Tuesday Closing Dairy Market Update - USDA Raises Milk Production

GENERAL OVERVIEW:

Milk futures were hit hard today, with Class III futures falling more than Class IV futures. The butter price fell more than block cheese, but the increase in nonfat dry milk offset some of the weakness. USDA increased its estimate for milk output and milk prices this year.

MILK:

Milk futures were under pressure today, with Class III showing most of the pressure. The decline of the block cheese price triggered the selling, pushing the April contract limit down to the lowest level since February 17^th. This has eliminated the bullishness that has recently developed as the block cheese price has been slowly improving. Milk production has been significantly higher than a year earlier for quite some time, and higher milk output is expected to continue through this year.

USDA raised its estimate for milk production on the World Agricultural Supply and Demand Estimates report released today. They estimate milk output at 234.7 billion pounds, up 200 million pounds from the February estimate. If realized, it would be an increase of 3.2 billion pounds from 2025. The estimate for the Class III average price remained unchanged at $16.65. This would be $1.36 below 2025. The estimate for the Class IV price was raised by $1.45 from the February estimate, but this would be $0.23 below a year ago. The All-milk price was raised to $19.70, up $0.75 from the February estimate.

AVERAGE CLASS III PRICES:

3 Month:	$16.45
6 Month:	$17.10
9 Month:	$17.51
12 Month:	$17.50

CHEESE:

The block cheese price fell similarly to today on Feb. 26 and then recovered quickly. The hope is that buyers will be aggressive buyers on the decline today, resulting in a price rebound. The USDA raised its estimate for the average cheese price to $1.6150, up a penny from the February estimate, but $0.17 below 2025. Unfortunately, the dry whey price was reduced by 3.00 cents to an average of 66.00 cents per pound. This is 6.00 cents higher than last year.

BUTTER:

The last time we saw a one-day decline in the butter price of this magnitude was on May 28, 2024. Buyers did not need to bid the market higher as they have been purchasing quite a bit of supply over the past number of weeks. They remained interested in buying, but at lower prices. The USDA raised its estimated butter price to $1.87. up $0.19 per pound from their February estimate. This would be $0.35 lower than 2025. The nonfat dry milk price was raised by $0.0750 to $1.39 per pound. This would be $0.16 above last year.

OUTSIDE MARKETS SUMMARY:

May corn closed down 1.50 cents per bushel at $4.5225, May soybeans closed up 5.50 cents at $12.0175, and May soybean meal closed up $1.00 per ton at $314.50. May Chicago wheat closed down 12.25 cents at $5.9100. April live cattle closed up $2.23 at $232.38. April crude oil is down $7.91 per barrel at $86.86. The Dow Jones Industrial Average is down 34 points at 47,707, with the NASDAQ is up one point at 22,697.

Tuesday Midday Dairy Market Summary - Milk Futures Plummet

OUTSIDE MARKETS SUMMARY:

CORN:	4 Lower
SOYBEANS:	Unchanged
SOYBEAN MEAL:	$0.90 Higher
LIVE CATTLE:	$2.02 Higher
DOW JONES:	357 Points Higher
NASDAQ:	145 Points Higher
CRUDE OIL:	$14.40 Lower

MIDDAY MARKET UPDATE:

The block cheese price fell 8.00 cents, closing at $1.55 with only one load traded and one offer remaining at the close of spot trading with no unfilled bids. This does not bode well for the market. The barrel cheese price remained unchanged at $1.57 with one load traded. The dry whey price remained unchanged at 64.00 cents with no loads traded. The weakness of block cheese and butter sent Class III futures limit down in the April contract, with substantial pressure on other contracts. Currently, Class III futures are 10-72 cents lower. The butter price fell 12.25 cents, closing at $1.8950 with 13 loads traded. There were nine unfilled bids and four uncovered offers remaining at the close. Grade A nonfat dry milk gained 2.75 cents to close at $1.7075 with three loads traded. Class IV futures are 5-37 cents lower. Butter futures are the daily 7.50 cents limit down in all traded contracts, with only the March contract down 5.62 cents. There is a pool of traders that want to sell but are unable to due to contracts being limit down. Dry whey futures are 0.15 cent lower to 1.50 cents higher. Cheese futures are 1.50-6.50 cents lower. USDA raised its estimate for milk production by 200 million pounds to 234.7 billion pounds.

Tuesday Morning Dairy Market Update - Spot Prices May Show Little Change

OPENING CALLS:

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

OUTSIDE MARKET OPENING CALLS:

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

MILK:

Class III milk futures held well despite the turmoil in the other commodity markets. Contracts closed higher, supported by the higher block cheese price. It is unlikely futures will run to the upside significantly, as the market will balance supply and demand. The increase in milk production will require demand to improve, or an oversupply could result as we move through the spring flush. With the outlook for better milk prices, farmers will increase milk production to take advantage of higher prices. USDA will release the World Agricultural Supply and Demand report Tuesday. It will contain estimates for domestic and international grain production and stocks. It will also contain estimates for milk production, milk prices, and dairy product prices for this year. This is not a market mover for dairy, but it will provide the outlook and potential for dairy this year.

CHEESE:

The block cheese price has held well, providing support for a better potential for milk prices. Cheese demand has been good, but it will need to increase to keep up with the expected higher milk output over the next few months. Bottling demand is steady and the increase in milk production will move to manufacturing. USDA is expected to raise the cheese price in the report Tuesday.

BUTTER:

Butter is holding above $2.00. This may be the support level for now as buyers remain active, but not aggressive. Butter supplies are sufficient for demand. The USDA is expected to raise the price outlook in the World Agricultural Supply and Demand report Tuesday.