Government intervention affects dairy markets

The “Mielke” Market Weekly

A lot of eyes are on dairy product demand right now as the spring flush begins. Exports are strong due to low U.S. prices, particularly on cheese and butter, but they are suspect due to the Trump tariff tit for tat and falling U.S. dollar.

We got a look back on February in the U.S. Department of Agriculture’s latest Dairy Supply and Utilization report, which showed overall cheese use at 1.1 billion pounds, down 0.8% from February 2024. HighGround Dairy blamed “tepid domestic consumption for both American and other-cheese as a volatile economic environment weighs on consumer purchasing.” The good news is, “Discounted U.S. product compared to the rest of the world continues to stimulate healthy export demand.”

Butter utilization, at 169.4 million pounds, was up 10.1% and “neared the monthly high set in 2021, missing it by just 500,000 pounds,” HGD said. “Ex-ports and domestic disappearance were both robust, and international shipments hit their highest mark since March 2022. These were likely buoyed by the steep discount that U.S. product carries to international prices.”

Unfortunately, nonfat dry milk and skim milk powder continued to falter, coming in at 151.5 million pounds, down 13.8% from a year ago and down from the year before for the 17th time in the past 19 months. HGD said, “It was the lowest volume for the month since 2011, highlighting just how poor demand is presently.”

Dry whey utilization fell to 57.2 million pounds, down 11.3%, the smallest monthly volume since November 2022, primarily due to poor domestic demand. Exports were up 3.0%; however, HGD said, “Growth seems unlikely to continue given the tariff war with China, the top destination for U.S. whey.” With China’s tariff at 125%, a U.S. price of 47 cents per pound would put whey at over a dollar to China.

Speaking in the April 21 Dairy Radio Now broadcast, HGD’s Curtis Bosma pointed out that we export a significant amount of the nonfat dry milk and whey we produce here, so there is a lot of concern about what lies ahead. Domestic demand is greatest for cheese and butter, he said, and cheese has faced some headwinds, while butter demand has been relatively steady.

“The thing that’s really going to move the price one way or the other,” said Bosma, “is going to be export demand, and right now, that’s quite questionable, given everything that’s going on.”

He adds that the new cheese plants which have come online were also built to tap into the whey supply chain, as demand for high-protein whey derivatives has seemingly been insatiable.

The problem is, a good segment of that demand is international, and if we’re unable to export that product because of tariffs or other trade concerns, then that presents a challenge, according to Bosma.

Timing is essential, he said, because as these plants come online, they’re not initially manufacturing the higher value whey products but are starting with the baseline commodity grade dry whey. However, those prices have slumped the last few months. The product mix may change over time, he concluded, but “That may be a lot slower than we want it to be.”

Fluid milk sales may be returning to their old ways. The USDA’s February data reports packaged sales at 3.4 billion pounds, down 2.2% from February 2024, following a 0.5% slippage in January and a 2.6% increase in December 2024.

Conventional product sales totaled 3.1 billion pounds, down 2.5% from a year ago. Organic sales, at 241 million pounds, were up 2.8% from a year ago and represented 7.1% of total milk sales in the month.

Whole milk sales totaled 1.2 billion pounds, down 1.3% from a year ago but up 0.1% year to date. Whole milk represented 35.5% of total milk sales for the month. Skim milk sales totaled 143 million pounds, down 6.7% from a year ago. 

Packaged fluid sales in the 2-month period totaled 7.2 billion pounds, down 1.3% from 2024. Conventional product sales totaled 6.7 billion pounds, down 1.7% from a year ago. Organic products, at 517 million pounds, were up 4.8% and represented 7.2% of total milk sales in the two months. The figures represent consumption in Federal Milk Marketing Orders, which account for about 92% of total fluid sales in the U.S.

Down on the farm, dairy margins weakened slightly over the first half of April as increasing feed costs more than offset a small improvement in milk futures, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC.

“Market participants continue to monitor the evolving trade war that the Trump administration is pursuing, with the reciprocal tariff scheduled that was revealed on ‘Liberation Day’ much more aggressive than most were anticipating,” the MW said. “While a 90-day reprieve was issued shortly after the announcement following stress in the U.S. Treasury market with yields spiking in response to a sharp selloff, punitive tariffs on China remain in place, and the country now faces an effective 145% duty on goods shipped to the U.S. An exemption was made for some consumer electronic products, including cell phones and computers that only face a 20% tariff, although China raised duties on U.S. exports to 125%, which effectively shuts down trade between the two countries.

“China is the largest buyer of U.S. dry whey, with shipments of 150 million pounds last year and representing a market share of around 40% of U.S. exports between 2022 and 2024. February U.S. dairy exports declined by 4.3% in volume to 463 million pounds but increased in value by 12.1% to $723.5 million. Nonfat dry milk exports fell 25.7% from last year to 106.9 million pounds, the weakest February volume since 2016. By contrast, February cheese exports of 99 million pounds were the strongest volume ever recorded for the month and up 7.3% from 2024. Butter exports rose 134.2% while exports of anhydrous milk fat were 10 times larger than in February last year,” the MW said.

Chicago Mercantile Exchange cheddar block cheese closed the Good Friday holiday-shortened week at $1.8350 per pound, up 9 cents on the week, the highest since Feb. 27, 2025 and 15.50 cents above a year ago. It has gained 23.25 cents in the past four weeks.

The Cheddar barrels climbed to $1.90 per pound Tuesday, the highest CME price since Oct. 30, 2024, but closed Thursday at $1.84, up 3.50 cents on the week, 18 cents above a year ago and a half-cent atop the blocks. The barrels have gained 29 cents in four weeks. Sales this week totaled 14 cars of block and 14 of barrel.

