Key Takeaways:
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With new cheese production capacity coming online and the industry transitioning out of the spring flush, dairy markets are on the move. CME spot block Cheddar prices have pulled back from late May highs, while spot butter prices have climbed over the past month. Class III briefly traded above Class IV in May, but shifting market fundamentals have returned Class IV to the lead, where it’s projected to stay through the second half of the year. While discounted US cheese and butter continue to attract international buyers, trade policy poses a key risk, as the return of paused tariffs next month could weigh on exports and domestic consumer demand.
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Planting is nearly complete, and new crop supply projections remain favorable. As a result, market focus is shifting toward weather developments and demand-side risks. Trade policy, biofuel mandates, and other regulatory shifts could significantly alter the demand landscape at any time. HighGround continues to encourage clients to explore flexible options strategies that establish a ceiling on potential upside while retaining the ability to benefit if prices move lower.
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Margins remain solid, and current price levels are likely supporting profitability for most producers. While market signals are favorable for now, conditions can shift quickly, making it essential to stay proactive with your price risk management strategy.
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