successfully increasing exports of premium specialty dairy products.
  • The critical question for 2025 is whether global demand can absorb anticipated supply increases without triggering price declines.
  • Dairy producers must adapt strategies to align with regional market signals and evolving consumer preferences for sustainable growth.
dairy industry trends, milk production 2025, dairy market analysis, European dairy decline, US dairy expansion, Oceania dairy strategy, global dairy market, cheese production, dairy exports, dairy sustainability

European Production Decline Creates Strategic Opportunities for Forward-Thinking Dairy Farmers

The European Union’s dairy sector faces unmistakable contraction in 2025, with milk deliveries projected at 149.4 million metric tonnes (MMT)—a 0.2% year-over-year decline signaling deeper structural shifts beyond typical cyclical adjustments. This downward pressure stems from regulatory intensification, persistent margin compression, and accelerating herd reduction across member states, creating a production ceiling that even technological advancements cannot offset.

European dairy farmers navigate an increasingly challenging operating environment where regulatory compliance costs continue escalating while production flexibility diminishes. Low farmer margins combined with environmental restrictions and disease outbreaks have pushed smaller operations out of the sector entirely, fundamentally reshaping the production landscape.

Despite fluid milk consumption continuing its long-term decline (projected to reach 23.5 MMT in 2025, down 0.3%), EU27 cheese production is forecast to reach 10.8 MMT, up 0.6% from 2024 levels. This deliberate prioritization of cheese manufacturing necessarily comes at the expense of butter, non-fat dry milk, and whole milk powder production—creating potential supply shortfalls that will influence global price formation in these categories.

American Dairy Expansion Accelerates Despite Market Risks and Labor Challenges

In stark contrast to European constraints, the United States dairy sector demonstrates robust expansion through 2025. Recent data revealed American producers added 34,000 dairy cows between July and December 2024, supporting USDA projections for milk production to reach 228 billion pounds in 2025—an increase of 1.7 billion pounds over 2024 levels.

This growth trajectory isn’t without challenges, however. Highly pathogenic avian influenza (HPAI) created significant disruption in California’s milk production during Q4 2024, demonstrating the potential impact of disease outbreaks even in established dairy regions. Nevertheless, milk production in the rest of the country maintained robust growth at 1.2%, highlighting the underlying expansion momentum.

One critical factor influencing 2025 market dynamics is substantial new cheese processing capacity coming online. Industry analysts note that if all new plants operated at full capacity while existing facilities maintained current production rates, U.S. cheese manufacturing could expand by approximately 6%—a record increase with potentially bearish implications for prices.

Oceania’s Strategic Value-Over-Volume Approach Offers Lessons for Global Producers

New Zealand’s dairy industry demonstrates sophisticated adaptation to evolving global market conditions, with production forecast at 21.3 million metric tons in 2025—below the five-year average of 21.5 million metric tons. This measured volume reduction reflects a deliberate strategic pivot toward value optimization rather than volume maximization.

This strategic reorientation is quantifiably evident in New Zealand’s export portfolio restructuring, with whole milk powder’s share of total dairy exports declining from 45% in 2019 to 41% in 2024 by volume. Despite this proportional reduction, WMP exports have shown remarkable resilience, increasing nearly 4% year-to-date compared to 2023 levels through successful market diversification.

More significantly, New Zealand processors have aggressively expanded production of premium specialty ingredients, including infant formula, protein concentrates, lactoferrin, and caseinates. Export volumes of these high-value products grew by 13.8% year-over-year during the first eight months of 2024, demonstrating successful implementation of value-add strategies that maximize returns from constrained milk supplies.

Supply-Demand Balance: The Fundamental Question Facing Dairy Markets in 2025

The critical question confronting global dairy markets centers on whether demand elasticity will sufficiently absorb anticipated supply increases without triggering substantial price deterioration. Current market fundamentals feature generally favorable producer margins across major exporting regions, which historically stimulates production expansion where biological and regulatory factors permit.

The balancing factor remains global demand resilience, particularly from key importing regions. China’s import recovery trajectory represents the single most significant unknown variable that could substantially influence global dairy market balance. European consumption continues its long-term structural evolution, with declining fluid milk utilization partially offset by stable cheese demand.

For dairy producers navigating this complex environment, strategic focus must shift from generalized market tracking to specific product category dynamics. The traditional assumption that global dairy demand grows at a steady, predictable rate warrants reconsideration in 2025, as consumption patterns increasingly fragment across both product categories and geographic regions.

Strategic Implications for Forward-Thinking Dairy Stakeholders

European processors face intensifying competition for declining milk supplies, necessitating strategic product portfolio optimization to maximize returns from constrained raw material availability. U.S. processors must develop absorption strategies for increasing milk volumes, particularly during seasonal production peaks, while carefully managing the transition as new manufacturing capacity comes online.

Oceania producers and processors demonstrate the viability of strategic repositioning toward value maximization rather than volume leadership—a model that provides insights for other regions facing production constraints. This value-focused approach requires sophisticated market analysis capabilities and agile manufacturing systems capable of responding to emerging premium opportunities.

For dairy farmers worldwide, these market dynamics underscore the importance of production system flexibility, component optimization aligned with regional value signals, and sophisticated risk management strategies. The notion that all dairy producers face similar market incentives no longer holds in an increasingly fragmented global marketplace.

“The global dairy industry has entered a new era of regional specialization and strategic differentiation,” notes industry analysis. “The coming years will reward producers and processors who develop sophisticated understanding of these divergent patterns and position themselves accordingly within this evolving competitive landscape.”

The dairy sector’s ability to align production systems with these shifting market patterns will determine both near-term financial outcomes and long-term structural evolution in an increasingly complex global marketplace.

Related Articles:

  • Sustainable Dairy Farming Practices for 2025 and Beyond
  • Dairy Pricing Forecasts: What to Expect in the Coming Year
  • Strategic Feed Management in Times of Market Volatility
  • Technology Innovations Reshaping Modern Dairy Operations

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Weekly Global Dairy Market Recap 03/03/25: Record Butterfat Meets Trade War Threat

Monday, March 3rd, 2025

Dairy markets face unprecedented turmoil as record-breaking butterfat levels collide with looming trade war threats. With US milk hitting 4.46% fat and Trump’s 25% tariffs set to disrupt key export channels, processors scramble to adapt. Is your operation ready for this perfect biological revolution and geopolitical chaos storm?

