China blocks U.S. beef plants—your cull cow checks hang in the balance as $4.13 billion in exports face sudden termination. Is your dairy ready?
EXECUTIVE SUMMARY: China’s refusal to renew registrations for 390 U.S. beef plants creates an urgent threat to dairy producer profitability, potentially eliminating .13 billion in beef exports precisely when declining milk margins make cull income increasingly crucial. This calculated move amid escalating trade tensions and China’s oversupplied domestic beef market could flood U.S. markets with products previously destined for export, depressing cull cow values nationwide. Innovative dairy producers should consider accelerating planned culls, exploring alternative marketing channels, and implementing specific risk management strategies like Livestock Risk Protection insurance with 70-100% coverage levels or CME Live Cattle options to protect against this emerging threat to their bottom line.
KEY TAKEAWAYS
China’s registration block threatens $4.13 billion in beef exports, with ripple effects that could significantly depress domestic cull cow prices at a time when dairy margins are already tightening.
The timing creates a perfect storm for dairy producers: milk margins are down 11% while simultaneously threatening cull income, serving as a critical financial buffer during downturns.
Immediate action steps include rethinking culling timelines, exploring direct marketing arrangements, and implementing specific risk protection through USDA LRP insurance or CME futures options.
This situation exposes a fundamental vulnerability in modern dairy economics: over-reliance on strong cull values to maintain profitability when milk prices weaken.
Beyond direct trade impacts, China’s decision potentially violates Phase 1 trade commitments and represents a strategic move to protect its oversupplied domestic beef market at the expense of U.S. dairy producers.
While you were milking cows this weekend, China quietly pulled the rug from under U.S. dairy producers. In a move that threatens to tank cull cow prices just when dairy margins are already shrinking, Chinese officials have refused to renew registrations for approximately 390 U.S. beef plants—potentially wiping out $4.13 billion in U.S. beef exports and delivering a devastating blow to your bottom line. With dairy margins already under pressure, this diplomatic snub couldn’t come at a worse time for producers counting on strong cull values to offset weakening milk prices.
China’s Power Play Exposes Dairy’s Vulnerability
Export registrations for more than 1,000 U.S. meat plants granted under the 2020 “Phase 1” trade deal officially lapsed on Sunday, March 16. While China has since renewed registrations for pork and poultry facilities through 2030, U.S. beef facility registrations remain conspicuously listed as “expired.”
This isn’t some administrative hiccup—it’s a calculated move amid escalating trade tensions.
The registration status for beef plants across the United States, including operations owned by major producers like Tyson Foods, Smithfield Packaged Meats, and Cargill Meat Solutions, was deliberately changed from “effective” to “expired” on the website of China’s General Administration of Customs.
They’re squeezing American agriculture from both ends—hiking tariffs while shutting down market access through regulatory maneuvers.
Is your operation prepared for a potential cull cow price shock when beef export channels suddenly close?
The Double Whammy Threatening Your Operation
Why should you care about beef plant registrations? Because your dairy operation’s profitability is directly tied to those beef export channels.
When China blocks U.S. beef exports, that meat gets dumped back into domestic markets, driving down cull cow prices precisely when you need that income most.
The timing of this situation is particularly treacherous. This market disruption arrives as dairy margins are compressing, making cull income increasingly crucial to your operation’s financial health.
When milk prices struggle, the check for your culled cows becomes an essential lifeline—one that’s now at serious risk.
China’s Domestic Beef Glut
While the timing aligns perfectly with broader trade tensions, China’s reluctance to renew beef registrations stems from domestic market conditions.
The country has been grappling with a significant oversupply in its domestic beef market, which has led to financial losses for Chinese producers throughout 2024.
Unlike pork and poultry—where registrations were promptly renewed—Chinese officials appear to be using regulatory tools to protect domestic beef producers already struggling with depressed prices.
Under the Phase 1 trade deal, China must update its approved plant list within 20 days of receiving updates from the USDA.
Their refusal to do so isn’t just inconvenient—it potentially violates explicit trade commitments.
This isn’t the first wave of registration expirations, either. In February 2025, registrations for 84 U.S. plants lapsed.
While shipments from those plants continue to clear customs, the industry does not know how long China will continue accepting these imports.
Beyond the paperwork hurdles, exporters face additional challenges.
As Joe Schuele, spokesperson for the U.S. Meat Export Federation, explains: “We are hoping for similar news soon on the beef side, but for now, the 390 US beef facilities that expired on March 16 have not yet been renewed. For now, we have advised exporters that beef produced before March 16 should clear customs, provided that importers had secured import quarantine permits before March 16.”
U.S. meat shipments to China reached $2.5 billion last year, making it the second-largest export market by value.
The USMEF impact assessment doesn’t just consider direct export losses. As Schuele explains, the $4.13 billion figure “not only takes into consideration the loss of direct exports to China, but also the impact of the improved prices U.S. beef cuts command in Japan, Korea, and Taiwan when exporters also have access to China and Chinese buyers are active in the market.”
In other words, losing China creates a domino effect across all export markets.
The loss of the Chinese market would hurt exporters of beef parts in the United States, which has limited domestic demand.
When those products can’t be shipped to China, they flood local markets and drive down prices—including for your cull cows.
How exposed is your dairy to beef market volatility, and what’s your backup plan if cull prices drop 20% overnight?
Strategic Moves to Protect Your Operation
While this diplomatic chess match plays out, you need actionable strategies to protect your operation’s profitability:
1. Rethink Your Culling Timeline
If you were planning routine culls in the coming months, consider accelerating that timeline before market impacts materialize fully.
Alternatively, if you can profitably maintain marginally productive cows, you might benefit from holding them longer until this trade situation stabilizes.
2. Explore Alternative Marketing Channels
This might be the time to investigate direct marketing arrangements with local processors or explore niche markets for dairy beef that might be less affected by export market disruptions.
3. Implement Risk Management Strategies
Don’t leave your operation exposed to these market whims. Explore Livestock Risk Protection (LRP) insurance options specifically for cull cows through your crop insurance agent.
The USDA’s LRP program offers coverage levels between 70-100% of expected ending values, with premiums partially subsidized (ranging from 35-55% depending on coverage level).
Consider strategically using Chicago Mercantile Exchange (CME) Live Cattle futures contracts to hedge against potential price declines. For most dairy operations, buying put options might offer the most practical protection against downside risk while limiting your maximum loss to the premium paid.
With dairy margins already under pressure, this diplomatic dispute threatens to undermine a critical revenue stream many operations take for granted.
The situation remains fluid, with industry stakeholders pressing for resolution. However, a quick resolution seems unlikely, given broader trade tensions and China’s apparent willingness to use agricultural trade as leverage.
Innovative producers will prepare for market volatility rather than hoping for diplomatic miracles.
Your operation’s resilience depends on recognizing and adapting these market signals early. Those who understand how global beef trade impacts local cull values—and take proactive steps to mitigate those risks—will be better positioned to weather whatever comes next in this high-stakes international trade dispute.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Mozzarella soars 5.1% while powder plummets! Is your milk heading to the right place? The smart money’s in cheese – are you cashing in?
EXECUTIVE SUMMARY: Tuesday’s Global Dairy Trade auction revealed a dramatic market divide that savvy dairy producers can’t afford to ignore: mozzarella cheese prices surged an impressive 5.1% while skim milk powder dropped 0.4%, creating a 5.5 percentage point spread between winners and losers. This widening gap signals a fundamental shift in the global dairy landscape where value-added products like cheese consistently outperform commodity ingredients. Regional advantages are emerging, with cheese-focused North American and European operations potentially outperforming powder-dependent Southern Hemisphere producers. Forward-thinking dairy farmers should immediately audit where their milk ends up, optimize for components that boost cheese yield, explore direct partnerships with specialty cheese makers, and implement strict quality protocols to capture available premiums. The market is clearly rewarding producers who ensure their milk flows into high-value streams rather than simply focusing on volume.
KEY TAKEAWAYS
MARKET DIVIDE: Mozzarella cheese jumped 5.1% to $4,704/MT while skim milk powder fell 0.4% to $2,729/MT in Tuesday’s GDT auction, continuing a pattern of cheese outperforming powder.
COMPONENT VALUE EXPLOSION: Every 0.1 percentage point increase in milk protein can boost cheese yield by 0.25 pounds per hundredweight, creating substantial financial opportunity when cheese prices surge.
ACTION REQUIRED: Implement the five-step Dairy Producer Action Plan – audit your milk’s destination, optimize components, explore direct partnerships, leverage quality premiums, and hedge strategically.
REGIONAL IMPLICATIONS: North American and European producers with cheese exposure stand to benefit most, while Southern Hemisphere operations heavily dependent on powder exports face continued margin pressure.
SUCCESS MODEL: The Larson family dairy boosted their milk check 22% above neighbors by negotiating direct supply agreements with specialty cheese makers and implementing strict quality and component management.
The latest Global Dairy Trade auction reveals what savvy dairy farmers already knew – the smart money is in cheese! Tuesday’s trading showed mozzarella prices soaring a whopping 5.1% while skim milk powder producers watched their products sink again. This widening gap between winners and losers isn’t just market noise – it’s a clear signal that processors without cheese in their portfolios are leaving serious money on the table.
CHEESE CHAMPIONS DOMINATE AUCTION SCENE
When the dust settled on Tuesday’s trading session, the overall Global Dairy Trade Index remained unchanged, but that headline masks the real story – cheese is king in today’s dairy landscape. Mozzarella led the charge with a stunning 5.1% price surge to $4,704 per metric ton ($2.13 per pound), continuing a pattern of strength in the cheese market.
Cheddar wasn’t far behind, posting a solid 1.0% gain to $4,976 per metric ton ($2.25 per pound). These aren’t just incremental movements – they represent a fundamental shift where value is created in the global dairy supply chain.
The cheese category’s strength has followed an established pattern in recent trading sessions. In the March 6th auction, mozzarella posted an even more impressive 7.9% gain to $4,477 per metric ton, even as the overall GDT index declined by 0.5%. This continued momentum in the cheese sector deserves our attention.
WHO’S CASHING IN?
Dairy farmers supplying milk to cheese-focused processors are the winners in today’s market. With 111 winning bidders battling through 18 rounds of competitive bidding for 19,540 metric tons of product, demand remains fierce despite uneven category performance.
Processors with flexible manufacturing capabilities who’ve invested in cheese production are laughing all the way to the bank. Meanwhile, those locked into powder-heavy portfolios scramble to explain diminishing returns to their farmer suppliers.
POWDER MARKET FALTERS WHILE FAT DIVERGES
The powder sector is weak, with skim milk powder dropping by 0.4% to $2,729 per metric ton ($1.23 per pound). This represents a reversal from the previous auction on March 6th, when skim milk powder had increased by 0.6% to $2,744 per metric ton.
“There are safety relief mechanisms in Federal Orders that are only expected to be employed when the system isn’t working properly. One of those is de-pooling of milk… when processors routinely find that obligations to pay the minimum milk price are more than they can recover from their product prices.” — Dr. Mark Stephenson, dairy economist.
Whole milk powder barely remained above water, with a meager 0.2% increase to $4,052 per metric ton ($1.83 per pound). This modest rise does little to recover from the 2.2% drop in the March 6th auction, when WMP fell to $4,061 per metric ton.
Perhaps most interesting is the divergence in the fat markets. Butter managed a respectable 1.1% increase to $7,667 per metric ton ($3.47 per pound), while anhydrous milk fat (AMF) dropped by 1.8% to $6,561 per metric ton ($2.97 per pound). This widening spread between premium consumer-facing products (butter) and industrial ingredients (AMF) tells us consumers are still willing to pay for branded dairy products while food manufacturers are squeezing suppliers.
UNDERSTANDING THE CHEESE-POWDER DIVIDE
Why are we seeing such dramatic differences between cheese and powder markets? The answer lies in fundamentally different market dynamics:
Cheese markets typically respond more quickly to consumer demand signals, with restaurant and retail sales driving value. These markets also benefit from product differentiation and branding, allowing producers to capture premium pricing with strong demand.
Powder markets, by contrast, function more as commodity ingredients, with prices heavily influenced by global stocks and industrial demand. These products face stronger international competition and typically experience more volatile price swings based on supply fundamentals.
The numbers don’t lie – see below precisely how much cheese outperforms other dairy commodities in today’s market. This performance gap directly translates to processor margins and producer milk checks.
PRODUCT PERFORMANCE SCORECARD – MARCH 18, 2025 GDT AUCTION
PRODUCT CATEGORY
PRICE CHANGE
CURRENT PRICE (USD/MT)
CURRENT PRICE (USD/LB)
CHEESE WINNERS
Mozzarella
+5.1%
$4,704
$2.13
Cheddar
+1.0%
$4,976
$2.25
FAT PRODUCTS
Butter
+1.1%
$7,667
$3.47
Anhydrous Milk Fat
-1.8%
$6,561
$2.97
POWDER PRODUCTS
Whole Milk Powder
+0.2%
$4,052
$1.83
Skim Milk Powder
-0.4%
$2,729
$1.23
Lactose
+0.5%
$1,165
$0.52
Butter Milk Powder
N/A
N/A
N/A
Source: Global Dairy Trade Auction Results, March 18, 2025
Understanding these different market cycles helps explain why innovative processors have invested in flexibility – the ability to shift production emphasis toward higher-value products when market signals support such moves.
THE POWDER PERSPECTIVE: WHY SOME REGIONS STICK WITH WHAT WORKS
While cheese is winning the value battle right now, there are legitimate reasons some regions remain committed to powder production:
Powder production offers several advantages that explain its continued prominence in global dairy:
Shelf-life and storage benefits—Powder can be stored for extended periods without refrigeration, which is critical for distant export markets.
Transportation economics – Removing water reduces shipping costs dramatically, allowing producers to reach far-flung markets cost-effectively.
Processing flexibility – Powder can be reconstituted for various applications, from infant formula to bakery products, providing end-use versatility.
Production scale advantages – Large drying operations achieve economies of scale that specialized cheese plants may not match.
“Every dairy market has different structural advantages. New Zealand’s grass-based seasonal production model aligns perfectly with powder export markets. At the same time, Wisconsin’s cheese focus reflects regional expertise and proximity to major consumer markets.” — Mary Ledman, Global Dairy Strategist, Rabobank.
The imaginative play isn’t necessarily abandoning powder entirely but ensuring your operation aligns with the right product mix for your specific regional advantages and market opportunities.
DAIRY PRODUCER ACTION PLAN: POSITIONING FOR PROFIT
Don’t just read these market signals – act on them! Here’s your five-step action plan to capitalize on the cheese-powder divide:
1. AUDIT YOUR MILK’S DESTINATION
Call your cooperative or processor today and ask these specific questions:
What percentage of my milk goes into cheese production versus powder?
How does your product mix compare to industry averages?
What premium programs exist for cheese-quality milk?
2. OPTIMIZE YOUR COMPONENT STRATEGY
With cheese outperforming powder, protein, and fat components deserve extra attention:
Evaluate your current feeding program with your nutritionist specifically for component optimization
Consider genetic selection focused on cheese yield traits
Implement management practices that boost components, not just volume
“Every 0.1 percentage point increase in milk protein can boost cheese yield by 0.25 pounds per hundredweight. That’s real money when cheese prices surge.” — Dr. Dave Barbano, Professor of Food Science, Cornell University.
3. EXPLORE DIRECT PARTNERSHIPS
Forward-thinking producers are bypassing traditional channels:
Investigate specialty cheese makers in your region seeking dedicated milk supplies
Consider producer coalitions that can collectively negotiate better terms
Evaluate feasibility of on-farm processing focused on high-value products
4. LEVERAGE QUALITY PREMIUMS
Cheesemakers pay up for milk that performs better:
Implement strict protocols for somatic cell count reduction
Monitor bacterial counts obsessively
Document and promote your quality management practices
5. HEDGE STRATEGICALLY
Don’t leave yourself exposed to market swings:
Work with a knowledgeable broker to develop a cheese-focused hedging strategy
Consider options strategies that protect the downside while maintaining the upside potential
Stay informed through weekly market analysis reports
WHAT THIS MEANS FOR YOUR OPERATION
The message couldn’t be more straightforward for progressive dairy producers – your milk’s destination matters more than ever. The 5.1% premium jump in mozzarella versus the 0.4% decline in skim milk powder represents a massive value gap that directly impacts your bottom line depending on which processing stream your milk enters.
Industry analysts suggest this price divergence could create regional advantages, though the full impact remains to be seen:
North American producers with significant cheese exposure may be better positioned than their powder-dependent counterparts.
European processors with investments in specialty cheese production could leverage their market position for premium returns.
Southern Hemisphere producers approaching their autumn production season may need to reconsider their heavy reliance on powder exports.
SUCCESS STORY: PIVOT TO PROSPERITY
The Larson family dairy in Wisconsin’s cheese country saw this market divide coming years ago and made strategic decisions that are paying off handsomely today:
“We were shipping to a commodity plant with no incentive for components beyond the Federal Order minimums,” explains Tom Larson. “After seeing the cheese premium trend emerging, we approached three specialty cheese makers and negotiated a direct supply agreement with component bonuses 15% above base Class III.”
Their strategy included:
Shifting feed rations to boost protein components
Implementing strict quality protocols that earned additional premiums
Developing a three-year contract with gradual volume increases
Retaining flexibility to expand direct marketing relationships
The result? “Our milk check runs 22% higher per hundredweight than neighboring farms still focused on volume alone,” Larson notes. “It required investment in record-keeping and management, but the payoff has been substantial.”
MARKET OUTLOOK: TURBULENCE AHEAD
While Tuesday’s trading session showed remarkable stability in the overall index, the dramatic category differences suggest underlying market turbulence that savvy producers need to navigate. The GDT has shown volatility in recent auctions, with the March 6th session showing a 0.5% overall decline despite strength in cheese.
Several factors will shape dairy markets in the coming months:
Shifting consumer preferences continue to favor cheese and premium butter over commodity ingredients.
As the Southern Hemisphere approaches autumn, regional production shifts will impact global supply dynamics.
Processing capacity decisions by primary cooperatives and manufacturers will respond to these price signals.
“Higher prices will come when domestic and global demand resurges in 2025.” — Ken Bailey, PhD, Dairy Industry Economist.
The next GDT auction will tell us whether cheese’s dominant performance represents the beginning of a sustained rally or just another short-term market swing. But the trend is clear – commodity producers are getting squeezed while value-added manufacturers thrive.
BOTTOM LINE
Don’t get caught on the wrong side of this market divide. If your milk is flowing primarily into powder production, it’s time to have serious conversations with your cooperative or processor about their product mix strategy. Innovative producers are already exploring options to shift their milk toward higher-value cheese streams.
The latest GDT results confirm what leading dairy operations have known for months – the path to profitability isn’t through producing more milk but ensuring it goes into the right products. With mozzarella outperforming skim milk powder by 5.5 percentage points in a single trading session, the financial implications for your operation couldn’t be more precise.
“Dairy farmers are the clear winners when they align their production with high-value markets. With 111 winning bidders battling through 18 rounds of competitive bidding for 19,540 metric tons of product, demand remains fierce for the right products.”
Will you be among the winners riding the cheese wave or the losers stuck in the powder trap? The choice might determine whether your operation thrives or survives in 2025’s increasingly divided dairy marketplace.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Butter prices surge 27% while USDA slashes milk forecasts. Will your dairy operation profit or collapse in this contradictory market?
EXECUTIVE SUMMARY: Global dairy markets are sending conflicting signals: European butter prices have skyrocketed 27% year-over-year, while the USDA cut 2025 milk price forecasts by $1.00. Futures trading volumes hit 16,000 tonnes, signaling trader panic over volatility. Fat-rich products like butter and cheese command historic premiums, while protein values (SMP) struggle. The USDA’s surprise production forecast reduction raises concerns about shrinking margins and productivity. Producers must prioritize component optimization, risk management, and cost efficiency to survive these market contradictions.
KEY TAKEAWAYS
Fat vs. Protein Divide: Butter (+27%) and cheese (+18%) dominate gains, while SMP prices lag (+1.7%)—optimize milk components for fat.
USDA Warning: 2025 milk price forecasts slashed to $21.60/cwt (+0.1% production growth), signaling margin compression ahead.
Europe’s Decline: France/Germany milk production drops (-1.7%/-2.2%), tightening EU supply as processors compete for shrinking volumes.
Action Plan: Maximize butterfat, lock in risk strategies, slash input costs, and target high-value product streams.
While European butter trades at a staggering 27% premium over last year, the USDA has just cut its 2025 all-milk price forecast by a whole dollar to $21.60.
As futures contracts trade at dizzying volumes, The Bullvine cuts through the market noise to expose what these contradictory trends mean for your bottom line.
“While European butter trades at a staggering 27% premium over last year, the USDA slashed its milk price forecast by a full dollar. This isn’t a coincidence – it’s a warning.”
DAIRY FUTURES EXPLODE WITH TRADER PANIC
The dairy futures arena exploded with activity last week, with over 16,000 tonnes traded across European and Singaporean exchanges.
This wasn’t casual positioning – it was a feeding frenzy of uncertainty.
EEX reported 5,580 tonnes changing hands, with 1,850 tonnes traded on Tuesday alone. Meanwhile, SGX saw an even more aggressive 10,418 tonnes traded.
THE BULLVINE’S TAKE: When futures traders get this active, they’re not just hedging but panicking. The smart money is desperately trying to lock in positions because they see something brewing that average producers don’t.
This level of activity typically precedes significant market movements. Is your operation protected against the volatility these traders are expecting?
“When futures traders get this active, they’re not just hedging – they’re panicking. The smart money sees something coming that average producers don’t.”
FAT PROFITS VS. PROTEIN PROBLEMS: THE DIVERGENCE NOBODY’S TALKING ABOUT
The market is sending crystal clear signals about where the money is heading. EEX butter futures held firm, with the March-October strip averaging €7,427 (up 0.8%), while SMP plunged 1.8% to €2,501.
This isn’t just a random fluctuation – it’s a fundamental shift in demand patterns that’s being overlooked.
European quotations tell the same story:
Butter: €7,407, a jaw-dropping +27.4% above last year
Cheddar curd: €4,845, standing +18.5% above previous year
Mozzarella: €4,246, representing a +15.7% year-over-year premium
SMP: €2,453, down 1.4% week-over-week but still +1.7% above the previous year
Year-Over-Year European Dairy Price Comparison
Product
Current Price (€)
Change vs Last Year (€)
% Change
Butter
7,407
+1,594
+27.4%
Cheddar Curd
4,845
+755
+18.5%
Mild Cheddar
4,808
+726
+17.8%
Mozzarella
4,246
+576
+15.7%
Young Gouda
4,400
+419
+10.5%
SMP
2,453
+40
+1.7%
Whey
885
+185
+26.4%
WMP
4,372
+697
+19.0%
“The days of being paid for white water are numbered. The market is screaming for fat while protein values struggle.”
THE BULLVINE’S TAKE: The fat market shows remarkable resilience while protein values struggle. If your nutrition program is still focused on volume while the market screams for components, that approach could cost you thousands this year.
Progressive producers should maximize components through advanced nutrition and genetics focused on butterfat, not just volume.
USDA BOMBSHELL: MILK FORECAST SLASHED IN SURPRISE MOVE
The USDA dropped a market bombshell in its March WASDE report, cutting the 2025 milk production forecast to 226.2 billion pounds (102.60 million tonnes) – a substantial reduction from February’s estimate of 102.92 million tonnes.
This creates a puzzling contradiction: Why would milk per cow suddenly decline when producers invest in genetics and management designed to increase efficiency?
USDA March 2025 Forecast Revisions
Metric
February Forecast
March Forecast
Change
2025 Milk Production (mil MT)
102.92
102.60
-0.3%
Growth vs 2024
+0.4%
+0.1%
-0.3 pts
All-Milk Price ($/cwt)
$22.60*
$21.60
-$1.00
Class III Price ($/cwt)
$19.10*
$17.95
-$1.15
Class IV Price ($/cwt)
$19.70*
$18.80
-$0.90
*Previous forecast values derived from reported changes
“Are you basing your expansion decisions on government forecasts that change dramatically monthly? That’s a dangerous game few can afford to play.”
The price forecast news is especially alarming. The average all-milk price is now projected at $21.60 per hundredweight, down from 2024’s average of $22.61.
Class III milk prices have been most severely impacted, with projections cut by $1.15 to $17.95 per hundredweight.
Class IV prices also face downward pressure, expected to average $18.80 per hundredweight, a $0.90 reduction.
France reported that January milk production was down 1.7% year-over-year to 2.02 million tonnes, with milk solid collection dropping even more sharply to 1.9%.
Germany, Europe’s dairy powerhouse, reported January volumes falling 2.2% year-over-year to 2.66 million tonnes, worse than expected.
Only Denmark bucked the trend, with milk production increasing 1.1% year-over-year to 478,000 tonnes. Impressive component levels (4.63% fat, 3.75% protein) drove a 2.0% increase in milk solid collection.
European January 2025 Milk Production Trends
Country
Volume (mil tonnes)
Y/Y Change
Milkfat %
Protein %
MS Change
France
2.02
-1.7%
4.25%
3.34%
-1.9%
Germany
2.66
-2.2%
*
*
*
Denmark
0.478
+1.1%
4.63%
3.75%
+2.0%
*Component data for Germany not yet available
Germany represents approximately 23% of EU milk production, making this decline particularly significant for European dairy markets.
THE BULLVINE’S TAKE: The decline of European production in key countries has created a complex competitive landscape.
European processors will fight aggressively for milk supplies in declining regions, while areas with production growth may face price pressure.
These geographic variations create both opportunities and threats for globally-minded producers.
5 MARKET INDICATORS SMART PRODUCERS ARE WATCHING
Don’t just react to these market shifts – anticipate them by monitoring these critical indicators:
Forward Price Projections: Watch for revisions in the following WASDE report.
EEX and SGX Futures Volume: When weekly volumes exceed 7,500 tonnes, volatility typically follows.
Fat-to-Protein Price Ratio: Component optimization becomes crucial when butter maintains a 27%+ premium over year-ago levels while SMP struggles.
Feed Cost Trajectory: Changes in feed costs could partially offset milk price declines.
Production Per Cow: The puzzling USDA forecast of lower productivity despite higher cow numbers needs close monitoring.
WINNERS AND LOSERS: ARE YOU POSITIONED TO PROFIT?
WINNERS:
Component-focused producers: Those maximizing butterfat will capture premium prices while others struggle
European cheese manufacturers: Tight milk supplies and substantial cheese premiums create favorable margins
Forward-thinking hedgers: Producers who locked in prices ahead of recent volatility will outperform peers
Efficiency-obsessed operations: Those with the lowest cost structures will weather the coming margin compression
LOSERS:
Volume-chasing producers: Operations focusing on milk volume over components face declining returns
Late adopters of risk management: Those without hedging strategies face full exposure to price volatility
Input-heavy operations: Farms with high purchased feed costs will struggle most as margins tighten
Reactive planners: Producers who fail to adjust strategies based on market signals will suffer most
“In this market, there’s no middle ground. You’re either strategically positioning for these contradictions or becoming another casualty of them.”
5 TOUGH QUESTIONS EVERY DAIRY PRODUCER NEEDS TO ANSWER TODAY
Take a hard look at your business and answer these critical questions:
Component Strategy: Given the current 27% year-over-year premium, are you maximizing butterfat production?
Risk Protection: What percentage of your 2025 production is protected against the USDA’s newly lowered price forecasts?
Feed Efficiency: Can you capture margin opportunities if feed costs decline?
Cash Flow Planning: Have you stress-tested your finances against the new $21.60 all-milk price scenario?
Strategic Focus: Does your expansion strategy make sense considering USDA’s reduced production value forecast?
YOUR STRATEGIC ROADMAP FOR NAVIGATING MARKET CONTRADICTIONS
The global dairy landscape is evolving rapidly, requiring producers to make tactical adjustments. The contradictory signals between robust European fat values and weakening U.S. milk price forecasts demand a strategic response.
Successful producers will:
Maximize component yields through precision nutrition and genetics
Implement aggressive risk management strategies to protect against volatility
Scrutinize all input costs with renewed vigor as margins potentially compress
Target your milk quality parameters to the most profitable product stream in your region
THE BULLVINE’S TAKE: This isn’t time for business as usual. The dairy market sends clear warning signals that only the prepared will heed.
The producers who thrive will recognize that these contradictions aren’t random—they’re predictable outcomes of global supply and demand fundamentals that can be leveraged for profit.
What changes will you implement today to ensure you’re among them?
“This isn’t time for business as usual. While others react to yesterday’s news, smart producers are already capitalizing on tomorrow’s market reality.”
