Wednesday Morning Dairy Market Update - Will Cheddar Blocks Rally Again?

OPENING CALLS:

Class III Milk Futures:	1 to 10 Higher
Class IV Milk Futures:	Mixed
Butter Futures:	Mixed

OUTSIDE MARKET OPENING CALLS:

Corn Futures:	2 to 3 Lower
Soybean Futures:	5 to 7 Lower
Soybean Meal Futures:	$1 to $2 Lower
Wheat Futures:	0 to 1 Lower

MILK:

Class III futures are trading 3 lower to 7 higher Wednesday morning. Tuesday's WASDE report left the market optimistic about milk prices as there were increases for Class III, IV and the All-Milk price for 2026. Production is still high, with some articles floating around about the possibility of the herd size eventually creeping its way up to 10 million head of cattle. For now, the market has done an excellent job of finding products and consumers to utilize most of the excess in production. November's WASDE report raised the ending stocks for this year on both Fat Basis and Skim-solid Basis, but there are stories to see out with exports and domestic use for Skim-solids that show promise.

CHEESE:

Overnight cheese futures are unchanged. Cheese led the charge Tuesday in the spot market with an increase in Cheddar Blocks of 5.25 cents. I expect to see this spot market volatility continue as we head closer to the holidays. Production is still strong, yet demand is there, building inventories as they see opportunities to.

BUTTER:

Butter has not yet been traded Wednesday morning. Exports for butter are the biggest concern lately, as every other market has seemed to find demand. Butter use is not keeping up with the large quantities of production. The November WASDE report highlighted this fact on Tuesday when butter was the only product to be projected with a lower price for 2026 than last month's report. Cream supplies are still readily available but are getting tighter in certain regions.

Tuesday Closing Dairy Market Update - Higher Price Projections

GENERAL OVERVIEW:

USDA released the WASDE report Tuesday with higher projected prices for cheese, nonfat dry milk (NDM), dry whey and higher milk prices across the classes. Butter was the only product left out on the optimistic projections.

MILK:

Class III futures were mixed Tuesday with strength in the nearby months and weakness after the first of the year and beyond. The WASDE report was positive for all classes of milk it projects prices for. Class III projections were raised 25 cents per cwt for 2026 to $16.05. For 2027, the price dropped from last month's report 5 cents to $16.85. Class IV projected price is now $19.10, up 20 cents from last month, for both 2026 and 2027. The All-Milk price is $20.10 for 2026, up 20 cents and $20.50 for 2027, up 5 cents. Milk production for the year is projected at 237.7 billion pounds, up 0.8 billion pounds from last month's report. The 2027 projections also increased to 240.7 billion pounds, up 2.3 billion from last month.

AVERAGE CLASS III PRICES:

3 Month:	$17.12
6 Month:	$17.02
9 Month:	$17.15
12 Month:	$17.32

CHEESE:

Cheese futures also saw strength nearby Tuesday while the deferred months were weaker. The WASDE report predicted cheese prices 2.5 cents higher for 2026, coming in at $1.55. For 2027, the projected cheese price decreased 2.5 cents at $1.59. On a fat basis, supply increased 0.8 billion pounds while ending stocks decreased 1.2 billion pounds on lower exports and domestic use for 2026. In 2027, supply increased 4.5 billion pounds from last month's report to 263.5 billion pounds. Ending stocks were raised only 2.9 billion pounds with higher exports and domestic use projected.

BUTTER:

Butter happened to be the only product with a poorer outlook on Tuesday's WASDE report. The projected butter price fell 1 cent per pound for 2026 to $1.55 and decreased 8.5 cents for 2027 to $1.465. Nonfat dry milk price saw a 2-cent gain from last month at $1.755 for 2026 and a 6-cent gain for 2027 at $1.80. On a skim solid basis, supply increased 0.7 billion pounds while ending stocks jumped 1.1 billion pounds on mixed demand with lower domestic use but higher exports. For 2027, ending stocks increased 1.9 billion pounds from the higher projected carry in, higher production but offset slightly by higher demand both domestically and internationally.

OUTSIDE MARKETS SUMMARY:

December corn closed up 9.75 cents per bushel at $4.4900, January soybeans closed up 39.75 cents at $12.2800 and December soybean meal closed up $5.80 per ton at $326.50. December Chicago wheat closed up 4.75 cents at $5.9275.

December live cattle closed up $3.00 at $219.20. December crude oil is down 50 cents per barrel at $86.35. The Dow Jones Industrial Average is down 157 points at 52,231 and the NASDAQ is down 187 points at 25,065.

Tuesday Midday Dairy Market Summary -

OUTSIDE MARKETS SUMMARY:

CORN:	10 Higher
SOYBEANS:	38 Higher
SOYBEAN MEAL:	$4.90 Higher
LIVE CATTLE:	$3.00 Higher
DOW JONES:	255 Points Higher
NASDAQ:	306 Points Lower
CRUDE OIL:	$0.93 Lower

MIDDAY MARKET UPDATE:

The block cheese price increased by 5.25 cents to close at $1.6250 with 5 loads traded. The barrel cheese price was unchanged to close at $1.70 with no loads traded. Dry whey decreased 1.5 cents to close at 83.5 cents with no loads traded. Class III futures are trading 14 cents lower to 18 cents higher. The butter price increased by 0.5 cents, closing at $1.2650 with 5 loads traded. Grade A nonfat dry milk decreased 3.25 cents to close at $2.15 with 1 load traded. Class IV futures have not yet been traded Tuesday. Butter futures are 0.925 to 2.3 cents higher. Dry whey futures are unchanged to 0.25 cents lower. Cheese futures are 1.4 cents lower to 1.5 cents higher. Nonfat dry milk futures are 0.5 to 1.4 cents higher.