Summary

The global dairy industry stands at a critical juncture as unprecedented biological advancements collide with geopolitical upheaval. Record-breaking milk component levels, exemplified by US butterfat reaching 4.46%, are overwhelming processing infrastructure designed for yesteryear’s milk composition. Simultaneously, President Trump’s impending 25% tariffs on Canadian and Mexican imports threaten to disrupt established trade patterns with the US dairy industry’s top export markets. This convergence of factors has created a paradoxical market where butter futures show surprising strength on European exchanges while cheese markets face mounting pressure in the US. Producers and processors alike must navigate this complex landscape, balancing the opportunities presented by component-rich milk against the challenges of processing bottlenecks and potential trade disruptions. Strategic priorities for industry stakeholders include reevaluating component optimization strategies, accelerating processing infrastructure investments, diversifying export markets, and implementing more sophisticated feed cost management approaches. The industry’s ability to adapt to these converging disruptions will determine which operations thrive in this new dairy production and trade era.

Key Takeaways

  • US milk butterfat levels hit an unprecedented 4.46% in January, challenging processing capabilities.
  • President Trump’s 25% tariffs on Canadian and Mexican imports, effective March 4, threaten key dairy export channels.
  • European butter futures are surprisingly strong, up 4.9% to €7,305, while other dairy commodities are under downward pressure.
  • Cheese inventories are 5.7% below year-ago levels, but prices are declining due to export uncertainty.
  • Butter cold storage surged 26% monthly, reaching 9.2% above January 2024.
  • USDA projects record 94 million acres of corn plantings, defying current bearish price signals.
  • Dairy producers must reevaluate component optimization strategies to align with processing constraints.
  • There is an urgent need for investment in processing infrastructure to handle increasingly component-rich milk.
  • Trade diversification beyond Mexico, China, and Canada is critical for risk mitigation.
  • Adaptive strategies and market intelligence are essential for navigating biological and geopolitical disruptions.
dairy market analysis, butterfat levels, dairy exports, tariff impact, milk production statistics

Are dairy processors prepared for the biological revolution in the milk tank? “Recent milkfat levels are like nothing they have ever witnessed,” report industry veterans watching butterfat content reach a mind-boggling 4.43% in January Federal Milk Marketing Orders. This unprecedented biological shift collides with potentially devastating trade policy developments as President Trump’s 25% tariffs on Canadian and Mexican imports activate tomorrow (March 4). The dairy industry faces a perfect storm where processing infrastructure designed for yesterday’s milk composition simultaneously meets geopolitical disruption threatening our top three export markets—Mexico, China, and Canada—.

Global Futures Market Performance: The Butter Anomaly

Last week, the European Energy Exchange (EEX) trading activity revealed a puzzling market contradiction that challenges conventional pricing relationships. While 9,030 tonnes (1,806 lots) changed hands across dairy products, butter futures demonstrated remarkable strength. The March-October 2025 strip advanced 4.9% to €7,305 even as SMP declined 2.8% to €2,603. This divergence contradicts traditional price coupling between fat and protein streams, suggesting sophisticated market participants anticipate structural shifts in global butterfat availability despite current processing bottlenecks.

ExchangeProductVolume TradedPrice Change (Mar-Oct strip)Current Price Level
EEXButter3,145 tonnes+4.9%€7,305
EEXSMP5,410 tonnes-2.8%€2,603
EEXWhey475 tonnesUnchanged€920
SGXWMP9,277 tonnes-0.9%$3,804
SGXSMP1,396 tonnes-2.0%$2,821
SGXAMF82 tonnes-0.1%$6,623
SGXButter179 tonnes-2.3%$6,672

The Singapore Exchange (SGX) reported substantial trading volumes (10,934 lots), but prices moved overwhelmingly in one direction—down. WMP dropped 0.9% to $3,804, SMP fell 2.0% to $2,821, AMF decreased marginally by 0.1% to $6,623, and butter retreated 2.3% to $6,672. This bearish sentiment on SGX contrasted with EEX butter strength suggests deep regional divergences in how markets view near-term supply-demand balance.

Implementation guidance: Forward-thinking dairy producers should carefully evaluate regional processing capacity constraints for high-fat milk before making genetic or nutrition adjustments aimed at further component increases. While EU markets currently reward additional butterfat, not all processing regions have the infrastructure to handle 4.4%+ butterfat milk efficiently.

European Valuations: Year-Over-Year Perspective Challenges

While weekly movements in European dairy quotations showed modest changes, the year-over-year comparison reveals market dynamics that defy conventional economic expectations. Butter is €1,289 (+22.0%) above last year despite supposedly adequate global supplies. Similar strength appears in WMP (+18.5 %) and cheese varieties (+10.4% to +16.9%), challenging the narrative that dairy markets are oversupplied or that inflationary pressures have subsided. Only SMP shows weakness (-0.8 %) compared to year-ago levels.

ProductCurrent PriceWeekly ChangeY/Y Change
Butter (EU avg)€7,136-€12 (-0.2%)+€1,289 (+22.0%)
SMP (EU avg)€2,503+€3 (+0.1%)-€19 (-0.8%)
Whey (EU avg)€904Unchanged+€184 (+25.6%)
WMP (EU avg)€4,335-€32 (-0.7%)+€677 (+18.5%)
Cheddar Curd€4,755-€45 (-0.9%)+€686 (+16.9%)
Mild Cheddar€4,782-€22 (-0.5%)+€677 (+16.5%)
Young Gouda€4,307-€17 (-0.4%)+€406 (+10.4%)
Mozzarella€4,071+€2 (+0.0%)+€521 (+14.7%)

What explains this massive price appreciation amid modest production growth? The traditional supply-demand equation appears insufficient. European processing capacity constraints, regulatory impacts on production, and shifting consumer preferences toward higher-fat products may create structural support for prices that contradict conventional market analysis expecting mean reversion.

Implementation guidance: Producers should resist the urge to hedge heavily against expected price declines that may not materialize. The persistent strength across multiple fat-containing products suggests structural rather than cyclical price support, warranting strategic rather than tactical risk management approaches.

Global Milk Production: Component Revolution

Milk production data from January 2025 reveal an unprecedented revolution in milk composition that our industry has failed to prepare adequately. While fluid milk volume increases remain modest across major producing regions, the component story differs dramatically.

RegionButterfat %Protein %Y/Y Change in Milk VolumeY/Y Change in Milksolids
United States4.46%3.41%+0.1%+2.2%
United Kingdom4.39%3.41%+4.3%+4.5%
Australia4.24%3.38%-2.7%-1.8%
Netherlands4.66%N/A-1.7%-1.0% (fat only)
PolandN/AN/A+2.3%N/A
ItalyN/AN/A-0.6%+0.7%

US milk components have reached extraordinary levels at 4.46% butterfat and 3.41% protein, increasing milk solid collections by 2.2% despite fluid volume growth of just 0.1%. This pattern repeats across multiple regions, with component levels consistently exceeding historical averages. The UK reports 4.39% butterfat and 3.41% protein, while Dutch milk contains an astounding 4.66% butterfat.

Have we reached peak genetic potential for components, or is this the beginning of a biological revolution in milk composition? The processing infrastructure built for 3.5-4.0% butterfat milk is proving inadequate, creating bottlenecks that pressure producer prices despite strong finished product values.