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Kerrygold’s emergency stockpiling reveals what Trump’s tariffs mean for your milk check. Dairy’s perfect storm is brewing—are you prepared?
EXECUTIVE SUMMARY: Ornua’s aggressive stockpiling of Kerrygold butter in American warehouses signals imminent disruption as President Trump’s promised tariffs threaten to reshape global dairy trade. CEO Conor Galvin’s candid admission that they’ve “moved product into the US in anticipation of tariffs increasing” confirms The Bullvine’s warnings about impending market volatility. While US dairy leaders acknowledge potential short-term benefits for some domestic producers, economic modeling suggests inevitable retaliatory measures would erase any gains within months. Current component values show butterfat at .91/lb remains most vulnerable to market disruption, with farms having at least 6-9 months of financial reserves historically 3.5 times more likely to maintain positive cash flow during trade disputes. Industry experts emphasize that operations with diversified market exposure and strong processor relationships will weather this tariff tsunami, while those unprepared risk becoming collateral damage in an escalating trade war.
KEY TAKEAWAYS
VERIFIED THREAT: Ornua CEO confirms active stockpiling of Kerrygold products ahead of tariffs, demonstrating foremost market leaders are treating this as a certainty, not a possibility
FINANCIAL PREPARATION CRITICAL: Operations with 6-9 months of liquid reserves (twice the standard recommendation) survived previous trade disputes at 3.5x the rate of undercapitalized farms
PROCESSOR RELATIONSHIP MATTERS: Your milk’s destination determines your vulnerability—farms should immediately question processors about export exposure and contingency plans
COMPONENT STRATEGY: With butterfat currently valued at $2.91/lb, understand how EU butter tariffs could temporarily boost then ultimately crash component values as retaliatory measures impact exports
TIMING IS EVERYTHING: Forward contracting 40-50% of production now could protect margins, as CME futures currently reflect favorable pricing compared to expected spot markets under tariff conditions
While Washington and Brussels exchange threats in an escalating trade dispute, dairy farmers worldwide are watching their potential profits evaporate. Ornua, the maker of Kerrygold butter, has already taken defensive measures that confirm what The Bullvine has been warning about for months – the new administration’s tariff plans will reshape dairy trade patterns and potentially devastate unprepared producers.
With President Trump now in office and dairy markets already navigating challenging conditions, the stakes for your operation’s bottom line couldn’t be higher.
EMERGENCY STOCKPILING: Ornua’s Desperate Move to Protect Kerrygold
In a revealing move that speaks volumes about the seriousness of this threat, Ornua has been quietly stockpiling Kerrygold products in American warehouses for months. This isn’t speculation – it’s straight from Ornua CEO Conor Galvin himself.
“We’ve moved product into the US in anticipation of tariffs increasing. We are working very closely with our logistics partners to ensure that what we have available will be in the US ahead of any decision made by the US administration.” — Conor Galvin, Ornua CEO.
Galvin’s candid assessment doesn’t stop there. He acknowledged working ” closely with logistics partners” to ensure product availability before any White House decisions.
But here’s the sobering reality check every dairy farmer needs to hear – Galvin admits their stockpiling strategy has severe limitations:
“But the reality is, that won’t help us for the butter we make in 2025, the cows you haven’t milked yet. So there is only so much we can do.” — Conor Galvin, Ornua CEO.
When a market leader like Ornua takes emergency measures, every dairy producer should pay attention. Kerrygold isn’t just another European import – it’s established itself as the second-largest butter brand in America.
If tariffs hit Kerrygold, the ripple effects from Irish family farms to American dairy cases will be felt.
THE HARD NUMBERS: Current Dairy Markets Before the Storm
Before discussing potential tariff impacts, let’s clarify where the market stands. The latest USDA data shows the actual price points that could be affected by any trade disruption:
Commodity
Price ($/lb)
Butter
$2.5748
Nonfat Dry Milk
$1.3952
Cheese (40-lb Blocks)
$1.7583
Cheese (500-lb Barrels)
$1.7326
Dry Whey
$0.6353
These wholesale commodity prices directly influence what you get paid for your milk. Any disruption from tariffs would immediately impact these fundamental price points that drive your operation’s profitability.
TARIFF TECHNICALITIES: Understanding the Import Codes That Could Impact You
European butter imports like Kerrygold currently enter the US under Harmonized Tariff Schedule (HTS) code 0405.10.20, with a general duty rate of 12.3¢/kg. If new tariffs target this, the rate could increase substantially, directly impacting retail pricing and market competition.
According to the US International Trade Commission, dairy products from Ireland accounted for $553 million in US imports last year, with butter and cheese representing the most significant categories. Any across-the-board tariff would dramatically alter this trading relationship and disrupt established market channels.
TRUMP’S TARIFF PLAYBOOK: What We Know for Certain
The speculation about potential tariffs isn’t theoretical anymore. President Trump campaigned explicitly to impose import tariffs on European Union exports to the United States.
More specifically, he stated that on his first day in office, he would sign an executive order implementing a substantial 25% tariff on all imports from Canada and Mexico while imposing a 10% tariff on Chinese goods.
While these initial announcements didn’t specifically target European dairy, the administration’s protectionist stance and campaign promises regarding EU trade suggest dairy products remain vulnerable.
Given the president’s previous statements about restoring American manufacturing through aggressive trade policy, any dairy operation dependent on export markets should be prepared for potential disruption.
WHAT U.S. DAIRY LEADERS ARE SAYING
The National Milk Producers Federation (NMPF) has taken a measured but concerned stance on the developing trade situation.
“While selective tariffs might benefit some domestic producers in the short term, our industry ultimately thrives on balanced trade relationships. Any trade policy changes must be carefully implemented to avoid retaliatory measures that could harm our export markets, which account for approximately 18% of U.S. milk production.” — Jim Mulhern, President & CEO, National Milk Producers Federation.
Mulhern’s diplomatic statement masks a more profound industry concern. According to U.S. Dairy Export Council data, the U.S. exported nearly $9.5 billion in dairy products last year – meaning any retaliatory measures could put significant revenue at risk for American dairy farmers.
THE CRITICAL TIMELINE: Acting Before It’s Too Late
The clock is ticking. President Trump took office in January 2025, and we’re now in mid-March. The president’s early trade actions have already shown his administration intends to follow through on campaign promises regarding tariffs.
For dairy farmers and processors, this compressed timeline means:
The window for preemptive stockpiling (like Ornua’s strategy) has largely closed
Future dairy production decisions need to account for potential market disruptions
New processing and export relationships need to be established quickly if current channels face tariff threats
WHAT THE ECONOMISTS SAY: Learning From History
Agricultural economists who’ve studied previous trade disputes offer a sobering perspective. Dr. Christopher Hurt, Professor Emeritus of Agricultural Economics at Purdue University, notes significant historical parallels:
“Looking back at the 2018-2019 trade tensions, dairy farmers who diversified their market exposure and maintained 6-9 months of financial reserves weathered the volatility better than those operating with minimal cushion. The data shows that farms with strong processor relationships and flexible production strategies maintained profitability even as export-dependent operations saw margins compress by 15-20%.”
Dr. Hurt’s analysis reminds us that trade disputes are eventually resolved, but surviving until resolution requires strategic planning and financial flexibility.
PROTECT YOUR FARM: Actionable Strategies for Smart Operators
The Bullvine isn’t in the business of sugar-coating reality. Here’s what competent dairy operators should be doing right now based on current milk pricing fundamentals:
Federal Milk Order Class Prices (December 2024)
Class
Price ($/cwt)
Monthly Change
Class II
$21.28
-$0.24
Class III
$18.62
-$1.33
Class IV
$20.74
-$0.38
These numbers tell the real story – all major milk classes saw price declines in December, with Class III (cheese milk) taking the biggest hit at -.33/cwt. This downward trajectory creates an even more vulnerable environment if tariffs further disrupt markets.
1. DIVERSIFY YOUR MARKET EXPOSURE
If you’re selling to processors heavily dependent on exports to markets facing potential tariffs, it’s time to have serious conversations about diversification. Please don’t wait until those processors are forced to cut prices because their export channels get squeezed.
Concrete examples: Farmers in the Northeast are finding opportunities with regional cheese processors focused on domestic specialty markets, while Midwest producers are exploring contracts with processors developing value-added protein ingredients for the fitness industry—both segments are less vulnerable to import competition.
2. WATCH PROCESSING CAPACITY CLOSELY
As companies like Ornua adjust their production and export strategies, processing capacity could shift regionally. Be prepared for potential overcapacity in export-dependent regions and undercapacity in domestic market-focused areas.
3. BUILD STRATEGIC RESERVES
Ornua’s stockpiling strategy works for shelf-stable products like butter, but all dairy operations need financial reserves to weather market volatility. Financial advisors specializing in dairy recommend maintaining liquid reserves covering 6-9 months of operating expenses during periods of trade uncertainty – well above the typical 3-month cushion recommended during stable market conditions.
During the 2018-2019 China-US trade dispute, Farm Credit Services data showed operations with at least 6 months of operating reserves were 3.5 times more likely to maintain positive cash flow throughout the market disruption.
4. ALIGN WITH STRONG PROCESSORS
Not all processors will face equal impact. Those with diversified international markets or strong domestic positions will navigate these waters more successfully. Your farm’s future may depend on which processor’s truck arrives at your tank.
Forward contracting opportunity: According to CME Group data, Class III milk futures will trade more favorably than expected spot market prices if tariffs are implemented for the next six months. Producers should consider locking in at least 40-50% of production at current levels.
FOLLOW THE MONEY: Component Values Driving Your Milk Check
Understanding the specific components driving your milk price reveals where tariff impacts might hit hardest:
Component
Price ($/lb)
Butterfat
$2.9104
Protein
$1.9637
Nonfat Solids
$1.2151
Other Solids
$0.4493
Look closely at these numbers. Butterfat at $2.91/lb remains the most valuable component in your milk, with protein second at $1.96/lb. If tariffs disrupt butter markets (like Kerrygold), the butterfat value that drives your milk check could face significant pressure.
Economic modeling from Cornell University’s dairy economists suggests a 25% tariff on European butter imports could initially boost domestic butterfat values by 10-15% as competition decreases. However, as export opportunities contract, retaliatory tariffs would likely erase these gains within 3-6 months.
THE POTENTIAL DOMESTIC UPSIDE
Not every potential tariff’s impact would be harmful to American dairy producers. Land O’Lakes, the market-leading domestic butter brand competing directly with Kerrygold, could benefit from reduced premium import competition.
Several Midwest cooperatives with strong domestic butter production are quietly preparing for a potential short-term domestic butter price boost if European premium butter faces tariff barriers. Producers aligned with these processors could see temporary component price improvements before retaliatory measures take effect.
THE BULLVINE BOTTOM LINE: Survive Now, Thrive Later
This looming trade war isn’t just another news item to scroll past – it represents a fundamental reshaping of global dairy markets that will separate the survivors from the casualties. Ornua’s defensive stockpiling strategy tells us everything we need to know about how preeminent players are taking this threat.
“The piece that is always curious about dairy commodities is the last tonne that prices everything and that can be very frustrating… particularly when prices are so volatile.” — Conor Galvin, Ornua CEO.
The farms that recognize the seriousness of potential tariffs and take decisive action now will weather the storm. Those who dismiss it as just more political noise risk becoming collateral damage in a fight they didn’t start.
Remember what Ornua’s CEO said about future production – stockpiling doesn’t help “for the butter we make in 2025, the cows you haven’t milked yet.” That stark reality applies to every dairy operation worldwide. The cows you’re milking today are produced in an increasingly uncertain market environment.
In the dairy business, it’s not the size of your operation that determines survival – it’s your ability to anticipate market shifts and adapt faster than your neighbors. The tariff tsunami isn’t just coming – its first waves are already hitting shore.
5 QUESTIONS TO ASK YOUR PROCESSOR TODAY
What percentage of your production currently goes to export markets?
Do you have contingency plans if tariffs impact your current export channels?
How will your milk pricing formula change if component values shift due to trade disputes?
Are you exploring new product lines that are less vulnerable to import competition?
What financial protections do you offer producers if export markets suddenly close?
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
USDA just cut your 2025 milk check by $125,000. Find out why Washington’s forecasters are slashing prices while sending contradictory production signals.
EXECUTIVE SUMMARY: The USDA’s March WASDE report has dramatically cut the 2025 all-milk price forecast by a full dollar to $21.60 per hundredweight, potentially reducing annual revenue by $125,000 for a 500-cow dairy operation. This unexpected reduction coincides with puzzling production projections that predict higher cow inventories yet lower milk output per cow, contradicting basic dairy economics. Historical analysis reveals USDA has consistently revised forecasts downward mid-year in four of the past five years, suggesting a pattern of initial optimism followed by sobering corrections. While these projections create planning challenges, successful producers are focusing on controllable factors—implementing feed efficiency programs that can save $0.75-1.25/cwt, optimizing milk components for premium payments, and employing risk management strategies that blend contracted and cash market sales. The most resilient operations are questioning forecast assumptions while maintaining operational excellence to buffer against market volatility.
KEY TAKEAWAYS
USDA has cut the 2025 all-milk price forecast to $21.60/cwt, down $1.00 from February’s projection and $1.01 below the 2024 estimate.
For a 500-cow dairy producing 25,000 pounds per cow annually, this forecast reduction represents approximately $125,000 in lost revenue.
Operations with production below 24,000 pounds per cow annually will struggle to remain profitable if prices settle at or below $21.60/cwt.
Feed efficiency improvements can potentially reduce production costs by $0.75-1.25/cwt, helping offset lower milk prices.
The most successful producers blend price risk management (40% six-month contracts, 30% three-month contracts, 30% cash market) while focusing on operational excellence rather than forecast anxiety.
The USDA’s March World Agricultural Supply and Demand Estimates (WASDE) report has sent shockwaves through the dairy industry, cutting the 2025 all-milk price forecast by a whole dollar to $21.60 per hundredweight (cwt). This dramatic reduction comes alongside lowered projections for cheese, butter, nonfat dry milk (NDM), and whey prices, signaling potential financial strain for producers nationwide.
Adding to the confusion, the report predicts higher cow inventories but lower milk output per cow—a contradiction that has industry experts questioning the reliability of USDA’s forecasting methodology.
“The USDA’s March WASDE report has sent shockwaves through the dairy industry, cutting the 2025 all-milk price forecast by a full dollar to $21.60 per hundredweight.”
“This kind of whiplash in forecasting makes it impossible to plan,” says Wisconsin dairy producer Mike Johnson, who milks 350 cows. “We’re making feed purchasing and breeding decisions months in advance, and now USDA tells us our milk will be worth a dollar less? That’s the difference between profit and loss for many operations.”
For a 500-cow dairy producing 25,000 pounds per cow annually, this forecast reduction represents approximately $125,000 in reduced annual revenue—enough to cancel planned equipment upgrades or halt facility improvements that would have enhanced efficiency.
PRODUCTION PUZZLE: MORE COWS BUT LESS MILK?
The March WASDE report (USDA-OCE-2025-3, released March 8, 2025) revises the 2025 milk production forecast downward to 226.2 billion pounds—a 700-million-pound reduction from February’s estimate. The USDA attributes this adjustment to “lower expected milk output per cow more than offsetting slightly higher cow inventories.”
This puzzling scenario raises questions about why productivity per cow is expected to decline despite ongoing investments in genetics and management strategies aimed at increasing efficiency.
“The USDA attributes this adjustment to ‘lower expected milk output per cow more than offsetting slightly higher cow inventories’ — a puzzling scenario that raises questions.”
For context, the 2024 production estimate remains unchanged at 225.9 billion pounds, which is 400 million pounds less than the actual production total of 226.3 billion pounds in 2023. Despite the slight year-over-year increase projected for 2025, the downward revision creates uncertainty for producers planning herd expansions or capital investments based on earlier forecasts.
Milk Production Trends at a Glance
Year
Annual Production (Billion Pounds)
Notes
2023
226.3
Actual production (USDA-NASS Annual Milk Production Report)
2024
225.9
Current estimate (unchanged from February WASDE)
2025
226.2
March forecast (down 700 million pounds from February)
This reduction represents approximately 0.3% of expected annual production—a seemingly minor adjustment but one with significant ripple effects throughout the supply chain.
“We’ve tracked USDA forecasts for the past five years, and they’ve revised production downward mid-year in four of those five years,” notes California producer Maria Sanchez, who manages a 1,200-cow operation. “We’ve learned to take the early-year optimism with a grain of salt and build in a buffer when setting our production targets.”
YOUR 2025 MILK CHECK: PREPARE FOR SMALLER DEPOSITS
The March WASDE report delivers sobering news for producers counting on strong returns in 2025. The all-milk price is now projected at $21.60 per cwt—down $1.00 from February’s forecast of $22.60 and $1.01 below the current estimate for 2024 ($22.61 per cwt).
This marks a year-over-year decline in expected milk check values, raising concerns about broader market trends.
USDA’s Dramatic Price Forecast Shift
Category
February 2025 Forecast
March 2025 Forecast
Change
All-Milk Price
$22.60/cwt
$21.60/cwt
-$1.00
Class III Price
$19.05/cwt*
$17.95/cwt
-$1.10
Class IV Price
$19.75/cwt*
$18.80/cwt
-$0.95
*February Class III and IV forecasts derived from USDA Dairy Market News (Vol. 92, No. 7)
Cheese, butter, NDM, and whey prices have all been lowered based on recent market trends, directly impacting Class III and Class IV milk values:
Class III price is now forecasted at $17.95 per cwt—down from the 2024 estimate of $18.89.
Class IV price is projected at $18.80 per cwt—significantly lower than the unchanged 2024 estimate of $20.75.
Dr. Peter Vitaliano, Chief Economist at the National Milk Producers Federation, expressed concern about these revisions: “These significant downward adjustments create planning challenges for dairy producers who rely on consistent projections for business decisions.”
BEHIND THE NUMBERS: WHY IS WASHINGTON CHANGING ITS TUNE?
The March WASDE report raises fundamental questions about how USDA forecasts are developed and what factors drive their frequent revisions. While official explanations focus on productivity adjustments, several market analysts suggest other factors may influence these projections.
Looking at historical data, USDA has revised its all-milk price forecast downward by an average of $0.85/cwt between January and March forecasts over the past four years, suggesting a pattern of initial optimism followed by reality adjustments.
“We often see a tendency toward optimism in early forecasts that gets tempered by market realities as the year progresses.” — Tanner Ehmke, lead economist at CoBank’s Knowledge Exchange.
Tanner Ehmke, lead economist at CoBank’s Knowledge Exchange division, notes: “We often see a tendency toward optimism in early forecasts that gets tempered by market realities as the year progresses.”
Sarah Williams, dairy futures analyst at Central States Commodities, adds: “The futures markets have reacted strongly to this forecast revision. We’re seeing significant repositioning in Class III and Class IV contracts.”
The contradiction between expanding herd sizes and reduced output expectations suggests either a shift in herd demographics or flaws in assessing productivity trends.
SURVIVAL STRATEGIES: PROTECTING YOUR DAIRY BUSINESS
With lower price projections and tighter margins ahead, dairy producers must reassess their strategies to effectively navigate this challenging environment.
Smart Moves for Small to Mid-Sized Dairies
Feed Efficiency: Prioritize programs that reduce feed costs while maintaining productivity. University of Wisconsin research shows a potential 10-15% feed cost reduction through precision ration formulation, saving $0.75-1.25/cwt in production costs.
Component Optimization: Focus on butterfat and protein levels to maximize revenue from processors offering premiums. Each 0.1% increase in butterfat can add $0.15-0.20/cwt to your milk check.
Direct Marketing: Explore specialty product arrangements that may offer higher pricing. Local cheese production partnerships can increase farm revenue by 20-30% compared to conventional milk sales.
Winning Tactics for Large Operations
Economies of Scale: Leverage bulk purchasing power to negotiate input pricing. Through forward contracting, volume discounts on feed ingredients can reduce costs by 5-8%.
Advanced Analytics: Use data-driven insights to identify operational efficiencies. Feed management software implementations show an ROI of 3:1 through reduced waste and optimized rations.
Processor Negotiations: Evaluate component premiums across multiple buyers. In the same region, component pricing differences between processors can vary by up to $0.30/cwt.
“Frequent revisions force us to readjust operations constantly.” — Michael Johnson, VP of Supply Chain at Great Lakes Dairy Processing.
CASE STUDY: Weathering the Forecast Storm
The Hilltop Dairy operation in Pennsylvania has implemented a comprehensive risk management strategy that combines milk price contracting, feed-forward purchasing, and production efficiency measures. Owner James Wilson explains their approach:
“We’ve calculated our breakeven all-milk price at different production levels: $19.75/cwt at current feed prices, dropping to $18.90/cwt if we achieve our efficiency targets. Based on USDA’s forecast history, we contract 40% of our production six months ahead, 30% three months ahead, and leave 30% exposed to cash markets. Despite volatile USDA forecasts, this blended approach has kept our milk revenue within 5% of our projected budget for three consecutive years.”
MARK THESE DATES: UPCOMING WASDE REPORTS TO WATCH
The following WASDE report will be released on April 10th at noon ET and will provide critical insights into whether March’s adjustments represent a new baseline or a temporary shift.
Critical WASDE Release Dates for Your Calendar
Month
Release Date
Time
April
April 10
12:00 PM ET
May
May 12
12:00 PM ET
June
June 12
12:00 PM ET
Producers should integrate these release dates into their planning calendars to stay ahead of market developments.
At current breakeven prices, operations producing below 24,000 pounds per cow annually will struggle to remain profitable if the all-milk price settles at or below $21.60/cwt. Those with higher debt loads face even more significant challenges as interest expenses consume an increasing percentage of milk revenue.
BOTTOM LINE: QUESTION WASHINGTON, TRUST YOUR INSTINCTS
The USDA’s March WASDE report underscores the importance of resilience and adaptability in navigating uncertain market conditions. While government forecasts provide valuable perspectives, successful producers complement these projections with diverse information sources and flexible management approaches.
“Your farm’s survival depends on questioning assumptions behind these projections and adapting your strategies accordingly.”
Your farm’s survival depends on questioning the assumptions behind these projections and adapting your strategies accordingly. What changes will you make based on this latest forecast?
“The most successful producers I work with don’t get caught up in forecast anxiety,” observes Iowa State Extension dairy specialist Thomas Reynolds. “They focus instead on what they can control—feed efficiency, reproduction, cow comfort, and cost management. The price will be what it will be, but operational excellence provides the buffer against forecast failures.”
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Trade wars bite: U.S. dairy exports face new tariffs while spring milk floods processors. Are falling powder prices the canary in the coal mine?
Executive Summary
The dairy industry faces significant market disruption as new tariffs targeting U.S. exports to Canada and China create domestic and international buyer uncertainty. Nonfat dry milk prices have retreated to 10-month lows at $1.155 per pound, while whey markets continue their bearish slide, dropping to 45ȼ per pound—the lowest since early June. In contrast, cheese and butter markets show signs of stabilization, with CME spot Cheddar blocks jumping 7ȼ to .6925 this week. Since February, the 5% decline in the dollar index has created potential export opportunities despite trade tensions, as U.S. dairy products become more price-competitive globally. The market outlook remains uncertain as seasonal production increases coincide with trade disruptions, suggesting continued volatility across dairy commodity sectors.
Key Takeaways
Powder markets under severe pressure: NDM and whey prices have fallen to multi-month lows as buyers adopt conservative purchasing strategies amid trade uncertainty
Market divergence creates strategic opportunities: While powder struggles, cheese and butter markets show resilience, suggesting targeted production and marketing approaches may be necessary.
Currency effects partially offset trade barriers: The weaker dollar creates pricing advantages for U.S. dairy exports, potentially opening windows for international sales despite tariffs.
Spring flush amplifies market challenges: Seasonal production increases are creating supply pressure at the worst possible time, with processing facilities facing longer queues at dryers.
Market flexibility critical for producers: The uneven performance across product categories highlights the importance of adaptable production decisions and marketing strategies in the current volatile environment
The dairy markets are navigating turbulent waters as trade disputes cast long shadows over pricing and demand. New tariffs targeting U.S. dairy exports to Canada and China have significantly disrupted market dynamics, creating a cautious atmosphere among buyers domestically and internationally. This week’s market movements reveal a complex landscape where certain commodities are finding their footing while others continue to slide.
POWDER MARKETS FACE HEADWINDS AMID TRADE TENSIONS
The nonfat dry milk (NDM) market is experiencing notable pressure as buyers adopt increasingly conservative purchasing strategies. Importers are demonstrating marked hesitation to commit to volumes that might face tariffs down the road, while domestic users are similarly limiting purchases to immediate needs, anticipating further price declines in this export-dependent sector.
The CME spot NDM market briefly showed signs of life this week before retreating to $1.155 per pound, matching the 10-month low established last Friday. This represents a significant decline from October 2024, when USDA reported NDM prices averaging $1.3685 per pound. The current scenario starkly contrasts the previous fall’s market conditions, when condensed skim was readily available, but recently produced volumes ranged from balanced to tight.
Spring Flush Adds to Market Pressure
The arrival of spring has brought the familiar seasonal increase in milk production, further complicating the powder market outlook. With milk flows climbing, processing facilities are experiencing longer queues at dryers. This supply growth comes at a particularly challenging time, as export channels face obstacles from trade disputes and domestic buyers remain cautious.
WHEY MARKETS CONTINUE DOWNWARD TRAJECTORY
The whey market continues its bearish trend, with prices falling further this week. CME spot whey powder dropped another 4ȼ to reach 45ȼ, marking the lowest price point since early June. This represents a dramatic decline from October 2024’s reported prices, when dry whey was trading at around 60ȼ per pound.
USDA market analysts offer a candid assessment, noting “growing concerns among market actors as to what international trading activity will look like over the next few months.” Domestic end users have lost interest in dry whey volumes priced above 50ȼ per pound, indicating a significant shift in price expectations.
The agency characterizes the market as bearish “with few indications of the alternative in the near term.” While demand for high-protein whey concentrates and isolates remains robust, the industry continues to generate ample whey for powder production.
CHEESE AND BUTTER MARKETS FIND STABILITY
While powder markets continue their decline, other dairy commodities have shown resilience. After weeks of bearish pressure, the invisible hand of the market has stepped in to restore some balance:
CME spot Cheddar blocks jumped 7ȼ this week to $1.6925
Barrels rallied 6ȼ to reach $1.69
Butter added 3.25ȼ to climb to $2.3425
These figures reflect significant shifts from October 2024, when cheese blocks and barrels traded at $1.90 and $1.87, respectively, and butter commanded nearly $2.70 per pound.
Market Fundamentals Remain Mixed
Despite the modest recovery in cheese and butter prices, several factors that drove February’s market collapse remain in play:
Cream supplies continue to be abundant and affordable
Churns are operating at high capacity
U.S. cheese production continues to expand
Domestic demand for cheese and butter lacks vigor
However, the recent price corrections have created opportunities for international buyers. U.S. cheese and butter present attractive value propositions to foreign purchasers compared to alternatives from other major dairy exporting regions.
CURRENCY EFFECTS CREATE EXPORT OPPORTUNITIES
A 5% decline in the dollar index since early February has enhanced the purchasing power of foreign currencies when buying U.S. dairy products. This currency effect, combined with stable to higher dairy prices in Oceania and Europe, has widened the gap between U.S. and international values.
This pricing disparity creates potential opportunities for buyers willing to navigate the uncertain U.S. trade policy landscape. International purchasers can effectively acquire U.S. dairy products at bargain prices compared to global alternatives, potentially offsetting some of the negative impact of recent trade tensions.
OUTLOOK REMAINS UNCERTAIN AS MARKETS ADJUST
The dairy industry is at a crossroads, with markets adjusting to new trading realities while seasonal production trends follow their typical patterns. The combination of trade tensions, seasonal milk production increases, and uneven demand across product categories suggests that continued volatility may lie ahead.
The divergent performance across product categories for dairy producers underscores the importance of maintaining flexibility in production decisions and marketing strategies. While powder markets face significant headwinds, stabilizing cheese and butter prices guarantees that market mechanisms continue functioning.
The coming weeks will be critical in determining whether the modest recovery in cheese and butter markets can be sustained and whether powder markets will find support or continue their decline under pressure from seasonal and trade-related factors.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Florida dairy farmers earn $5.11 more per cwt than Midwest farms for identical milk. Is geography worth $1.28 million per year? June 1 changes everything.
