01-12-2026:   March Class III Milk (DLH26):    Cheddar Cheese Prices, Seasonals, Cow Production, Falling Exports

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Introduction

A trend we note among commodities recently is a singificant downmove in milk prices. 

Class III Milk Futures (DLH26) – Key Trade Factors to Watch

To anticipate direction in Class III milk futures (March 2026 contract, DLH26), focus on the drivers that typically move dairy markets:

1 U.S. Milk Production (Supply)

Bullish if: Production drops
Bearish if: Production rises

Watch:

USDA Milk Production Report (monthly)

Cow numbers
Milk per cow (productivity trends)  That's roughly 68 lb. per day per cow.
Feed costs (corn & soybean meal) are around  $11.64 per 100 lb. of milk.  This is lower than recent annual feed cost data.
If feed costs fall, margins improve → farmers expand output → pressure on prices.

2 Cheese Market (Primary Pricing Driver)

Class III is heavily tied to cheddar cheese prices.

Watch:

CME Cheese Blocks & Barrels
Block–barrel spread
Spot trading volume
Falling cheese prices = direct pressure on Class III futures.

3 Exports (Global Demand)

Exports are critical.

Watch:

U.S. Dairy Export sales (weekly/monthly)
China demand
Mexico purchases (largest U.S. dairy buyer)
Global Dairy Trade (GDT) auction results
Strong global demand → supports milk
Weak global demand → bearish

4 Cold Storage Report

Rising cheese inventories = bearish
Tight inventories = bullish
This report often moves futures if there's a surprise.

5 Seasonal Patterns

Milk is seasonally weakest:
During spring flush (March–May)
Production peaks → prices often soften into early spring.
If DLH26 is weakening now, seasonal supply pressure may be part of it.

6 Feed Costs (Margin Signal)

Corn and soybean meal matter.

If:
Corn drops sharply → milk production expansion → bearish
Corn rallies → herd contraction risk → bullish

      Moving Average Chart

      Moving Average with Confirmations

The idea behind this chart reflects YouTube traders' beliefs that siple indicators work best. Their idea is to fit the periof of the moving average by trial and error to where it appeats the price hovering near or crossing the moving average often (but ot always) gives the most reliable signals for a reversal. We attepted the "fit" and then looked for confirmations. Colnfirmations were when the Commodity Channel Index exceeded + or - 100, or when the MACD line sinks below or rises above a "reasonable" distance from tghe center line. In hose cases, the MA signal is to be taken more seriously, other times less so. Based upon that, this method would suggest the previous major shift was to an uptrend still in p;rogress, but due to seasonal and other factors, mensioned elsewherein thie article, we think the safer bet is for a continued downmove in milk prices.

      Intermarket Analysis