Implementation guidance: Producers should calculate their “component-adjusted basis” when comparing their production against benchmarks, as raw volume comparisons increasingly misrepresent actual milk solids production. Additionally, negotiate supply agreements that properly value components based on processing capacity in your region, as some plants may discount excessively high components they cannot efficiently process.

US Market Crisis: Tariffs Meet Processing Constraints

The US dairy industry faces an unprecedented convergence of challenges that could fundamentally reshape market dynamics. President Trump’s confirmation that 25% tariffs on Canadian and Mexican imports will activate on March 4 threatens established export channels representing billions in dairy trade. The potential for retaliatory tariffs from Mexico (our largest export market), China (second largest), and Canada (third largest) creates massive uncertainty just as domestic production constraints intensify.

The cheese market initially demonstrated resilience before succumbing to downward pressure, with CME spot Cheddar blocks plunging 12.5¢ to $1.775 per pound. Despite this decline, cold storage data reveals an intriguing contradiction—cheese inventories remain 5.7% below year-ago levels, with American-style cheese stocks down 7.4% to their lowest January volume since 2018. This tightness should support prices in a rational market, but fear of trade disruption with Mexico has overwhelmed fundamental analysis.

Meanwhile, the butter market faces a crisis stemming from unprecedented butterfat levels in farm milk. Industry contacts report processing bottlenecks throughout the supply chain, with “cream suppliers under significant pressure to find homes” and “butter plants backed up” with delays “exceeding post-holiday levels of inflows.” Cold storage data confirms this production surge, with butter inventories jumping 26% in a month to reach 270.28 million pounds, 9.2% above January 2024. Despite strong demand, this supply pressure pushed CME spot butter down 7¢ to $2.345 per pound.

Implementation guidance: Dairy producers selling into export-dependent channels should immediately review their milk buyers’ exposure to Mexican, Chinese, and Canadian markets. Those heavily dependent on these channels should explore diversification options or risk management tools to mitigate potential market disruptions. Additionally, producers should prioritize quality metrics beyond just component levels, as processing constraints may increasingly discount milk with extreme component values that create handling challenges.

Feed Market Developments: Contradicting Conventional Signals

The USDA’s preliminary acreage projections challenge conventional wisdom about crop economics and farmer decision-making. Despite relatively unattractive returns at current price levels, farmers are projected to plant 94 million acres of corn this spring, up significantly from 90.6 million acres last year and representing one of the highest corn seedings in the past decade. This increased corn acreage comes at the expense of soybeans, projected at 84 million acres, down from 87.1 million in 2024.

Why would farmers expand corn production when markets show clear bearish signals? May corn futures closed at $4.695 per bushel, down more than 35¢ for the week, while May soybeans dropped 32¢ to $10.25 and soybean meal declined $4 to $300 per ton. The conventional narrative suggesting farmers plant based on price signals appears increasingly questionable.

This acreage shift may reflect deeper structural factors, including risk management strategies, input cost considerations, crop rotation benefits, and regional adaptations to changing climate patterns. If realized, this expanded corn acreage could produce a record 15.6 billion bushel harvest, assuming trendline yields of 181 bushels per acre.

Implementation guidance: Dairy producers should resist the temptation to forward contract substantial feed needs at current prices despite their apparent value. The projected acreage expansion and improved South American weather suggest significant downside potential for feed costs later in 2025. Consider implementing a graduated purchasing strategy that secures only 30-40% of needs before planting progress reports, keeping sufficient flexibility to take advantage of potential summer price weakness.

Strategic Reset: Navigating Converging Disruptions

The dairy industry must fundamentally rethink conventional approaches facing converging disruptions across multiple fronts. The biological revolution in milk components has rendered many processing facilities inadequate, just as geopolitical tensions threaten to disrupt established trade patterns. This requires a strategic reset across several dimensions:

Trade diversification has become an immediate necessity rather than a long-term aspiration. The concentration risk is unacceptable, with Mexico, China, and Canada collectively representing over 60% of US dairy exports. Forward-thinking processors have already accelerated market development in Southeast Asia, the Middle East, and Latin America, unaffected by current tariff disputes. Producers should prioritize relationships with processors demonstrating diversified market exposure.

Component optimization strategies must evolve beyond simplistic “more is better” approaches. The record-breaking components now seen across multiple regions have created processing bottlenecks that paradoxically devalue the very components being produced. Dairy operations should implement precision nutrition programs that optimize component production based on actual processor capacity and payment systems rather than theoretical component values.

Processing infrastructure investment represents the most significant opportunity in the current environment. The mismatch between milk composition and processing capacity has created bottlenecks that depress producer returns despite strong finished product markets. Forward-thinking cooperatives and processors who rapidly expand their capacity to handle high-component milk will gain competitive advantages in procurement and finished product markets.

Feed cost management requires abandoning conventional seasonality assumptions as climate change and geopolitical tensions create new market patterns. The projected record corn acreage suggests waiting for harvest pressure before making substantial purchases, but trade disruptions could create unexpected price volatility regardless of supply fundamentals. Implement staggered purchasing strategies with trigger points based on technical signals rather than calendar dates.

Outlook: Biological Revolution Meets Geopolitical Disruption

The global dairy landscape is undergoing transformative change as the biological revolution in milk composition collides with geopolitical disruptions of established trade patterns. In the coming months, market segmentation based on processing capability, export exposure, and component handling capacity will likely increase.

Given the imminent trade disruptions that could simultaneously affect our top three export markets, dairy producers should immediately evaluate milk buyer stability. Those selling to processors heavily dependent on Mexican, Chinese, or Canadian markets face heightened risk, requiring immediate risk management attention.

The longer-term strategic challenge involves aligning production systems with the rapidly evolving processing infrastructure needed to handle increasingly component-rich milk. The current bottlenecks reflect an industry unprepared for the biological revolution in the milk tank, with genetics and nutrition advancements outpacing processing technology investments.

Forward-thinking producers will increasingly differentiate themselves by optimizing not just production volume or components but also the specific attributes most valued by their particular processor and end market. This more sophisticated approach requires more profound engagement with downstream supply chain partners and more nuanced production strategies than the industry has historically employed.

As we navigate these converging disruptions, flexibility and market intelligence will prove more valuable than rigid production systems optimized for yesterday’s market conditions. The industry’s adaptability to these biological and geopolitical revolutions will determine which operations thrive during this period of transformative change.

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Butter and Cheese Production Surge: How 2023’s Record-Breaking Output Shapes the Future

Monday, October 7th, 2024

Explore how this year’s surge in butter and cheese influences your dairy farming. Ready to embrace the shift?