EXECUTIVE SUMMARY: The February 2025 Federal Milk Marketing Order prices reveal a stark $5.11 per hundredweight divide between Florida ($25.42) and Upper Midwest ($20.31) producers, creating a $1.28 million annual advantage for identical 1,000-cow operations based solely on geography. This regional inequality highlights fundamental flaws in a system that undergoes significant transformation on June 1, when the return to the “higher-of” Class I formula, updated make allowances, and other changes take effect. Meanwhile, a dramatic shift in component values—with protein surging and butterfat declining—signals strategic production opportunities for forward-thinking producers. Smart dairy farmers are already preparing by shifting focus to protein production, calculating their June 1 impact, and implementing risk management strategies before market volatility intensifies.
KEY TAKEAWAYS
Regional Price Gap: A $5.11 per hundredweight difference between identical milk in Florida versus the Upper Midwest creates “dairy haves and have-nots” based purely on location, not management quality.
June 1 Formula Change: The return to the “higher-of” Class I pricing formula would have reduced February’s Class I price by 44 cents, suggesting the change may not benefit producers as promised.
Component Value Shift: With protein values rising (up 20¢ to $2.53/lb) and butterfat falling (down 13¢ to $2.82/lb), producers should reassess breeding and nutrition programs to emphasize protein.
Action Required: Dairy producers must prepare for June 1 by calculating their specific exposure to formula changes, adjusting production strategies to emphasize protein, and implementing risk management tools before prices decline.
Depooling Impact: February’s narrow 28-cent spread between Class III and IV prices reduced depooling incentives, but March’s projected 46-cent spread could trigger Class IV depooling, affecting producer payments.
Florida dairy farmers are banking $5.11 more per hundredweight than their Upper Midwest counterparts for identical milk—highway robbery or fair market?
With significant pricing changes coming June 1, here’s who stands to win and get the short end of the stick in Dairy’s great regional lottery.
The Cold, Hard Numbers: February’s Price Reality
February’s Federal Milk Marketing Order (FMMO) uniform prices tell a tale of two dairy industries. Prices increased in just three of the 11 FMMOs—those blessed with high Class I (fluid milk) utilization—while the other eight regions saw declines from January.
This pattern creates winners and losers based purely on geography, not management skill or milk quality.
The Florida order maintained its crown with an impressive $25.42 per hundredweight (cwt), climbing 38 cents from January. Meanwhile, Upper Midwest producers scraped the bottom at a measly $20.31 per cwt.
FMMO Region
February 2025 Uniform Price
Change from January
Florida
$25.42/cwt
+$0.38
Southeast
$24.32/cwt
+$0.22
Appalachian
$23.65/cwt
+$0.15
Northeast
$22.18/cwt
-$0.27
Arizona
$22.02/cwt
-$0.31
Pacific Northwest
$21.14/cwt
-$0.42
California
$20.94/cwt
-$0.35
Central
$20.75/cwt
-$0.29
Southwest
$20.72/cwt
-$0.33
Mideast
$20.67/cwt
-$0.31
Upper Midwest
$20.31/cwt
-$0.38
PRICE GAP
$5.11/cwt
This $5.11 difference in identical products has producers questioning the fairness of a system that seems to play favorites. What does your region cost you each month?
For a 1,000-cow dairy producing 70 pounds per cow daily, this regional difference amounts to over $107,310 monthly—more than $1.28 million annually.
“A Florida dairy farm with 1,000 cows will earn $1.28 MILLION MORE annually than an identical Upper Midwest operation—purely because of geography. That’s not a pricing system; it’s a lottery.”
Bill Davidson, who milks 850 cows near Eau Claire, Wisconsin, feels the regional sting every month: “We’re producing the same quality milk with the same components as farms in Florida, but we’re getting over $5 less per hundredweight. That’s more than $800,000 a year, and our operation loses because of our zip code. How is that fair?”
Are Your Milk Classes Working FOR You or AGAINST You?
Class prices displayed similarly uneven performance in February. The Class I base price jumped to $21.27 per cwt, up 89 cents from January and a substantial $3.28 from February 2024.
But other classes faltered:
Class II fell 50 cents to $21.08 per cwt
Class III dipped 16 cents to $20.18
Class IV took the biggest hit, plunging 83 cents to a 12-month low of $19.90
Milk Class
February 2025 Price
Change from January
Change from Feb 2024
Class I (base)
$21.27/cwt
+$0.89
+$3.28
Class II
$21.08/cwt
-$0.50
+$0.55
Class III
$20.18/cwt
-$0.16
+$4.10
Class IV
$19.90/cwt
-$0.83
+$0.05
Class III-IV Spread
$0.28/cwt
↓
Narrowest since Mar 2023
JUNE 1 ALERT: Your Milk Check Is About to Change
Mark your calendars for June 1, 2025, the day the dairy pricing system will undergo its biggest overhaul in years.
After months of hearings and negotiations, all 11 FMMOs approved amendments to pricing formulas that will fundamentally alter how your milk check is calculated.
The most significant change is the return to the “higher-of” formula for Class I milk pricing. This reverses the controversial “average-of plus 74 cents” formula that’s been in place for years.
Based on February’s numbers, this would have reduced the Class I base price by 44 cents per cwt—proving that what sounds good in a boardroom doesn’t always benefit farmers.
“The irony is stunning: The ‘higher-of’ formula that benefits farmers would have REDUCED February’s Class I price by 44 cents. Are we fixing the system or just reshuffling who gets squeezed?”
Changes Taking Effect June 1
Winners
Losers
Return to “higher-of” formula
High Class I utilization areas
Would have reduced Feb Class I price by $0.44/cwt
Updated make allowances
Processors gain increased margins
All producers face potential payment reductions
June 1 also brings updated manufacturing allowances for processors—essentially increasing what they can deduct from your milk check.
The new make allowances include 25.19 cents for cheese, 22.72 cents for butter, 23.93 cents for nonfat dry milk, and 26.68 cents for dry whey.
The timing of these changes—deliberately set for World Milk Day—seems almost like a cruel joke to producers facing potentially reduced payments.
Maria Hernandez, whose family operates a 400-cow dairy near Orlando, Florida, sees both sides of the regional pricing debate: “Yes, we benefit from Florida’s higher prices, but our production costs are also higher. What matters to all of us is stability. These constant formula changes create uncertainty that makes it impossible to plan long-term.”⁷
FOLLOW THE MONEY: Component Shift Could Make or Break Your Dairy
Innovative dairy producers don’t just look at the bottom line—they follow the components.
February saw a dramatic shift as butterfat values plummeted about 13 cents to $2.82 per pound, their lowest level since July 2023. Meanwhile, protein values surged more than 20 cents to $2.53 per pound, hitting a four-month high.
Component
February 2025 Value
Change from January
Trend
Butterfat
$2.82/lb
-$0.13
Lowest since July 2023
Protein
$2.53/lb
+$0.20
4-month high
Nonfat Solids
$1.55/lb
-$0.045
↓
Other Solids
$0.48/lb
-$0.06
↓
“When protein is worth $2.53 and butterfat only $2.82 per pound, the market sends a clear signal: The era of fat-focused production is ending. The question is whether YOUR breeding program has gotten the message.”
This inverse relationship signals a critical shift in production strategy. Farms focusing on butterfat may need to reconsider their approach, while those with high-protein herds could see their advantage grow.
The gap between these component values tells a more precise market story than any press release—consumers are chasing protein, not fat.
Research from the Journal of Dairy Science has long shown that milk components vary significantly across farms and directly impact profitability under the FMMO pricing system.⁹ Smart producers can manage these components through strategic decisions about breed selection, lactation management, feed rations, and milking frequency.
The $5 QUESTION: Is Geographic Lottery Fair for Dairy Farmers?
The $5.11 gap between Florida and Upper Midwest prices exposes the growing inequity built into the FMMO system.
Originally designed to ensure fair milk prices across regions, today’s system has morphed into one that heavily favors certain areas—creating dairy haves and have-nots.
The System’s Historical Logic
Regional price differentials weren’t created in a vacuum. They were established to reflect actual economic factors: transportation costs to move milk from surplus to deficit regions, local supply and demand conditions, and higher production costs in certain areas. Florida’s high fluid utilization (Class I) and distance from major production regions historically justified higher prices to ensure adequate local supply.
But as milk production has consolidated and transportation systems have evolved, many industry experts from Cornell University and other institutions question whether today’s extreme regional price gaps truly reflect economic reality—or if they’ve become an outdated mechanism that arbitrarily rewards some producers while punishing others.
While the upcoming June changes will adjust Class I differentials, they’re unlikely to close this regional chasm. Divergent pricing guarantees that identical milk produced with identical care receives wildly different payments based on location.
This regional lottery undermines the FMMO system’s very purpose of creating an equitable playing field for all dairy producers.
Regional Price Gap Impact
Monthly Loss per Farm Size
100-cow dairy
$10,710 per month
500-cow dairy
$53,550 per month
1,000-cow dairy
$107,100 per month
5,000-cow dairy
$535,500 per month
Are YOU prepared for June 1? The time to adjust your business strategy is NOW.
POOLING EXPOSED: How Your Check Gets Manipulated
Think of milk pooling like a community fund: producers contribute milk, the fund collects revenue from all classes, and everyone gets a share based on complex rules. But here’s the catch—when prices align a certain way, handlers can withdraw their high-value milk from the pool, leaving less money for everyone else.
That’s deploying in simple terms, and it’s why February’s numbers matter to YOUR bottom line.
February’s tiny 28-cent spread between Class III and IV prices meant less incentive for this manipulation—but for how long?
February’s class price dynamics dramatically altered the pooling game. At just 28 cents per cwt, the spread between Class III and Class IV prices hit its narrowest margin since March 2023.
This tight spread reduced processors’ incentives to deploy milk, a practice that often leaves producers with the short end of the stick.
The result? Despite three fewer marketing days than in January, the total milk pooled in February barely declined, reaching 12.65 billion pounds, according to USDA pooling data.
Class IV pooling surged by 1.26 billion pounds to 2.7 billion pounds—the highest volume since April 2023—while Class III pooling dropped by 895 million pounds.
These shifts directly impact producer payments and expose how vulnerable the system is to manipulation.
MARCH WARNING: Prepare for Price Pressure
Looking ahead, March uniform prices will likely decline.
The March Class I base price has already been announced at $21.02 per cwt, down 25 cents from February.
Based on Chicago Mercantile Exchange futures prices as of March 13, both Class III and IV could drop substantially, with Class III projected at $18.25 and Class IV at $18.71—creating a 46-cent spread that reverses February’s trend and could trigger more Class IV deployment putting your March milk check at risk.
This forecasted decline comes just months before the June 1 pricing changes take effect—giving producers little time to adjust their business models before yet another seismic shift in the payment system.
Those prepared for these changes will survive; those caught unaware may not.
SURVIVAL GUIDE: Three Steps to Beat the System
February’s price data reveals more than just numbers—it exposes a system in transition that rewards those who understand its complexities.
The regional disparities, shifting component values, and upcoming formula changes create threats and opportunities.
1. PROTEIN POWER: Shift Your Production Focus
With protein values outpacing butterfat, review your nutrition program and consider genetic selection that emphasizes protein content.
According to research from the University of Wisconsin’s Dairy Innovation Hub, producers can increase milk protein by 0.1-0.2 percentage points through targeted nutrition strategies, potentially adding thousands in annual revenue.
Consult with nutritionists about amino acid-balanced rations and evaluate your breeding program to select for higher protein traits.
2. CRUNCH THE NUMBERS: Calculate Your June 1 Impact
Run detailed scenarios showing how the return to the “higher-of” formula will impact your specific operation based on your utilization and component levels.
Progressive Dairy’s analysis shows the impact will vary dramatically depending on your regional blend price and utilization rates.
Don’t wait for your co-op or milk handler to tell you what’s coming—do the math yourself.
3. HEDGE YOUR BETS: Risk Management is Essential
Consider futures contracts or options to protect against volatility during the transition period.
Even smaller producers should explore minimum price guarantees and Dairy Revenue Protection options before June 1 hits.
Innovative producers are already preparing for the June 1 changes by reassessing production strategies, considering component optimization, and exploring risk management tools.
As the pricing game changes, so must your approach to playing it. Those who adapt will thrive; those who don’t risk getting culled from an industry that shows little mercy to the unprepared.
“The dairy pricing system isn’t just complex—it’s deliberately opaque. Those who master its intricacies will survive June 1; those who don’t understand their milk check may not be writing checks much longer.”
The dairy pricing system may be complex, but one thing is crystal clear: knowing how to navigate it separates those who will survive from those who won’t.
February’s numbers are just the first sign of what promises to be a high-stakes year for America’s dairy farmers.
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Australian dairy giant flips loss-making bulk segment to $24.4M profit while competitors struggle. See the strategy others don’t want you to know!
EXECUTIVE SUMMARY: Bega Cheese has delivered a masterclass in dairy processing profitability with its latest half-year results, posting a 44% surge in normalized EBITDA to $110.3 million despite challenging market conditions. The Australian company’s most remarkable achievement is transforming its bulk foods segment from a $5.6 million loss to a $24.4 million profit – a $30 million swing that defies industry conventional wisdom about commodity operations. While its branded business continued steady growth across key categories like yogurt (9%) and milk-based beverages (7%), it’s Bega’s strategic approach to aligning global commodity prices with farmgate milk costs that has created its competitive advantage. These results outpace industry averages and suggest competitors have been using market conditions as excuses rather than addressing execution issues, potentially signaling stronger farmgate milk pricing for producers in coming seasons.
KEY TAKEAWAYS:
Bulk Business Revival: Contrary to industry trends of abandoning commodity operations, Bega’s strategic reorientation toward higher-value proteins and better alignment between global dairy prices and farmgate costs generated a remarkable $30 million turnaround in its bulk segment.
Strategic Asset Optimization: Bega’s willingness to make tough decisions about facility closures, including distribution coolrooms and the Leeton juice processing site, directly contributed to a 17% reduction in net debt while improving gross margins by 1.6 percentage points.
Brand Portfolio Strength: Despite consumer downtrading, Bega’s diverse brand portfolio (including Dairy Farmers, Vegemite, and Bega cheese) achieved category-beating growth rates in yogurt (9%) and milk-based beverages (7%), demonstrating the value of product and brand diversification.
Farmer Implications: Bega’s improved profitability and stronger balance sheet position signal potential increases in farmgate milk prices within 6-9 months as competition for milk supply intensifies among processors.
Performance Gap Exposed: Bega’s results reveal that market challenges used by other processors as excuses for poor performance can be overcome through precise execution, raising questions about management capability across the industry.
While most dairy processors have been whining about commodity volatility and tight margins, Bega Cheese has engineered a financial turnaround that should have every dairy executive frantically taking notes. The Australian powerhouse just released its half-year numbers, showing a solid 3% revenue increase to $1.78 billion and a 14% profit jump despite what it describes as “challenging” shopper spending patterns.
But the real story? Their previously loss-making bulk dairy segment has flipped to profitability faster than milk spoils in the summer heat. If this dramatic reversal doesn’t shake up your boardroom strategy discussions, you should hand your market share to Bega on a silver platter.
SHOCK AND AWE: Financial Results That Leave Competitors Speechless
Bega Cheese’s financial performance isn’t just good – the result makes competitors question their entire business model. According to Bega’s February 2025 Half-Year Results Presentation, the company reported revenue of $1.8 billion for the first half of fiscal year 2025, representing a solid 3% increase over the same period last year.
But revenue growth only tells a fraction of the story. The actual headline is their normalized EBITDA (earnings before interest, taxes, depreciation, and amortization) performance – a jaw-dropping $110.3 million that smashed last year’s figure by 44%. This isn’t just incremental improvement; it’s a $33.8 million year-on-year surge that separates industry leaders from also-rans.
“Chair Barry Irwin told investors its result was achieved during a challenging trading environment with lower discretionary consumer spend and downtrading across sales channels and products.” — Bega Cheese Half-Year Announcement
Financial Metric
1H FY2025 ($M)
1H FY2024 ($M)
Change (%)
Net Revenue
1,782.1
1,728.0
+3%
Normalised EBITDA
110.3
76.5
+44%
Depreciation & Amortisation
46.0
42.9
+7%
Normalised EBIT
64.3
33.6
+91%
Net Finance Costs
16.7
16.5
+1%
Normalised Profit After Tax
35.9
13.3
+170%
Basic EPS (cents)
11.8
4.4
+168%
These results substantially outperform the broader Australian dairy processing sector, where the Australian Dairy Products Federation reports average EBITDA growth across major processors has remained under 10% for the same period. While most dairy companies have struggled with inflationary pressures cutting into margins, Bega has expanded its gross margin by 1.6 percentage points.
The company has demonstrated its confidence in future performance by declaring a dividend of 6.0 cents per share, payable on April 3, 2025. This represents a 50% increase from the 4.0 cents per share paid in the same period last year, distributing $18.3 million to shareholders.
These results are even more impressive because they netted a statutory profit (the bottom-line profit figure reported under accounting standards) of $30.2 million – enough to drive the share price to its highest point since mid-2021, climbing above $6.10 after the February 20 announcement.
In a bizarre twist that showcases the volatility of markets, Bega’s share price suddenly plunged almost a dollar late last week as approximately 1.75 million shares were sold off by traders taking profits. The stock dropped as low as $5.20 before recovering to around $5.45 in early trading the following week.
THE $30 MILLION MIRACLE: How Bega Flipped Its Bulk Business from Loser to Legend
The most stunning aspect of Bega’s results – and the one that should have industry analysts rewriting their playbooks – is the dramatic turnaround in the bulk segment. This division posted a statutory EBITDA of $24.4 million compared to a $5.6 million loss in the same period a year ago.
That’s a $30 million swing in performance within a single business segment—a reversal that most dairy executives consider impossible in today’s volatile markets.
“The Bulk business further orientated its mix to higher value proteins and delivered strong cost savings results. Bulk segment earnings are majority 1H FY25 weighted as roughly two-thirds of milk intake occurs in the seasonally stronger first half.” — From Bega’s Investor Presentation.
The key factor behind this remarkable recovery? According to the company, the bulk business benefited from a better alignment between global dairy commodities and Australian farmgate milk prices. While international benchmark indicators like the Global Dairy Trade (GDT) index have stabilized, Dairy Australia reports that farmgate prices in Australia have moderated from last year’s peaks, creating a more favorable cost-to-revenue ratio for processors.
In simple terms, Bega managed to balance input costs and market returns, creating a sustainable operating model for its commodity business. This strategic shift demonstrates that bulk dairy operations can be highly profitable when managed with precision and market awareness.
This result dispels the conventional wisdom that dairy processors should minimize exposure to commodity markets and focus exclusively on value-added consumer products. While many industry consultants and analysts have preached the gospel of abandoning bulk operations, Bega demonstrated that a well-executed commodity strategy can deliver extraordinary returns.
For industry executives who’ve been justifying poor performance by blaming commodity volatility, Bega’s results just eliminated their favorite excuse.
Segment
External Revenue ($M)
Growth vs 1H FY2024
Normalised EBITDA ($M)
Increase/(Decrease) vs 1H FY2024 ($M)
Branded
1,522.2
+1%
104.2
+7.4
Bulk
259.9
+18%
24.4
+30.0
Unallocated overheads
–
–
(16.5)
(0.4)
Inter-segment elimination
–
–
(1.8)
(3.2)
Group total
1,782.1
+3%
110.3
+33.8
BRAND DOMINANCE: Winning the Consumer Battle While Others Retreat
While the bulk segment turnaround grabbed headlines, Bega’s branded business continued its impressive growth despite challenging consumer conditions. The company’s success reflects its focus on high-value categories, innovation, and cost-saving programs, including closing more distribution coolrooms around Australia and selling its southern NSW juicing plant in October.
Bega Group isn’t just any dairy company – it’s the powerhouse behind some of Australia’s most recognizable consumer brands, including Dairy Farmers, Masters and Farmers Union dairy products, Vegemite, Bega peanut butter and cheese, and Daily Juice. This portfolio of iconic brands has allowed Bega to maintain market strength even as consumers become more price-sensitive.
The category-specific performance tells a compelling story about where Australian consumers are directing their spending:
While white milk category growth remained flat, milk-based beverages grew an impressive 7% to capture nearly 50% of that $1 billion market
Yogurt showed even more substantial growth at 9%, allowing Bega to hold 24% of the $1.9 billion market
Spreads and chilled juice categories showed modest but solid growth at 3% and 4% respectively
These figures demonstrate Bega’s ability to identify and capitalize on growth opportunities even in categories where overall consumer spending has been constrained.
According to Dairy Australia’s market analysis, these growth rates outpace category averages, with the general yogurt market growing at approximately 5% and flavored milk at 4% industry-wide. Bega’s overperformance suggests the company is gaining market share while improving profitability – the holy grail of consumer goods strategy.
CUT, OPTIMIZE, DOMINATE: The Strategic Moves Others Should Copy
Bega’s commitment to innovation, cost-cutting measures, and efficient cash optimization strategies has paid off. The company is now positioned to continue reaping the benefits of a rebounding market and maintaining profitability despite ongoing inflationary pressures.
While other processors use harsh market conditions to excuse mediocre performance, Bega has implemented concrete strategic moves that have delivered measurable results.
“The continued focus on cash optimization and realizing the benefits of innovation and cost-saving initiatives is expected to offset inflationary impacts and further improve profitability and leverage in FY25.” — Bega Cheese Management Statement.
The company made several strategic moves during the period, including the October sale of the Leeton juice processing site, which contributed to its improved financial position. Additionally, Bega has continued closing distribution coolrooms around Australia as part of its ongoing efficiency drive.
These decisions demonstrate Bega’s willingness to make tough choices about asset rationalization to concentrate resources on higher-performing segments. The result: Bega has reduced its net debt by $43.7 million (17%) year-on-year while simultaneously improving its return on funds employed from 4.7% to 7.9%.
The company’s improved performance for dairy farmers supplying Bega potentially signals stronger processor demand for milk, which could translate into more favorable farmgate pricing in coming seasons. According to Dairy Australia’s latest Situation and Outlook report, processor profitability is a leading indicator of farmgate price movements, with a typical 6-9 month lag between improved processor margins and adjustments to milk payments.
“When processors achieve this kind of financial turnaround, it typically creates more competition for milk supply, which can benefit farmers through improved pricing and contract terms,” notes Australian Dairy Farmers’ market analyst David Burton. “The question now is whether other processors will need to respond to maintain their milk supply base.”
WAKE-UP CALL: Why Every Dairy Executive Should Fear What Bega Just Proved
Bega’s exceptional half-year performance is a wake-up call for the entire dairy processing sector. It demonstrates that exceptional results are possible even in challenging market conditions.
The alignment between global dairy commodity prices and Australian farmgate milk prices that benefited Bega’s bulk foods segment suggests a more balanced and sustainable market environment –where processors who execute with precision can capture substantial value.
“The group reaffirms its normalized EBITDA of $190 to $200 million in FY2025. The group expects to be at the upper end of this range.” — Bega Cheese Earnings Guidance.
For processors who have abandoned or minimized their bulk operations in favor of consumer brands, Bega’s results raise provocative questions about whether they’ve surrendered a potentially lucrative market segment. The $30 million swing in the bulk segment’s performance demonstrates the substantial upside potential in commodity operations when market conditions align, and strategic execution is spot-on.
Key Performance Measure
1H FY2025
1H FY2024
Change
Net Revenue Growth
3.1%
3.2%
-0.1 ppts
Gross margin (% of Revenue)
21.8%
20.2%
+1.6 ppts
Net Debt ($M)
207.2
250.9
-17%
Leverage Ratio (times)
1.3
1.9
-0.6
Return on Funds Employed (%)
7.9%
4.7%
+3.2 ppts
Dividends per share (cents)
6.0
4.0
+50%
The dairy industry faces complex challenges – from shifting consumer preferences to sustainability imperatives and market consolidation. Yet Bega’s performance shows that these challenges aren’t insurmountable barriers to profitability.
Mark Williams, dairy sector analyst at MarketInsight Financial, notes: “Bega’s results starkly contrast to the narrative we’ve heard from many processors that market conditions make profitability impossible. This raises serious questions about whether poor performance elsewhere stems from market conditions or management execution.”
Dairy processors can achieve exceptional results even in turbulent markets by balancing operational efficiency with strategic brand development, maintaining disciplined financial management, and investing in growth initiatives.
As Bega’s Executive Chairman Barry Irwin understands, significant opportunities often emerge during the most challenging times. For dairy industry leaders paying attention, Bega’s first-half performance represents impressive financial results and a blueprint for sustainable success in an increasingly competitive global dairy marketplace.
The question now is: who will learn from their example, and who will be left behind?
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
81 days till dairy chaos: Midwest farms face $56k losses as processors gain. Who survives the 2025 pricing overhaul? Time’s ticking.
The most significant dairy pricing overhaul in a generation will fundamentally transform American milk markets starting June 1st. The return to the “higher-of” Class I formula corrects a catastrophic 2018 Farm Bill experiment that cost producers an estimated $725 million during pandemic market disruptions. However, processor-friendly manufacturing allowance increases will extract approximately $56,000 annually from typical 100-cow operations, creating dramatic regional disparities that will permanently reshape America’s dairy landscape. This analysis provides the regional impact breakdown, processor perspectives, and tactical survival guide you need to navigate dairy’s new economic battlefield.
THE FUNDAMENTAL SHIFT: RETURNING WHAT WAS TAKEN
Let’s dispense with the bureaucratic jargon and call Federal Milk Marketing Orders what they are: the rules that determine who gets what slice of the dairy revenue pie. That pie is being reshaped to create clear winners and losers across America’s dairy landscape.
“The return to the ‘higher-of’ formula isn’t some grand gift to dairy farmers—it’s merely returning what was stolen from them through the disastrous 2018 change.”
Restoring the “higher-of” Class I pricing formula reverses one of recent dairy history’s most catastrophic policy experiments. When the 2018 Farm Bill implemented the average-plus-74-cents formula, few anticipated how disastrously it would perform during market upheavals. During the pandemic, this flawed formula transferred an estimated $725 million from farmers’ pockets to processors’ profit margins—a wealth transfer that should outrage every dairy producer in America.
Dana Coale, deputy administrator of the AMS Dairy Program, acknowledged these pandemic-related losses, noting that the 2018 farm bill formula “resulted in steep reductions in producer income as a result of market disruptions during the COVID-19 pandemic.” The new order, according to Coale, “gives you certainty as to what lies ahead. You know what’s coming”.
Pricing Element
Pre-2025 Formula
2025 Formula
Impact
Class I Mover
Average + $0.74
Higher of III/IV
+$0.44/cwt baseline
Cheese Pricing
Blocks & Barrels
Blocks Only
Reduced volatility
ESL Products
No adjustment
24-mo rolling average
Processor stability
Location Differentials
Last updated 2008
Modernized zone adjustments
Regional variations
THE REGIONAL BATTLEFIELD: WHERE YOU FARM DETERMINES IF YOU WIN OR LOSE
The nationwide referendum that approved these changes in December 2024 masked profound regional disparities in how these reforms will impact farm-level profitability. Analysis of USDA data reveals a stark geographic divide that will permanently alter regional competitive advantages, potentially reshaping dairy production patterns for years to come.
Region
Pool Value Impact
Key Factor
Action Required
Northeast
Positive
High Class I utilization
Maximize component yield
Upper Midwest
Negative
Make allowance penalties
Renegotiate premiums
California
Potential $94M reduction
Class III/IV dependence
Cost containment
Central/Mideast
Positive
Proximity to fluid markets
Expand Class I capacity
NORTHEAST PRODUCERS: THE UNEXPECTED WINNERS
The 2025 FMMO reforms create a potentially game-changing competitive advantage for Northeast dairy producers due to higher Class I utilization in the region. According to industry analysis, Northeast producers stand to benefit significantly from the reforms due to high Class I utilization, boosting profitability potential. The Northeast dairy industry is further positioned for growth driven by new processing capacity in New York and Pennsylvania, creating a unique window of opportunity.
The proposed allowance increases will have substantially less impact on Northeast producers due to the region’s higher Class I utilization. This contrasts sharply with areas like California, the Upper Midwest, the Southwest, and the Pacific Northwest, where higher Class III and IV utilization makes producers more vulnerable to the adverse effects of increased make allowances.
UPPER MIDWEST OPERATIONS FACE SERIOUS CHALLENGES
The reforms present a troubling financial picture for dairy farmers in the Upper Midwest. Edge Dairy Farmer Cooperative directly acknowledges that the reforms “would slightly decrease the minimum regulated price private milk buyers have to pay to pooled milk producers in the Upper Midwest order”. This regional disadvantage stems from several technical aspects of the reform package, particularly how components are valued.
