Tariffs Starting to Affect U.S. Dairy Exports to China
Published: Friday, July 11, 2025
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
May U.S. dairy exports declined .7% from a year ago, "primarily due to lower volumes of powders and trade tensions earlier in 2025," said HighGround Dairy, "when these sales would have been made."
Exports to China decreased 68% and exports to Mexico were down 6.9%. The decrease to Canada was not as drastic, says HGD, but was down 1.6% from a year ago. Sailings to Japan and South Korea rose and limited the losses.
U.S. cheese exports hit a record 113.6 million pounds, up 7.3%. And, for the second month in a row, Cheddar exports surpassed 22 million, according to HGD, but "Surprisingly, shipments across the southern border dropped 12.1%. Sailings to South Korea were up 19.6%, Japan up 24%, and Australia up 28%.
HighGround says the tariff troubles with China likely caused the drop in U.S. cheese shipments, as "these contracts were likely signed in February, when the trade spat was at its height. U.S. cheese remains at a huge discount to the rest of the world, which will likely mean more record-setting exports in coming months."
The U.S. was a net exporter of butter for the second consecutive month, shipping 11.6 million pounds abroad, while importing only 7.4 million. The export surplus was the highest since March 2022, according to HGD. "While exports to Canada were up significantly from May 2024, year-ago values were relatively weak and down from April, March and February 2025, suggesting that trade tensions were weighing on volumes there," HighGround stated.
Cash Cheddar block cheese jumped 10 cents last Monday and hit $1.7225 per pound last Tuesday, but retreated to a Thursday close at $1.6850 in the shortened holiday week, up 6.50 cents and ending four weeks of declines, but 21.50 cents below a year ago, as traders awaited the afternoon's Dairy Products report. The barrels finished at $1.72, 5.50 cents higher and 18.25 cents below a year ago. Sales totaled 26 loads of block on the week and 178 for June, up from 136 in May. Barrel sales totaled 10 for the week and 33 for June, down from 53 in May.
High summer temperatures in the Central region are contributing to lighter milk output, reports Dairy Market News, and some cheesemakers were turning to the spot market for milk to run full production. Some planned to take a break for the holiday and were selling milk. Others noted unplanned production problems. Class III prices ranged $8 to $1-under at mid-week. Cheese production is steady to lighter in the Central region. Retail cheese demand is steady, but food service sales remain light. Export demand is steady and remains up from a year ago.
Milk handlers in the West say demand from cheese manufacturers is strong, but increasing temperatures are decreasing farm milk output. Cheese production is steady for the most part. Domestic demand varies from steady to stronger, while export demand is stronger, says DMN.
CME butter saw its Thursday close at $2.6050 per pound, 4.25 cents higher on the week, but 52.75 cents below a year ago. There were 20 sales on the week and a whopping 286 for all of June, up from 123 in May, and the highest monthly total since October 2024's 318 loads.
Milk output and components are declining in the Central region, but plenty of cream was available ahead of the holiday. Downtime, both planned for July 4 and unplanned due to churning troubles, at some facilities last week was keeping cream plentiful in the region. Cream demand is strong as ice cream makers and butter makers are pulling on available volumes. Domestic butter demand remains soft, though contacts report export sales are strong.
Increasing temperatures are negatively impacting cream volumes in the West, which is tightening availability of spot loads. Butter production for the holiday week was steady for the most part. Domestic butter demand is steady and demand from international buyers is strong, according to DMN.
CME powder closed last Thursday at $1.26 per pound, up a penny on the week, and 8 cents above a year ago. There were 29 sales on the week, 25 on Thursday alone, and 32 for June, down from 102 in May.
Dry whey finished the short week at 60.75 cents per pound, 2.25 cents higher, highest since Feb. 5, and 11.50 cents above a year ago. There were 10 CME sales on the week and 40 for the month of June, up from 29 in May.
Higher feed prices offset a rise in the All Milk Price and resulted in the May milk feed price ratio being down for the fourth consecutive month. The latest Ag Prices report shows the May ratio at 2.24, down from 2.27 in March, and compares to 2.24 in May 2024.
The All Milk Price averaged $21.30 per hundredweight with a 4.24% butterfat test, up 30 cents from April which had a 4.32 test, and compares to $22 in May 2024, with a 4.17% test.
The national corn price averaged $4.64 per bushel, up 2 cents from April, and 13 cents above a year ago. Soybeans averaged $10.40 per bushel, up 20 cents from April, but $1.50 below a year ago. Alfalfa hay averaged $191 per ton, up $11 from April, but $11 below a year ago.
The May average cull price for beef and dairy combined was at $147 per hundredweight, up $5 from April, $15 above May 2024 and $75.40 above the 2011 base average.