Summary:

The dairy industry is experiencing an unexpected shift, focusing on increased butter and cheese production, with record-breaking butter output and a surge in Italian-style cheese making headlines. This surge, driven by high prices and an abundant milk supply, poses new implications for dairy farmers and industry professionals. Notably, butter output rose by 14.5%, and cheese production hit 1.2 billion pounds, spotlighting a strategic purchaser approach during spring and summer to avoid price increases. The emphasis on mozzarella reflects growing consumer demand, although cheddar production saw a decline of 6.6% in the first eight months, raising costs and affecting buyer interest. Additionally, changes in whey processing require a careful balance between whey protein products and powder to successfully navigate the evolving market landscape.

Key Takeaways:

  • Butter output reached new monthly records from May to August 2024, driven by high prices and abundant cream.
  • U.S. cheese production increased, focusing on Italian-style cheeses, while Cheddar production declined.
  • Whey processors shifted focus to higher protein concentrates and isolates, reducing whey powder production.
  • Milk powder production declined significantly due to tighter supply and competitive manufacturing demands.
  • Future market trends predict continued heavy cheese production, affecting Class III and Class IV futures with expected shifts in pricing.
butter production increase 2023, cheese production trends, dairy market analysis, Mozzarella demand rise, Cheddar production decline, whey protein market evolution, dairy pricing strategies, Italian-style cheese popularity, dairy farmers market implications, milk supply and demand dynamics

Record-breaking butter and cheese production has characterized 2023, hitting new monthly marks and breaking down limits like never before. This is more than simply an outstanding performance on paper; it is a watershed moment for dairy farmers and the industry. The implications for markets and pricing might be substantial. But what does this imply for your dairy business? A revolution is underway, with butter output rising 14.5% and cheese production approaching 1.2 billion pounds. It’s crucial to adapt to these changes. Will you grasp the chance, or will the tide change the landscape of your business? Continue reading to learn more about these trends and how they may affect your company.

Butter Churns Thriving: The Summer Surge 

Let’s look further at the spike in butter manufacturing. High prices and sufficient milk supply increased butter production from May to August. Butter production in the United States skyrocketed over these months, setting new records. What drives this trend? When the cream is ample, manufacturing becomes more feasible, increasing supply. On the other hand, high prices encourage businesses to increase output to satisfy rising demand.

This record production has advantages, particularly as the autumn baking season approaches—when demand for butter surges. With more butter available, the market is better prepared to deal with the seasonal surge, eventually stabilizing prices and ensuring that stocks stay strong. This is excellent news for producers and consumers trying to meet their fall baking and culinary demands.

Interestingly, butter purchasers demonstrated exceptional strategic awareness by buying aggressively in spring and summer. Their preemptive purchase technique was intended to avoid the regular October price spikes witnessed in previous years. By obtaining supply beforehand, they could better negotiate the market and contribute to the competitive price environment. Such efforts highlight the crucial role of competent dairy specialists in surviving in a competitive sector.

Have You Noticed the Cheese Production Shift?

Have you seen a difference in U.S. cheese output this year? While cheese production is increasing, there is a noticeable trend toward Italian-style cheeses, notably Mozzarella. Why Mozzarella, you ask? It’s simple: consumer demand is surging. Production increased by 4.7% in August compared to the previous year. This development demonstrates shifting customer tastes and manufacturers’ capacity to accommodate these expectations.

But what about the essential favorite, Cheddar? It is a different tale here. Cheddar production has fallen behind last year’s results by 6.6% over the first eight months of the year. What’s driving the decline? Primarily, there is a change in production priorities, with more milk being allocated to the thriving Italian cheese industry. However, this change has resulted in a scarcity of fresh Cheddar, increasing costs and temporarily discouraging purchasers owing to sticker shock.

The shortfall has significantly impacted market dynamics. Cheddar prices rose sharply, hitting an all-time high last month. What was the result? A temporary departure of customers caused manufacturers to reconsider their strategies—a positive development. The market behaves like a living thing, responding and adjusting to these manufacturing patterns.

Whey Evolution: What’s Your Next Move? 

What does an increase in whey protein concentrates (WPCs) and isolates (WPIs) indicate for the market? Simply put, CPUs are reshaping the game. Converting whey into value-added goods has a tremendous impact on the industry. Can you feel it yet? The effect is palpable. WPCs with a mid-level protein concentration are up 4.4% from last year, while WPIs increased by 35.1%.

But there’s a catch: WPC and WPI manufacturing increase diverts raw material that would otherwise wind up in whey powder. As a result, whey powder output has been down 23.9% since August 2023. So, how does this affect whey powder stocks? They’re drying out, reaching their lowest point since January 2022 and down 34.8% from a year ago.

Prices fluctuate as availability tightens. The pressure on equities has steadied U.S. whey prices, providing a buffer against a drop too low. Are you prepared to adjust your approach in reaction to these changes? Knowing the balance between whey protein products and whey powder will be critical for successfully navigating the market as these dynamics develop. What are your plans of action?

Milk Powder Paradox: Navigating the Supply Lag

When faced with milk powder production issues, the impact of decreasing milk supply and rapid cheese manufacturing growth must be addressed. You’ve probably observed how these factors contradict the formerly consistent rise of milk powders like NDM and SMP.

So, what’s at the heart of this uproar? Milk supplies are becoming tighter. Fresh milk is sent straight to cheese makers, leaving less for powder. This circumstance has clogged the milk stream, significantly reducing the amount of milk accessible for powder manufacture.

The possible consequences for the milk powder sector have reached a peak. With milk powder production declining, particularly in the United States, a renewed emphasis on premium pricing techniques is developing. Changes in supply and demand will keep prices stable globally, particularly in foreign markets dealing with comparable restrictions.

As a dairy farmer or industry professional, you can consider how this dynamic will impact your buying strategy and investment priorities in the following years. Will your production priorities change? Or will there be a shift towards new markets?

While the current scenario seems complicated, the developing milk powder business offers a significant opportunity to readjust and innovate in adversity.

Strategic Outlook: Aligning with Market Movements

The existing circumstances pose important issues for dairy producers like yourself. The dramatic change in cheese manufacturing capacity will likely divert significant milk volumes away from milk powder production. This redirection directly impacts the future markets for Class III and Class IV.

Class III Futures: Industry forecasts indicate that rising cheese supply would drop Class III futures below $20 per hundredweight (cwt) by February 2025. This estimate likely reduced sales for cheese milk, adversely damaging cheese manufacturers’ profit margins.

Class IV Futures: Class IV futures are expected to remain over $21 per cwt from February to November 2025. According to Global Dairy Trade, the supply of nonfat dry milk (NDM) and skim milk powder (SMP) is expected to be restricted, creating a profitable opportunity for those positioned accordingly.

So, how should the projected market upheavals influence your decision-making? Strategic reallocation of resources might be critical. Given the high premium associated with Class IV contracts, shifting focus to milk powder manufacturing may be advantageous.