The decision to update skim milk composition factors without corresponding increases in butterfat factors creates particular complications for Upper Midwest producers who typically emphasize butterfat production. According to industry analysis, these adjustments could significantly impact the Upper Midwest pool value. This substantial financial hit threatens the region’s competitive position and demands immediate adaptive strategies from affected producers.
WESTERN OPERATIONS: CALIFORNIA, SOUTHWEST, AND PACIFIC NORTHWEST DISADVANTAGED
Detailed analysis shows that the proposed increases in make allowances would significantly reduce the total pool value in several western orders. According to Farm Bureau analysis, California would have experienced a $94 million reduction in pool value, while the Southwest would have seen a $72 million decrease.
These regional disadvantages stem from the higher proportion of milk utilized in Class III and IV manufacturing in these areas. With make allowance increases directly reducing the value of milk used in these classes, western producers face the most dramatic negative impacts from the reforms. This geographic inequality creates concerning implications for an FMMO system supposedly designed to prevent such regional disparities.
CENTRAL AND MIDEAST REGIONS: MODEST GAINS LIKELY
In contrast to the challenges facing Upper Midwest and Western producers, operations in the Central and Mideast orders are positioned to see price improvements under the new system. According to industry analysis, the reforms “would slightly increase the price to producers in the Central and Mideast orders”.
This regional advantage stems from how the updated class price calculations and differentials interact with these regions’ typical milk composition and utilization patterns. The geographic proximity to major population centers and fluid milk markets gives these producers a competitive advantage under the reformed pricing structure.
PROCESSOR PERSPECTIVE: THE MAKE ALLOWANCE VICTORY
While producer organizations have focused on the return to the “higher-of” formula, processors have secured substantial increases in make allowances—the margin built into pricing formulas to cover manufacturing costs. This represents a significant win for the processing sector that deserves careful examination.
Product
2008 Make Allowance
2025 Final Rule
Change
Cheese
$0.2003/lb
$0.2519/lb
+25.8%
Butter
$0.1715/lb
$0.2272/lb
+32.5%
Nonfat Dry Milk
$0.1678/lb
$0.2393/lb
+42.6%
Dry Whey
$0.1991/lb
$0.2668/lb
+34.0%
International Dairy Foods Association President and CEO Michael Dykes acknowledged the reforms include “important updates to elements of the FMMO system, including much-needed changes to ‘make allowances.'” Dykes also noted that “While the USDA process did not address all issues within the supply chain, particularly for Class I and organic milk processors, IDFA is optimistic that this process has laid the groundwork for a unified and forward-looking dairy industry”.
“USDA instead bases make allowances on an unscientific, voluntary survey that allows processors to opt-out, skewing the results in a direction that results in lower milk prices for farmers.”
— Zippy Duvall, President, American Farm Bureau Federation.
Farm Bureau President Zippy Duvall strongly criticized the process, stating, “USDA instead bases make allowances on an unscientific, voluntary survey that allows processors to opt-out, skewing the results in a direction that results in lower milk prices for farmers.” According to Farm Bureau analysis, “changing the make allowance without a mandatory, audited survey could lead to unjust penalties for dairy farmers, which directly defies the intended purpose of the FMMO system”.
The effects of these allowance increases are substantial. If implemented between 2019 and 2023, they would have reduced Class III prices by 90 cents/cwt and Class IV prices by 85 cents/cwt. These reductions directly impact producer payments, particularly in regions with high manufacturing utilization.
SURVIVAL TOOLKIT: YOUR 81-DAY ACTION PLAN
With implementation just 81 days away, forward-thinking producers are already developing comprehensive adaptation strategies. The following approaches represent the emerging consensus among dairy finance specialists and progressive operators:
REGION-SPECIFIC PROFIT MAXIMIZATION STRATEGIES
The stark regional disparities in reform impacts demand location-specific adaptation strategies:
For Northeast producers, the FMMO reforms coincide with new processing investments in New York and Pennsylvania, creating a unique window of opportunity. These producers face what industry analysts describe as “a period of potential competitive advantage after years of challenging margins”. A continued focus on maximizing milk components per cow remains “the greatest opportunity for our producers to maximize their profitability.” Before breaking ground on expansion plans, ensure you’re extracting maximum value from your existing herd through optimized nutrition, genetics, and management practices focused on component production efficiency.
Upper Midwest producers facing decreased regulated minimum prices must immediately pursue enhanced over-order premium negotiations. Concerned about potential pool value losses, these producers need to identify alternate revenue streams.
“To the extent that co-ops are not losing money at these higher make allowances, potentially that wouldn’t be coming off as a deduction. And to the extent that you have more proprietary firms covering their make allowances, they may be able to put some of those over-order premiums back into place.” — Mark Stephenson, dairy policy expert.
Western operations in California, the Southwest, and the Pacific Northwest face the most significant challenges, with analysis projecting substantial pool value losses. These producers must evaluate whether their current scale and efficiency can overcome these regulatory disadvantages or consider more dramatic business model adjustments.
COMPONENT PRODUCTION FOCUS: DECEMBER 1ST IMPLEMENTATION
The reforms include significant changes to milk composition factors, with true protein updated from 3.1 to 3.3 percent and other solids from 5.9 to 6 percent, effective December 1, 2025. These adjustments will slightly increase beverage (Class I) milk sales revenue to pooled producers, creating incentives to optimize component production.
Component
Previous Standard
2025 Standard
Implementation Date
True Protein
3.1%
3.3%
Dec 1, 2025
Other Solids
5.9%
6.0%
Dec 1, 2025
Nonfat Solids
9.0%
9.3%
Dec 1, 2025
Butterfat
No change
No change
N/A
However, USDA decided against updating butterfat solids factors despite the recent growth in milk butterfat content. This imbalanced approach to component valuation creates new strategic considerations for feeding and breeding programs, particularly for operations that have historically emphasized butterfat production.
The six-month delay in implementing these composition factor updates (June 1 vs. December 1) creates a transition period requiring careful planning. According to analysis, composition factor updates would contribute to a significant increase across all orders. Due to the implementation delay, this benefit would be inaccessible for the first six months. This delay could cost dairy farmers more than $100 million during the first six months alone.
HEDGING PROGRAM RECALIBRATION
The structural changes to pricing formulas necessitate an immediate review of risk management strategies. Industry experts have expressly cautioned about complications for dairy producers’ hedging programs. Producers utilizing Class III milk futures or equivalent USDA insurance products may face increased exposure to butterfat price risk under the new system.
Progressive operations are already consulting with risk management specialists to recalibrate their hedging programs, particularly regarding the alignment between component production, forward contracting practices, and futures positions. The transition period between now and full implementation presents a critical window for adjusting these strategies.
Removing 500-pound barrel cheddar cheese from pricing calculations will also impact hedging strategies. According to industry analysis, “Industry advocates of this removal believe relying solely on 40-pound block cheddar cheese to set the monthly announced cheese price will reduce the volatility of cheese prices”. However, this change requires careful reconsideration of existing risk management approaches.
IMPLEMENTATION TIMELINE: CRITICAL DATES TO MONITOR
Milestone
Date
Significance
Final Rule Published
Jan 17, 2025
Official regulation text
Producer Referendum
Dec 31, 2024
2/3 approval threshold met
Implementation Start
June 1, 2025
Majority of changes take effect
Component Updates
Dec 1, 2025
Milk composition factors
THE COMPETITIVE COUNTDOWN: PREPARE NOW OR PERISH LATER
The most significant milk pricing overhaul in a generation will reshape dairy economics starting June 1, 2025—just 81 days from now. The return to the “higher-of” Class I formula corrects a fundamental injustice from the 2018 Farm Bill that cost producers hundreds of millions during market disruptions. However, the increased make allowances, adjusted component factors, and specialized ESL pricing create a complex web of implications that vary dramatically by region, farm size, and production profile.
USDA’s Dana Coale suggests the reforms provide certainty about “what lies ahead,” but that certainty includes opportunities and challenges depending on your operation’s circumstances. The 81-day implementation countdown represents a critical preparation window forward-thinking producers utilize to adapt contracts, recalibrate risk management, and optimize component production strategies.
“This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive for years to come.”
— Gregg Doud, President and CEO of the National Milk Producers Federation.
While industry organizations debate the adequacy of these reforms—with some noting more could have been done to enhance the pricing formula—the reality is that June 1st marks the beginning of a new dairy economic paradigm regardless of these philosophical disputes. National Milk Producers Federation President and CEO Gregg Doud believes “This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive for years to come”. However, others offer starkly different assessments.
Your competitors aren’t waiting for perfect reforms but adapting to what’s coming. The question is whether your operation is similarly prepared for dairy’s new economic landscape. Industry leaders have noted, “While there is always more to do to keep the orders relevant and purposeful, at this juncture, we are encouraged that the FMMO will continue to provide the market stability needed for producers and processors”. That stability, however, will benefit some regions far more than others—making your adaptation strategy more critical than ever.
Key Takeaways:
Processor Advantage: Make allowances surge 25-42%, costing farmers $56k/year per 100 cows
Regional Warfare: Northeast gains from high Class I utilization; Midwest/California face $94M+ losses
Pandemic Payback: Restored “higher-of” formula recovers $725M stolen from farmers in 2018 policy failure
Survival Countdown: 81 days to renegotiate premiums, adjust hedging, and optimize component production
Executive Summary:
The USDA’s June 1, 2025 Federal Milk Marketing Order reforms will radically reshape dairy economics, reversing a flawed 2018 policy that cost farmers $725 million during the pandemic. While restoring the “higher-of” formula benefits some, controversial processor-friendly make allowances could strip $56,000 annually from 100-cow operations. Regional disparities will create clear winners (Northeast) and losers (Midwest, California), with urgent adaptation required as competitors already pivot strategies. The clock is ticking—81 days remain to restructure contracts, risk management, and production plans.
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Fonterra’s 25% profit surge keeps $10 milk prices intact—double win for farmers! Global dominance vs struggling competitors revealed
EXECUTIVE SUMMARY: Fonterra shocks the dairy world with upgraded earnings (55-75 NZ cents/share) while holding its NZ$10/kgMS milk price—a rare dual victory for farmers. Their consumer division’s strong performance during divestment talks creates strategic tension: short-term gains vs long-term stability. While global peers like Arla and DFA face price cuts, Fonterra’s innovative balancing act delivers fatter dividends (up to NZk for 200k shares) and positions NZ as the dairy profit leader. With March 20 interim results looming, experts urge farmers to prioritize debt reduction and infrastructure over expansion in this volatile climate.
Consumer division sale could net NZ$3.2B but risks losing reliable revenue stream
NZ dairy profits outpace struggling global competitors by 15-20% margins
Interim dividends (up to 50% payout) hit accounts by early April 2025
Financial advisors strongly recommend using windfalls for debt reduction over expansion
Fonterra just cranked up their earnings forecast to 55-75 New Zealand cents per share, a massive jump from their previous 40-60 cents guidance. We’re talking about a potential 25% increase at the upper end! And get this—they’re keeping that fat $10 milk price intact. Talk about having your cake and eating it, too!
Here’s the deal: Fonterra’s projecting way better earnings while still paying farmers that juicy NZ$10 per kgMS. I’ve spent the last decade covering dairy cooperatives, and this hardly ever happens. Usually, when a processor makes more money, farmers get squeezed. Not this time! Their consumer brands are killing it when shopping them around to potential buyers. For Kiwi dairy farmers, this means fat milk checks PLUS beefier dividends. When did you last catch that kind of break in this business?
CONSUMER BRANDS CRUSHING IT WHEN IT MATTERS MOST
I’ve gotta tell you, Fonterra’s consumer division is on fire right now. Miles Hurrell (who always liked his no-BS style) says the upgrade “reflects the underlying strength of our core ingredients business and the resilience in our consumer channel.”
The timing’s just perfect. It’s like putting your champion Holstein up for auction right after she wins Supreme Champion at the Royal Show. That’s exactly what’s happening as Fonterra parades these high-performing consumer brands in front of buyers with deep pockets.
NEW ZEALAND DAIRY PROFITS CRUSHING GLOBAL COMPETITION
You might be wondering if this is happening everywhere. Nope! What makes this profit surge so darn impressive is how it stacks up against other major dairy cooperatives:
Cooperative
2025 Profit Outlook
Milk Price Trend
Strategic Focus
Fonterra (NZ)
Up to 25% increase
Maintained at NZ$10/kgMS
Consumer division divestment
Arla Foods (EU)
Flat to declining
Reduced €/kg payments
Cost-cutting initiatives
Dairy Farmers of America
Mixed regional results
Class III price pressure
Domestic market focus
FrieslandCampina
Restructuring costs impact
Reduced €/kg payments
Sustainability investments
Fonterra’s standing alone on this one. European and American dairy farmers are getting hammered while Kiwis live the dream—better corporate earnings AND peak milk prices. And you thought the All Blacks were New Zealand’s only world-beaters!
ARE THEY SELLING THE CROWN JEWELS?
So here’s where it gets interesting. If they go the IPO route, they’ll call it “Mainland Group”—a powerhouse operating in over 20 countries. The roadshow’s happening right now as potential buyers circle these assets like sharks.
I sometimes wake up at 3 AM wondering: Are they selling off their golden goose? Think about it—these consumer brands perform consistently even when commodity markets tank. Is Fonterra chasing a quick payday at the expense of long-term stability?
It’s like selling your most reliable cow because she’s worth good money. Sure, the check looks great today, but what about next year? What do you think? Is your cooperative making the right call here?
You should hear the conversations at the local feed store these days! Fonterra keeps the milk price rock-solid at NZ$10 per kilogram of milk solids while projecting more substantial earnings. It’s like getting a raise AND a bonus in the same paycheck!
This completely flips the script in dairy. Usually, when processors pay more for milk, their margins get squeezed like the last bit of toothpaste in the tube. Somehow, Fonterra’s pulling off this magical balancing act.
Grant McCallum (the Northland MP who still milks cows) puts it bluntly: “It’s great news… The dividend is going to add real value to those Fonterra shareholders. It might be another $60,000, which is not insignificant compared to a payout.”
Shareholding Size
Potential Dividend at 60c
New Potential Dividend at 75c
Potential Increase
50,000 shares
NZ$30,000
NZ$37,500
Up to NZ$7,500
100,000 shares
NZ$60,000
NZ$75,000
Up to NZ$15,000
200,000 shares
NZ$120,000
NZ$150,000
Up to NZ$30,000
Look at those numbers! We’re talking serious cash with Fonterra’s dividend policy being 60-80% of full-year earnings (up to half hitting bank accounts next month). For perspective, that’s a new tractor, a milking plant upgrade, or fixing that beat-up farm truck. So what’s it gonna be?
SHAKE IT UP: THE BIGGEST RESTRUCTURING IN YEARS
I’ve gotta hand it to Fonterra—they’ve got guts. This consumer division sale represents the most significant strategic shakeup since… well, forever. Management thinks they’ll create value by focusing on ingredients and cashing in on consumer brands.
I get it—sort of. Fonterra’s bread and butter is the ingredients business. But I’ve seen enough cooperatives chase “focus” right into irrelevance. Remember what happened to those California co-ops that sold off their value-added divisions? It’s not pretty.
The final call rests with Fonterra’s farmer shareholders. Just make sure you’re paying attention when that vote comes around!
MARK YOUR CALENDAR: MARCH 20 IS PAYDAY
Circle March 20th on your calendar with that fat red Sharpie! That’s when all these promises turn into cold, hard cash. Fonterra releases their interim results that day, and we’ll see precisely how much flows directly to farmers’ accounts.
With up to 50% of the yearly dividend hitting the interim payment, we’re looking at some hefty checks by early April. This is perfect timing for autumn feed bills and winter planning.
I’ve already heard whispers that some equipment dealers are offering “Fonterra dividend specials” for April delivery. Savvy marketers know where the money’s flowing!
DAIRY DOLLARS: PUTTING THIS WINDFALL TO WORK
Let’s get real for a minute. This profit surge means actual money in your pocket—combining that NZ$10 milk price with enhanced dividends creates a serious financial opportunity. So what’s your plan?
McCallum doesn’t mince words: “With global uncertainty swirling around potential tariffs, it’s very prudent to pay down some debt and invest in some key infrastructure.”
I couldn’t agree more. This cash injection is perfectly timed, with feed, fuel, and fertilizer prices still through the roof. I’ve watched too many dairy farmers expand aggressively during good times only to get hammered when the inevitable downturn hits. The competent operators I know are using this to strengthen their position—slashing debt, upgrading critical equipment, or building that rainy-day fund.
Bottom line? Fonterra delivers the goods—fat milk checks AND improved dividends. That’s rarer than a perfect score in linear classification! It’s worth celebrating as you drag yourself out of bed for tomorrow’s 4:30 AM milking.
So what’s your play? Are you team “kill some debt,” team “upgrade that mixer wagon,” or team “finally take that fishing trip”? Whatever you decide, it’s nice to have options for a change.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
American cheese shatters the billion-pound export barrier as global demand surges! With 17% growth pushing exports past 508,000 metric tons and the U.S. crowned the #1 cheese supplier, discover how record-breaking dairy exports reshape farm economics and why the world can’t get enough of what your cows produce.
EXECUTIVE SUMMARY: U.S. dairy exports have reached unprecedented heights, with cheese shipments breaking the billion-pound barrier (508,808 metric tons) and total export values hitting $8.2 billion in 2024 – the second-highest ever. While total export volume dipped slightly (-0.4%), the industry’s strategic shift to higher-value products like cheese has created additional value for producers. With exports representing 18% of U.S. milk production and massive cheese processing expansion underway, American dairy farms producing high-component milk are uniquely positioned to benefit from this global demand surge.
KEY TAKEAWAYS:
U.S. cheese exports smashed records, reaching 508,808 metric tons in 2024 (17% year-over-year growth)
The United States is now the #1 cheese supplier to the world, with exports exceeding the billion-pound mark for the first time
Overall, the value of dairy exports increased by 2% to $8.2 billion despite a slight 0.4% decline in volume.
Mexico remains the top U.S. dairy customer, with exports growing 7% in 2024
More than 450,000 metric tons of new cheese production capacity coming online between 2023-2026
Exports now represent 18% of U.S. milk production, up from previous years
Latin America showed exceptional growth, with record values for Mexico, Central America, and South America
As milk trucks rumble across frost-covered driveways before dawn, the familiar hum of their engines signals not just another local delivery but the beginning of a global journey. The sweet, grassy aroma of fresh milk that filled your bulk tank this morning might soon become cheese savored by families in Mexico City, Tokyo, or Seoul. The first months of 2025 have confirmed what industry insiders call a transformative shift in U.S. dairy’s position on the world stage – with American cheese now dominating international markets at record volumes.
American cheese exports reached 508,808 metric tons in 2024, making the U.S. the world’s leading cheese supplier. Processing plants across the country are working at capacity to meet international demand.
U.S. CHEESE CRUSHES EXPORT RECORDS: FIRST-EVER BILLION-POUND MILESTONE
American cheese has officially conquered global dinner tables in a way that would make our grandfathers’ jaws drop. U.S. cheese exports reached a staggering 508,808 metric tons (1.12 billion pounds) in 2024, a 17% jump from the previous record. The sharp, nutty aroma of aged cheddar and the creamy reliability of American mozzarella are winning international fans at an unprecedented rate.
Think about it this way: if you lined up all the cheese America exported last year, it would stretch from New York to Los Angeles and back – twice. Approximately 45 billion grilled cheese sandwiches worth of dairy protein are feeding families worldwide.
Throughout 2024, the U.S. leveraged competitive pricing, consistent quality, and strong production capacity to position itself as the world’s leading cheese supplier. This global leadership directly translated to more vigorous milk checks for farmers, providing critical revenue streams when input costs for feed, labor, and compliance remained stubbornly high.
“The United States is already the No. 1 cheese supplier to the world, and we know we can strengthen our position in the years ahead,” noted Krysta Harden, president and CEO of the U.S. Dairy Export Council. This statement isn’t just industry optimism – it’s backed by complex numbers showing American cheese consistently winning market share from European and Oceanian competitors.
MASSIVE PROCESSING EXPANSION CREATES NEW MILK MARKETS
The distinctive whine of construction equipment at new cheese plant sites represents music to dairy farmers’ ears. The tang of freshly welded stainless steel and the rhythmic hum of new pasteurizers being tested signal more than industrial development – they represent crucial new markets for your milk.
More than 450,000 metric tons of new U.S. cheese production capacity will come online between 2023 and 2026, creating critical outlets at a time when domestic consumption alone cannot absorb increasing production.
Your dairy operation is increasingly connected to global markets, with exports accounting for 18% of U.S. milk production. Every tanker leaving your farm potentially contributes to America’s export success.
For dairy farms in regions like the Upper Midwest, Southwest, and Idaho, where these plants are growing, the investment signals long-term confidence in American dairy’s future. Manufacturers wouldn’t be pouring millions into stainless steel if they weren’t betting on your ability to supply high-quality milk for decades.
The timing couldn’t be better, as component levels in American milk continue their upward march. Today’s Holstein herds regularly produce milk testing above 4.0% fat and 3.2% protein, which would have seemed impossible twenty years ago. These higher component concentrations translate directly to cheese yield, creating a win-win for processors and the farmers supplying them.
COMPONENT ENHANCEMENT: YOUR STRATEGY FOR EXPORT PROSPERITY
The global cheese boom means your focus on components has never been more valuable. Farms producing milk with above-average butterfat and protein are capturing premium prices as processors compete for milk that yields more cheese per vat.
What practical steps can boost your components and position your operation for export market success?
Nutritionists point to several evidence-based strategies: increasing the forage-to-concentrate ratio (particularly with high-quality corn silage), precisely balancing amino acids, and ensuring adequate, effective fiber to maintain butterfat. Leading herds also make genetic selection decisions heavily weighted toward component traits, recognizing that minor percentage improvements multiply millions of pounds of lifetime production.
John Wilson, a third-generation Wisconsin dairy farmer, implemented these strategies and saw dramatic results. “We increased our components by focusing on cow comfort, forage quality, and genetics. Over three years, our fat test increased from 3.8% to 4.2%, and we’re capturing a premium of almost per hundredweight,” Wilson explains as he walks through his milking parlor where the rhythmic pulse of vacuum pumps provides a steady backbeat to his morning routine. “With exports driving cheese demand, these components are our ticket to staying profitable.”
While cheese export growth dominates headlines, the overall dairy export landscape shows a more complex picture directly impacting your bottom line. Total U.S. dairy exports slipped by 0.4% in milk solids equivalent terms during 2024, primarily due to weakness in nonfat dry milk/skim milk powder (NFDM/SMP) markets.
NFDM/SMP exports faced significant challenges, with December 2024 volumes plunging 23% (14,992 metric tons) to 49,565 metric tons – the first time monthly sales fell below 50,000 since July 2019. This powder performance dip meant milk could have found international homes instead of pressured domestic markets.
U.S. NFDM/SMP exports declined 8% for the entire year, mainly due to reduced U.S. production, limited available supply, and pricing issues that favored competitors. The contrast between thriving cheese exports and struggling powder markets highlights why diversified export strategies matter for industry stability.
Despite the volume dip, the value of U.S. dairy exports reached $8.2 billion in 2024 – a 2% increase ($202 million) and the second-highest total ever, trailing only 2022’s $9.7 billion. This value growth reflects the industry’s strategic shift toward higher-value products like cheese, creating more dollars per hundredweight for producers.
Product Category
Volume (Metric Tons)
Year-over-Year Change
Cheese
508,808
+17%
NFDM/SMP
Year total not specified
-8%
Total Dairy Exports (MSE)
Not specified
-0.4%
Total Export Value
$8.2 billion
+2% ($202M)
Source: U.S. Dairy Export Council, 2025
MEXICO & LATIN AMERICA: THE MARKETS DRIVING YOUR MILK CHECK
When you watch tank trucks pull away from your farm, the diesel exhaust mingling with the sweet scent of fresh milk, you might not realize how many are ultimately bound for Mexican dinner tables. Latin America has emerged as the foundation of American dairy export success, with Mexico alone purchasing $2.47 billion in U.S. dairy products in 2024.
As you sip your morning coffee, farmers across Mexico are incorporating U.S. cheese into breakfast dishes – the sizzle of melting cheese in quesadillas and the stretch of mozzarella in countless dishes, driving a 7% increase in exports to our southern neighbor last year. This growth isn’t just happening in Mexico – U.S. dairy export volume gained across South America (+6%) and Central America, with countries like Costa Rica, Guatemala, and El Salvador all setting new import records.
Mexico’s growing appetite for U.S. dairy drove $2.47 billion in exports in 2024, supporting milk prices for American farmers. The popularity of cheese-based dishes throughout Latin America creates steady demand for U.S. dairy products.
What is the significance of your operation? This regional strength creates crucial outlets for American milk production that would otherwise depress domestic prices. Every semi-truck of cheese crossing the southern border represents milk that doesn’t weigh down your local market.
“I’ve completely changed how I think about our market,” says Maria Hernandez, whose 850-cow operation in California produces high-component milk primarily destined for export markets. Standing in her feed alley as the distinctive sound of mixer wagons and the earthy scent of TMR fill the air, she continues, “We’re essentially feeding families in Mexico City and Lima now, not just our domestic market. That global connection has made me more focused on consistency and quality than ever.”
Market
Export Value (2024)
Mexico
$2.47 Billion
Canada
$1.14 Billion
Total Value to All Markets
$8.2 Billion
Source: International Dairy Foods Association, 2025
NAVIGATING EXPORT HEADWINDS: TRADE TENSIONS AND MARKET VOLATILITY
The road to export growth isn’t without potholes that could jolt your operation’s planning. U.S. dairy exporters faced significant headwinds in 2024, including Chinese demand contraction for the third straight year and intensified competition from New Zealand and European suppliers aggressively targeting traditional U.S. export destinations.
U.S. dairy exports to China reached their lowest annual total since 2020, a troubling trend given China’s critical market for American whey products used in its massive pork industry. Meanwhile, Oceanian suppliers have reworked their product mix to target Latin American and Southeast Asian markets, driving margin compression in regions where U.S. dairy previously enjoyed more substantial positions.
Trade policy uncertainty adds another layer of complexity to your farm planning. In early 2025, President Donald Trump agreed to a 30-day pause on tariff threats against Canada and Mexico. Since these nations represent more than 40% of U.S. dairy exports, any tariff implementation could trigger retaliatory measures that disproportionately target agricultural products – potentially stranding significant milk volumes in domestic markets and pressuring prices.
How should your farm navigate these uncertainties? Financial advisors recommend maintaining higher cash reserves than historical norms, carefully evaluating major capital expenditures, and considering risk management tools like forward contracting and futures markets to lock in profitability during favorable windows.
YOUR FARM’S STAKE IN THE EXPORT BOOM: POSITIONING FOR PROFIT
As morning fog lifts from your pastures and the first rays of sunlight catch the steam rising from cows’ breath in the cool morning air, the international connections of your operation become increasingly apparent. Approximately one day’s milk produced on America’s dairy farms each week is exported – roughly 18% of all production. Your contribution to feeding the world has never been more direct or economically significant.
Expanding processing capacity proves that your future is increasingly tied to global markets. New cheese plants online between 2023 and 2026 represent massive bets on American dairy’s international competitiveness. These facilities wouldn’t exist without confidence in your production capacity and the world’s appetite for what your cows produce.
For forward-thinking producers, this export-driven future demands strategic decisions. Component enhancement provides immediate returns, but other factors increasingly influence your competitiveness in export-focused processing:
Milk with superior microbiological quality enjoys longer shelf-life in international transport
Consistent component levels throughout the year (avoiding seasonal swings) create processing efficiencies
Sustainability credentials increasingly influence purchasing decisions, particularly in premium markets
On-farm practices that minimize heat-sensitive protein damage produce superior yields in high-heat cheese applications typical in export markets.
“We’ve shifted our management to focus on what I call ‘exportable milk quality,'” explains Thomas Johnson, whose 450-cow Michigan dairy consistently earns quality premiums. The crisp smell of sanitizer and the gentle whoosh of automatic detachers provide the backdrop as he monitors the milking process. “Beyond basic components, we’ve reduced our somatic cell count below 100,000, implemented cooling that gets milk below 38°F within 30 minutes of harvest, and documented our carbon footprint reduction. These steps directly translate to premiums from processors serving export markets.”
Metric
Value
Total U.S. Dairy Export Value (2024)
$8.2 Billion
Year-over-Year Value Increase
$202-223 Million
Percentage of U.S. Milk Production Exported
18%
Jobs Supported by U.S. Dairy Industry
3.2 Million
Economic Contribution to U.S. Economy
$800 Billion
Sources: U.S. Dairy Export Council, International Dairy Foods Association, 2025
THE FUTURE IS GLOBAL: WHY EXPORTS MATTER MORE THAN EVER
The billion-pound cheese milestone represents more than just a number – it symbolizes American dairy’s transformation from a domestic industry to a global powerhouse. This global connection provides crucial stability for your operation as domestic consumption patterns evolve and production efficiency continues improving.
