May 2024 Dairy Producer Market Update

Key Takeaways:

After spending most of 2024 around or below the $1.60s, the cheese market has finally seen lift-off. CME spot block Cheddar rallied from a low of $1.3925 per pound on March 22, 2024, to a high of $1.98 per pound on May 9, 2024, marking an increase of nearly 60 cents. Subsequently, Class III futures for May through December 2024 contracts average $19.76/cwt as of May 16, 2024, a significant improvement from the $15.50/cwt Class III price announced for April.
While international demand continues to challenge the nonfat dry milk market, butter seems to be thriving, keeping Class IV prices lofty. As of May 16, 2024, CME spot butter has settled at or above $3.00 per pound for ten trading days in 2024, setting records for this time of year. While fundamentals may not necessarily support the recent highs, buyer nervousness appears to be a contributing factor, as they secure whatever coverage they can to avoid paying more in the fall.
With higher milk prices, the margin outlook for producers has improved, especially for those in Class III-heavy regions. However, the dairy markets remain highly volatile as a lot of uncertainty lingers. Market participants are expressing concerns about the impacts of highly pathogenic avian influenza (HPAI) as well as the ultimate direction of the cheese market. With futures markets presenting a historically elevated margin opportunity, HighGround has been urging producers to take action to secure their financial future.

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