Planning for Tomorrow: Navigating the Evolving Dairy Industry 

The environment of butter and cheese manufacturing is dynamic and changing. As we’ve seen, the remarkable production in recent months has shifted expectations and price patterns for dairy products. The repercussions are far-reaching, with butter inventories comfortably higher than in prior years and cheese preferences shifting toward specific kinds such as Mozzarella. Constrained milk powder production complicates the situation, presenting strategic alternatives.

So, how will these events impact your future actions in the dairy industry? Will more excellent output lead to long-term market competitiveness, price, and demand changes? As you think about it, consider how aligning with these trends may boost the success of your business. In light of these market shifts, where do you see the most significant possibility for growth? It’s a time for introspection and strategic planning for those determined to remain ahead in the dairy sector.

The Bottom Line

Finally, we must assess the changes that have occurred in 2023. Butter and cheese prices have risen significantly due to smart bidding and increased demand. However, it is challenging sailing. The complexity of reduced Cheddar output and tighter milk powder supplies indicate an industry dealing with inventory and supply issues.

Imagine the future dairy landscape. How may your approach change when additional cheese manufacturing capacity becomes available? Are you prepared for the expected changes in Class III and IV? Consider how you will adjust as disease pressures increase and global considerations become more important. Will the emphasis on cheese change the overall milk market dynamics?

The bottom line is to keep an eye on emerging trends and be prepared to adjust. What proactive measures will you take now to be competitive tomorrow? The dairy sector is more than simply production; it’s about adapting to change with insight and agility.

Learn more:

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CME Dairy Market Update: Mixed Cash Prices for Cheese, Butter, and Dry Milk

Wednesday, September 4th, 2024

Wednesday’s cash dairy prices painted a mixed picture, keeping dairy farmers and industry professionals on their toes. 

cash dairy prices, CME dairy market reports, Chicago Mercantile Exchange, dairy farmers, dry whey prices, cheese block prices, cheese barrel prices, butter prices, nonfat dry milk prices, dairy market analysis, dairy industry news, dairy professionals, dairy market trends, dairy product prices, dairy market update

Let’s break down the day’s movements so you can keep your strategy sharp: 

  • Dry Whey: Dropped by $0.0050, settling at $0.5650, with only one sale recorded.
  • 40-Pound Cheese Blocks: Saw a slight increase of $0.0150, reaching $2.23, based on one sale.
  • Cheese Barrels: Down by $0.01, ending at $2.25, with one sale recorded.
  • Butter: Decreased by $0.0050 to $3.1475, with no sales recorded.
  • Nonfat Dry Milk: Edged up by $0.0125, closing at $1.3550, with two sales at different prices ($1.35 and $1.3550).

With spot cheese largely stable this week after last week’s quick rally, buy-side enthusiasm cooled on Wednesday. Spot block cheese did push 1.5 cents higher on one trade to a new 2024 high price but was tempered by an unfilled offer and the price of barrel cheese falling a penny on one trade. 

The reasons for the above $2.00 cheese price (less cheddar production, improved summer demand, tighter milk supplies) remain intact. But buyers are quieter this week at both the exchange and anecdotally. While supply side data is bullish, demand still gets a vote. It’s too early to say we’ve entered a lower demand period, but spot cheese has been unstable lately, and that dynamic seems to be ongoing. 

Futures markets have been active this week with open interest rising on up and down moves. Speculators, both large and small, are long on Class III and Cheese, continuing to trade from the long side. Producer selling is not as heavy as expected, despite excellent Q4 farm margins, but they’ve been active this week. 

Big bull markets always grab attention, and the daily volumes in Class III (and to a lesser extent cheese) illustrate that. Nearby Class III and Cheese are set to start lower today, following yesterday’s weaker close, as the market braces for some spot weakness. 

Headline milk production in July was down 0.4%, but when adjusted for components and bottled milk, the solids available for processing were up 1.1% from last year. With tighter cheese supplies, it’s assumed cheese production improved from -1.4% YoY in June to +0.9% in July. More milk went into cheese, leaving less for butter, with butter production in July forecast up 1.5% YoY compared to 2.8% in June. Combined NFDM+SMP production is forecast to drop 14.7%, similar to June’s 15.5% drop. High protein WPC/WPI production remained strong, with solids shifted out of dry whey and low protein WPC. 

Spot butter has traded slightly weaker since hitting a new 2024 high last week. Prices dipped just ½ cent yesterday with no trades, but futures saw strong volumes of 545 contracts, with open interest rising by 223 contracts. Most of this was due to a Jan-Jun futures pack trading 50x/month @ 289, a new high as 2025 contracts have traded slightly higher recently. The range-bound nature of spot butter, making new highs while doing so, fuels appetite to buy deferred futures as milk production expectations play out for the rest of the year. 

Spot nonfat traded 1.25 cents higher on two trades to 1.355, hitting another 2024 high. Futures volumes have been steady this week, with 191 contracts traded yesterday and open interest rising by 98 contracts. Even with spot prices pushing higher, futures have recently consolidated near last week’s highs. Prices were mixed to lower into 2025. Despite bullish US fundamentals and stronger exports to Mexico, the market probably needed a breather after a roughly 10 cents rally over 3-4 weeks.

Daily CME Cash Dairy Product Prices ($/lb.)

 FinalChange ¢/lb.TradesBidsOffers
Butter3.1475-0.5023
Cheddar Block2.231.5101
Cheddar Barrel2.25-1100
NDM Grade A1.3551.25262
Dry Whey0.565-0.5121

 Weekly CME Cash Dairy Product Prices ($/lb.)

 TueWedCurrent Avg.Prior Week Avg.Weekly Volume
Butter3.15253.14753.153.18213
Cheddar Block2.2152.232.22252.1282
Cheddar Barrel2.262.252.2552.21152
NDM Grade A1.34251.3551.34881.31158
Dry Whey0.570.5650.56750.56052

 CME Futures Settlement Prices

 TueWed
Class III (SEP) $/CWT.22.5422.6
Class IV (SEP) $/CWT.22.5122.38
Cheese (SEP) $/LB.2.2132.219
Blocks (SEP)$/LB.2.1352.135
Dry Whey (SEP) $/LB.0.53280.5285
NDM (SEP) $/LB.1.27751.29
Butter (SEP) $/LB.3.1653.17
Corn (SEP) $/BU.3.85253.9125
Corn (DEC) $/BU.4.094.13
Soybeans (SEP) $/BU.9.961.005
Soybeans (NOV) $/BU.1.0151.0275
Soybean Meal (SEP) $/TON320323.3
Soybean Meal (DEC) $/TON321.1328.6
Live Cattle (OCT) $/CWT.179.53179.18

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Prices Mostly Higher Tuesday at the Chicago Mercantile Exchange

Tuesday, September 3rd, 2024
Dairy prices update, Chicago Mercantile Exchange, Cash dairy prices, Dry whey price, Cheese block prices, Cheese barrel prices, Butter prices trend, Nonfat dry milk prices, Dairy market analysis, Dairy product trading

Tuesday brought some exciting changes in cash dairy prices on the Chicago Mercantile Exchange that might catch your attention.  Dry whey saw a slight uptick, rising $0.01 to $0.57. This wasn’t just a blip; a recorded sale at that price supported it.  Consistency in these minor gains can significantly boost your revenue over time.