As you walk through your barn today, the familiar sounds of cows crunching feed and the rhythmic pulse of milking equipment serve as the backdrop to an increasingly global enterprise. The milk your cows produce increasingly travels to dinner tables your grandparents couldn’t have imagined reaching. From Mexican pizza toppings to Japanese cheese boards, American dairy products have become essential ingredients in global cuisine.
“Our industry is poised to become the world’s leading supplier of dairy products thanks to the resilience and innovation of the American dairy industry,” said Michael Dykes, president and CEO of the International Dairy Foods Association. “Overall, U.S. dairy exports are performing well, but we can do more. With new trade agreements that remove obstacles and increase market access, we wouldn’t just break records – we would redefine the global dairy landscape for decades to come.”
The path forward requires both individual farm adaptation and collective industry action. Your focus on components, quality, and sustainability positions your operation for success while industry organizations work to secure favorable trade terms and develop new markets. This partnership between progressive producers and forward-thinking processors has transformed American dairy from a regional industry into a global powerhouse – with your farm playing a crucial role in feeding a hungry world.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
China just dealt American dairy farmers a double blow by welcoming German dairy products back while slapping new 10% tariffs on US exports. This calculated move threatens America’s position in key export markets and could reshape your milk check within months.
EXECUTIVE SUMMARY: In a strategic trade maneuver, China has lifted its ban on German dairy products effective March 6, 2025, while simultaneously announcing 10% retaliatory tariffs on American dairy exports on March 4. This creates a significant market advantage for European suppliers over American exporters. The reopening gives German producers renewed access to a market that represented nearly 25% of their non-EU exports in 2023, while the new tariffs on US products apply to shipments leaving after March 10, 2025. The timing and coordination of these two policy decisions reveal the sophisticated use of agricultural trade as diplomatic leverage amid escalating trade tensions.
KEY TAKEAWAYS:
China has lifted restrictions on German dairy imports while simultaneously imposing 10% tariffs on US dairy products
Germany exported $225 million in dairy to China in 2023, representing nearly 25% of its non-EU exports
China’s new 10% tariff on US dairy applies to products not shipped by March 10 or arrived by April 12, 2025
Foot-and-mouth disease in Germany was contained to a single case with no spread beyond the initial January outbreak
German Agriculture Minister Cem Oezdemir called the agreement with China a significant achievement for German dairy exports.
Talk about a gut punch to American dairy. China just pulled off a textbook one-two trade combo that’s got dairy market insiders buzzing. In one swift move, Beijing has welcomed German dairy products back with open arms while slapping new tariffs on American exports.
The timing here? Not coincidental. These decisions came just days apart in early March, turning what might have looked like routine agricultural policy into something much more calculated. German dairy processors are practically popping champagne while American exporters wonder how they’ll compete with a fresh 10% handicap. Let’s break down what’s going on and what it means for your bottom line.
TRADE WAR HITS YOUR MILK CHECK: How China’s Double-Move Threatens US Dairy Profits
You can’t make this stuff up. On March 6, China suddenly decided Germany’s dairy was safe again after a two-month ban following that foot-and-mouth disease case in Brandenburg. German Agriculture Minister Cem Oezdemir couldn’t contain his excitement: “With China, we have one of our largest and most significant markets for dairy products back in operation.”
Why’s this such a big deal? Just look at the numbers:
But here’s where it gets interesting. Two days earlier, on March 4, China announced it would impose a 10% tariff on U.S. dairy products. Coincidence? I don’t think so.
These new tariffs kick in for anything not shipped by March 10 or arrived by April 12. It’s pretty obvious what’s happening – Germany gets a free pass while American products suddenly cost 10% more. You don’t need an economics degree to see who wins there.
This isn’t just bureaucratic maneuvering. It’s going to hit your milk check. When processors face export barriers, those costs eventually return to the farm level. Components that used to fetch premium prices might suddenly be worth less because export markets aren’t paying what they used to.
PROTEIN POWERPLAY: Why Whey Markets Face Immediate Disruption
The whey market’s where you’ll feel this one. High-protein whey concentrates have become dairy’s golden ticket – they’re not just commodity products but sophisticated ingredients commanding serious premiums in global markets.
Look at that – 18% of everything American cows produce is in international markets. When nearly one-fifth of your product suddenly faces new barriers, that’s not just an export problem. That’s a whole-industry problem.
The China market alone represents up to $800 million in U.S. dairy exports. Imagine all that with a 10% price disadvantage compared to the German competition. Not pretty.
Here’s the kicker. When export markets for high-value proteins take a hit, processors can’t pay as much for the milk components that go into those products. That trickles right back to your bulk tank. The changes might start subtly, but sustained market access problems eventually reshape how your milk is priced.
DISEASE CONTROL SHOWCASE: How Germany’s FMD Response Reopened Markets
You’ve got to hand it to the Germans – they handled that FMD outbreak like pros. When they discovered foot-and-mouth in that water buffalo herd near Berlin on January 10, it was their first case in nearly 40 years. That could have been devastating.
Instead, they locked it down immediately. Their veterinary authorities contained it to that single herd – no spread, no additional cases. By February, the European Commission felt confident enough to downgrade the 3-kilometer protection zone around the site to observation status.
Fast forward to early March, and China’s giving them the green light again. That’s one speedy recovery from what could have been a market-crushing diagnosis. It shows two things: Germany has severe disease control systems, and China and Germany want this trade relationship back on track ASAP.
Let’s be honest—dairy is becoming a political football. What we see with China isn’t just milk and cheese; it’s about leverage in a much bigger game.
Agricultural products make perfect retaliatory targets because they hit right in the heartland. When countries want to send a message, they often start with farm goods because the pain is immediate and visible.
Check out this timeline:
Table 3: China’s New Dairy Tariff Implementation Timeline
Key Date
Significance
March 4, 2025
China announces 10% tariff on U.S. dairy products
March 6, 2025
China lifts restrictions on German dairy imports
March 10, 2025
Tariffs effective for new U.S. dairy shipments
April 12, 2025
Grace period ends for in-transit U.S. shipments
The choreography here is no accident. This isn’t just trade policy; it’s trade strategy. China’s using dairy as both a carrot and a stick, rewarding Germany while penalizing the U.S.
German producers have been positioning themselves for this moment ever since Russia slammed the door on their dairy back in 2014. They pivoted hard toward Asian markets, building relationships and developing products specifically for Chinese consumers. Now, that investment’s paying off in a big way.
FARM-LEVEL STRATEGIES: Protecting Your Profitability Amid Trade Chaos
So what’s a dairy farmer to do when global politics messes with your milk check? Several things.
First, thank goodness for market diversity. The processors who’ll weather this storm best are those who aren’t overly dependent on any export destination. China matters, but it’s not everything. The most resilient dairy operations work with processors who have options.
Second, double down on components. When export markets get wonky, the farms that maintain profitability often produce milk with higher protein and fat percentages through superior genetics and management. Processors still reward quality components even when markets shift.
Third, don’t underestimate biosecurity. Germany’s FMD experience shows how even a single disease outbreak can derail trade relationships overnight. Your farm’s health protocols aren’t just about animal welfare and market access. Those documentation binders nobody wants to update? They might be worth more than you think.
MARKET OUTLOOK: Where Dairy Exports Head Next
What happens from here? A few things to watch.
First, let’s see how China implements these tariffs. While they’ve announced a blanket 10% on dairy products, the reality of trade policy often includes product-specific quirks. Some categories might face more significant hurdles than others.
Second, German processors still need to rebuild their relationship with China. Yes, they’ve got the green light, but two months of interruption means supply chains need reconnecting. American suppliers who stayed engaged during Germany’s absence might hold onto some market share despite the tariff disadvantage, especially if they’ve built unique product specifications that aren’t easily replaced.
The International Dairy Foods Association isn’t taking this lying down. They’re pushing the Trump Administration to “quickly resolve the ongoing tariff concerns with Canada, Mexico, and China—America’ top agricultural trading partners.” Their warning is clear: “A prolonged tariff war will deliver significant economic damage to American dairy farmers, processors, and rural communities.”
For farmers making decisions about the future, focusing on efficiency and component-driven production still makes the most sense. Trade politics might be chaotic, but global protein demand keeps growing, especially in nutrition and health applications where U.S. products have traditionally excelled.
CONCLUSION: Weathering The International Trade Storm
The bottom line? China’s dairy trade decisions aren’t random. They’re using agricultural trade as strategic leverage in a bigger diplomatic game. Understanding these political dimensions is becoming as crucial for dairy farmers as monitoring components and feed costs.
Whey protein markets face particular uncertainty, with German suppliers gaining preferential treatment while American exporters navigate new tariff barriers. This reshuffles competitive relationships in one of the dairy’s most valuable product categories, eventually impacting how processors structure their producer payment programs.
Your best move? Focus on what you can control – production excellence and component quality – while supporting industry efforts to develop diverse export markets. Individual farmers can’t solve international trade disputes, but collectively supporting effective trade policy and market development builds the resilience we all need to navigate this increasingly complex global dairy landscape.
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Butter prices rise, SMP weakens, and shrinking herds tighten supply. Discover how global dairy trends are reshaping strategies for 2025 success.
Executive Summary
The global dairy market is navigating a period of divergence, with butter prices showing resilience while skim milk powder (SMP) faces downward pressure. USDA has revised its 2025 milk production forecast downward for the third consecutive month, signaling tightening supplies as European dairy herds decline. U.S. dairy production is consolidating, with significant operations dominating milk sales, creating opportunities for component optimization over volume growth. Global trade data reveals strong butter demand but weaker protein markets, while health challenges like Highly Pathogenic Avian Influenza (HPAI) add complexity to the outlook. Producers must focus on aligning their production systems with high-demand products and leveraging strategic risk management to thrive amid these shifting dynamics.
Key Takeaways
Butter Strength vs. SMP Weakness: Butter prices rose 0.8% on EEX futures while SMP fell 2.2%, reflecting diverging market trends for milk components.
Shrinking Herds Tighten Supply: USDA forecasts a 1.1 billion-pound reduction in 2025 U.S. milk production; European herds also face steep declines.
Industry Consolidation: Large farms (1,000+ cows) now account for 66% of U.S. milk sales, emphasizing the shift toward concentrated production systems.
Global Trade Trends: Butter demand remains strong globally, with prices up 2.7% at GDT, while WMP and SMP face headwinds from international competition.
Strategic Focus Needed: Producers should prioritize component optimization (e.g., milkfat for butter/cheese) and monitor key metrics like Chinese import demand and herd sizes.
The global dairy landscape reveals crucial divergences that demand producer attention: butter markets show resilience. At the same time, SMP faces weakness, European dairy herds continue their concerning decline, and USDA has revised its 2025 milk production forecast downward for the third consecutive month. These signals point to a tightening supply situation that may support prices, yet component optimization – not just volume – will determine which producers capture the highest returns.
Market Heats: Butter Rises While SMP Declines
The European Energy Exchange (EEX) reported substantial trading volume last week, with 5,090 tonnes changing hands. This activity was nearly evenly split between butter (2,705 tonnes) and skim milk powder (2,385 tonnes), with Tuesday emerging as the most active trading day.
Butter futures demonstrated modest strength on the EEX, with the March to October 2025 strip averaging €7,367, marking a 0.8% increase week-over-week. The total open interest for EEX butter futures increased by 94 lots to 2,981 lots, suggesting growing engagement from market participants despite price uncertainty.
In contrast, skim milk powder futures on the EEX declined 2.2% to €2,547, mirroring the weaker outlook for nonfat dry milk identified in USDA’s latest forecasts. This divergent performance between butter and SMP reflects a fundamental shift in component valuation that producers must navigate strategically in 2025.
The Shrinking Herd: Production Constraints Point to Price Support
The USDA has consistently revised its milk production forecasts downward over recent months, creating a tightening supply situation that may provide price support. The most recent forecast shows 2025 milk production at 226.9 billion pounds, representing a cumulative reduction of 1.1 billion pounds since December 2024.
The structural transformation of U.S. dairy production continues to accelerate, with significant implications for market dynamics. According to the 2022 Census of Agriculture, U.S. farms selling milk declined by 39% between 2017 and 2022 – the most substantial decline between adjacent Census periods dating back to 1982.
Table 1: U.S. Dairy Industry Structure and Consolidation (2017-2022)
Metric
2017
2022
Change
Farms selling milk
40,336
24,470
-39%
Milk cow inventory
9.5 million
9.3 million
-2.4%
Farms with 2,500+ cows
714
834
+16.8%
Share of milk sales from farms with 1,000+ cows
57%
66%
+9 percentage points
Total milk sales value
$36.7 billion
$52.8 billion
+44%
Meanwhile, European dairy cow inventory data for December 2024 revealed consistent declines across major producing countries. Germany’s dairy cow population stood at 3.59 million head, down 123,000 head (-3.3%) compared to the previous year, while France and the Netherlands showed similar troubling trends.
Beyond Volume: Component Optimization Is the New Profit Driver
The latest USDA forecasts reveal a critical divergence across dairy product categories, creating challenges and opportunities for strategically positioned producers. The February forecast raised cheese prices to $1.8800 per pound, citing “tight inventories from 2024 that are expected to carry into 2025,” while estimates for butter, nonfat dry milk, and dry whey faced downward pressure.
What many producers may miss: USDA forecasts suggest “growth in milk components will likely balance out the lower-than-average growth per cow,” indicating a shift toward quality over quantity in production metrics. Farms that align their milk component profiles with cheese manufacturing requirements may capture premium returns despite broader market adjustments.
According to data released on March 6, 2025, the all-milk price forecast has been revised upward to $22.75 per cwt, up $0.25 from the previous month’s estimate. While this price level represents solid returns, it demands efficiency and strategic positioning from producers.
Global Signals: How International Markets Are Reshaping Your Operation
The Singapore Exchange futures offer additional perspectives on global dairy commodity trends. SGX whole milk powder futures traded down 0.7% over the March-October 2025 curve, with the average price settling at ,779. In contrast, SGX butter futures showed significant strength, rising 4.0% to $6,939.
The Global Dairy Trade auction (Event 375) recorded a modest decline of 0.5%, with the average winning price reaching $4,209. While WMP declined 2.2% to $4,061, butter strengthened by 2.7% to $7,577, reinforcing the narrative of stronger milkfat values relative to protein components.
Regional milk production data revealed divergent trends, with Spanish collections declining 0.9% year over year while Irish production surged 9.4%. Chinese farmgate milk prices have stabilized at 3.12 Yuan/Kg after declining 13.8% year over year, creating uncertainty about import demand from this crucial market.
Beyond the Markets: Health Challenges Adding New Complexity
An often-overlooked factor impacting 2025 dairy markets is the continued presence of Highly Pathogenic Avian Influenza (HPAI) in US dairy herds. First confirmed in March 2024, HPAI had spread to 925 cases across 16 states by January 14, 2025, according to APHIS.
The first human case associated with exposure to infected dairy cattle was reported on April 1, 2024, highlighting the public health dimension of this challenge. As this situation continues to evolve, producers must remain informed about biosecurity protocols and market implications.
Strategic Positioning: How Smart Producers Are Responding
The current dairy market landscape presents a complex picture requiring strategic responses from industry stakeholders. The moderately positive performance of butter futures indicates sustained demand for milkfat products despite broader market uncertainties.
The divergent performance between butter and skim milk powder markets suggests ongoing structural imbalances in component valorization. While milkfat continues to command a premium, protein markets face more challenging conditions. This divergence creates strategic opportunities for dairy processors and producers who can optimize their systems accordingly.
For individual dairy producers, success in 2025 will likely come from combining tactical excellence in production management with strategic positioning aligned with emerging market signals. USDA analysis shows feed prices will remain favorable in 2025, potentially supporting margins if milk prices remain current.
Bottom Line: Your Action Plan for Q2 2025
The global dairy market is resilient amid evolving supply and demand dynamics. The USDA’s upward revision of the all-milk price forecast to $22.75 per cwt offers cautious optimism. Still, the persistent decline in European dairy herds and emerging health challenges like HPAI add complexity to the outlook.
The operations that will thrive in this environment will be those that:
Focus on component optimization rather than simply maximizing volume
Maintain financial flexibility to adapt to market shifts
Align their production systems with the products showing the most substantial demand
As we move into 2025, producers should monitor several key metrics: the evolution of European dairy herds, US replacement heifer numbers, Chinese import demand, and the continuing divergence between butter and SMP prices. These indicators will provide early signals about potential market shifts that could create challenges and opportunities in the months ahead.
Insights from USDA’s 10-Year Dairy Forecast Dive into long-term projections for milk production, price trends, and market volatility. Discover strategies to adapt to evolving industry dynamics and capitalize on growth opportunities.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
NZ dairy hits $11.76/kgMS despite Chinese retreat. Discover why global supply constraints reshape markets and how innovative farmers are capitalizing.
EXECUTIVE SUMMARY: The New Zealand dairy market is experiencing unprecedented highs, with farmgate prices reaching $11.76 per kgMS despite reduced Chinese participation. This paradox stems from severe global supply constraints, with the “Big 7” export regions projected to grow only 0.8% in 2025. The EU and NZ environmental regulations have created production ceilings, transforming the competitive landscape. Fonterra and Rabobank’s conservative $10.00 forecast masks fundamental market shifts, creating opportunities and risks for producers. Innovative farmers leverage this high-price environment to invest in efficiency-boosting technologies and optimize their product mix while preparing for eventual market moderation.
KEY TAKEAWAYS:
Global milk supply growth is constrained to just 0.8% in 2025, driving high prices despite reduced Chinese demand.
The gap between current returns ($11.76/kgMS) and Fonterra’s forecast ($10.00/kgMS) offers a strategic buffer for farm investments.
Environmental regulations reshape global dairy competitiveness, favoring early adopters of sustainable practices.
The divergence between WMP and cheese returns signals a shift in the optimal product mix, requiring strategic adaptation.
The current high-price environment demands a nuanced approach combining debt reduction with targeted growth investments.
The New Zealand dairy market finds itself at a fascinating crossroads where traditional supply-demand dynamics are being rewritten before our eyes. With farmgate prices hitting a remarkable $11.76 per kgMS at the latest auction despite a minor GDT index retreat, we’re witnessing a market that defies conventional bearish pressure even as Chinese participation dramatically shrinks. This creates unprecedented opportunity and hidden risk for New Zealand producers in 2025.
Warning! Are You Missing These Crucial Market Signals?
The latest Global Dairy Trade auction presents a deceptively simple narrative that masks more profound market disruptions. While the headline 0.5% GDT index decline seems unremarkable, what’s happening beneath the surface should have every dairy farmer‘s attention. WMP prices fell 2.2% while cheese values surged by NZD 15/kg – a dramatic shift that’s reshaping milk value destinations right before our eyes.
You’ve likely heard analysts claiming Chinese demand drives everything, but the current market flips this assumption on its head. North Asian buyers (predominantly China) have slashed their market share by a staggering 16 percentage points year-over-year, yet prices remain firm. This contradicts the dairy industry’s long-held belief that Chinese participation is essential for premium prices. What’s happening? The global dairy cupboard is nearly bare, with constrained production across key export regions creating a seller’s market despite wavering demand.
The calculated auction return of $11.76 per kgMS has pushed the season-to-date average to $10.39, significantly outpacing Fonterra’s forecasted payout of $10.00. This spread between market reality and cooperative forecasting isn’t just accounting trivia – it represents a crucial cash flow buffer many farms desperately need in the face of rising input costs.
U.S. Dairy Trade Category
FY 2025 Projection
Change from 2024
Exports
$8.4 billion
+$400 million
Imports
$5.7 billion
+$300 million
Trade Balance
+$2.7 billion
+$100 million
The Surprising Truth About Supply Constraints Driving Record Prices
The remarkable constraint on global milk supply truly supports these elevated prices. According to Rabobank’s latest Dairy Quarterly report released today (March 6, 2025), milk production in the “Big 7” export regions (Australia, New Zealand, Argentina, Uruguay, Brazil, the EU, and the US) is expected to expand by just 0.8% year-on-year in 2025, with a similar gain anticipated in the first half of 2026. This controlled growth rate is insufficient to build meaningful inventories in a market already short on products.
Production Period
“Big 7” Export Regions Growth
Market Context
Second half of 2024
+0.5% year-over-year
Reversing previous 0.5% decline
Forecast for 2025
+0.8% year-over-year
First growth across all regions since 2020
Q1 2025 vs. Q2-Q4 2025
0.5% vs. 0.9%
Stronger growth in latter part of year
The contrast between regions couldn’t be more stark. Rabobank projects total milk production from the Big 7 will reach 325.8 million metric tonnes in 2025, up from 323.2 million mt last year. This would push 2025 production past the previous peak in global annual milk production of 323.7 million mt in 2021. China stands apart from this trend, with Chinese supply expected to fall further in 2025 following a drop in 2024 that represented “a stark break from the recent trend” of significant expansion.
Environmental regulations in the European Union and New Zealand have created a production ceiling that is unlikely to lift anytime soon. These constraints aren’t just talking points – they’re transforming the competitive landscape of global dairy. While New Zealand producers face these limitations, the resulting global supply tightness delivers unprecedented returns that create opportunity and responsibility.
Revealed: What Fonterra and Rabobank Don’t Want You to Know
Fonterra and Rabobank have landed at a $10.00 farmgate milk price forecast, creating an appearance of market consensus. Rabobank just today (March 6, 2025) revised its milk price forecast by 30 cents to $10.00 kg/MS for the 2024/25 New Zealand dairy season, citing elevated global prices despite modest supply growth. But this apparent agreement masks fundamental differences in market outlooks that could significantly impact your operation’s financial planning.
Both analyses fail to acknowledge how dramatically the traditional price-setting mechanisms have changed. Five years ago, a 16% drop in Chinese participation would have crashed prices—today, it barely registers. Neither institution has adequately explained this structural market shift or its long-term implications for New Zealand producers.
Fonterra’s February 21 earnings update projecting results in the upper half of its 40-60 cents per share guidance sends a powerful signal about the cooperative’s trading performance. This profitability isn’t just good news for shareholders—it potentially provides Fonterra with financial flexibility to support the milk price even if commodity markets weaken later in 2025. Have you considered how this might impact your farm’s cash flow planning?
Fonterra’s seemingly conservative $10.00 forecast despite $11.76 current returns isn’t just cautious business practice – it reflects a fundamental shift in how the cooperative manages price expectations. After the volatility-induced farmer distress of previous seasons, Fonterra has adopted a strategy of under-promising and over-delivering. While this protects farmers from disappointment, it also creates potential liquidity constraints during the production season when cash flow matters most.
Forecast Source
Current Forecast
Market Calculation
Gap
Strategic Approach
Fonterra
$10.00 per kgMS
$11.76 per kgMS
$1.76
Conservative, risk-averse
Rabobank
$10.00 per kgMS
Not specified
Unknown
Recently revised upward by 30 cents
Season-to-date
$10.39 per kgMS
Based on actual returns
N/A
Trending above forecasts
We Analyzed Global Dairy Production: Here’s What No One’s Talking About
Annual milk production in the European Union and New Zealand was expected to decline slightly in 2024, while Australia showed minimal growth. This pattern continues into 2025, with Rabobank forecasting only modest growth worldwide. The U.S. supply expansion is expected in 2025, “but it’s likely to be modest at sub-1%,” starkly contrasting the constraints facing Oceania and European producers.
What limits this growth even in favorable price environments? The answer lies partly in genetics and replacement challenges. As U.S. farmers have discovered, dairy herds cannot expand quickly when replacement heifers are scarce. For New Zealand producers, this creates both challenge and opportunity—farms with strong heifer programs have a competitive advantage that will only grow as environmental restrictions tighten.
The divergence between regions directly tracks regulatory burden and sustainability policy implementation. The message for New Zealand producers is clear: environmental compliance costs will continue reshaping competitive dynamics, rewarding those who adapt early and penalizing those who resist.
Looking at product categories, we’re seeing dramatic shifts in production patterns. Nonfat dry milk, skim milk powder, cheese, whey, and lactose are the primary dairy products exported by countries like the U.S., while butter and cheese remain the top two dairy products imported. These category-specific shifts reveal how processors are maximizing returns in tight milk markets – a strategy New Zealand processors appear to be adopting with the recent divergence between WMP and cheese returns.
5 Proven Strategies Smart Dairy Farmers Are Using Right Now
Current market conditions for New Zealand dairy farmers present a rare strategic window that demands action. With returns substantially exceeding forecasts, this is the year to strengthen your balance sheet while simultaneously investing in technologies that will drive efficiency when prices inevitably moderate.
Conventional wisdom suggests holding cash during high-price periods as a buffer against future downturns. However, this ignores the tremendous opportunity cost of delayed investment in productivity-enhancing technologies. Farms that invest strategically during profitable periods consistently outperform those that build cash reserves. Have you evaluated which approach best fits your operation’s five-year plan?
One bright spot heading into 2025/26 is the outlook for feed costs, which will likely be the lowest in several years as global corn, soybean meal, and alfalfa values continue to decline. This creates a dual opportunity for New Zealand producers – strong milk prices combined with potentially moderating input costs. The farms that capitalize on this window will emerge in more substantial competitive positions when markets eventually rebalance.
The Ultimate Guide: How to Maximize Your Dairy Farm’s Potential in 2025
The current $11.76 per kgMS return creates an unprecedented opportunity for New Zealand dairy operations to strengthen financial positions while investing in future competitiveness. The gap between current returns and Fonterra’s $10.00 forecast represents a strategic buffer that competent operators will leverage for balance sheet enhancement rather than viewing it as simply “extra” income.
The divergence between WMP and cheese returns signals a longer-term shift in optimal product mix that both processors and producers should heed. For farms with flexible production for different manufacturing streams, analyzing component optimization strategies that align with evolving global product demand would be wise.
Global production constraints aren’t likely to resolve quickly, given environmental pressures and limited growth potential in key regions like New Zealand and the EU. Rabobank’s forecast of only 0.8% growth in global milk production for 2025 creates a multi-year window of favorable pricing that rewards strategic thinking over-reactive management. Your operation’s approach to this extended high-price environment will likely determine your competitive position when markets eventually rebalance.
Have you challenged your operation’s traditional response to high milk prices? The conventional save-and-pay-down-debt approach made sense in volatile markets. Still, the structural changes in global dairy demand and constrained supply growth suggest a more nuanced strategy combining targeted debt reduction with strategic growth investment may deliver superior returns. The real question isn’t whether prices will eventually moderate – they will – but whether you’ll have positioned your operation to thrive when they do.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Dairy markets are in panic mode, but savvy farmers smell opportunity, so 94% of exports dodge tariffs while traders overreact. Your 60-day action plan is inside.
EXECUTIVE SUMMARY: Recent tariff announcements have sent dairy markets into a tailspin, but the actual impact on U.S. dairy exports is limited to just 6% for China and 10% for Canada. This disconnect between market reaction and economic reality creates opportunities for strategic dairy producers. Regional differences in feed costs and projected margins highlight the importance of location-specific strategies. A 60-day action plan leveraging natural hedges and split strategies can help producers navigate the volatility. Understanding market psychology and inventory signals is crucial for making informed decisions. With only 4% of cheese exports affected, the current market panic may represent a buying opportunity for forward-thinking farmers.
KEY TAKEAWAYS:
Despite severe market reactions, new tariffs affect only 6% of U.S. dairy exports to China and 10% to Canada.
Regional economics matter: Wisconsin’s projected 2025 margin ($11.34/cwt) significantly outperforms California’s ($8.69/cwt) due to lower feed costs.
A 60-day action plan includes 70% feed coverage through June, dropping to 40% later while protecting nearby milk revenue and maintaining flexibility for potential late-year recovery.
Market psychology drives prices more than actual trade impacts, creating potential opportunities for contrarian operators.
The dairy markets took a wild ride this week after Tuesday’s tariff announcements, but savvy producers are spotting opportunities where others see chaos. While headlines scream trade war, the numbers tell a different story—one in which only 6% of U.S. dairy exports to China and 10% to Canada are actually affected by these new tariffs. This massive disconnect between market fear and economic reality creates the perfect opportunity for forward-thinking farmers to position themselves ahead of the inevitable correction.
TRADERS OVERREACT WHILE DAIRY FARMERS KEEP THEIR COOL
Tuesday, March 4, 2025, wasn’t just another day at the office—it was when the U.S. fired the opening salvo in what might become a severe trade skirmish. The United States slapped a hefty 25% tariff on Canadian and Mexican imports while adding another 10% to everything from China. With Mexico’s response coming this Sunday, China and Canada immediately hit back with targeted counter-tariffs on select U.S. dairy products.
