Tariffs Are Likely to Impact the Global Dairy Markets
Published: Friday, April 18, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
Tariffs remained the No. 1 subject on a lot of people's minds, particularly those in the dairy industry as the Trump Tariff Tit for Tat was changing almost by the hour. Tariffs were increased on all trading partners of the U.S. and response was almost immediate, with some countries reciprocating, while others asked for further negotiation, prompting Trump to drop the tariffs back to the 10% level last Wednesday and postpone the bigger increases for three months for about 75 countries.
The bellwether Standard and Poor's 500 gained over 8% in minutes. Crude oil went from $4 lower on the day to $2 higher. Things reversed direction the next day. And, in the ongoing game of chicken with China, which increased its tariffs to 125% on U.S. goods, Trump responded, raising China's tariffs to 145%.
Speaking in the April 14 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said the resulting uncertainty in the markets is something they do not like, but "food commodities fared better and remained rather stable." The soybean market is watching closely as over half of U.S. beans are exported to China.
The bellwether spot cheese market made its most recent low on March 21, two weeks before "Liberation Day," he said, and the futures market made its low, two days after April 2 Liberation Day. "U.S. cheese and butter prices remain attractive on the world stage, tariffs or no tariffs," he concluded, and are "stable to higher."
Rabobank Global Strategist Mary Ledman warned, "The escalating trade war between the U.S. and China is set to impact the global dairy market, particularly lactose and dry whey. With China imposing reciprocal tariffs on U.S. imports, the U.S. dairy sector, which exports over 50% of its dry whey and lactose production to China, faces potential disruptions. This could lead to shifts in trade dynamics, with the EU and UK possibly stepping in to fill the gap. The intensifying trade war could result in lower prices for U.S. dairy producers, slimmer margins for traders, and higher prices for Chinese end users and consumers," Ledman warned.
The April 9 Daily Dairy Report pointed out, "Milk production in China fell for the seventh straight month in February. CN Agri data showed that milk collections were 6.1 billion pounds in both January and February, with year-to-date output down 9.2% compared to January and February 2024. Milk prices in China fell 15% in February relative to February 2024, according to RaboResearch. And skim milk powder production in January and February plummeted more than 30% compared to the same months in 2024."
Per capita dairy consumption in China is far below the rest of the world, says the DDR, and not keeping pace with gains in milk output there.
Interestingly, one of the reasons is "many Chinese are lactose intolerant, which is why milk historically has not been a staple of the Chinese diet and why adoption is slow," according to the DDR.
Back on the home front, you'll recall February milk production was up 1% from a year ago, after factoring the Leap Day. Adjusting for the fat and protein components, it was up 3.5%. The February Dairy Products report shows where the milk was used, keeping in mind, February 2024 had 29 days and February 2025 had 28, a phenomena which occurs about every four years, so the totals are skewed.
Cheese output totaled 1.155 billion pounds, up 1.3% from February 2024, adjusted for leap year. Revisions added 10.3 million pounds to January's total. Output for the two months stood at 2.3 billion pounds, down .2% from 2024.
Mozzarella production totaled 373.3 million pounds, up 3.4% from a year ago, with YTD output hitting 785.3 million pounds, up 1.7%.
Cheddar production hit 318 million pounds, up 1%, from a year ago. Revisions added 3 million pounds to the January total. Cheddar YTD hit 635.6 million pounds, down 1.5% from a year ago.
Butter production totaled 210 million pounds, up 12.4 million, or 6.3%, from a year ago, after increasing just .5% in January. YTD butter totaled 421.1 million pounds, up 1.5% from a year ago.
Weaker cheese, ice cream and sour cream production freed up some fat for butter, says StoneX.
Nonfat and skim milk powder production was up .2% from a year ago, which StoneX says is only the second time in 20 months that powder production has been up year over year.
HighGround Dairy warned, "Ballooning nonfat dry milk stocks will make it hard for this market to stage a rally."
Ditto on whey stocks, says HighGround. "Dry whey output tanked in February to the lowest volume for the month since the start of the century, yet stocks continued to build. Ultimately, trade wars will dictate the direction of this market."
