Cheese blocks plummet 9.50¢ as dairy markets face pressure. What’s driving the decline, and how will it impact producers? Get the full analysis here.

EXECUTIVE SUMMARY: The CME dairy markets experienced significant pressure on March 4, 2025, with cheese blocks leading the decline, falling 9.50 cents to $1.7750/lb. This sharp drop occurred despite stable inventories, suggesting potential shifts in demand or increased selling pressure. While cheese markets weakened, butter held steady at $2.3450/lb, and nonfat dry milk remained unchanged. The weekly averages show a downward trend across all commodities, with butter declining 3.1% from the previous week. Despite spot market weakness, futures markets signal optimism for near-term milk values. However, the current milk-feed ratio of 2.18 remains below the profitability threshold of 2.25, indicating ongoing challenges for producers. Global market conditions, including increased European milk production and premium Oceania butter prices, continue to influence U.S. export competitiveness.

KEY TAKEAWAYS:

• Cheese blocks plunged 9.50 cents to $1.7750/lb, narrowing the block-barrel spread to just 0.50 cents.
• Weekly averages show a downward trend across all dairy commodities, with butter declining 3.1% from the previous week.
• Despite spot market weakness, futures markets remain optimistic about near-term milk values.
• The milk-feed ratio of 2.18 is below the 2.25 profitability threshold, signaling ongoing margin pressure for producers.
• Global market conditions, including European production increases and Oceania butter premiums, continue to impact U.S. export competitiveness.

Today’s dairy markets registered significant downward pressure, with cheddar blocks leading the decline with a substantial 9.50 cent drop, while barrels fell 2.50 cents. This market weakness comes amid challenging global trade conditions and evolving domestic supply dynamics affecting multiple dairy commodities.

The cheddar block market fell sharply to $1.7750/lb, representing a significant 9.50 cent decline amid moderate trading activity. Despite relatively stable cheese inventories in the latest Cold Storage report, this dramatic movement comes. Cheddar barrels also weakened, though less dramatically, by falling 2.50 cents to $1.7800/lb, narrowing the block-barrel spread to just 0.50 cents, representing an unusually tight price relationship between these two cheese varieties.

Daily Price Summary: Mixed Performance Across Dairy Product Categories

Butter markets held steady at $2.3450/lb with minimal trading activity but continued offering interest, suggesting potential for downward price pressure in coming sessions. NDM remained unchanged at $1.2000/lb while dry whey decreased 1.50 cents to $0.5100/lb amid substantial offering pressure with four uncovered offers versus just one bid.

Weekly Trend Analysis Shows Continued Market Softness

The weekly averages show a general downward trend across all commodities compared to the previous week, with butter showing the most significant percentage decline at nearly 3.1% lower than the prior week’s average.

Trading Activity Reveals Continued Selling Pressure

Today’s trading session featured moderate activity for cheddar blocks. Four trades were executed alongside offering interest (0 bids versus three offers), indicating continued selling pressure at current price levels. This trading pattern suggests the potential for further price adjustments in coming sessions unless fresh buying interest emerges.

Cheddar barrels recorded modest activity with two trades and limited interest on either side of the market (0 bids, one offer). Butter saw no trades executed despite both bids (1) and offers (2), indicating a relatively balanced but inactive market. Similarly, NDM recorded no trades but showed equal bidding and offering interest (2 bids, two offers). At the same time, dry whey saw substantial selling pressure with four uncovered offers compared to just one bid.

Global Market Conditions Create Mixed Outlook for U.S. Exports

The U.S. dairy export environment continues to evolve amid changing global supply and demand dynamics. International dairy product prices have shown varied performance, with Global Dairy Trade auctions indicating some strength in whole milk powder but continued pressure on skim milk powder markets.

European milk production continues to increase seasonally, while New Zealand production remains slightly below historical norms. According to recent Bullvine reporting, the European Union faces projected milk production declines of 0.2% in 2025, creating potential opportunities for U.S. producers to capture market share in key export destinations.

The international competitive landscape is particularly evident in the forward price projections for key dairy commodities. In Oceania markets, butter is trading at a significant premium to U.S. values, with March 2025 prices at $7,370/metric ton compared to U.S. equivalent values of approximately $5,170/metric ton.

Futures Markets Signal Optimism Despite Today’s Spot Market Weakness

Despite today’s market pressure, particularly in the cheese sector, futures markets remain relatively optimistic about milk values for the near term. The Class III milk futures for coming months show a gradual strengthening pattern that suggests market participants anticipate improved demand or tightening milk supplies as we move through the spring flush period.

Current future values reflect growing concern about milk prices in the immediate term but suggest relatively favorable conditions. Feed markets continue to provide some relief for producers, though corn futures remained relatively strong at $4.53/bushel for March delivery on Friday.

Producer Profitability Analysis: Margins Below Threshold Despite Recent Improvements

The milk-feed ratio is calculated using the formula: (All-milk price per cwt) ÷ (16% of corn price + 8% of soybean meal price + 26% of alfalfa hay price)

While today’s calculated ratio of 2.18 shows improvement from last month’s and year-ago levels, it remains below the 2.25 threshold typically associated with sustainable profitability for most dairy operations. This metric helps explain why expansion remains limited despite generally favorable milk prices.

Market Sentiment: Analysts Divided on Future Direction

Market sentiment has shifted somewhat with today’s significant decline in cheese prices, particularly for blocks. Market participants note that the substantial 9.50 cent decline in blocks suggests selling pressure from inventory holders or reduced buying interest from major commercial users. The fact that the butter market held unchanged despite recent weakness indicates a potential stabilization point for that commodity.

The International Dairy Foods Association’s most recent weekly market commentary noted: “While the first quarter has shown surprising price resilience given inventory levels, today’s block cheese weakness suggests we may be entering a more challenging phase for dairy commodity markets, particularly if spring flush production significantly exceeds current projections.”

Strategic Recommendations for Dairy Stakeholders

Today’s dairy markets registered significant price declines for cheese, with blocks falling 9.50 cents to $1.7750/lb and barrels declining 2.50 cents to $1.7800/lb. Butter held steady at $2.3450/lb, while NDM remained unchanged at $1.2000/lb. Dry whey decreased 1.50 cents to $0.5100/lb amid substantial offering pressure.

Producers should closely monitor cheese markets for stabilization following today’s substantial block price decline. The narrowed block-barrel spread bears watching as it often signals changing market dynamics that can affect Class III milk values. Feed markets continue to provide some margin opportunity, with corn and soybean meal values moderating slightly, though the calculated milk-feed ratio remains below the traditional profitability threshold of 2.25.

In coming reports, market participants should pay particular attention to weekly cold storage movements and milk production data, as these will provide important context for whether today’s price declines represent a temporary adjustment or the beginning of a more sustained price correction. Additionally, watching daily trading volumes and bid/ask spreads will provide early indications of changing market sentiment, particularly for cheese markets, which experienced the most significant movement today.

LEARN MORE

• What’s Driving the Cheese Market? A Surge in Prices Explained
• Global Dairy Market Shake-Up: Key Trends and Insights from December 9th, 2024 Recap
• US Dairy Market Shifts: Cheese Prices Surge 15% While Butter Hits 18-Month Low

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