Here’s what’s got everyone spooked: this trade confrontation looks broader than the 2018 disputes, hitting North America and Asia simultaneously. But dig beneath the headlines, and you’ll find something shocking—these tariffs directly impact only a tiny slice of America’s dairy export volume. For cheese specifically, just 4% of exports face these new barriers.
“The current additional tariffs on U.S. products don’t justify the declines that we saw in CME spot cheese and butter this week,” notes the latest ProfitView analysis. The report points to domestic demand concerns and escalation fears driving the overreaction. CME spot blocks fell hard this week, with barrels dropping by less—a market psychology lesson playing out in real-time.
REGIONAL ADVANTAGE: WHY SOME DAIRY STATES WILL THRIVE WHILE OTHERS STRUGGLE
Not all dairy regions feel trade disruptions equally. The StoneX data reveals a fascinating geographic divide that innovative producers are already exploiting. Wisconsin’s projected 2025 margin of $11.34 per hundredweight towers over California’s vulnerable $8.69—a $2.65 difference that could mean survival versus struggle during market turbulence.
State
Milk Price (USD/cwt)
Feed Cost (USD/cwt)
Margin (USD/cwt)
Wisconsin
$20.73
$9.39
$11.34
New York
$21.91
$10.41
$11.50
Idaho
$20.99
$10.55
$10.44
Texas
$21.73
$11.49
$10.24
Arizona
$21.15
$11.44
$9.71
California
$20.05
$11.36
$8.69
Source: USDA, CME, StoneX Calculations, Estimates and Forecasts
This regional advantage isn’t random—it’s structural. Wisconsin’s feed cost advantage ($9.39 vs. California’s $11.36 per hundredweight) provides crucial cushioning against milk price volatility. This $1.97 feed cost differential becomes even more decisive during trade disruptions, representing a built-in competitive advantage regardless of milk price movements.
Texas faces similar challenges, with the highest feed costs among major dairy states at .49, explaining their tighter expected margins despite relatively high projected milk prices of .73. These regional variations matter because they dictate how aggressively different producers approach risk management in the current environment.
YOUR 60-DAY ACTION PLAN: TURNING MARKET PANIC INTO PROFIT
Market disruptions separate reactive farmers from strategic business managers. While most producers scramble to understand what happened, forward-thinking operators are already executing targeted margin protection strategies that exploit the current price overreaction.
First, recognize that the natural hedge is working in your favor. The same market forces hammering milk prices while simultaneously pushing feed costs lower. Corn futures for April 2025 have plummeted to $4.44 per bushel, down $0.42 in just one week and $0.51 from last month. Soybean meal shows similar weakness at $290 per ton, down $8.25 week-over-week and $18.15 month-over-month. This automatic counterbalance helps stabilize margins even as milk prices fall.
US Dairy Margin Projections 2025 (USD/cwt)
Month
Apr-25
Jun-25
Aug-25
Oct-25
Dec-25
US Margin
10.83
9.58
10.33
11.21
11.40
Class III
17.59
17.46
18.09
18.36
18.17
Corn ($/bu)
4.44
4.55
4.50
4.43
4.47
SBM ($/ton)
290
297
303
306
310
Source: USDA, CME, StoneX Calculations, Estimates and Forecasts.
The futures curves tell a fascinating recovery story after June’s low point. Innovative operators are implementing split hedge strategies that match these market dynamics. The data suggests 70% feed coverage through June, dropping to 40% for later months to capture potential harvest-time price breaks. For milk, protect revenue more heavily in nearby months while maintaining flexibility to grab potential late-year price recovery.
With Mexico’s retaliatory announcement expected, Sunday, Tuesday, and Wednesday represent your window to execute these strategies before the next wave of market volatility hits. Class III milk futures for April 2025 are trading at $17.59 per hundredweight, down $0.86 from last week. While these levels reflect market panic, they may represent reasonable downside protection given the uncertain trade environment.
WHY MARKETS OVERREACT: THE PSYCHOLOGY BEHIND THE PANIC
The current market behavior provides a textbook example of why commodity markets often overreact to geopolitical developments. This phenomenon isn’t random—it’s a documented pattern driven by specific psychological biases that create repeated opportunities for contrarian operators.
Traders display classic availability bias, giving disproportionate weight to dramatic, headline-grabbing events. The announcement of tariffs triggers immediate selling regardless of actual economic impact. Herd behavior amplifies initial moves as traders follow each other rather than independently analyzing fundamental impacts. Finally, risk asymmetry pushes traders to exit positions first and ask questions later since the penalty for being wrong about downside risk typically exceeds the opportunity cost of missing upside potential.
The disconnect between market reaction and actual trade impact couldn’t be more apparent. CME spot blocks fell hard this week despite only 4% of cheese exports affected by these new tariffs. This perfectly illustrates how markets price fear rather than facts during geopolitical events.
Even more interesting is what’s happening with butter. Canada is the largest destination for U.S. butter exports, but this week’s tariffs only impact a small fraction of that volume. They could be extended to all butter volume three weeks from now, but the current weakness in the spot market is more likely due to ample cream supplies than trade concerns.
INVENTORY SIGNALS: WHAT 41% HIGHER NFDM STOCKS TELL US ABOUT THE MARKET
The powder market tells a different story about what’s driving price movements. U.S. NFDM and dry whey prices were lower this week, while global prices were higher. After running above other major exporters, U.S. powder prices are now starting to converge—a necessary correction regardless of trade tensions.
January’s report showed NFDM stocks were up a staggering 41% year-over-year, creating inventory pressure that was building long before any tariff talk. This inventory situation, combined with lower-than-forecast cheese and butter production in January, suggests processors were already adjusting production mix to address domestic market realities.
The powder inventory situation creates both challenges and opportunities. The convergence of U.S. powder prices with global values could improve export competitiveness, potentially offsetting some tariff impacts if the price adjustment continues. For processors, this signals an urgent need to rebalance product mix away from powder production as spring flush approaches.
THE BOTTOM LINE: ARE YOU A MARKET FOLLOWER OR A MARKET LEADER?
The disconnect between tariff impacts and market reaction creates danger and opportunity for dairy producers. While headlines scream trade war, the economic reality is far more nuanced: only 6% of exports to China and 10% to Canada currently face tariffs. Competent operators recognize this overreaction for what it is—a potential buying opportunity masked as a crisis.
Regional economics matter more than ever during market disruptions. Wisconsin’s $2.65 margin advantage over California ($11.34 vs. $8.69) highlights how geographic positioning creates natural resilience for some and vulnerability for others. Understanding your specific regional economics should drive your risk management approach.
For forward-thinking producers, today’s challenge isn’t about surviving a trade war but exploiting market inefficiencies while others panic. Are you following the herd or positioning yourself ahead of the inevitable correction when markets recognize that 94% of exports remain unaffected? Your answer to that question might determine whether 2025 is your most profitable or challenging year.
With Mexico’s announcement looming Sunday and spring flush approaching, the next 60 days will separate reactive operators from strategic managers. The choice isn’t whether to respond but how to transform market psychology from threat to opportunity while others try to understand what hit them.
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Northeast dairy is booming with new processing plants, FMMO reforms, and cautious optimism. Learn how producers are balancing growth and challenges.
EXECUTIVE SUMMARY: The Northeast dairy industry 2025 is poised for growth, driven by new processing capacity in New York and Pennsylvania, favorable Federal Milk Marketing Order (FMMO) reforms, and a focus on maximizing milk components per cow. Producers are cautiously optimistic as improved margins from 2024 create expansion opportunities, but rising input costs and political uncertainties temper enthusiasm. New processing facilities in New York and West Virginia create fresh market opportunities, while Pennsylvania sees smaller-scale investments. Producers also closely monitor biosecurity due to the highly pathogenic avian influenza (HPAI) threat. With tight labor shortages and heifer supplies, farmers are focusing on efficiency and strategic planning to navigate 2025’s challenges and capitalize on its opportunities.
KEY TAKEAWAYS
FMMO Reforms: Changes taking effect in June 2025 favor Northeast producers due to high Class I utilization, boosting profitability potential.
Processing Expansion: New facilities in New York and Pennsylvania create market opportunities, while investments in West Virginia expand regional capacity.
Profitability Focus: Increasing milk components per cow remains the most reliable strategy for maximizing farm margins amid rising input costs.
Biosecurity Concerns: HPAI remains a looming threat; proactive biosecurity measures are essential to protect herds and maintain production.
Strategic Caution: Tight labor markets, limited heifer supplies, and political uncertainties require producers to balance growth with operational efficiency.
Northeast Dairy stands at a critical crossroads: New milk pricing rules, processing expansion, and disease challenges combine to create unprecedented opportunities and serious threats for forward-thinking producers.
The Northeast dairy landscape is transforming in 2025, with significant policy shifts, processing expansions, and bird flu concerns reshaping the industry’s future. While many New York and Pennsylvania producers are strategically positioning for growth thanks to improved margins, they’re balancing optimism with hardheaded realism as rising input costs and disease concerns demand attention.
For Northeast producers, the coming months bring a potent mix of game-changing opportunities and persistent challenges that demand clear-eyed analysis and decisive action.
JUNE 1 PRICING REVOLUTION: WHY NORTHEAST PRODUCERS STAND TO WIN BIG
Mark your calendars for June 1, 2025 – that’s when the most significant dairy pricing overhaul in decades takes effect across every Federal Milk Marketing Order in the country.
These aren’t minor tweaks but fundamental changes that will reshape regional profitability patterns nationwide. The reforms touch every aspect of FMMO pricing: the surveyed commodity products, Class III and IV formula factors, base Class I Skim Milk Price, and Class I differentials.
Critical implementation detail: while most changes activate on June 1, the new milk composition factors won’t take effect until December 1, 2025. This staggered implementation creates a complex transition period requiring careful financial planning.
What does this mean for your farm? The FMMO amendments include updating skim milk composition factors to 3.3% true protein, 6.0% other solids, and 9.3% nonfat solids, removing 500-pound barrel cheddar cheese prices from pricing calculations, updating manufacturing allowances, and returning to the “higher-of” advanced Class III or IV skim milk prices for determining the base Class I skim milk price.
Northeast Advantage Alert: These changes won’t impact all regions equally. Looking back over the past decade, had these new formulas been in place, the Class III price would have been about 16 cents lower while the Class IV would have been down about 47 cents. With their higher Class I utilization, Northeast producers may fare better than those in regions like the Upper Midwest.
FMMO Change
Implementation Date
Impact on Northeast Producers
Return to “higher-of” Class I pricing formula
June 1, 2025
Potentially positive due to higher Class I utilization in Northeast
Updated manufacturing allowances for Class III and IV
June 1, 2025
Class III price approximately 16¢ lower, Class IV approximately 47¢ lower based on historical analysis
Removal of 500-pound barrel cheddar from pricing calculations
June 1, 2025
Potential impact on cheese prices and Class III formula
New skim milk composition factors (3.3% true protein, 6.0% other solids, 9.3% nonfat solids)
December 1, 2025
Delayed implementation creates transitional period requiring careful planning
While Western processors struggle with milk shortages, the Northeast sees the opposite – significant processing investment that creates absolute market security for growth-minded farms.
In a major power play, the Maryland & Virginia Milk Producers Cooperative Association (MDVA) has purchased the HP Hood facility in Northeast Philadelphia. This acquisition isn’t just changing ownership – it’s creating expansion opportunities that will nearly double the facility’s processing capacity from about 12 million gallons to approximately 25 million gallons annually by 2026.
The deal comes with serious financial backing: the commonwealth provided an incentive package totaling $10 million in grants and loans. The package includes $7.25 million through a Pennsylvania Industrial Development Authority loan, $2.5 million in Redevelopment Assistance Capital Program funding, and a $300,000 workforce development grant.
Strategic product focus: The Northeast Philadelphia facility produces coffee creamer, half-and-half, and other extended-shelf-life dairy products. MDVA’s Maola Local Dairies will operate the extended shelf-life ultra-high temperature dairy processing factory, bringing the cooperative’s processing footprint into Pennsylvania for the first time.
“(It’s) been suggested to me that we change that name and add Pennsylvania to it because Pennsylvania is our largest state as far as members are concerned,” noted Jay Bryant, CEO of MDVA. “We have plants in North Carolina, Virginia, and Maryland, and finally having a plant in Pennsylvania is so exciting.”
Beyond this specific acquisition, Kelly Reynolds from Reyncrest Farm confirms the broader processing growth trend: “In our area, milk processing capacity is increasing, and that’s very exciting to see as an operation that would like to grow. New plants are opening, and older plants in our area are taking steps to modernize their facilities. We are very excited about these opportunities.”
Processing Facility
Location
Investment
Capacity Changes
Completion Timeline
MDVA (former HP Hood facility)
Northeast Philadelphia, PA
Part of $10 million incentive package
Expanding from 12 million to 25 million gallons annually
By 2026
Various facilities
New York and surrounding areas
Not specified
New plants opening and modernization of existing facilities
Ongoing through 2025
BIRD FLU THREAT INTENSIFIES: TWO VIRAL GENOTYPES NOW HITTING U.S. DAIRY
The Northeast dodged the initial dairy bird flu outbreak, but recent poultry cases in Pennsylvania and New York signal the virus is circling closer. Are you prepared?
The threat of highly pathogenic avian influenza (HPAI) H5N1 continues to loom large over the Northeast agricultural sector. While dairy producers remain vigilant, the poultry industry in the region has already experienced significant impacts. In Pennsylvania, a massive layer farm with nearly 2 million birds was recently affected, along with a broiler facility in Cumberland County housing 30,000 birds.
Viral evolution alert: The virus has demonstrated its ability to mutate and spread across species. In Nevada, two different genotypes of H5N1 have been detected in dairy cattle: the B3.13 genotype found in an earlier December case in Nye County and the D1.1 genotype discovered in the more recent Churchill County cases. This evolution presents a moving target for biosecurity efforts.
According to Nevada officials, the symptoms in cows infected with the D1.1 genotype are similar to those sick with the B3.13 genotype. These typically include sudden decreases in lactation, thicker milk, and reduced feed consumption. This similarity in symptoms makes clinical identification challenging without laboratory confirmation.
Urban outbreak danger: The rapid spread across multiple agricultural sectors highlights the interconnected nature of disease transmission. The virus has been confirmed in New York at two live bird markets, one in Queens County and another in Bronx County. This urban presence creates additional transmission pathways that could affect dairy operations through equipment, vehicles, or personnel moving between facilities.
While Northeast dairy producers haven’t faced widespread outbreaks yet, the experience in other regions demonstrates the importance of implementing comprehensive biosecurity measures immediately. These include limiting farm access, maintaining visitor logs, using protective equipment, and preventing contact between cattle and wild birds, particularly waterfowl.
POLITICAL UNCERTAINTY MEETS FARM REALITY: NAVIGATING 2025’S POLICY MINEFIELD
With a new administration settling in, Northeast Dairy faces complex regulatory questions affecting your bottom line.
The regulatory environment continues to exert a massive influence on Northeast dairy operations. With a new presidential administration taking office, dairy producers are closely monitoring potential policy shifts that could affect their bottom line.
“The current volatility that comes with any new administration and the general uncertainty of a few key areas, such as labor and trade, are a few primary concerns right now,” explains Kelly Reynolds. These uncertainties complicate long-term planning and investment decisions, contributing to many producers’ measured approach despite improved financial positions.
Policy tripwires to watch: Several specific policy areas command particular attention from Northeast dairy farmers. Rebecca Ferry of Dreamroad Jerseys LLC identifies key concerns: “The new farm bill is a great concern, as is immigration reform and the fluctuations in the government employment situations and tariffs.” The pending farm bill negotiations will establish the agricultural policy framework for coming years, directly affecting risk management tools and market support mechanisms.
At the state level, Pennsylvania’s regulatory framework creates unique challenges. “Permitting laws also continue to affect our farms, with Pennsylvania’s permitting laws sometimes hindering the ability of our farms to expand as quickly as in other neighboring states,” notes Jayne Sebright of the Center for Dairy Excellence. Additionally, Pennsylvania continues evaluating potential changes to how milk premiums benefit farms through the Pennsylvania Milk Board.
THE NORTHEAST GROWTH EQUATION: SOLVING FOR MAXIMUM PROFITABILITY
The Northeast dairy sector in early 2025 stands at a genuine inflection point. The question isn’t whether you should grow but how and when.
The processing capacity expansion creates tangible growth opportunities just as FMMO reforms potentially reshape regional price relationships. However, rising input costs, persistent disease threats, and political uncertainties demand strategic caution.
Milk component reality check: While everyone’s obsessing over expansion, the actual profit play might be maximizing components and per-cow production. As Sebright bluntly puts it, this remains “the greatest opportunity for our producers to maximize their profitability.” Before breaking ground on that new barn, ensure you’re squeezing every dollar from the cows you already have.
This is when the wheat gets separated from the chaff in dairy management. The most successful operators will balance opportunistic growth with practical risk management – leveraging new processing capacity and pricing advantages while maintaining strict biosecurity protocols and closely monitoring policy developments.
The critical 2025 decision: Northeast producers face a strategic choice: expand now while processing capacity shows signs of growth, or wait until the full FMMO impact becomes clear. The imaginative play might be phased growth – increasing components and per-cow production immediately while preparing expansion plans for late 2025 after fully implementing both FMMO reforms.
THE BOTTOM LINE: NORTHEAST’S MOMENT OF OPPORTUNITY
The Northeast dairy industry is entering a period of potential competitive advantage after years of challenging margins.
New processing investments, FMMO changes taking effect June 1, and proximity to major population centers create a promising foundation for strategic growth. However, this opportunity window has significant caveats – rising input costs, evolving disease threats, and policy uncertainties that demand careful navigation.
For Northeast dairy producers, 2025 requires threading the needle between capitalizing on market opportunities and managing emerging risks. Those who make this problematic balance look easy – leveraging processing capacity growth and adapting to pricing changes while implementing rigorous cost controls and biosecurity measures – will emerge as the region’s next generation of industry leaders.
The question isn’t whether an opportunity exists in Northeast Dairy – it does. The real question is which operators will seize it most effectively while preparing for the inevitable challenges ahead. As processing capacity expands and pricing structures evolve, the foundation is being laid for a Northeast dairy renaissance that could reshape regional production patterns for years.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Global dairy markets in turmoil as US-China-Canada tariff war erupts. Find out how this trade clash impacts milk prices and farm incomes worldwide.
EXECUTIVE SUMMARY: A sudden escalation in trade tensions has rocked the global dairy industry, with Canada and China imposing retaliatory tariffs on US dairy products and Mexico expected to follow suit. These measures target over 40% of US dairy exports, threatening to disrupt international trade flows and pressure milk prices worldwide. The situation creates both challenges and opportunities for dairy producers globally, potentially reshaping market dynamics and competitive landscapes. While US farmers face immediate export barriers, European and Oceania producers may find new market openings. However, the long-term consequences could lead to a fundamental restructuring of global dairy trade patterns, affecting producers across all major exporting regions.
KEY TAKEAWAYS:
Retaliatory tariffs from Canada (25%) and China (10-15%) now target US dairy exports, with Mexico likely to announce similar measures soon.
Over $4 billion in annual US dairy exports are at risk, potentially flooding domestic markets and pressuring global milk prices.
European and Oceania dairy exporters may find short-term opportunities to gain market share, particularly in China.
The crisis highlights the risks of export dependency and may accelerate industry consolidation and market diversification efforts.
Global dairy trade flows could see significant long-term restructuring as markets adjust to new competitive realities.
The global dairy landscape shifted dramatically overnight as Canada and China announced substantial retaliatory tariffs on US dairy products, with Mexico poised to follow suit by Sunday. This rapidly escalating trade conflict threatens to disrupt international dairy flows, potentially creating ripple effects for producers worldwide—from European exporters eyeing new opportunities to New Zealand farmers watching for price impacts across Asian markets.
THE HARD TRUTH: MAJOR TRADE ROUTES BLOCKED
Here’s the unvarnished truth about yesterday: The Trump administration implemented sweeping 25% tariffs on goods from Canada and Mexico and increased levies on Chinese imports to 20%. The response was swift and targeted, and trade partners knew precisely where to hit back.
Canada didn’t waste a minute announcing that CA$30 billion (US$20.7 billion) worth of US goods would face reciprocal 25% tariffs. Dairy products were prominently featured on their hit list. Everything from yogurt to buttermilk faces barriers that make US products significantly less competitive north of the border.
China followed suit with its punch to the global dairy markets, declaring that US agricultural products would face 10-15% tariffs beginning March 10, with dairy explicitly targeted at 10%. Beijing allows a brief grace period for shipments already en route—cargoes shipped before March 10 and arriving before April 12 won’t incur the additional tariffs. That window gives exporters weeks, not months, to adjust to a dramatically altered market landscape.
Suppose Mexico, Canada, and China represent more than 40% of all US dairy exports. That’s one day’s weekly worth of milk on America’s dairy farms. Milk will soon need to find alternative destinations or flood domestic markets, creating potential competitive pressure for dairy producers worldwide.
“This doesn’t look like a full-scale trade war just yet, but it could be heading that way,” warns Kang Wei Cheang, an agriculture broker at StoneX in Singapore. “China’s actions suggest they want to keep things from spiraling out of control, but the real question is whether the US is willing to negotiate.”
Country
Annual Export Value (2024)
Key Product Dependence
% of Total U.S. Exports
Mexico
$2.47 billion
Leading destination for US skim and non-fat powder
Top market for U.S. dairy overall
Canada
$1.14 billion
Record imports from US in 2024
Second largest dairy trade partner
China
$500-800 million (recent years)
Major market despite 2024 decline
Strategic growth market
Combined Total
Over $4 billion
More than 40% of all U.S. dairy exports
MARKET IMPACT: GLOBAL DAIRY PRICES FACE PRESSURE
When approximately 18% of America’s milk production suddenly faces significant barriers to leaving the country, the implications extend beyond US borders. The American dairy industry has invested over $8 billion in new processing capacity that will come online in the next few years—a capacity that depends on continued export growth. With three significant markets simultaneously imposing tariffs, export growth is seriously jeopardized.
The situation creates opportunities for European and Oceania dairy exporters to capture market share, particularly in China, where demand growth remains strong despite recent volatility. However, increased competition in third-country markets could emerge if US exporters attempt to redirect volumes previously destined for Canada, Mexico, and China.
Scenario
Global Market Impact
US Farm-Level Consequence
International Effect
Short-term tariffs
Temporary price volatility
Cash flow challenges
Opportunity for competing exporters
Medium-term tariffs
Reshuffling of global trade flows
Significant margin pressure
Price pressure in alternative markets
Long-term tariffs
Permanent shifts in market access
Accelerated farm consolidation
Restructured global dairy trade patterns
HISTORICAL CONTEXT: LESSONS FROM PREVIOUS TRADE DISPUTES
Similar scenarios have had far-reaching consequences. During the previous US-China trade war during President Trump’s first term, Beijing imposed tariffs as high as 25% on American farm products, including soybeans. As a result, American soybean shipments fell almost 80% over two years, creating opportunities for Brazilian exporters while restructuring global oilseed trade patterns.
The current situation’s comprehensive scope, with simultaneous retaliatory actions from multiple major trading partners, makes it potentially more severe. During previous disputes, dairy exporters could pivot to alternative markets when one destination implemented tariffs. Today’s scenario offers few escape routes, with key markets all imposing barriers simultaneously.
The hard-won market positions developed by US exporters will be difficult to reclaim once European and New Zealand competitors strengthen their relationships with buyers. This situation creates opportunities and challenges for dairy producers worldwide as traditional trade flows are disrupted and new patterns emerge.
COMPETING PERSPECTIVES: LEGITIMATE GRIEVANCES OR SELF-INFLICTED WOUNDS?
Let’s be clear – there are legitimate grievances with trading partners. According to Michael Dykes, president and CEO of IDFA, “For too long, our exports to Canada have yet to fulfill the promises of the U.S.-Mexico-Canada Agreement (USMCA) because Canadian policies continue to prevent American exporters from filling their tariff-rate quotas.”
However, the International Dairy Foods Association has urged the Trump administration to “quickly resolve the ongoing tariff concerns with Canada, Mexico, and China,” emphasizing these countries’ status as America’s top agricultural trading partners. Their statement acknowledges the existing barriers but warns that “prolonged tariffs will further diminish market access” rather than solving the underlying problems.
On Monday, Canada’s finance minister, Dominic LeBlanc, said that imposing tariffs would be “a mistake” and that his country “is ready to respond to any of these scenarios.” Meanwhile, Mexico’s president, Claudia Sheinbaum, suggested that “another tariff would follow one tariff in response.” However, she indicated that Mexico was prepared to cooperate on migration and drug trafficking issues.
STRATEGIC CONSIDERATIONS FOR DAIRY PRODUCERS WORLDWIDE
For dairy producers and processors globally, this trade disruption necessitates strategic reconsideration:
Assess market exposure. Understand precisely how dependent your business is on markets affected by these tariffs, either directly or through secondary effects.
Identify emerging opportunities. As traditional trade flows face disruption, new openings may emerge for suppliers positioned to fill gaps.
Monitor price signals carefully. Global commodity prices will likely reflect shifting trade patterns, potentially creating risks and opportunities.
Watch for policy responses. Before China’s tariffs were announced, US Agriculture Secretary Brooke Rollins said earlier this week that American farmers would soon start receiving an initial tranche of $30 billion in funding approved by Congress to fight a market downturn. Other nations may implement similar support measures.
Consider market diversification. The current situation highlights the risk of overreliance on specific export destinations, emphasizing the value of a diversified market approach.
THE BIGGER PICTURE: STRUCTURAL CHANGES IN GLOBAL DAIRY TRADE
This crisis forces a fundamental reassessment of global dairy trade patterns. For decades, the US dairy industry has transitioned from a domestic focus to an export orientation. Since the early 2000s, its exports have nearly tripled, making it the world’s third-largest dairy exporter, behind New Zealand and the European Union.
Despite recent volatility, Chinese demand remains a critical piece of the long-term export puzzle. US dairy exports to China fell in 2024, marking the lowest year since 2020. Demand also remains soft in key Southeast Asian markets, including the Philippines, Vietnam, and Malaysia – illustrating the challenges facing all global exporters.
The tariff situation occurred when global dairy markets were already experiencing significant uncertainty. Recent Fonterra Global Dairy Trade (GDT) auctions have shown strengthening prices, but potential disruptions to US export flows could create additional volatility as markets adjust to new trade patterns.
THE BOTTOM LINE: GLOBAL MARKETS SEEK NEW EQUILIBRIUM
The coming days will be critical. Mexico is expected to announce its retaliatory measures by Sunday, potentially targeting dairy exports as part of its response. Meanwhile, the administration could still announce exemptions that might spare dairy from the worst impacts.
One thing’s specific: Global dairy has recently entered one of its most challenging market environments. The US dairy industry, which supports over 3.2 million jobs and pumps almost $800 billion into the US economy, faces significant headwinds from these tariff measures. The implications will extend to dairy producers worldwide as markets adjust to new trade realities.
The situation may create opportunities for European dairy exporters, particularly from Ireland, France, and the Netherlands, to strengthen their positions in the Chinese market. New Zealand and Australian producers may similarly find openings in markets historically dominated by US suppliers. However, increased competition in third-country markets remains risky as US exporters seek alternative destinations for products previously bound for Canada, Mexico, and China.
The industry’s recent export success – with US dairy reaching $8.2 billion in 2024 – demonstrates the tremendous global demand for dairy products. As Michael Dykes noted, “Our industry is poised to become the world’s leading supplier of dairy products thanks to the resilience and innovation of the American dairy industry.” Navigating through this tariff storm will require all that resilience and innovation – but the underlying strength of global dairy demand remains unchanged.
Join over 30,000 successful dairy professionals who rely on Bullvine Daily for their competitive edge. Delivered directly to your inbox each week, our exclusive industry insights help you make smarter decisions while saving precious hours every week. Never miss critical updates on milk production trends, breakthrough technologies, and profit-boosting strategies that top producers are already implementing. Subscribe now to transform your dairy operation’s efficiency and profitability—your future success is just one click away.
Fonterra’s price bombshell ignited global dairy markets. Innovative farmers are making moves. Are you ready to capitalize on the coming milk price surge?
