Tariffs Target U.S. Dairy's 3 Largest Export Markets
Published: Friday, March 14, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The benchmark federal order milk price is heading back down. The Agriculture Department announced the February Class III price at $20.18 per hundredweight, down 16 cents from January, but is still $4.10 above February 2024. The Class IV price is $19.90, down 83 cents from January but 5 cents above a year ago.
Last Friday morning, Class III futures had the March contract at $18.34; April, $17.20; and May at $17.62, peaking again in September at $18.45.
The Trump tariff "Tit-for-Tat" war between the U.S., China, Mexico and Canada and will impact scores of U.S. products, including dairy. China and Canada responded immediately with retaliatory tariffs and Mexico was expected to announce similar action Sunday. It was announced last Thursday, however, that Trump would pause the tariffs for one month on products covered by the U.S., Mexico and Canada free trade agreement, the USMCA.
The March 5 Daily Dairy Report warned of the tariffs, "This is wrenching news for the U.S. dairy industry, which relies heavily on exports to keep domestic markets balanced. Last year, exports accounted for 16.4% of total U.S. milk production, and the dairy industry's three largest export markets, Mexico, Canada and China, accounted for more than half of all dairy exports by volume and value. Mexico, the largest market for U.S. dairy overall, is also the leading buyer of U.S. nonfat dry milk (NDM) and cheese, accounting for 52.4% and 37.7% of NDM and cheese exports, respectively, in 2024. The country is also the second largest market for butter and milkfat behind Canada."
Speaking in the March 10 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said tariffs were one of the main topics at last week's annual outlook conference in Nashville, but "There is no definitive answer," as to how they will be implemented and for how long, or will some be rolled back, as they were on the automotive side of things. The uncertainty leads the markets to volatility, he said, but right now people are taking a "shoot first and ask questions later" attitude, with more of a bearish tilt as they believe this will negatively impact our trade and our prices, but we just don't know yet.
Dairy exports to China are primarily dry whey, permeate and lactose, which initially were not being hit with retaliatory tariffs. Cheese and powder are included, but U.S. exports to China are very low, according to Kurzawski.
He also said fat and cream availability was another big topic. He added, "Whey protein had a banner year in 2024 and remains on strong footing but there's a lot of cream out there and that was one of the bearish aspects of the conference."
Meanwhile, leaders from the National Milk Producers Federation and Dairy Export Council urged Mexico and Canada to "take U.S. concerns seriously." NMPF's Gregg Doud stated, "Mexico and Canada are valuable trading partners that American agriculture depends on, and trade with those countries is critical to the well-being of dairy farmers. Let's focus on getting the concerns ironed out quickly so we can focus on bolstering these critical trade relationships. Then, let's put those tariff tools to work, driving change with the trading partner that's brushed off U.S. concerns for far too long, the European Union."
Speaking of exports, U.S. milk equivalent sailings in January were up 1.1% from a year ago. Cheese exports totaled 102.9 million pounds, up 21.9%, with Cheddar up 116.1%, highest since 2014. Cheese exports were up for the 13th consecutive month, according to HighGround Dairy, and while Mexico increased its purchases, the gain was a modest .6%. "Japan, South Korea and Bahrain each imported at least 2.2 million pounds more U.S. cheese."
Butter exports, at 7.1 million pounds, were up 40.7% and dry whey, at 32.8 million pounds, was up 10%. Nonfat and skim milk powder exports totaled 103.1 million pounds, down 20.2%, and their lowest level since June 2019, according to HGD. Whey exports totaled 32.8 million pounds, up 10% from a year ago.
You'll recall that January milk production inched up .1% from a year ago but fat and protein rose even more and component adjusted production was up 2.2%. The January Dairy Products report shows where the milk ended up.
January cheese vats produced 1.210 billion pounds, up .7% from December, and .8% above January 2024.
Wisconsin output, at 305.4 million pounds, was up .3% from December and .8% above a year ago. California produced 208.9 million, up 2.6% from December but .3% below a year ago. Idaho produced 91 million pounds, down 1.4% from December but 4.9% above a year ago. New Mexico, with 75.8 million pounds, was up 2.9% from December but 7.5% below a year ago.