The Agriculture Department raised its milk production forecast from last month, in its latest World Agricultural Supply and Demand Estimates (WASDE) report, citing larger cow inventories and slightly higher milk per cow.
2025 production and marketings were projected at 226.9 and 225.9 billion pounds, respectively, up 700 million on both. If realized, both would be up 1 billion pounds, or .4%, from 2024.
Imports are lower on both a fat and skim-solids basis, primarily due to additional duties placed on imported dairy products, in particular imports of butter fats and milk protein products. Exports on a skim-solid basis were reduced, primarily on lower shipments of dried skim milk products and whey products. Exports on a fat basis were raised on higher expected shipments of butter.
Prices for butter, cheese, nonfat dry milk (NDM) and whey were all lowered, based on recent prices and higher expected milk supplies.
The Class III milk price was lowered on anticipated lower cheese and whey prices. The 2025 average was projected at $17.60 per hundredweight, down 35 cents from last month's estimate, and compares to $18.89 in 2024 and $17.02 in 2023. With April 10 settlements, the 2025 average would be $18.32.
The Class IV price was lowered on lower butter and nonfat dry milk prices and is expected to average $18.20, down 60 cents from a month ago, and compares to $20.75 in 2024 and $19.12 in 2023.
This month's corn outlook included greater exports, reduced feed and residual use, and smaller ending stocks. Feed and residual use was cut 25 million bushels to 5.8 billion based on disappearance during the December-February quarter as indicated in the March 31 Grain Stocks report. Exports were raised 100 million bushels reflecting the pace of sales and shipments to date and relatively competitive U.S. prices. Ending stocks are down 75 million bushels from last month to 1.5 billion. The season-average corn price was unchanged at $4.35 per bushel.
Soybean supply and use included higher imports and crush, and lower ending stocks. The crush was raised 10 million bushels to 4.42 billion on higher soybean meal domestic use and soybean oil exports. Soybean oil for biofuel was lowered based on pace to date. However, stronger use is forecast for the last part of the marketing year due to tariffs impacting imports of other biofuel feedstocks. Soybean ending stocks were lowered 5 million bushels to 375 million. The U.S. season-average soybean price forecast was unchanged at $9.95 per bushel. Soybean meal was lowered $10 to $300 per short ton and the soybean oil price was raised 2 cents to 45 cents per pound, according to the WASDE.
The USDA's weekly Slaughter report shows 49,600 dairy cows were sent to slaughter the week ending March 29, down 2,900 from the previous week, and down 7,100, or 12.5%, from a year ago. Year to date, 693,600 head had been culled, down 54,200 head, or 7.2%, from a year ago.
CME block Cheddar climbed to a Friday close at $1.7450 per pound, up 10.50 cents on the week, highest since March 13, and 21 cents above a year ago.
The Cheddar barrels made it to $1.8050, 14.50 cents higher, highest since Feb. 27, 23.25 cents above a year ago, and an inverted 6 cents above the blocks. Sales for the week totaled 27 loads of block and 11 of barrel.
StoneX said, "The level of skepticism on any market strength, be it spot or futures, is rather staggering these days. And for good reason as worries over demand and liquidity continue to plague outside energy and equity markets." "Indecisive" might be a good description for the dairy complex yet cheese and butter remain attractively priced, both for U.S. and international buyers.
Midwest contacts told Dairy Market News that cheese demand ranges from post-holiday order quiet to steady. Most said orders were steady after holiday deliveries had been prepared and/or out the door. Some cheesemakers were taking advantage of widely available and affordable spot milk, adding to production ahead of the upcoming seasonal demand. Milk prices are falling, with some as low as $5-under class early in the week, while some were still around $1-under, according to DMN.
Strong Milk Production
Seasonally stronger milk production is keeping a more than ample supply for western cheese manufacturers, but a few sellers reported they are receiving less than desired prices for their milk. Cheese output is steady to stronger. Inventories are mixed among manufacturers. Domestic retail cheese demand is steady to lighter and cheese has made its way into retail ads more often than usual recently. Food service demand continues to be less robust than retail and demand from international buyers is steady to strong, says DMN.
Cash butter made its way to a $2.3475 per pound Friday finish, 5.25 cents higher on the week but 57.25 cents below a year ago, with 30 trades for the week.
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