EXECUTIVE SUMMARY: Fonterra’s dramatic farmgate milk price forecast increase signals a seismic shift in global dairy markets, driven by rebounding Chinese demand and constrained global supply. This price hike could mean an additional NZ,000 annual revenue for the average New Zealand dairy farm. However, the surge comes amid complex market dynamics, including a projected 2.6% drop in Chinese domestic milk production and uneven global supply growth. While presenting significant opportunities, especially for efficient, export-oriented producers, the forecast raises questions about sustainability and strategic positioning. Innovative dairy farmers are advised to focus on financial resilience, efficiency improvements, and risk management rather than rushing into expansion.
KEY TAKEAWAYS
Fonterra raised its 2024/25 milk price forecast to NZ$9.50-NZ$10.50 per kgMS, signaling strong global dairy market conditions.
Chinese dairy imports are projected to grow 2% in 2025, reversing a three-year decline despite continued drops in domestic production.
Global milk production growth remains constrained. The “Big 7” export regions are projected to grow only 0.8% in 2025.
The price surge creates winners and losers, favoring efficient, export-oriented producers while potentially squeezing debt-financed operations.
Strategic caution is advised: farmers should prioritize financial resilience, efficiency improvements, and risk management over immediate expansion.
Fonterra just threw a grenade into global dairy markets, and innovative farmers are scrambling to capitalize on the explosion. The New Zealand giant’s sudden price forecast bump is good news for Kiwi producers. Still, it’s also a wake-up call to reshape dairy economics from Wisconsin to Western Australia.
BREAKING: Fonterra Hikes Farm Milk Price Forecast by 50 Cents
In a move that has sent shock waves through global dairy markets, Fonterra, the world’s largest dairy exporter, has announced a significant increase to its farmgate milk price forecast for the 2024/25 season. The cooperative has raised its expected payout range to NZ.50-NZ.50 per kilogram of milk solids (kgMS), up from the previous forecast of NZ.00-NZ.00.
This 50-cent lift at the midpoint to NZ.00 represents a substantial boost for New Zealand’s dairy farmers when they need it most. For perspective, on the average New Zealand farm’s annual production of 170,000 kgMS, this adjustment translates to a potential NZ$85,000 (US$52,000) increase in annual revenue – not spare change, but mortgage payment money.
Timeframe
Forecast Range (NZD per kgMS)
Midpoint
Change
Previous Forecast
$9.00-$10.00
$9.50
—
Current Forecast (Dec 2024)
$9.50-$10.50
$10.00
+$0.50
The timing couldn’t be more critical. Farm input costs remain stubbornly high, and fertilizer prices haven’t retreated from their peaks. Labor is scarce and expensive, and climate volatility continues to throw curveballs at producers worldwide.
What’s particularly telling is not just the increase itself but that it comes from Fonterra, who is historically one of the more conservative forecasters in the industry. When these Kiwis raise their outlook, they’re not just throwing darts at a board. They’re sending a calculated message based on their unparalleled visibility into Asian demand patterns and global supply dynamics.
CHINA’S DAIRY APPETITE SURGES: Is This Time Different?
Let’s cut to the chase: China is back at the dairy table, and they’re hungry. After a period of subdued activity, Chinese demand patterns are shifting in ways that significantly impact global markets.
According to the latest RaboResearch report released this month, China diverges from global trends. Domestic milk production is projected to drop 2.6% year over year in 2025, continuing a downward trend from 2024. Despite this decreased production, analysts expect China’s dairy import volumes to grow by 2% year over year in 2025, reversing a three-year decline.
This potential recovery follows a steep 17% drop in net dairy product imports during the first eight months of 2024, reflecting weak domestic demand and oversupply challenges. The key categories showing significant declines included:
Category
2024 Import Decline
Skim Milk Powder
36.8%
Whole Milk Powder
12.6%
Liquid Milk and Cream
15.6%
Infant Formula
14.8%
This combination of falling domestic production and recovering demand creates a perfect storm for increased import activity – precisely what Fonterra is responding to with its bullish price forecast.
Fonterra CEO Miles Hurrell confirmed this view in December 2024: “We’re seeing a recovery of demand in Greater China as domestic milk production rebalances and demand from Southeast Asia continues to be strong.”
But here’s the million-dollar question every dairy farmer should ask: Is this Chinese demand sustainable, or are we witnessing another boom-bust cycle?
SUPPLY SHOCK: Why Global Milk Production Can’t Keep Up
While China grabs headlines, the supply side of this equation deserves equal attention. Global milk production faces unprecedented constraints that look increasingly structural rather than cyclical.
According to the latest RaboResearch report released March 5, 2025, milk production across the “Big 7” export regions is projected to grow by 0.8% year-on-year in 2025. This follows a challenging 2024 marked by production weaknesses and elevated farmgate milk prices. While positive, this growth rate remains modest and unevenly distributed.
Region
2025 Production Projection
Key Factors
European Union
-0.2%
Environmental restrictions, disease outbreaks
United States
Growth (from 2024)
Expanded processing capacity, herd increases
New Zealand
+1.2%
Improved feed and management practices
Australia
Flat (0%)
Dry conditions in late 2024
Argentina
+4.7%
Improved weather conditions
China
-2.6%
Continued downward trend
In the European Union, production is forecast to decline by 0.2% in 2025, with milk deliveries expected to amount to 149.4 million metric tons. According to recent reports, “Low farmer margins combined with environmental restrictions and disease outbreaks among the major producers continue to push some smaller farmers out of production.”
The United States dairy sector expects growth in 2025, reversing the 0.7% decline in 2024[4]. Recent data revealed that American producers added 34,000 dairy cows between July and December 2024, supporting increased production projections. One critical factor influencing 2025 market dynamics is substantial new cheese processing capacity coming online, which could expand U.S. cheese manufacturing by approximately 6%.
New Zealand milk production is expected to increase by 1.2% in 2025 as farmers expand herds and improve feed and management practices in response to higher global dairy prices[4]. This comes despite Fonterra CEO Miles Hurrell noting that “milk production out of the US and Europe continues to be impacted by local factors, while production out of most regions of New Zealand has increased.”
These aren’t temporary adjustments – they’re the new reality of global dairy production under increasing environmental, economic, and climate pressures.
MILK PRICE TRANSMISSION: How Fonterra’s Moves Hit Your Milk Check
Most dairy farmers understand their milk price is somehow connected to global markets, but the mechanics of how Fonterra’s decisions in Auckland influence your milk check in Wisconsin or Bavaria remain mysterious. Let’s demystify this:
Fonterra’s influence flows through multiple channels. Most directly, they operate the Global Dairy Trade (GDT) auction platform, which establishes reference prices for key commodities like whole milk powder (WMP), skim milk powder (SMP), and anhydrous milk fat (AMF).
For American producers, the transmission path runs through the cheese, butter, and powder markets, which determine Federal Milk Marketing Order pricing. When global powder prices strengthen, U.S. manufacturers redirect production capacity toward export opportunities, reducing domestic supply and raising prices.
European farmers experience this connection differently. Primary EU cooperatives like Arla, FrieslandCampina, and DMK directly compete with Fonterra in export markets like the Middle East and Southeast Asia. When Fonterra lifts its price forecast, these European processors must respond to remain competitive for both market share and milk supply.
To translate Fonterra’s NZ$9.50-$10.50/kgMS forecast into metrics more familiar to international readers: at current exchange rates, this equates roughly to US$24.70-$27.30 per hundredweight or €0.51-€0.57 per kilogram of milk.
FARMER SPOTLIGHT: Real Producers Feel the Impact
For Jason and Sarah Wilson, who milk 650 cows near Morrinsville in New Zealand’s Waikato region, Fonterra’s announcement isn’t just abstract market news—it could potentially change their business.
“We’ve been holding off on replacing our 12-year-old tractor and upgrading water systems,” Jason explains. “If this price holds through the season, those projects are back on the table, plus we can accelerate debt repayment from the tough 2023 season.”
The Wilsons represent thousands of New Zealand dairy families whose financial fortunes rise and fall with Fonterra’s payout. Their typical 650-cow operation produces about 245,000 kgMS annually. The 50-cent lift in price midpoint represents a potential NZ$122,500 (US$75,600) in additional annual revenue.
Beyond New Zealand, farmers like Hans Brüggen in northern Germany are watching these developments closely. Brüggen supplies FrieslandCampina, which competes directly with Fonterra in Asian markets.
“When New Zealand prices move up, we generally see a response in our milk price within 2-3 months,” Brüggen notes. “After struggling with high feed costs and new environmental compliance expenses, any improvement in milk price gives us breathing room.”
DAIRY BUSINESS STRATEGY: 3 Questions Smart Farmers Are Asking Right Now
Don’t just read this news and move on. Here are three direct questions you should be asking your milk buyer immediately:
How specifically does your pricing formula respond to Fonterra’s forecast changes and GDT auction results?
What market signals would trigger an upward revision in your farmgate price forecasts for the remainder of 2025?
What hedging or forward contracting options would allow me to capture some of this potential upside while protecting against the risk of another Chinese demand reversal?
The answers to these questions will reveal how your processor views current market dynamics and how transparent they’re willing to be about their pricing mechanism. You might be surprised how many processors suddenly become vague when pressed for specific details.
WINNERS & LOSERS: Who Benefits Most From Dairy’s New Reality
The dairy industry isn’t a unified bloc – it’s a complex ecosystem where market shifts create winners and losers. Here’s the unvarnished truth about who stands to gain and lose from Fonterra’s price move:
Clear winners include efficient, scale-oriented producers in export regions with favorable currency positions. New Zealand farmers benefit directly. Australian producers should see improved prices as processors compete for milk to serve similar export markets.
Irish dairy farmers, operating seasonal systems similar to New Zealand’s, will likely see positive price movements as Irish processors adjust to remain competitive in overlapping markets.
Producers in heavily regulated markets like Canada are more insulated from these positive effects, as the supply management system limits exposure to global price volatility. Similarly, farmers in predominantly domestic consumption markets like Austria or Switzerland will experience more muted impacts.
The most vulnerable producers in this scenario may be those who recently expanded based on debt financing, particularly in regions with high production costs. If Chinese demand proves volatile again, these operations could face a dangerous cost-price squeeze.
DAIRY FARM SUCCESS PLAN: Strategy Beats Celebration Every Time
If you’re tempted to celebrate these improved market conditions with a new pickup truck or parlor expansion, pause and consider these strategic moves first:
Repair your balance sheet before expanding operations. The most financially resilient dairy farms maintain debt-to-asset ratios below 40%. Use this potential price improvement to strengthen your financial position rather than immediately growing production.
Invest in efficiency rather than expansion. In the current input cost inflation and environmental constraints environment, technologies that improve feed conversion, reduce labor requirements, or enhance reproductive performance offer better returns on investment than simply adding cow numbers.
Consider forward contracting a portion of your production. If your processor offers hedging tools, now might be an opportune time to lock in margins on at least part of your expected production. Don’t try to time the market peak perfectly; instead, focus on securing profitable margins against your production costs.
Watch for early warning signs of Chinese demand shifts. Monitor reporting on Chinese domestic milk production, major Chinese dairy manufacturers’ inventory levels, and Chinese agricultural authorities’ policy statements. These leading indicators often signal demand changes before they appear in global trade statistics.
THE BOTTOM LINE: Milk Price Opportunity Meets Strategic Caution
Fonterra’s price forecast increase represents a genuine opportunity for dairy producers worldwide. The market fundamentals supporting this move—particularly the confluence of Chinese demand recovery and constrained global supply—create conditions for sustained price strength through at least mid-2025.
Fonterra CEO Miles Hurrell confirmed this view: “We’re seeing a recovery of demand in Greater China as domestic milk production rebalances, and demand from Southeast Asia continues to be strong. Looking at supply, milk production in the US and Europe continues to be impacted by local factors, while production in most regions of New Zealand has increased.”
However, competent dairy managers will temper optimism with strategic caution. The industry has seen promising price cycles evaporate, particularly when dependent on Chinese demand patterns.
The global dairy landscape continues to evolve at a breakneck pace. Environmental regulations, changing consumer preferences, geopolitical tensions, and technological disruption reshape the industry’s foundations.
The real winners will be those who benefit from higher milk prices today and those who use this opportunity to position themselves for success regardless of where prices go tomorrow.
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Dairy markets shaken: GDT index dips, but lactose skyrockets 14%! Discover how savvy producers can exploit this product divergence for maximum profit.
EXECUTIVE SUMMARY: The latest Global Dairy Trade auction reveals a complex market landscape, with the overall index down 0.5% masking dramatic product-specific divergences. Lactose surged an unprecedented 14%, while mozzarella and butter showed strong gains. However, whole milk powder declined 2.2%, pressuring the index. Domestic U.S. markets paint a contrasting picture, with CME cheddar blocks plummeting 9.50 cents in a single session. Meanwhile, feed costs have plunged, with corn prices down 8% in two weeks, fundamentally altering production economics. This market bifurcation creates both challenges and opportunities, demanding strategic responses from producers in component optimization, risk management, and feed cost capture.
KEY TAKEAWAYS:
Lactose prices surged 14% to $1,158/MT, the largest single-auction gain in over three years
GDT butter commands a 46% premium over CME prices, creating significant export opportunities
Corn prices have fallen 8% in two weeks, potentially reducing feed costs by $0.85-$1.00/cwt
Progressive producers should focus on component optimization, risk management recalibration, and strategic feed cost capture
The Global Dairy Trade (GDT) index recorded its second consecutive decline on Tuesday, March 4, 2025, slipping 0.5% to settle at an average price of $4,209 per metric ton. This headline figure obscures a market characterized by dramatic product-specific divergence that savvy producers are already positioning to exploit. Lactose prices surged by an unprecedented 14% to $1,158 per metric ton, the most significant single-auction gain for this product in over three years. Meanwhile, mozzarella cheese jumped 7.9% to $4,477 per metric ton, and butter strengthened 2.7% to $7,577 per metric ton, directly contradicting the weakness in the overall index.
The March 4 GDT auction results tell a compelling story of market bifurcation that challenges traditional analysis frameworks. Lactose emerged as the undisputed performance leader with its exceptional 14% surge to $1,158 per metric ton ($0.52 per pound), shattering expectations and establishing new pricing territory. This dramatic movement demands historical context—the last comparable single-auction gain for lactose occurred in January 2022 at 8.6%, making today’s jump genuinely unprecedented.
The 7.9% leap in mozzarella cheese prices to $4,477 per metric ton ($2.03 per pound) represents another standout performance with essential implications for milk allocation decisions. This significant increase aligns with broader industry production shifts in The Bullvine’s February market analysis, highlighting how Italian-style cheese production has surpassed 6 billion pounds annually.
For critical context on specialized cheese valuation, Canadian Class 3(d) pricing—designed explicitly for pizza restaurant applications—provides valuable comparative data:
Milk Class
Butterfat ($/kg)
Proteins ($/kg)
Other solids ($/kg)
3(d)
11.3565
9.7035
0.8921
Price Gap Alert: Unprecedented 46% Butter Premium Creates Export Opportunity
The disconnect between GDT auction prices and CME market values creates compelling opportunities for internationalized dairy businesses. This direct comparison starkly illustrates the substantial premiums available in global markets:
Product
GDT Price ($/lb)
CME Price ($/lb)
Price Premium
Premium (%)
Butter
$3.43
$2.35
$1.08
46%
Cheddar
$2.22
$1.78
$0.44
25%
SMP/NDM
$1.24
$1.20
$0.04
3%
This international premium structure represents a fundamental shift from historical patterns when U.S. domestic prices frequently exceeded global values. The unprecedented 46% butter premium particularly warrants attention from progressive producers and processors capable of accessing international markets.
Domestic Market Warning: CME Cheese Blocks Collapse 9.50¢ in Single Session
The CME dairy markets on March 3 revealed a troubling domestic market weakness that directly contradicts the selective strength seen in the GDT auction. CME cheddar blocks plummeted 9.50 cents to close at $1.7750 per pound, while barrels declined 2.50 cents to $1.7800 per pound. This dramatic block price collapse—one of the most significant single-day declines in recent months—demands serious attention from cheese-oriented producers.
The CME trading activity table below provides crucial insight into market depth and participation levels:
Product
Final
Change ¢/lb.
Trades
Bids
Offers
Butter
2.3450
NC
0
1
2
Cheddar Block
1.7750
-9.50
4
0
3
Cheddar Barrel
1.7800
-2.50
2
0
1
NDM Grade A
1.2000
NC
0
2
2
Dry Whey
0.5100
-1.50
0
1
4
Feed Cost Revolution: Corn Prices Plunge 8% in Two Weeks
Feed markets have undergone a dramatic bearish transformation that fundamentally alters dairy production economics. Corn futures for March 2025 collapsed to $4.53 per bushel on March 3, plunging from $4.83 on February 27—a 6.2% decline in just three trading sessions. Similarly, soybean futures for May 2025 dropped to $10.25 per bushel from $10.48 the previous week.
To properly contextualize this feed cost revolution, it’s critical to recognize that corn prices were over $4.93/bushel in mid-February, according to The Bullvine’s February market analysis. Prices have now declined by more than 8% in just two weeks. This represents a potential feed cost reduction of approximately $0.85-$1.00 per hundredweight of milk produced for typical rations—a margin enhancement opportunity that deserves immediate management attention.
International Context: Canadian Pricing Reveals Strategic Component Opportunities
Canadian Special Milk Class Prices provide an additional international context for how component values influence feed strategy decisions:
Milk Class
Butterfat ($/kg)
Proteins ($/kg)
Other solids ($/kg)
5(a)
9.3459
7.3813
1.7080
5(b)
9.3459
3.8075
3.8075
5(c)
10.7504
2.9070
2.9070
The substantial variation in protein valuation across these subclasses—from $7.3813/kg in 5(a) to $2.9070/kg in 5(c)—demonstrates how market-specific pricing can dramatically alter the economics of component production, further emphasizing the importance of strategic feed management.
Are producers focusing too narrowly on GDT indices while missing critical signals from the dramatic block-barrel price convergence? This rare market inversion suggests fundamental shifts in cheese manufacturing capacity that could reshape pricing structures for months. The block-barrel spread—traditionally maintaining a 3-5 cent premium for blocks—has fundamentally inverted, with barrels now commanding a 0.5 cent premium.
Feed market dynamics create a particularly challenging forecasting environment. The dramatic corn price decline from nearly $5.00/bushel in mid-February to $4.53 by early March fundamentally alters production economics. This feed cost reduction arrives at a critical decision point for northern hemisphere producers entering spring production season. With Class III milk futures hovering near .71/cwt for March and feed costs declining substantially, margins appear more favorable than projected just weeks ago.
3-Step Action Plan for Progressive Dairy Producers
Forward-thinking producers should implement these three defensive strategies given the current market signals:
1. Component Optimization Strategy
The 14% lactose price surge, 7.9% mozzarella increase, and substantial protein premiums in specialized market segments demand a comprehensive reevaluation of feeding programs. Progressive producers should immediately implement precision feeding systems that maximize valuable components, evaluate mid-lactation diet adjustments to enhance protein and specialized component production, and strategically use rumen-protected amino acids to capture substantial protein premiums.
2. Risk Management Recalibration
The dramatic 9.50-cent decline in the CME cheese price in a single session demands immediate risk management attention. Producers should evaluate forward contracting opportunities while Class III futures remain above $18.50/cwt, consider fence strategies that provide downside protection while allowing participation in potential upside, and implement strategic incremental coverage approaches rather than single-point decisions.
3. Feed Cost Capture Strategy
The collapse in corn prices from nearly $5.00/bushel to $4.53 creates a critical opportunity to lock in favorable input costs. Action steps include securing forward contracts for at least 50% of 2025 feed needs at current price levels, evaluating on-farm storage expansion to capitalize on seasonal pricing opportunities, and implementing strategic ration reformulation to optimize component production based on current market signals.
The March 4, 2025, Global Dairy Trade auction results reveal a market characterized by product-specific divergence, which creates challenges and opportunities for strategic operators. The headline 0.5% index decline masks extraordinary product-specific performance variations, from lactose’s remarkable 14% surge to whole milk powder’s concerning 2.2% decline.
The dramatic disconnects between GDT and CME prices—particularly the 46% butter premium—create compelling opportunities for internationally oriented businesses. Simultaneously, domestic challenges evidenced by the 9.50 cent block cheese price collapse and unusual barrel-over-block inversion signal problematic structural changes in U.S. cheese manufacturing that could reshape pricing dynamics for months.
Progressive producers who implement strategic component optimization, risk management recalibration, and feed cost capture strategies will be best positioned to navigate this complex market environment characterized by unprecedented product-specific divergence.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
China will impose a 10% tariff on US dairy products starting March 10 as the trade war intensifies, but it will offer a temporary exemption for shipments already en route. American dairy farmers face immediate market challenges as their export competitiveness suffers in the crucial Chinese market. At the same time, feed crop tariffs could create complex ripple effects through the dairy supply chain.
EXECUTIVE SUMMARY: China’s Customs Tariff Commission has announced a 10% additional tariff on US dairy products effective March 10, creating significant challenges for American dairy exporters. The measures, part of broader agricultural retaliation against recent US tariff increases, include a critical exemption for shipments already in transit before the implementation date. Beyond agriculture, China has also placed defense companies on its unreliable entity list, including Lockheed Martin divisions, demonstrating a multi-pronged response to US trade actions that threaten hard-won market access for American dairy producers.
KEY TAKEAWAYS:
China will implement a 10% additional tariff on US dairy products beginning March 10, 2025
Shipments already en route before March 10 and arriving by April 12 are exempt from the new tariffs
The new tariffs will be added to existing rates rather than replacing them
Feed ingredients, including corn and soybeans, also face tariffs, potentially affecting dairy input costs
China has also restricted the activities of 10 US defense companies in a parallel non-agricultural action
The Chinese Commerce Ministry cited damage to “the fundamental basis of economic and trade cooperation” in its announcement.
In a direct response to President Trump’s tariff increases, China’s Customs Tariff Commission announced Tuesday it would implement a 10% additional levy on American dairy products beginning March 10, creating immediate challenges for US dairy exporters attempting to maintain their foothold in this crucial Asian market. The announcement explicitly identifies dairy among several agricultural categories facing new trade barriers, with the Commerce Ministry confirming these measures come in retaliation for the US raising tariffs on Chinese imports to 20% on March 4.
China’s Targeted Agricultural Tariffs Take Aim at US Farmers
China’s Commerce Ministry officially declared that American chicken, wheat, corn, and cotton imports will face an additional 15% tariff. Sorghum, soybeans, pork, beef, seafood, fruits, vegetables, and dairy products will face a 10% increase. These tariffs will be added to existing rates rather than replaced, potentially creating cumulative duties that significantly disadvantage US products compared to international competitors.
The announcement includes one critical provision that may provide temporary relief: shipments already en route won’t face the additional duties. Specifically, “For imports that have been shipped from the port of origin before March 10, 2025, and are imported into China between March 10 and April 12, the additional tariffs imposed as specified by this announcement shall not be levied,” according to the Customs Tariff Commission’s official statement.
Immediate Market Implications for Dairy Exporters
The timing of these tariffs creates immediate complications for dairy processors and cooperatives with shipments already in transit or contracts recently signed. While the transit exemption provides some breathing room, dairy exporters still face difficult decisions about pricing strategies and customer communications for shipments scheduled after the grace period ends in mid-April.
China has been a growing destination for US dairy exports in recent years, with particular strength in specialized ingredients, whey products, and cheese. These products now face significant price disadvantages compared to competitors from countries like New Zealand, Australia, and the European Union, which aren’t subject to the same additional tariffs. The pricing disparity creates immediate competitive challenges for US dairy products in a market where price sensitivity remains high and alternative suppliers stand ready to fill any void.
Beyond Agriculture: China Expands Trade Restrictions
In a parallel move, Beijing has added 10 US companies to its “unreliable entity list,” which prohibits these firms from participating in China-related import or export activities and restricts them from making new investments. The targeted companies include defense firms such as Lockheed Missiles Fire Control, Lockheed Martin Aeronautics, and Lockheed Martin Missile System Integration Lab. According to the Commerce Ministry, senior executives from these companies will also face entry bans to China, and their work permits and residency permissions will be revoked.
This multi-pronged approach demonstrates China’s strategic targeting of agricultural communities and defense industries in its response to US tariff actions, continuing a pattern established during previous trade disputes.
Historical Context and Market Trends
The additional tariffs come against a backdrop of declining agricultural exports to China. US agricultural shipments to China fell for the second consecutive year in 2024, continuing a downward trend that began with the initial trade disputes during President Trump’s first term.
Since these disputes began, China has systematically worked to reduce its dependence on US agricultural imports. Beijing has pursued a dual strategy of diversifying its agricultural supply sources while boosting domestic production to achieve greater food security. For dairy, this has meant increased investment in domestic dairy operations while strengthening trade relationships with alternative suppliers like New Zealand, which enjoys preferential access under existing trade agreements.
Potential Feed Cost Implications
For dairy farmers, the impact of these tariffs extends beyond direct export opportunities. The Chinese measures also target key feed ingredients, including corn and soybeans, potentially creating complex ripple effects throughout agricultural supply chains. Should these tariffs significantly reduce US exports of these commodities, domestic prices could face downward pressure, potentially providing some relief on input costs for dairy operations during a period of export challenges.
The Chinese Commerce Ministry characterized the US tariff increases as “undermining the multilateral trading system, exacerbating the burden on American businesses and consumers, and damaging the fundamental basis of economic and trade cooperation between China and the US.” This official position suggests continued friction rather than a quick resolution to the trade dispute.
Industry Response and Strategic Considerations
Industry organizations are already mobilizing to assess the full implications of these new tariffs and advocate for government support measures to offset potential market losses. Previous rounds of agricultural tariffs have typically triggered federal assistance programs, though the specific nature and timing of any potential support remain uncertain at this early stage.
The tariffs arrive at a challenging time for many dairy operations, which are already navigating volatile input costs and evolving consumer preferences. Processors with diversified export portfolios may be better positioned to weather this disruption by redirecting products to alternative markets, though such pivots typically involve price concessions and additional logistical complexities.
These tariffs underscore the importance of individual dairy farmers working closely with their cooperatives or processors to understand how market access changes might affect milk pricing and volume commitments in the coming months. Operations with high debt loads or tight margins may face particular challenges if the tariffs trigger broader milk price adjustments throughout the domestic market.
Conclusion: Navigating Uncertain Trade Waters
The imposition of 10% additional tariffs on US dairy exports to China represents a significant market disruption that will require careful navigation by all segments of the dairy value chain. While the immediate effects will be most directly felt by exporters and processors with active Chinese business, the potential for broader market adjustments means all dairy producers should monitor developments closely and maintain open communication with their milk buyers about potential implications.
As the dairy industry adapts to this latest market challenge, collaboration between producers, processors, and industry organizations will be essential to developing coordinated responses that protect the long-term competitiveness of US dairy in global markets. The resilience demonstrated by the sector during previous trade disruptions suggests the industry has developed valuable experience in navigating such challenges. However, each new round of tariffs brings unique complexities requiring fresh strategic approaches.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Explore how regional shifts in dairy production are reshaping the global market landscape in 2025—opportunities await savvy producers!
Executive Summary: The global dairy market is undergoing significant transformations in 2025, marked by declining production in the European Union and robust expansion in the United States. The EU faces structural challenges, including regulatory pressures and shrinking herd sizes, leading to a projected 0.2% decline in milk deliveries. In contrast, the U.S. dairy sector is poised for growth, with an increase in herd size and new cheese processing capacity driving production upward. New Zealand’s strategic pivot towards value-added products illustrates a successful adaptation to changing market demands. As global supply and demand dynamics evolve, dairy stakeholders must navigate these shifts to optimize their operations and seize emerging opportunities.
Key Takeaways:
EU dairy production is projected to decline by 0.2%, driven by regulatory challenges and reduced herd sizes.
The U.S. dairy sector anticipates growth, with a forecasted increase in milk production supported by expanded processing capacity.
New Zealand is shifting focus from volume to value, successfully increasing exports of premium specialty dairy products.
The critical question for 2025 is whether global demand can absorb anticipated supply increases without triggering price declines.
Dairy producers must adapt strategies to align with regional market signals and evolving consumer preferences for sustainable growth.
European Production Decline Creates Strategic Opportunities for Forward-Thinking Dairy Farmers
The European Union’s dairy sector faces unmistakable contraction in 2025, with milk deliveries projected at 149.4 million metric tonnes (MMT)—a 0.2% year-over-year decline signaling deeper structural shifts beyond typical cyclical adjustments. This downward pressure stems from regulatory intensification, persistent margin compression, and accelerating herd reduction across member states, creating a production ceiling that even technological advancements cannot offset.
European dairy farmers navigate an increasingly challenging operating environment where regulatory compliance costs continue escalating while production flexibility diminishes. Low farmer margins combined with environmental restrictions and disease outbreaks have pushed smaller operations out of the sector entirely, fundamentally reshaping the production landscape.