Italian cheese totaled 521.7 million pounds, down .3% from December but 2.2% above a year ago. American output hit 473.9 million pounds, up .5% from December and .2% above a year ago. Mozzarella totaled 412.7 million pounds, up 3.6% from a year ago.
Cheddar output crept to 326.1 million pounds, up 8.5 million pounds, or 2.7%, from December, but was down 4.5 million, or 1.4%, from a year ago.
Butter production hit 218.3 million pounds, up 18.6 million, or 9.3%, from December, and was up 1.1 million pounds, or .5%, from a year ago.
Yogurt production totaled 418.5 million pounds, up 5.3% from a year ago. Hard ice cream output jumped to 59.6 million pounds, up 20.1% from 2024.
Dry whey output jumped to 76.2 million pounds, up 7.2 million pounds, or 10.5%, from December but was shy by 1.5 million, or 1.9%, from a year ago. Whey stocks came in at 60.8 million pounds, up 600,000 pounds, or 1.1%, from December but 6.7 million pounds, or 9.9%, below those a year ago.
Whey protein concentrate production was up 10.3% from a year ago and whey protein isolate output was up 19.9%.
Nonfat dry milk output jumped to 153.5 million pounds, up 22.8 million, or 17.5%, from December, and was up 15.2 million pounds, or 11%, from a year ago. Stocks grew to 299.3 million pounds, up a whopping 43.2 million, or 16.9%, from December, and were up an eye-catching 87 million pounds, or 41%, from 2024.
Skim milk powder output dropped to 35.5 million pounds, down 15.3 million, or 30.1%, from December but was down 21.4 million, or 37.6%, from a year ago.
Dairy margins remained flat over the last half of February as a continued drop in milk prices coupled with a sharp selloff in the corn market were largely offsetting, says the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. The MW detailed the January Milk Production and Cold Storage reports and warned that the retaliatory tariffs from China, Mexico and Canada will "keep pressure on Class III milk."
An increase in the All-Milk Price nudged the January milk feed price higher for the first time since September 2024. The USDA's latest Ag Prices report shows the ratio at 2.82, up from 2.73 in December, and compares to 1.98 in January 2023.
The All-Milk Price ended three months of decline and averaged $24.10 per hundredweight, with a 4.46% butterfat test, up 80 cents from December, which also had a 4.46 test, and compares to $20.10 in January 2024, with a 4.35% test.
The national corn price averaged $4.29 per bushel, up 6 cents from December but 45 cents per bushel below a year ago. Soybeans averaged $10 per bushel, up 21 cents from December but $2.80 below a year ago. Alfalfa hay averaged $161 per ton, down $3 from December and $41 below a year ago.
The January average cull price for beef and dairy combined was at $126 per hundredweight, up $5 from December, $23 above January 2023, and $54.40 above the 2011 base average.
Milk production margins moved higher for the first time since September to remain at historically high levels and were 78 cents per hundred-weight above January, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo. "Income over feed costs in January were above $15 per hundredweight after a one month hiatus and above the $8 per hundredweight level needed for steady to higher milk production for the 15th month in a row. Input prices were mostly higher in January with two of the three input commodities inside of top 10 for January all-time. Feed costs were the eighth highest ever for the month of January and increased 2 cents per hundredweight from December." The ratio was above the five-year average for the 11th month in a row, according to Brooks.
"Milk income over feed costs for 2024 were $13.45 per hundredweight, a gain of 8 cents per hundredweight versus last month's estimate. Income over feed was above the level needed to maintain or grow milk production, and up $5.45 per hundredweight from 2023's level."
"Looking at 2025, milk income over feed costs (using Feb. 28 CME settling futures prices for milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) are expected to be $13.24 per hundredweight, a loss of 21 cents per hundredweight versus 2024. Income over feed in 2025 would be above the level needed to maintain or grow milk production, and down 5 cents from last month's estimate," Brooks concludes.