But there’s more. Forty-pound cheese blocks edged up by a modest $0.0050, now sitting at $2.2150. Again, one sale was recorded at that new price point, showing that demand remains steady. 

  • Dry whey: Up $0.01 to $0.57
  • Cheese blocks: Up $0.0050 to $2.2150
  • Cheese barrels: Unchanged at $2.26
  • Butter: Down $0.0175 to $3.1525
  • Nonfat dry milk: Up $0.0125 to $1.3425

It’s not all rosy, though. Butter prices slipped by $0.0175, settling at $3.1525 across thirteen recorded sales. This dip might be a downer, but informed decisions come from knowing all the details.

Daily CME Cash Dairy Product Prices ($/lb.)

 FinalChange ¢/lb.TradesBidsOffers
Butter3.1525-1.751326
Cheddar Block2.2150.5100
Cheddar Barrel2.26NC101
NDM Grade A1.34251.25632
Dry Whey0.571120

Weekly CME Cash Dairy Product Prices ($/lb.)

 MonTueWedThurFriCurrent Avg.Prior Week Avg.Weekly Volume
Butter–3.1525–––3.15253.18213
Cheddar Block–2.215–––2.2152.1281
Cheddar Barrel–2.26–––2.262.21151
NDM Grade A–1.3425–––1.34251.31156
Dry Whey–0.57–––0.570.56051

 CME Futures Settlement Prices

 MonTue
Class III (SEP) $/CWT.022.54
Class IV (SEP) $/CWT.022.51
Cheese (SEP) $/LB.02.213
Blocks (SEP)$/LB.02.135
Dry Whey (SEP) $/LB.00.5328
NDM (SEP) $/LB.01.2775
Butter (SEP) $/LB.03.165
Corn (SEP) $/BU.03.8525
Corn (DEC) $/BU.04.09
Soybeans (SEP) $/BU.09.96
Soybeans (NOV) $/BU.01.015
Soybean Meal (SEP) $/TON0320
Soybean Meal (DEC) $/TON0321.1
Live Cattle (OCT) $/CWT.0179.53
Categories : Dairy Markets
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Surging Dairy Prices: Are You Prepared for the Impact?

Friday, August 16th, 2024

Discover the latest dairy market milestones and record highs. How will rising prices impact your farm? Stay informed to make the best decisions for your dairy business.

Summary: Dairy spot markets have reached historic highs, with prices rising faster than ever. CME spot Cheddar barrels have increased by 25% to $2.255 per pound, the highest level in over two years. Butter has also skyrocketed to $3.18 a pound, a record high for this time of year. Nonfat dry milk has seen its value rise to $1.255 per pound, a level not seen in 18 months. The markets are begging for producers to make more milk, but biology limits their ability to respond. However, there is a silver lining: the potential for increased profits. The demand for butter remains strong, even at record-high costs, providing a stable market for dairy products. Nonfat dry milk (NDM) rose 5.5% to $1.255 a pound, its highest level in 18 months. Class III and Class IV futures have performed exceptionally well, reaching life-of-contract highs and posting significant gains. The primary cause of these tremendous gains is a scarcity of milk, influenced by seasonal factors, such as cow stress and increased school demand.

  • Record-high prices for dairy spot markets, especially for Cheddar barrels and butter.
  • Nonfat dry milk reaches levels not seen in 18 months, highlighting the market’s upward trend.
  • Biological limitations hinder immediate production increases, despite growing market demand.
  • Strong butter demand provides a reliable market for dairy products, even at high costs.
  • Class III and Class IV futures reach life-of-contract highs due to milk scarcity.
  • Seasonal factors, including cow stress and school demand, contribute significantly to milk scarcity.
  • Potential for increased profits for dairy producers amidst the tightening milk supply.
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Imagine waking up to discover that every drop of milk in your storage tanks is suddenly worth more than a week ago. Dairy spot markets are at historic highs, and prices are rising faster than ever. CME spot Cheddar barrels have increased to $2.255 per pound, the highest level in over two years. Butter skyrocketed to $3.18 a pound, a record high for this time of year. Even nonfat dry milk saw its value rise to $1.255 per pound, a level not seen in 18 months. “The markets are begging for producers to make more milk, but biology limits their ability to respond.” With this fast-paced movement, it’s difficult not to pay attention. But amidst this surge, there’s a silver lining-the potential for increased profits. So, what does this mean for you and your operations? How can you leverage this surge to your advantage?

ProductPrice ChangeCurrent PriceHistorical Context
Cheddar Barrels+25¢$2.255 per lbHighest in over 2 years
Blocks+14.25¢$2.10 per lbHighest since January 2023
Butter+8.25¢$3.18 per lbLoftiest since last October
Nonfat Dry Milk (NDM)+5.5¢$1.255 per lbFirst time in 18 months
Whey Powder-1.25¢$0.55 per lbHigher than much of the past 2 years

Skyrocketing Prices Alert: The Dairy Market Soars to New Heights 

Recent milestones in the CME spot markets for cheddar barrels, blocks, butter, and nonfat dry milk have been impressive. The price of Cheddar barrels increased by 25% to $2.255 a pound, reaching its highest level in two years. This spike reflects fundamental market dynamics, with a temporary increase and a large retreat. Similarly, Cheddar blocks significantly rose 14.25˼, driving the price to $2.10 per pound, matching the highest level since January 2023.

Butter has also been increasing in popularity. The price increased by 8.25 percent to $3.18 a pound, the most since October during the pre-holiday surge. Despite the high cost, merchants were busy, swapping 103 cargoes this week alone. More impressively, 51 loadings were reported on Thursday, the biggest since daily trading started in 2006. This demonstrates that demand for butter remains strong, even at record-high costs, providing a stable market for dairy products.

Nonfat dry milk (NDM) rose 5.5 percent to $1.255 a pound, its highest level in 18 months. This shows that demand is recovering, that supply is constrained, or both. However, whey powder did not share the spotlight, declining 1.25 percent compared to last Friday. Despite a slight decline, the current whey price of 55˼ remains much higher than the previous two years.

Class III and Class IV Futures Break Records: Milk Supply Shortages Fuel Market Surge

Class III and IV futures have lately performed exceptionally well, reaching life-of-contract highs and posting significant gains. On Thursday, September, Class III futures rose to $21.81 per cwt, up $1.13 per week. The October contract advanced 84˼ to reach $22. Despite a modest setback on Friday, these data show tremendous development and a promising future for the dairy industry.