Midwest cheesemakers told Dairy Market News that demand tones have improved the past two weeks. Retail customers are more aggressive in buying. Retail Cheddar and Italian-style cheesemakers relay similar notes. Barrel makers say demand has steadied somewhat, but they are also actively purchasing milk and increasing production. Milk has grown in availability, and spot milk prices mid-week were as low as $6 under Class III. Lower prices were expected later in the week and over the spring holiday weekend.

Seasonal milk production continues to be more than ample for Western cheese manufacturers. Cheese production varies from lighter to steady. Availability of varietal cheeses is mixed. Buyers convey certain varieties are tight and present challenges securing loads. Stakeholders indicate strong export demand is playing a part in the tightness of certain types. Domestic demand is steady to moderate, with demand from frozen pizza makers strong, according to DMN.

Cash butter inched up to $2.35 per pound Tuesday but closed Thursday at $2.3425, a half-cent lower on the week, and 57.75 cents below a year ago. There were 38 sales put on the board for the short week.

Butter churning remains busy in the Central region, and plants continue to add to inventories for future demand needs, focusing on expectations of late summer and fall upticks. Cream availability has been wide open for the entire year, though plant managers reported a slight tightening cream market this week, relative only to previous weeks, but it remains far from tight. Cream suppliers say they are unsure what to expect following the spring holiday weekend.

Cream availability continues to be steady for Western butter manufacturers. Some reported spot loads were being offered at somewhat lower multiples with the holiday weekend at hand. Plants were generally running heavy butter production before the weekend. Butter inventory growth is mixed, and a few manufacturers said that not much was making its way to the freezer. Sellers note that, despite 2025 trade policy changes, domestic prices remain competitive internationally and export demand continues to be strong overall. Domestic retail butter demand is mixed. For some butter sellers, food service demand is down compared to last year, said DMN.

Grade A nonfat dry milk closed Thursday a half-cent higher at $1.1725 per pound, 5.25 cents above a year ago, with only three sales for the week.

Dry whey saw its Thursday close at 48.25 cents per pound, up 1.75 cents on the week and 9 cents above a year ago, with eight sales reported for the four days.

The USDA’s weekly crop progress report showed U.S. corn was 4% planted as of the week ending April 13, 2% behind a year ago and 1% behind the 5-year average. Two percent of the soybeans were in the ground, 1% behind a year ago and dead even with the 5-year average.

The agriculture department’s monthly Livestock, Dairy and Poultry Outlook, issued April 16, mirrored milk price and production projections in the April 10 World Agricultural Supply and Demand Estimates report.

It also reported that the highly pathogenic avian influenza impact remains. California is the state with the highest number of dairy herds from September through December 2024. Since then, the number of reported outbreaks has declined significantly both in California and elsewhere.

The 2025 U.S. dairy herd size forecast was 9.405 million head, up 25,000 head from the previous month’s projection. An anticipated higher milk yield per cow throughout the year led to an increase of 10 pounds per cow, which is now forecast at 24,130 pounds per head, according to the Outlook.

Tuesday’s Global Dairy Trade saw its weighted average inch up 1.6%, following a 1.1% gain April 1. Volume continued to fall, totaling 36.9 million pounds, down from 38.9 million April 1 and the lowest since May 5, 2020. The average metric ton price crept up to $4,385 U.S., up from $4,250.

Results were mixed. Lactose led the gains, jumping 22% after dropping 2.6% April 1. GDT mozzarella was up 5.4% after dropping 4% last time, while Cheddar was down 1.8%, following a 1.7% rise. Whole milk powder was up 2.8%, following a 0.1% slip. Skim milk powder was down 2.3% after rising 5.9%. Anhydrous milkfat was up 2.1% after a 2.3% gain, while butter was up 1.5% after dropping 1.2% April 1.

StoneX says the GDT 80% butterfat butter price equates to $3.3980 per pound U.S., up 3.4 cents, after falling 2.9 cents last time, and it compares to CME butter, which closed Thursday at $2.3425. GDT Cheddar equated to $2.2330, down 4.3 cents, and compares to Thursday’s CME block Cheddar at $1.8350. GDT skim milk powder averaged $1.2677 per pound, down from $1.3044 last time. Whole milk powder averaged $1.8917 per pound, up from $1.8424. CME Grade A nonfat dry milk closed Thursday at $1.1725 per pound.

Analyst Dustin Winston said, “Regionally, North Asia, which includes China, purchases fell from the last event and last year. Skim milk powder purchases were a significant factor in this decline. Southeast Asia and Oceania purchases and market share also fell from both the last event and last year. This market share was picked up in the most part by Europe, where market share nearly tripled from last year’s levels. Middle Eastern market share stayed in line with last year and last event’s levels.”

In politics, Agriculture Secretary Brooke Rollins announced the cancellation this week of the Partnerships for Climate-Smart Commodities. “Following a thorough line-by-line review of each of these Biden era partnerships,” Rollins said, “It became clear that the majority of these projects had sky-high administration fees which in many instances provided less than half of the federal funding directly to farmers. … Select projects may continue if it is demonstrated that a significant amount of the federal funds awarded will go to farmers. We continue to support farmers and encourage partners to ensure their projects are farmer focused or reapply to continue work that is aligned with the priorities of this administration. With this action, USDA is cutting bureaucratic red tape, streamlining reporting, lowering the paperwork burden on producers and putting farmers first.”

“USDA will review existing grant agreements based on three farmer-first policy priorities: a minimum of 65% of federal funds must go to producers; grant recipients must have enrolled at least one producer as of Dec. 31, 2024; and grant recipients must have made a payment to at least one producer as of Dec. 31, 2024.”