The week ending Feb. 22 saw 51,600 dairy cows sent to slaughter, down 1,900 from the previous week and 8,600, or 14.3%, below that week a year ago. Year to date, 427,600 head had been culled, down 29,300, or 6.4%, from a year ago.
Cash block Cheddar, after plunging 12.50 cents the previous week and closing at $1.7750, dropped to $1.6050 per pound last Tuesday, lowest CME price since April 15, 2024 but it rallied to close the first Friday of March at $1.6225, down 15.25 cents on the week but still 16.25 cents above a year ago. The barrels sunk to $1.63 last Friday, 15 cents lower, lowest since Dec. 2, 2024, 14.25 cents above a year ago, and an inverted half-cent above the blocks. Sales totaled 41 loads of block on the week, highest since April 2024, and 11 of barrel.
Midwest cheesemakers reported slower sales to Dairy Market News. Food service demand particularly has been slowing. Cheese inventories are on the uptick, however there are reports of some being oversold. Milk availability remains close or near balanced.
Demand for Class III milk from Western cheese manufacturers is strong and the seasonally strengthening milk output is providing plenty. Cheese production is steady to stronger. Demand is lighter to steady domestically and mixed from international buyers, says DMN.
CME butter fell to $2.25 per pound last Tuesday, lowest since Dec. 22, 2021 but it finished last Friday at $2.31, 3.50 cents lower on the week, and 49.25 cents below a year ago. There were 37 sales on the week, with 27 on Thursday alone.
"The bears are in clear control of central butter markets," said DMN. Traders say recent demand upticks may slow as market prices continue to hit turbulence. Butter availability is growing and churning is very active.
Cream availability is wide open and while the low end of the multiple range ticked higher, there remains an abundance of milkfat in the region. As Class II and III manufacturing picks up seasonally, cream will tighten but not in the near term.
Cream remains readily available in the West. Churns are generally at-or-near capacity building stock for later seasonal demand. Demand is steady domestically and international buying has been very strong for first quarter.
Grade A nonfat dry milk closed last Friday at $1.1550, down 4.50 cents on the week, lowest since May 10, 2024 and 1.50 cents below a year ago, on 15 sales.
Dry whey saw its Friday finish at 49 cents per pound, down 2 cents on the week, lowest since July 8, 2024 but 8 cents above a year ago, on six sales.
Whole milk powder was the primary mover in the March 4 Global Dairy Trade where the weighted average slipped .5%, following a .6% decline on Feb. 18. Volume continued to fall as well, slipping to 46.2 million pounds, down from 49.9 million on Feb. 18, and the lowest since June 18, 2024. The average metric ton price, fell to $4,209, down from $4,370.
Whole milk powder was down 2.2%, after inching .2% lower on Feb. 18. Skim milk powder was up .6%, following a 2.5% drop. Anhydrous milkfat was off .3%, after a .8% slip, while butter was up 2.7%, following a 2.2% rise. Cheddar was up 1.1%, after dropping 3.4%, and Mozzarella was up 7.9%, after inching .1% lower. Lactose was up 14%, after dropping 3.4% on Feb. 18.
StoneX says the GDT 80% butterfat butter price equates to $3.3529 per pound, up 8.8 cents, and compares to CME butter which closed last Friday at $2.31. Cheddar equated to $2.2293, up 2.4 cents, after losing 7.4 cents, and compares to Friday's CME block Cheddar at $1.6225. GDT skim milk powder averaged $1.2447 per pound, compared to $1.2492 last time. Whole milk powder averaged $1.8419, down from $1.8838 CME nonfat closed last Friday at $1.1550 per pound.
Analyst Dustin Winston reported, "Regionally the biggest change came from North Asia (which includes China). Market share from the largest buyer on the auction fell by 9 percentage points from the previous auction and 16% from year-ago levels. North Asia's share of WMP, SMP and butter was down significantly from last year."
USDA's 2024 Cold Storage Summary showed the peak month for butter stocks was May, with 379.8 million pounds. The smallest inventory was in November with 213.6 million pounds. Cheese stocks peaked in January, at 1.457 billion pounds. The smallest inventory was in November, with 1.338 billion pounds.
Return to Top of Page