Dairy markets face a pivotal moment as butter prices surge amid global supply shifts and looming Federal Milk Marketing Order reforms. With EU cream shortages driving U.S. exports and new pricing formulas set for June, producers navigate a complex landscape of opportunity and risk. Dive into our comprehensive analysis for actionable insights.

Summary:

In today’s dairy market report, butter prices surged 3.25¢ to $2.4100/lb, driven by tightening EU supplies and strong import demand. Cheese markets remained stable, with blocks holding at $1.9200/lb, as traders await the impact of upcoming Federal Milk Marketing Order reforms set for June 2025. These reforms, including changes to Class I pricing and removing barrel cheese from pricing formulas, are poised to reshape market dynamics. Global factors continue to influence U.S. markets, with New Zealand’s focus on protein concentrates reducing butter competition and China’s projected 3% decline in cheese imports affecting export outlooks. USDA forecasts suggest potential margin compression for producers, with the all-milk price projected at $22.55/cwt for 2025, down from $23.05/cwt in 2024. Amidst these changes, producers should consider strategic feed cost management and hedging strategies to navigate the evolving landscape.

Key Takeaways:

• Butter prices jumped 3.25¢ to $2.4100/lb due to EU supply shortages and increased import demand.
• Cheese markets held steady, with blocks at $1.9200/lb, as the industry anticipates FMMO reforms in June 2025.
• FMMO changes include reverting to “higher-of” Class I pricing and removing barrel cheese from pricing formulas.
• Global dynamics: EU butterfat inventories are down 4% YoY; New Zealand focuses on protein concentrates.
• China’s projected 3% decline in 2025 cheese imports may impact U.S. export opportunities.
• USDA forecasts lower all-milk prices for 2025 at $22.55/cwt, down from $23.05/cwt in 2024.
• Feed costs remain a concern: March corn futures at $5.02/bu, soybean meal at $293.60/ton (+4.3% YoY).
• Producers advised to lock in December corn futures at $4.77/bu to manage feed costs.
• Labor shortages persist, with dairy workers averaging 42.1 weekly hours.
• Recommendation to execute 50% of Q2 butter sales at $2.65+/lb to capitalize on EU demand.

Butter Prices Surge 3.25¢ on EU Import Demand; Cheese Markets Await FMMO Formula Changes Effective June 2025

Key Price Changes & Market Trends

Commentary: Butter rallied 3.25¢ to $2.4100/lb as EU buyers sought U.S. supplies amid 4% YoY butterfat inventory declines.Cheese blocks held at $1.9200/lb despite zero trades, reflecting producer caution ahead of June’s FMMO updates removing barrel cheddar from pricing formulas. Barrels dipped 0.25¢ as exporters awaited USDA’s projected 3% decline in China’s 2025 cheese imports.

Volume and Trading Activity: Butter saw nine trades with one bid and two offers, signaling institutional positioning for spring demand. Cheese markets remained stagnant, aligning with USDA’s forecast for 227.2B lbs 2025 milk production (−0.8B lbs vs prior estimate). Dry whey and NDM markets showed no bids/offers amid stable Chinese whey demand ($0.5550/lb).

Global Context

• EU Butter Shortages: EU cream imports will rise 8% in Q1 2025, driving U.S. butter exports to 944M lbs milk-equivalent (+128M lbs YoY).
• New Zealand Production: Milk collection is up 1.2% year over year, but focusing on protein concentrates reduces global butter competition.
• China’s Skim-Solids Pullback: Dry whey exports fell 518M lbs milk-equivalent YoY, offsetting stable cheese demand.

Forecasts and Analysis

USDA WASDE Revisions (February 2025):

Feed Cost Dynamics:

• March corn futures: $5.02/bu (−2.1% MoM) on South American harvests.
• Soybean meal futures: $293.60/ton (+4.3% YoY).

Dairy Margin Coverage: In November 2024, the margin above feed costs reached $14.29/cwt (+$4.71 YoY)6.

FMMO Regulatory Updates

Effective June 1, 2025:

1. Class I Pricing: Return to “higher-of” Class III/IV skim prices vs. “average-of +74¢” formula.
2. Make Allowances:
   • Cheese: $0.2519/lb (+12% vs 2024)
   • Butter: $0.2272/lb
   • Dry Whey: $0.2668/lb
3. Barrel Cheese Removal: 500-lb barrels excluded from Dairy Product Mandatory Reporting.

December 1, 2025:

• Skim milk composition factors updated to 3.3% protein and 6% other solids.

Market Sentiment

Traders anticipate margin compression:

• “The Class III-IV spread narrowing to 39¢ will reduce deploying incentives,” noted a CME analyst.
• USDA’s Dairy Confidence Index rose to 58/100 (+4 pts MoM), but labor shortages persist at 42.1 avg weekly hours/hired worker.

Closing Summary & Actionable Insights

Summary:
Butter’s rally reflects structural EU deficits, while cheese markets brace for FMMO formula shifts. USDA’s lowered 2025 milk production forecast (−0.8B lbs) underscores feed-cost pressures.

Recommendations:

1. Feed Management: Lock December corn futures at $4.77/bu (−4.3% vs spot) using ARMS cost benchmarks.
2. Butter Hedging: Execute 50% Q2 forward sales at $2.65+/lb to capture EU premiums.
3. Labor Mitigation: Explore H-2A visas before April’s USDA Farm Labor Survey.

Learn more:

• Solar Energy Revolution on European Dairy Farms: Navigating Hurdles and Reaping Benefits
• Efficient Energy Practices: A Guide for Dairy Farmers
• China’s Bold Move Towards Sustainable Farming Could Transform Your Dairy Business

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