Class IV futures traded steadily, with tiny but continuous weekly gains. In September, Class IV increased by 53% to $22.22; in October, it increased by 67% to $22.41. This consistent rise implies that Class III and Class IV are practically comparable, in sharp contrast to the significant discrepancies witnessed in the previous year.

What’s causing these tremendous gains? The primary cause is a scarcity of milk. Seasonal factors, such as cow stress from a hot summer and increased school demand, have considerably influenced milk supply. Additionally, avian influenza in central areas has reduced milk output, further straining the market. This scarcity has forced processors to give up to $3.50 premiums over the already high Class III price for spot milk, the highest ever recorded in mid-August.

Tight Milk Supply: What’s Behind the Sizzling Summer Stress? 

Several converging variables are principally responsible for the limited milk supply. Seasonal stress has been especially tough for cows this year, with high summer temperatures reducing milk output. Have you noticed your herd is suffering more than usual? This seasonal strain is not a tiny blip; it considerably impacts milk production. Avian influenza is another factor that changes the game in this equation. Bird flu may impede milk production, especially in the central United States. The virus decreases productivity in a significant portion of the country’s dairy cows, causing a ripple effect across the industry.

The challenges of raising milk production add another dimension to this complex problem. Heifers are expensive and rare, making increasing herd levels difficult for farmers like you. Even as attempts to stabilize or grow dairy head numbers intensify, the truth remains sobering: many of you are coping with older cows that produce less milk than younger heifers. This aged herd leads to declining yields, limiting its capacity to fulfill market demand. The shortage of milk raises overall expenses. Have you ever wondered why processors are paying up to $3.50 more than the already high-Class III price for spot milk? High demand combined with limited supply sends prices into the ceiling.

Fresh cheddar supply has dropped, resulting in a significant increase in the barrel market. These limits pushed dairy prices significantly higher, changing market dynamics and placing farmers in power. However, this also entails walking a tightrope, balancing rising prices and the constant fight to increase productivity. The market remains positive, and prices are projected to rise as supply limitations continue.

The Global Dairy Showdown: Stabilization in Oceania and Europe Amid Market Turmoil 

The worldwide dairy production situation has been stable. Since August 2023, production levels among the world’s biggest dairy exporters have consistently been lower than in previous years. However, there is hope for stability, especially in Oceania and Europe. Following months of volatility, these areas are now finding their feet and stabilizing their production, providing a sense of reassurance and confidence in the global dairy market.

The struggle for milk powder market share has intensified owing to a significant fall in Chinese imports. As China adjusts its import plans, Oceania and Europe compete to fill the gaps, reshaping global trade maps and adding complexity to the delicate balance of supply and demand.

This increased rivalry emphasizes an important point: although production may be steady in vital places, market dynamics constantly change. Dairy farmers and exporters must be adaptable and ready to respond to changing global trade and consumer needs, fostering a sense of preparedness and proactivity in the industry.

Mixed Market Realities: Butter Soars While Cheese and Milk Powder Face Challenges 

The demand prognosis for different dairy products is varied. Butter demand is high, and this trend will likely continue, given its importance in-home consumption and processed goods. Strong demand has kept butter prices stable despite volatility in other industries.

Cheese, on the other hand, must deal with increasing pricing, which might reduce worldwide demand. The high prices will make U.S. cheese-less competitive worldwide, reducing export quantities. With Europe already catching up, the American race may halt as global customers seek more economical options.

Whey and milk powder are in a challenging situation. High pricing may dissuade the foreign market, mainly when competing with European peers whose recently increased costs. While many dairy sectors have strong local demand, the export market presents a substantial barrier. The present high pricing may be beneficial for immediate profits. However, they may reduce international competitiveness, resulting in a natural ceiling on dairy prices and balancing the market over time.

Record Harvests and Crop Yields: A Boon for Dairy Producers? 

Turning our attention away from the dairy farms and onto the lush fields, the most recent USDA estimates are optimistic. The organization predicts record harvests for corn and soybeans, with a 183.1 bushels per acre corn output. Soybeans are also doing well, with forecasts indicating that output may reach new highs. These stats are not just astounding; they are game changers.

What does this imply for you as a dairy farmer? Feed expenses might take a significant chunk out of your earnings. With such plentiful crops, feed costs are anticipated to stabilize or fall. Lower feed costs imply higher profits, mainly because milk prices are already upward.

While you may be eager to rejoice, it is essential to remember the bigger picture. Cheap feed may increase animal output, affecting meat markets and milk supply dynamics. As you drink your coffee and analyze these estimates, it’s evident that the USDA’s forecast represents a complicated mix of possibilities and concerns. But one thing sticks out: abundant crops have the potential to flip the tide in your favor, making your dairy farming future sustainable and lucrative.

The Bottom Line

Soaring prices and restricted milk supply have pushed the dairy market to new highs. Record-breaking achievements in cheese, butter, and nonfat dry milk support the optimistic trend. However, the summer stress on the cows and problems like avian influenza and an aging herd hinder attempts to increase milk output. With worldwide supply deficits and competitive international markets, butter demand remains high. At the same time, cheese and milk powder prices face export hurdles. While producers enjoy high prices, the future remains unpredictable, with supply limits and global market dynamics important in determining pricing and availability.

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Will Milk Prices Soar or Stagnate? Dairy Farmers Brace for Future Trends

Wednesday, August 7th, 2024

Will milk prices go up or stay flat? Check out the trends affecting dairy farmers and their income. Keep reading to learn more.

Summary: Cheese prices have been on a rollercoaster over the past two months, creating uncertainty for dairy farmers. The future remains shaky, with milk prices tied to corn prices dropping. Cheese buyers are cautious, leading to a balanced but possibly unstable market. Also, demand is shifting towards Italian and Hispanic cheeses. So, what does all this mean for you? Milk prices are fluctuating, directly affecting your profitability. Block cheese increased from $1.8753 in May to $1.9126 in July despite low milk costs. This decrease in the price difference between block and barrel cheese indicates an equilibrium in supply and demand—a brief relief. Because milk and corn prices are linked, corn price drops can reduce your feed costs. To navigate these changes, consider diversifying your product offerings, improving herd management, exploring new markets, keeping an eye on corn prices, and leveraging technology. The link between milk and grain prices adds complexity and opportunities for a higher income-to-feed ratio.

  • Cheese prices have been highly variable, adding uncertainty for dairy farmers.
  • Milk prices are closely tied to corn prices, which are declining.
  • The cheese market is stable but might face instability due to cautious buyer behavior.
  • Demand is shifting towards Italian and Hispanic cheeses.
  • There’s a decreasing price difference between block and barrel cheese, indicating supply and demand equilibrium.
  • A drop in corn prices can lower feed costs, potentially boosting farm profitability.
  • Diversifying products, improving herd management, exploring new markets, and leveraging technology can help navigate these changes.

