For Now, U.S. Dairy Products Escape Countertariffs
Published: Friday, February 21, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Tariffs were back in the news last week after President Trump postponed them on Canada and Mexico the previous week. China was hit with 10% tariffs, though items $800 and less were paused, according to HighGround Dairy. China, in turn, imposed a 15% tariff on U.S. coal and liquefied natural gas and 10% on crude oil, agricultural machinery and large-engine vehicles. Trump also announced new tariffs of 25% on all imports of steel and aluminum as well as reciprocal tariffs on any country trading with the U.S.
The Daily Dairy Report points out that Mexico did not include nonfat dry milk in its list of potential targets for retaliatory tariffs. However, "Trade tensions have chilled cross-border commerce. Dairy Market News describes Mexican demand for U.S. milk powder as 'subdued,' and exporters expressed concerns about committing today to buy milk powder that could face tariffs if the trade spat heats up." It also reported that domestic buyers have taken a step back "to avoid catching the proverbial falling knife."
The Agriculture Department again lowered its 2025 milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates report, citing lower expected cow inventories. Milk supply and use estimates for 2024 were adjusted to reflect December domestic and trade data.
2024 production and marketings were projected at 225.9 and 224.9 billion pounds, respectively, up 100 million pounds on both from last month's estimate. If realized, both would be down 500 million pounds, or .2%, from 2023.
2025 production and marketings were projected at 226.9 and 225.9 billion pounds, respectively, down 300 million on both from a month ago. If realized, both would be up 1 billion pounds, or .4%, from 2024.
Milk and dairy product price forecasts reflected updated price formulas of the Federal Milk Marketing Order, as published in the Federal Register on Jan. 17 by the Agricultural Marketing Service. Butter, nonfat dry milk and whey prices were lowered based on recent prices. The cheese price was raised on recent prices and tight inventories from 2024 that are expected to carry into 2025.
Cheese was projected to average $1.88 per pound in 2025, up 1.50 cents from last month's estimate, and compares to $1.8634 in 2024 and $1.7593 in 2023.
Butter was projected at $2.6450 per pound, down a nickel from a month ago, and compares to a $2.8870 average in 2024 and $2.6170 in 2023.
Nonfat dry milk was projected with a $1.2950 average, down 4.50 cents from last month's estimate, and compares to $1.2420 in 2024 and $1.1856 in 2023.
Dry whey is expected to average 60.50 cents per pound in 2025, down 3.5 cents from last month's estimate, and compares to a 49.13 cent average in 2024 and 36.18 cents per pound in 2023.
Class III and Class IV milk price forecasts for 2025 were lowered. Look for the Class III to average $19.10 per hundredweight in 2025, down 60 cents from last month's projection, and compares to $18.89 in 2024 and $17.02 in 2023. The Class IV price is expected to average $19.70, down $1.10 from last month's estimate, and compares to $20.75 in 2024 and $19.12 in 2023.
This month's corn outlook was unchanged. The projected season-average price was raised 10 cents to $4.35 per bushel. Global coarse grain production was forecast 1.8 million tons lower to 1.492 billion.
This month's outlook is for reduced production, trade and ending stocks. Foreign corn production was forecast down, with declines in Argentina and Brazil.
Soybean supply and use projections were also unchanged. The season-average soybean price was projected at $10.10 per bushel, down 10 cents from last month. Soybean meal and oil prices were unchanged at $310 per short ton and 43 cents per pound, respectively. Global soybean supply and use forecasts included lower production, higher use and lower ending stocks.
Production was reduced for Argentina and Paraguay due to persistent heat and dryness in January. Brazilian soybean production was unchanged at 169 million tons. Beneficial weather in the Center-West is boosting soybean prospects, but drier weather in the south accelerated soybean development at the expense of yields, according to the WASDE.
U.S. dairy culling continues to lag. The USDA reported 57,500 dairy cows were sent to slaughter the week ending Feb. 1, 6,000 more than the previous week, but 2,500, or 4.2%, below a year ago. Year to date, 275,700 cows had retired from the dairy business, down 9,200 head, or 3.3%, from a year ago.
Cash dairy prices in Chicago were a bit skittish with the "T" word (tariffs) being bandied about again the week leading up to Valentine's Day. But the Cheddar blocks closed last Friday at $1.92 per pound, up 6 cents on the week and 44 cents above a year ago. The barrels crept to $1.83 by last Thursday, but closed last Friday at $1.8175, 3.75 cents higher, 21 cents above a year ago, and a higher than normal 10.25 cents below the blocks. There were eight CME sales of each on the week.
StoneX stated in its Feb. 12 Early Morning Update, "It's important to remember that the 10-year spot block price average in February is $1.7020. $1.90 block cheese today is appropriately reflective of a tighter-than-normal cheese market."
Meanwhile, Midwest cheesemakers reported mixed demand, according to Dairy Market News. Italian-style cheesemakers, particularly hard Italian styles, said sales are strong. Cheddar makers say demand varies plant to plant, with some being oversold. Milk availability also varies. Plant downtime continues to impact milk prices. Some cheesemakers had a lot of offers while others said milk was short and they were looking for more but having no luck.
Demand for Class III milk from Western cheese manufacturers is generally at-or-above expectations, says DMN. Class I milk demand is seasonally strong and bottlers were pulling heavily on milk volumes as well as cheese manufacturers. Cheese output was steady to stronger. Inventories are reportedly tight on certain varieties while others are generally far from short. Demand is mostly steady from retail and steady or lighter from food service, according to DMN.
Results of this year's Super Bowl was a win-win for the dairy industry as well as for the Eagles. The Daily Dairy Report pointed out that National Pizza Day fell on the same day, which is the biggest pizza-eating day of the year. The DDR stated, "The Washington Post notes that Americans eat 3 billion pizzas annually, the equivalent of 46 slices per person. Assuming a 14-inch pizza is topped with 9 ounces of cheese, consumers eat nearly 1.7 billion pounds of cheese on pizzas each year, or about 35% of U.S. Mozzarella production."
The DDR added that the playoffs and Super Bowl may have been part of the reason USDA's December Dairy Products report showed record high Mozzarella production. Americans love cheese and that's great news for U.S. dairy farmers.
Butter jumped to $2.43 per pound last Wednesday but closed last Friday at $2.3775, down a quarter-cent on the week, lowest since June 26, 2023, and 37.25 cents below a year ago. There were 51 sales on the week, 31 on Wednesday alone.
Midwest butter makers relay that demand has yet to move out of its seasonal hiatus despite a slight pickup from January in retail. Outside of some planned and unplanned plant downtime this week, churning was unquestionably in one of its busiest runs of the year, says DMN. Cream is markedly abundant in the region and moving in from the West at "undeniably affordable rates."
Cream is plentiful in the West and multiples were again below prior week. In some cases, offers for distressed loads were at much lower multiples. Churns are busy while butter demand is moderate to steady, according to DMN.
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