Milk production margins moved higher for the first time since January and remained at historically high levels with a 3 cent per hundredweight gain above April, according to dairy economist Bill Brooks of Stoneheart Consulting in Dearborn, Mo. "Income over feed costs (IOFC) in May were above the $8 per hundredweight level needed for steady to higher milk production for the 19th month in a row," he said. "Input prices were higher in May, with two of the three input commodities inside of the top 10 for May all-time. Feed costs were the 10th highest ever for the month of May and increased 27 cents per hundredweight from April."
Income over feed costs for 2025, (using June 27 CME settling futures prices for Class III milk, corn and soybeans plus the Stoneheart forecast for alfalfa hay) is expected to be $13.12 per hundredweight, says Brooks, a loss of 25 cents per hundredweight versus last month's estimate, and would be above the level needed to maintain or grow milk production, and down 27 cents from 2024.
Dairy margins ticked higher in the final trading days of the month as lower feed costs were coupled with a bounce in Class III milk futures, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. The MW detailed the May Milk Production and Cold Storage reports.
Feed costs continued to fall, according to the MW. "New crop corn futures scored contract lows as the crop is off to a great start heading into the all-important month of July. The corn crop was rated 73% good to excellent through the week ending June 29. This was 3 points higher than the previous week and 9% higher than the five-year average."
"Soybean meal futures fell to contract lows in the last half of June as regulations regarding soybean oil production and biofuel mandates are expected to lead to increase meal availability," the MW concluded.
Powder and fat took the July 1 Global Dairy Trade weighted average down 4.1%, following a 1% decline on June 17, biggest decline since Aug. 15, 2023. Volume soared to 56.7 million pounds, up from 33.5 million on June 17. The average metric ton price slipped to $4,274, down from $4,389.
Agriculture Secretary Brooke Rollins announced port re-openings for cattle, bison and equines from Mexico last week. The USDA, following collaboration between USDA Animal and Plant Health Inspection Service experts and their counterparts in Mexico, will increase New World Screwworm (NWS) surveillance, detection and eradication efforts.
"Progress has been made in several critical areas since the ports were closed on May 11, including: resolution of challenges with conducting flights in Mexico that has allowed our team to consistently conduct sterile NWS fly dispersal seven days each week and dispersal of more than 100 million flies each week," said Rollins. "We also sent five teams of APHIS staff to visit/observe and gain a deeper understanding of Mexico's NWS response."
The June federal order Class III milk price was announced last week at $18.82 per hundredweight, up 25 cents from May but $1.05 below June 2024. That put the six-month average at $19, up from $16.92 at this time a year ago, and compares to $17.48 in 2023. Last Wednesday's futures settlements portended a July price at $17.32 and August, $18.24, with an $18.99 peak in October.
The June Class IV price is $18.30, up 17 cents from May, but $2.78 below a year ago. Its six-month average stands at $18.87, down from $ 20.17 a year ago, and compares to $18.59 in 2023.
You'll recall May milk production was up 1.6% from a year ago. The USDA's latest Dairy Products report shows milk continues to flow to the churn and vat.
Cheese output totaled 1.252 billion pounds, up 1.4% from April, and up 3.3% from May 2024. April output was revised up 6 million pounds. Total output for the first five months of 2025 hit 6.1 billion pounds, up 1.2% from 2024.
Mozzarella production totaled 408.4 million pounds, up .8% from a year ago. American cheese, at 511.8 million pounds, was up 3.3% from April and 5.6% above a year ago. Italian-style cheeses totaled 517.4 million pounds, up 1% from April and up 2.4% from a year ago.
Cheddar production jumped to 355.7 million pounds, up 14.9 million pounds, or 4.4%, from April, and up a whopping 31.3 million, or 9.6%, from a year ago. Revisions added 2.7 million pounds to the April total. YTD Cheddar hit 1.7 billion pounds, up 4.8% from a year ago.
Butter output fell to 211.9 million pounds, down 2.5 million pounds, or 1.2%, from April, but was up 7.1 million, or 3.5%, from a year ago. YTD butter hit 1.1 billion pounds, up 3.7% from a year ago.
Yogurt production totaled 423.7 million pounds, up 5.3% from a year ago. Hard ice cream, at 64.1 million pounds, was down 4.4% from 2024.
Dry whey output jumped to 72.7 million pounds, up 3.1 million pounds, or 4.4%, from April, and up 4.4 million, or 6.5%, from a year ago. Whey stocks grew to 63.7 million pounds, up 3.2 million, or 5.3%, from April, but down 800,000 pounds, or 1.2%, from a year ago.
Nonfat dry milk output fell to 158.3 million pounds, down 4.6 million, or 2.8%, from April, and down 9.4 million pounds, or 5.6%, from a year ago. Stocks fell to 249.9 million pounds, down 21.5 million, or 7.9%, from April, and down 2.3 million pounds, or .9%, from 2024.
Skim milk powder production grew to 47.8 million pounds, up 12.3 million pounds, or 34.8%, from April, but was down 1.9 million, or 3.8%, from a year ago.
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