CME Dairy Spot Markets

In addition to the Dairy futures markets, CME Group also offers electronic markets in four “spot” or “cash” dairy products through the CME Direct Auction platform: 

  • Cheese in two forms: block and barrel
  • Butter
  • Dry Whey
  • Nonfat Dry Milk

These markets affect the prices of Class 3 and Class 4 Milk due to the structure of the dairy pricing system developed by the U.S. government.

Why dairy spot markets are important

The dairy spot markets have a very specific purpose. Companies participate in these markets for inventory management, either to dispose of surplus product or to procure product for orders that they may have already booked, but lack sufficient inventory.

On occasion, individuals also have used these markets to trade physical cheese, butter, dry whey and nonfat dry milk, however, it is important to keep in mind that the dairy spot markets are not intended for speculative purposes.  They are designed instead to be used only as inventory control tools for commercial market participants, with every trade resulting in physical delivery.

This module will describe the structure and functioning of the dairy spot markets at CME Group, including the products, trading process and delivery system.

About CME’s four dairy spot markets

Trading in all four products—Cheese, Butter, Dry Whey and Nonfat dry milk—requires buyers and sellers to either take or make delivery of a specific grade and type of the product. Sellers must offer product that meets USDA specifications; lesser grades are not acceptable for trading. Sellers also must hold title to the product they are offering.


Each of the four dairy spot markets has different specifications and rules that must be adhered to for sales to occur on the exchange. Each market also has defined delivery weights: Cheese (either in block or barrel)and Nonfat Dry Milk must weigh between 40,000 and 44,000 pounds, Dry Whey must weigh between 41,000 and 45,000 pounds, and butter must weigh between 40,000 and 42,000 pounds.

Not only are there product specifications, but packaging and grading stipulations that must be met as well. Buyers and sellers also must meet Exchange-imposed deadlines on when product must be made available for pick-up, when it must be picked up, and when ownership and money transfers between the two parties.

You can find details on these specifications in the CME Rulebook.  


Trading in the dairy spot markets takes place five days a week on the CME Direct Auction platform, in 10-minute trading sessions.

Dry Whey trades from 10:45 a.m. – 10:55 a.m. CT, Cheese trades from 11:00 a.m. – 11:10 a.m. CT, Butter from 11:15 a.m. – 11:25 a.m. CT, and Nonfat Dry Milk from 11:30 a.m. - 11:40 a.m CT.


In order to trade the dairy spot markets, traders and individual companies first must be granted access to the CME Direct Auction through their Futures Commission Merchant—or FCM.

A “view only” option is available to individuals who simply want to observe the live spot markets; however, they still must register for this service through the Exchange.

Traders are not representing themselves in dairy spot market trades. They are executing trades on behalf of their dairy customers who need to adjust their inventory levels.

During the pre-market open, buyers and sellers will post bids, offers and quantities for the dairy product that is queued to trade. Bids and offers can be significantly different from the previous day’s closing price, but they must follow the allowed price increment as stated in the CME Rulebook.

Once the market opens, individuals must activate these resting orders for them to go live during the trading session.


The CME Globex Command Center (GCC) operates the open and close of the electronic market every day and monitors the market to ensure that the platform is functioning as intended. Fines can be levied for participants who don’t follow the rules during the trading session.  This oversight provides an orderly and efficient pricing mechanism for the market.

All information is recorded by CME Direct. All bids and offers, as well as all completed sales are posted on the trading screen during the session, and on the CME Group website by noon each trading day. This information provides traders and their customers with a snapshot on the markets during the trading session, as well as the final settlement price and quantity traded.

It also provides information on any unfilled bids--that is, unsuccessful attempts to buy, and uncovered offers--in other words, unsuccessful attempts to sell for the session.

Once a trade takes place, CME Direct immediately notifies both the buyer and seller on their screens that a transaction has been confirmed.


The delivery process begins when the buyer and seller enter the required information on the trade, as outlined by the rules, into the delivery system. Once information is entered the system, it cannot be changed.

Trade information includes details such as the identity of the ultimate buyer and seller, if the product is to be graded, where the product is located, shipping instructions, grading and related certificates, and if payment is to be made before shipment. All this information is time stamped in the delivery system, so the CME Clearing Deliveries department can keep track of the progress of the trade.


This system of price discovery in the dairy spot market flows through to the Federal Milk Marketing Order system, and consequently, to the Dairy futures settlement prices as well.

The dairy spot markets for Dry Whey, Cheese, Butter and Nonfat Dry Milk help market participants manage their inventories and provide them with a trusted environment to transact business. 

This is a key function in CME Group’s role of facilitating open and transparent price discovery and risk management for those involved in buying and selling dairy products.

Test your knowledge


In case you didn’t know, the CFA Institute allows its members to self-determine and report continuing education credits earned from external sources. CFA Institute members are encouraged to self-document such credits in their online CE tracker. CME Institute offers a variety of courses, webinars, and white papers to support your professional education.

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