Are you ready for the rollercoaster ride of milk prices? Dairy producers are facing more challenges than ever before. The fluctuating milk costs could be your company’s make-or-break factor, and the recent cheese pricing fluctuations might leave you wondering about the future. Did you notice the average price of block cheese on the CME, which increased from $1.8753 per pound in May to $1.9126 in July? This significant rise is a promising development, especially considering the low milk costs. But can these increased prices be sustained, or are we heading for a decline? As a dairy farmer, it’s your responsibility to understand these patterns. Let’s delve deeper and determine whether milk prices will continue to rise or stabilize.

Brace Yourselves: Rollercoaster Ride of Cheese Prices Ahead! 

Have you observed any recent trends in cheese prices? It’s quite the rollercoaster.

The monthly block cheese price on the CME in July was $1.9126/pound. Compare it to June’s $1.8941 and May’s $1.8753, and you’ll see a constant rising trend. Meanwhile, barrel cheese averaged $1.9239 a pound in July, slightly lower than June’s $1.9516 and May’s $1.97844. But what’s more noteworthy is the block/barrel pricing differential. Historically, this gap has been reversed, implying that barrel prices were more significant than block prices, a market aberration.

The diminishing difference between block and barrel prices shows that supply and demand are in equilibrium. Most crucially, these statistics are higher than at the start of the year, providing much-needed respite to dairy farmers who have been dealing with low milk prices for far too long. For now, dairy producers may breathe a bit easier, but monitoring this spread will be critical for projecting milk price patterns.

Have You Ever Thought About How Milk and Corn Prices Are Connected? 

Have you ever wondered how milk and corn prices relate? It’s a fascinating connection, particularly if you’re a dairy farmer. Corn price drops are not necessarily good news for milk prices, and the cost of maize impacts how much dairy producers spend on feed.

Let’s look at the numbers. According to the June Agricultural Prices report, the average maize price has decreased from $6.49 per bushel in June 2023 to $4.48 per bushel. That is a substantial drop! Corn prices have also dropped, which might imply cheaper feed expenses for dairy producers. Nonetheless, this only sometimes implies increased revenue since milk costs are another vital aspect of the equation.

Understanding the relationship between milk and corn prices will help you make more informed financial choices for your farm. As maize prices continue to fall, watch how this affects milk pricing. The two may not always move in sync, but the ebb and flow are inextricably linked.

Let’s Talk About Income Over Feed for a Bit 

Let us briefly discuss revenue over feed. As a dairy farmer, you understand how important this measure is, correct? Income over feed refers to the difference between the money made by milk and the feed costs required to produce that milk. Feed frequently accounts for 40-60% of overall production costs.

If you’re interested in recent statistics, here’s a snapshot: In June, the revenue above feed price was $11.66, up from $3.65 a year earlier and the most since June 2022—such an improvement results in more money in your pocket, providing some respite amid volatile market circumstances.

So, why the boost? Higher milk prices and cheaper feed expenses. The June Agricultural Prices report revealed average maize prices at $4.48 per bushel, down from $6.49 the previous June. With feed prices down by around 34% from their high, many dairy producers benefit.

The Curious Case of Declining Cheese Inventory: What Gives? 

Cheese inventory has declined significantly compared to the previous year, although this has not caused any concern in the market. Why is this happening? Currently, supply and demand are securely balanced. Sellers are eager to sell cheese when prices are high, and buyers like to purchase when prices are low. However, the current equilibrium is likely to alter. As we approach the end of the year, cheese supplies will be drawn to sustain output.

Fresh cheese is essential in this recipe. Cheddar cheese aged up to 30 days is traded on the daily spot market, and rising demand for fresh cheese often raises total market prices. Even with considerable aged cheese reserves available, a jump in fresh cheese demand may cause supply to constrict and prices to rise. Keep a watch on this dynamic; it might significantly impact future cheese pricing. Changing strategy depending on this might be critical for remaining ahead.

But Wait, There’s More! Have You Been Following What’s Happening in the Global Dairy Market? 

But wait—there’s more! Have you been following what’s going on in the global dairy market? It’s similar to predicting the weather, but knowing about it might help you anticipate what to expect.

International trends and trade policy have a significant impact on domestic milk prices. Recent trade accords, such as the United States-Mexico-Canada Agreement (USMCA), have opened up new markets for American dairy farmers by improving access to the Canadian market for their goods [FAS USDA]. On the other hand, tariffs may cause snags, such as trade conflicts with China, which reduce the competitiveness of American milk. However, some assistance has been provided by lifting or reducing particular levies.

What does this mean to you? Keeping an eye on foreign markets and knowing trade rules can allow you to prepare more effectively. Whether you’re selecting whether to sell your milk or investing in new equipment, information is power. So, the next time you hear about a new trade deal or tariff reform, remember that it’s not simply global news. It is also your business.

Let’s Dive into Some Practical Tips to Help You Navigate Through Potential Milk Price Fluctuations. Shall We? 

Let’s dive into some practical tips to help you navigate potential milk price fluctuations. Shall we?

  • Diversify your product offerings.
  • Why limit yourself to a single product when you may extend your line? You may start making specialized cheeses or move into yogurt and butter. Have you considered this before? Diversifying may help you generate new income sources as customer preferences shift.
  • Improve Herd Management.
  • Maintaining your herd’s health and productivity is critical. Regular veterinarian check-ups, appropriate nourishment, and adequate housing may help. Effective herd management leads to higher milk output and quality. Remember that healthy cows generate more significant earnings.
  • Explore new markets.
  • Why restrict yourself to local marketplaces when a whole globe exists? Contact export agencies or even look at internet channels to reach a worldwide audience. You can discover that your items are in more demand in another nation.
  • Keep an eye on corn prices.
  • Corn prices substantially influence feeding expenditures. Regularly monitoring these prices will allow you to make more educated judgments. For example, purchasing feed in bulk at a low price may save you much money in the long run.
  • Utilize Technology.
  • Accept the power of technology to simplify your processes. From automated milking equipment to data analytics for herd management, technology may help you run more effectively and save money.

These recommendations will help you prepare for anything the market throws at you. It’s all about being adaptable and proactive.

The Bottom Line

So, what is the takeaway here? Cheese prices have fluctuated, indicating a possible influence on milk costs. The correlation between milk and grain prices adds another degree of intricacy. Farmers benefit from a higher income-to-feed ratio, but there is some concern as the year finishes. Cheese stocks are lower, but buyer behavior and demand dynamics stabilize prices. Will milk costs remain stable, or will they fluctuate? How would you address these risks in your dairy business?

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