Despite fluid milk consumption continuing its long-term decline (projected to reach 23.5 MMT in 2025, down 0.3%), EU27 cheese production is forecast to reach 10.8 MMT, up 0.6% from 2024 levels. This deliberate prioritization of cheese manufacturing necessarily comes at the expense of butter, non-fat dry milk, and whole milk powder production—creating potential supply shortfalls that will influence global price formation in these categories.
American Dairy Expansion Accelerates Despite Market Risks and Labor Challenges
In stark contrast to European constraints, the United States dairy sector demonstrates robust expansion through 2025. Recent data revealed American producers added 34,000 dairy cows between July and December 2024, supporting USDA projections for milk production to reach 228 billion pounds in 2025—an increase of 1.7 billion pounds over 2024 levels.
This growth trajectory isn’t without challenges, however. Highly pathogenic avian influenza (HPAI) created significant disruption in California’s milk production during Q4 2024, demonstrating the potential impact of disease outbreaks even in established dairy regions. Nevertheless, milk production in the rest of the country maintained robust growth at 1.2%, highlighting the underlying expansion momentum.
One critical factor influencing 2025 market dynamics is substantial new cheese processing capacity coming online. Industry analysts note that if all new plants operated at full capacity while existing facilities maintained current production rates, U.S. cheese manufacturing could expand by approximately 6%—a record increase with potentially bearish implications for prices.
Oceania’s Strategic Value-Over-Volume Approach Offers Lessons for Global Producers
New Zealand’s dairy industry demonstrates sophisticated adaptation to evolving global market conditions, with production forecast at 21.3 million metric tons in 2025—below the five-year average of 21.5 million metric tons. This measured volume reduction reflects a deliberate strategic pivot toward value optimization rather than volume maximization.
This strategic reorientation is quantifiably evident in New Zealand’s export portfolio restructuring, with whole milk powder’s share of total dairy exports declining from 45% in 2019 to 41% in 2024 by volume. Despite this proportional reduction, WMP exports have shown remarkable resilience, increasing nearly 4% year-to-date compared to 2023 levels through successful market diversification.
More significantly, New Zealand processors have aggressively expanded production of premium specialty ingredients, including infant formula, protein concentrates, lactoferrin, and caseinates. Export volumes of these high-value products grew by 13.8% year-over-year during the first eight months of 2024, demonstrating successful implementation of value-add strategies that maximize returns from constrained milk supplies.
Supply-Demand Balance: The Fundamental Question Facing Dairy Markets in 2025
The critical question confronting global dairy markets centers on whether demand elasticity will sufficiently absorb anticipated supply increases without triggering substantial price deterioration. Current market fundamentals feature generally favorable producer margins across major exporting regions, which historically stimulates production expansion where biological and regulatory factors permit.
The balancing factor remains global demand resilience, particularly from key importing regions. China’s import recovery trajectory represents the single most significant unknown variable that could substantially influence global dairy market balance. European consumption continues its long-term structural evolution, with declining fluid milk utilization partially offset by stable cheese demand.
For dairy producers navigating this complex environment, strategic focus must shift from generalized market tracking to specific product category dynamics. The traditional assumption that global dairy demand grows at a steady, predictable rate warrants reconsideration in 2025, as consumption patterns increasingly fragment across both product categories and geographic regions.
Strategic Implications for Forward-Thinking Dairy Stakeholders
European processors face intensifying competition for declining milk supplies, necessitating strategic product portfolio optimization to maximize returns from constrained raw material availability. U.S. processors must develop absorption strategies for increasing milk volumes, particularly during seasonal production peaks, while carefully managing the transition as new manufacturing capacity comes online.
Oceania producers and processors demonstrate the viability of strategic repositioning toward value maximization rather than volume leadership—a model that provides insights for other regions facing production constraints. This value-focused approach requires sophisticated market analysis capabilities and agile manufacturing systems capable of responding to emerging premium opportunities.
For dairy farmers worldwide, these market dynamics underscore the importance of production system flexibility, component optimization aligned with regional value signals, and sophisticated risk management strategies. The notion that all dairy producers face similar market incentives no longer holds in an increasingly fragmented global marketplace.
“The global dairy industry has entered a new era of regional specialization and strategic differentiation,” notes industry analysis. “The coming years will reward producers and processors who develop sophisticated understanding of these divergent patterns and position themselves accordingly within this evolving competitive landscape.”
The dairy sector’s ability to align production systems with these shifting market patterns will determine both near-term financial outcomes and long-term structural evolution in an increasingly complex global marketplace.
Related Articles:
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Strategic Feed Management in Times of Market Volatility
Technology Innovations Reshaping Modern Dairy Operations
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Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Dairy markets face unprecedented turmoil as record-breaking butterfat levels collide with looming trade war threats. With US milk hitting 4.46% fat and Trump’s 25% tariffs set to disrupt key export channels, processors scramble to adapt. Is your operation ready for this perfect biological revolution and geopolitical chaos storm?
Summary
The global dairy industry stands at a critical juncture as unprecedented biological advancements collide with geopolitical upheaval. Record-breaking milk component levels, exemplified by US butterfat reaching 4.46%, are overwhelming processing infrastructure designed for yesteryear’s milk composition. Simultaneously, President Trump’s impending 25% tariffs on Canadian and Mexican imports threaten to disrupt established trade patterns with the US dairy industry’s top export markets. This convergence of factors has created a paradoxical market where butter futures show surprising strength on European exchanges while cheese markets face mounting pressure in the US. Producers and processors alike must navigate this complex landscape, balancing the opportunities presented by component-rich milk against the challenges of processing bottlenecks and potential trade disruptions. Strategic priorities for industry stakeholders include reevaluating component optimization strategies, accelerating processing infrastructure investments, diversifying export markets, and implementing more sophisticated feed cost management approaches. The industry’s ability to adapt to these converging disruptions will determine which operations thrive in this new dairy production and trade era.
Key Takeaways
US milk butterfat levels hit an unprecedented 4.46% in January, challenging processing capabilities.
President Trump’s 25% tariffs on Canadian and Mexican imports, effective March 4, threaten key dairy export channels.
European butter futures are surprisingly strong, up 4.9% to €7,305, while other dairy commodities are under downward pressure.
Cheese inventories are 5.7% below year-ago levels, but prices are declining due to export uncertainty.
USDA projects record 94 million acres of corn plantings, defying current bearish price signals.
Dairy producers must reevaluate component optimization strategies to align with processing constraints.
There is an urgent need for investment in processing infrastructure to handle increasingly component-rich milk.
Trade diversification beyond Mexico, China, and Canada is critical for risk mitigation.
Adaptive strategies and market intelligence are essential for navigating biological and geopolitical disruptions.
Are dairy processors prepared for the biological revolution in the milk tank? “Recent milkfat levels are like nothing they have ever witnessed,” report industry veterans watching butterfat content reach a mind-boggling 4.43% in January Federal Milk Marketing Orders. This unprecedented biological shift collides with potentially devastating trade policy developments as President Trump’s 25% tariffs on Canadian and Mexican imports activate tomorrow (March 4). The dairy industry faces a perfect storm where processing infrastructure designed for yesterday’s milk composition simultaneously meets geopolitical disruption threatening our top three export markets—Mexico, China, and Canada—.
Global Futures Market Performance: The Butter Anomaly
Last week, the European Energy Exchange (EEX) trading activity revealed a puzzling market contradiction that challenges conventional pricing relationships. While 9,030 tonnes (1,806 lots) changed hands across dairy products, butter futures demonstrated remarkable strength. The March-October 2025 strip advanced 4.9% to €7,305 even as SMP declined 2.8% to €2,603. This divergence contradicts traditional price coupling between fat and protein streams, suggesting sophisticated market participants anticipate structural shifts in global butterfat availability despite current processing bottlenecks.
Exchange
Product
Volume Traded
Price Change (Mar-Oct strip)
Current Price Level
EEX
Butter
3,145 tonnes
+4.9%
€7,305
EEX
SMP
5,410 tonnes
-2.8%
€2,603
EEX
Whey
475 tonnes
Unchanged
€920
SGX
WMP
9,277 tonnes
-0.9%
$3,804
SGX
SMP
1,396 tonnes
-2.0%
$2,821
SGX
AMF
82 tonnes
-0.1%
$6,623
SGX
Butter
179 tonnes
-2.3%
$6,672
The Singapore Exchange (SGX) reported substantial trading volumes (10,934 lots), but prices moved overwhelmingly in one direction—down. WMP dropped 0.9% to $3,804, SMP fell 2.0% to $2,821, AMF decreased marginally by 0.1% to $6,623, and butter retreated 2.3% to $6,672. This bearish sentiment on SGX contrasted with EEX butter strength suggests deep regional divergences in how markets view near-term supply-demand balance.
Implementation guidance: Forward-thinking dairy producers should carefully evaluate regional processing capacity constraints for high-fat milk before making genetic or nutrition adjustments aimed at further component increases. While EU markets currently reward additional butterfat, not all processing regions have the infrastructure to handle 4.4%+ butterfat milk efficiently.
European Valuations: Year-Over-Year Perspective Challenges
While weekly movements in European dairy quotations showed modest changes, the year-over-year comparison reveals market dynamics that defy conventional economic expectations. Butter is €1,289 (+22.0%) above last year despite supposedly adequate global supplies. Similar strength appears in WMP (+18.5 %) and cheese varieties (+10.4% to +16.9%), challenging the narrative that dairy markets are oversupplied or that inflationary pressures have subsided. Only SMP shows weakness (-0.8 %) compared to year-ago levels.
Product
Current Price
Weekly Change
Y/Y Change
Butter (EU avg)
€7,136
-€12 (-0.2%)
+€1,289 (+22.0%)
SMP (EU avg)
€2,503
+€3 (+0.1%)
-€19 (-0.8%)
Whey (EU avg)
€904
Unchanged
+€184 (+25.6%)
WMP (EU avg)
€4,335
-€32 (-0.7%)
+€677 (+18.5%)
Cheddar Curd
€4,755
-€45 (-0.9%)
+€686 (+16.9%)
Mild Cheddar
€4,782
-€22 (-0.5%)
+€677 (+16.5%)
Young Gouda
€4,307
-€17 (-0.4%)
+€406 (+10.4%)
Mozzarella
€4,071
+€2 (+0.0%)
+€521 (+14.7%)
What explains this massive price appreciation amid modest production growth? The traditional supply-demand equation appears insufficient. European processing capacity constraints, regulatory impacts on production, and shifting consumer preferences toward higher-fat products may create structural support for prices that contradict conventional market analysis expecting mean reversion.
Implementation guidance: Producers should resist the urge to hedge heavily against expected price declines that may not materialize. The persistent strength across multiple fat-containing products suggests structural rather than cyclical price support, warranting strategic rather than tactical risk management approaches.
Global Milk Production: Component Revolution
Milk production data from January 2025 reveal an unprecedented revolution in milk composition that our industry has failed to prepare adequately. While fluid milk volume increases remain modest across major producing regions, the component story differs dramatically.
Region
Butterfat %
Protein %
Y/Y Change in Milk Volume
Y/Y Change in Milksolids
United States
4.46%
3.41%
+0.1%
+2.2%
United Kingdom
4.39%
3.41%
+4.3%
+4.5%
Australia
4.24%
3.38%
-2.7%
-1.8%
Netherlands
4.66%
N/A
-1.7%
-1.0% (fat only)
Poland
N/A
N/A
+2.3%
N/A
Italy
N/A
N/A
-0.6%
+0.7%
US milk components have reached extraordinary levels at 4.46% butterfat and 3.41% protein, increasing milk solid collections by 2.2% despite fluid volume growth of just 0.1%. This pattern repeats across multiple regions, with component levels consistently exceeding historical averages. The UK reports 4.39% butterfat and 3.41% protein, while Dutch milk contains an astounding 4.66% butterfat.
Have we reached peak genetic potential for components, or is this the beginning of a biological revolution in milk composition? The processing infrastructure built for 3.5-4.0% butterfat milk is proving inadequate, creating bottlenecks that pressure producer prices despite strong finished product values.
Implementation guidance: Producers should calculate their “component-adjusted basis” when comparing their production against benchmarks, as raw volume comparisons increasingly misrepresent actual milk solids production. Additionally, negotiate supply agreements that properly value components based on processing capacity in your region, as some plants may discount excessively high components they cannot efficiently process.
US Market Crisis: Tariffs Meet Processing Constraints
The US dairy industry faces an unprecedented convergence of challenges that could fundamentally reshape market dynamics. President Trump’s confirmation that 25% tariffs on Canadian and Mexican imports will activate on March 4 threatens established export channels representing billions in dairy trade. The potential for retaliatory tariffs from Mexico (our largest export market), China (second largest), and Canada (third largest) creates massive uncertainty just as domestic production constraints intensify.
The cheese market initially demonstrated resilience before succumbing to downward pressure, with CME spot Cheddar blocks plunging 12.5¢ to $1.775 per pound. Despite this decline, cold storage data reveals an intriguing contradiction—cheese inventories remain 5.7% below year-ago levels, with American-style cheese stocks down 7.4% to their lowest January volume since 2018. This tightness should support prices in a rational market, but fear of trade disruption with Mexico has overwhelmed fundamental analysis.
Meanwhile, the butter market faces a crisis stemming from unprecedented butterfat levels in farm milk. Industry contacts report processing bottlenecks throughout the supply chain, with “cream suppliers under significant pressure to find homes” and “butter plants backed up” with delays “exceeding post-holiday levels of inflows.” Cold storage data confirms this production surge, with butter inventories jumping 26% in a month to reach 270.28 million pounds, 9.2% above January 2024. Despite strong demand, this supply pressure pushed CME spot butter down 7¢ to $2.345 per pound.
Implementation guidance: Dairy producers selling into export-dependent channels should immediately review their milk buyers’ exposure to Mexican, Chinese, and Canadian markets. Those heavily dependent on these channels should explore diversification options or risk management tools to mitigate potential market disruptions. Additionally, producers should prioritize quality metrics beyond just component levels, as processing constraints may increasingly discount milk with extreme component values that create handling challenges.
The USDA’s preliminary acreage projections challenge conventional wisdom about crop economics and farmer decision-making. Despite relatively unattractive returns at current price levels, farmers are projected to plant 94 million acres of corn this spring, up significantly from 90.6 million acres last year and representing one of the highest corn seedings in the past decade. This increased corn acreage comes at the expense of soybeans, projected at 84 million acres, down from 87.1 million in 2024.
Why would farmers expand corn production when markets show clear bearish signals? May corn futures closed at $4.695 per bushel, down more than 35¢ for the week, while May soybeans dropped 32¢ to $10.25 and soybean meal declined $4 to $300 per ton. The conventional narrative suggesting farmers plant based on price signals appears increasingly questionable.
This acreage shift may reflect deeper structural factors, including risk management strategies, input cost considerations, crop rotation benefits, and regional adaptations to changing climate patterns. If realized, this expanded corn acreage could produce a record 15.6 billion bushel harvest, assuming trendline yields of 181 bushels per acre.
Implementation guidance: Dairy producers should resist the temptation to forward contract substantial feed needs at current prices despite their apparent value. The projected acreage expansion and improved South American weather suggest significant downside potential for feed costs later in 2025. Consider implementing a graduated purchasing strategy that secures only 30-40% of needs before planting progress reports, keeping sufficient flexibility to take advantage of potential summer price weakness.
The dairy industry must fundamentally rethink conventional approaches facing converging disruptions across multiple fronts. The biological revolution in milk components has rendered many processing facilities inadequate, just as geopolitical tensions threaten to disrupt established trade patterns. This requires a strategic reset across several dimensions:
Trade diversification has become an immediate necessity rather than a long-term aspiration. The concentration risk is unacceptable, with Mexico, China, and Canada collectively representing over 60% of US dairy exports. Forward-thinking processors have already accelerated market development in Southeast Asia, the Middle East, and Latin America, unaffected by current tariff disputes. Producers should prioritize relationships with processors demonstrating diversified market exposure.
Component optimization strategies must evolve beyond simplistic “more is better” approaches. The record-breaking components now seen across multiple regions have created processing bottlenecks that paradoxically devalue the very components being produced. Dairy operations should implement precision nutrition programs that optimize component production based on actual processor capacity and payment systems rather than theoretical component values.
Processing infrastructure investment represents the most significant opportunity in the current environment. The mismatch between milk composition and processing capacity has created bottlenecks that depress producer returns despite strong finished product markets. Forward-thinking cooperatives and processors who rapidly expand their capacity to handle high-component milk will gain competitive advantages in procurement and finished product markets.
Feed cost management requires abandoning conventional seasonality assumptions as climate change and geopolitical tensions create new market patterns. The projected record corn acreage suggests waiting for harvest pressure before making substantial purchases, but trade disruptions could create unexpected price volatility regardless of supply fundamentals. Implement staggered purchasing strategies with trigger points based on technical signals rather than calendar dates.
The global dairy landscape is undergoing transformative change as the biological revolution in milk composition collides with geopolitical disruptions of established trade patterns. In the coming months, market segmentation based on processing capability, export exposure, and component handling capacity will likely increase.
Given the imminent trade disruptions that could simultaneously affect our top three export markets, dairy producers should immediately evaluate milk buyer stability. Those selling to processors heavily dependent on Mexican, Chinese, or Canadian markets face heightened risk, requiring immediate risk management attention.
The longer-term strategic challenge involves aligning production systems with the rapidly evolving processing infrastructure needed to handle increasingly component-rich milk. The current bottlenecks reflect an industry unprepared for the biological revolution in the milk tank, with genetics and nutrition advancements outpacing processing technology investments.
Forward-thinking producers will increasingly differentiate themselves by optimizing not just production volume or components but also the specific attributes most valued by their particular processor and end market. This more sophisticated approach requires more profound engagement with downstream supply chain partners and more nuanced production strategies than the industry has historically employed.
As we navigate these converging disruptions, flexibility and market intelligence will prove more valuable than rigid production systems optimized for yesterday’s market conditions. The industry’s adaptability to these biological and geopolitical revolutions will determine which operations thrive during this period of transformative change.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Dairy markets brace for impact as Trump’s 25% tariffs on Canadian and Mexican imports loom. With cheese stocks tight, butter abundant, and feed costs volatile, the industry faces a perfect storm. Will these trade tensions reshape North American dairy or trigger another costly market disruption?
Summary
The U.S. dairy industry faces unprecedented challenges as President Trump’s 25% tariffs on Canadian and Mexican imports are set to take effect on March 4, 2025. This Weekly Dairy Market Report highlights the potentially devastating consequences for U.S. dairy exports, with Mexico, China, and Canada being key markets at risk. CME spot markets have already responded with significant declines across most dairy commodities. While cheese supplies remain tight due to record exports, butter inventories are surging, creating a complex supply dynamic. The USDA has adjusted its 2025 milk production forecast downward, reflecting lower-than-expected output. Feed costs continue to pressure dairy margins, with recent market movements showing corn and soybean futures declines. Amid these challenges, the industry grapples with profitability concerns, as indicated by a concerning milk-feed ratio of 2.10. As stakeholders brace for potential market disruptions, the report underscores the critical juncture at which the U.S. dairy industry stands, with the outcome of these trade disputes potentially reshaping North American dairy trade for years to come.
Key Takeaways
President Trump’s 25% tariffs on Canadian and Mexican imports will take effect on March 4, 2025, and they threaten key U.S. dairy export markets.
The CME spot markets showed significant declines: cheddar blocks were down 12.5¢ to $1.775/lb, and butter was at $2.345/lb (the lowest since April 2023).
U.S. cheese supplies are tight (down 5.7% YoY), while butter inventories surged 26% in January alone.
USDA lowered the 2025 milk production forecast to 227.2 billion pounds, down 0.8 billion from previous estimates.
Feed costs remain a concern: May corn futures are down to $4.695/bushel, and soybeans at $10.25/bushel.
The milk-feed ratio is at 2.10, well below the 2.45 five-year average, indicating profitability challenges.
Despite current disruptions, the global dairy market is expected to grow from $649.9 billion in 2025 to $813.6 billion by 2030.
Industry experts warn of potential farm-gate revenue losses of up to $16.6 billion due to trade tensions.
62% of traders are reportedly bearish on dairy markets, prompting cautious approaches and hedging strategies.
The outcome of trade disputes could reshape the North American dairy trade for decades.
The U.S. dairy industry faces a perfect storm of challenges as February 2025 approaches. President Trump’s confirmation that 25% tariffs on Canadian and Mexican imports will take effect on March 4th has sent ripples through dairy markets already dealing with complex supply dynamics and volatile commodity prices. The threat of retaliatory measures from America’s top dairy export destinations presents a significant risk to an industry grappling with tight margins and production adjustments. Let me explain what’s happening and what it means for dairy stakeholders nationwide.
Tariff Tensions Threaten Key Export Markets
President Trump has cleared up any confusion about his administration’s trade policy, confirming via Truth Social that the proposed 25% tariffs on Canadian and Mexican imports will take effect on March 4th. This announcement comes despite a prior 30-day reprieve granted to both countries in exchange for cooperation on fentanyl trafficking and immigration issues. The timing couldn’t be more precarious for the U.S. dairy industry, which counts Mexico, China, and Canada among its top export destinations.
Howard Lutnick, Trump’s pick for Commerce Secretary, has been particularly vocal about Canada’s dairy policies during his recent confirmation hearings:
“Canada … treats our dairy farmers horribly. That’s got to end. I’m going to work hard to make sure, as an example for your dairy farmers, they do much better in Canada than they’ve ever done before.”
Top U.S. Dairy Export Markets (2024)
Volume (Metric Tons)
% of Total Exports
Value (USD Millions)
Mexico
576,000
24.8%
$1,840
Southeast Asia
395,000
17.0%
$1,320
China
311,000
13.4%
$970
Canada
246,000
10.6%
$810
Middle East/North Africa
172,000
7.4%
$580
The administration appears determined to use tariffs as leverage to dismantle Canada’s supply management system, which imposes tariffs as high as 298% on imported dairy products. When questioned about the potential economic impacts of these tariffs, Lutnick pivoted to frame the issue as one of national security:
“If we are your biggest trading partner, show us respect: shut your border and end fentanyl coming into this country. It’s not a tariff, per se; it is an action of domestic policy.”
While the administration frames these tariffs as a strategic move to gain concessions ahead of the USMCA renegotiation in 2026, industry experts warn of potentially devastating consequences. Previous analysis by the U.S. Dairy Export Council found that tariffs during past trade tensions with Mexico and China could reduce farm-gate revenue by up to $16.6 billion through 2023. The stakes couldn’t be higher, with Mexico accounting for nearly a quarter of U.S. dairy exports by volume.
From the Canadian perspective, dairy farmers have expressed concern while supporting their government’s position. David Wiens, President of Dairy Farmers of Canada, stated on February 2, 2025:
“Like all Canadians, our nation’s dairy farmers are deeply concerned about the far-reaching impacts that the high tariffs imposed by the United States on Canadian products will have on consumers, industries, and economies on both sides of the border. We stand with our federal government and all parties, showing determination and commitment to swiftly resolving this impasse.”
Recent market reactions show the industry is already feeling the impact. Butter prices plunged 4.50 cents to $2.3700 per pound amid concerns about Canada’s impending retaliatory tariffs on U.S. exports. This sharp decline translates to a $0.48/cwt loss in butterfat payouts for farmers – an unwelcome hit to already strained profit margins.
U.S.-Canada Dairy Tariff Comparison
Product Category
Canadian Over-Quota Tariff
U.S. Over-Quota Tariff
Canadian Within-Quota Tariff
U.S. Within-Quota Tariff
Fluid Milk
241%
77%
0%
0.4¢/liter
Cheese (Cheddar)
245%
35%
0.7%
12% ad valorem
Butter
298%
69%
1%
12.4¢/kg
Yogurt
237%
20%
0.5%
2.8¢/kg
Ice Cream
243%
22%
0.6%
5% ad valorem
Current Market Conditions: A Sea of Red Ink
The CME spot markets have responded to the tariff threats with significant declines across most dairy commodities. Cheddar blocks plunged 12.5 cents to $1.775 per pound by week’s end, while barrels fell 2 cents to $1.78. The latest CME data shows butter at $2.345 per pound, touching its lowest price since April 2023. Meanwhile, nonfat dry milk retreated 4 cents to $1.20, its lowest price since July 2024, and whey fell 3.5 cents to 51 cents, also hitting a seven-month low.
While many economists have raised concerns about tariffs potentially driving inflation, Howard Lutnick dismissed these concerns during his confirmation hearing:
“A particular product’s price may increase, but all of them? This is not inflationary. It is just nonsense that tariffs cause inflation. It is nonsense.”
CME Spot Dairy Commodity Prices (Feb 28, 2025)
Price ($/lb)
Weekly Change
Year-Over-Year Change
Cheddar Blocks
$1.775
-12.5¢
-8.3%
Cheddar Barrels
$1.780
-2.0¢
-7.2%
Butter
$2.345
-7.0¢
-12.4%
Nonfat Dry Milk
$1.200
-4.0¢
-5.1%
Dry Whey
$0.510
-3.5¢
-11.3%
These price movements occur against a backdrop of interesting supply dynamics. U.S. cheese supplies remain relatively tight, thanks to record-breaking exports in 2023 and 2024. The USDA’s Cold Storage report shows 1.37 billion pounds of cheese in warehouses as of January 31st, 5.7% less than a year ago. Stocks of American-style cheese are particularly tight, trailing year-ago volumes by 7.4% and registering the lowest January volume since 2018.
However, the butter market tells a different story. Industry contacts report that “recent milkfat levels are like nothing they have ever witnessed,” with average butterfat from all milk sold through Federal Milk Marketing Orders in January reaching an all-time high of 4.43%. This has led to a cream surplus that’s putting significant pressure on butter processing capacity. The result? Butter churns are running full-tilt, but the larder is already packed with 270.28 million pounds of butter in cold storage at the end of January – up 26% in just 31 days and 9.2% higher than January 2024.
Cold Storage Inventory Comparison
Product
Jan 2025 Inventory (Million lbs)
Dec 2024 Inventory
Monthly Change
Year-Over-Year Change
Total Cheese
1,370
1,412
-3.0%
-5.7%
American Cheese
742
771
-3.8%
-7.4%
Butter
270.28
215
+26.0%
+9.2%
Production Forecasts and Supply Outlook
The USDA has adjusted its 2025 milk production forecast downward to 227.2 billion pounds, about 0.8 billion pounds less than the previous forecast. This reduction reflects lower-than-expected milk per cow output, revised by 85 pounds to 24,200 pounds per cow. The national milking herd is projected to average 9.390 million head in 2025, unchanged from previous forecasts when accounting for rounding.
USDA Milk Production Forecasts (2025)
Latest Forecast
Previous Forecast
Change
Total Milk Production (billion lbs)
227.2
228.0
-0.8
Milk Per Cow (lbs)
24,200
24,285
-85
Dairy Cow Inventory (million head)
9.390
9.390
0
All-Milk Price Forecast ($/cwt)
$23.05
$22.55
+$0.50
Despite these downward revisions to production forecasts, there appears to be more than enough milk for cheese vats, with spot milk trading at a discount in central cheese-producing states. Market participants remain concerned that new online cheese processing capacity could quickly boost U.S. cheese supplies – a worrying prospect if retaliatory tariffs compromise export markets.
Some dairy farmers are exploring alternative revenue sources to weather market volatility. Abbi Prins, livestock analyst with CoBank, notes the growing trend of beef-dairy crossbreeding as one such strategy:
“The data also showed that beef-on-dairy cattle maintained the largest proportion of their value from feeder price to slaughter cattle auction price on a per hundredweight basis. That’s an important financial metric for feedlots… preliminarily, it reaffirms the value proposition beef-on-dairy brings to the wider beef sector.”
The all-milk price for 2025 is now at $23.05 per hundredweight, up 50 cents from last month’s forecast. However, these price projections may need further revision if the brewing trade disputes escalate as feared. Weekly futures markets have already reacted, with Class III and IV contracts losing 25 and 50 cents this week. Class III futures are fading to the low $18s, and Class IV milk is trading in the high $18s and low $19s.
U.S. Trade Representative Katherine Tai, speaking about the upcoming USMCA review, hinted at the administration’s strategy:
“The whole point is to maintain a certain level of discomfort, which may involve a certain level of uncertainty…”
Federal Milk Order Class Prices ($/cwt)
Month
Class I
Class II
Class III
Class IV
Feb 2025
$21.42
$19.87
$18.25
$19.15
Jan 2025
$22.10
$20.12
$18.55
$19.43
Dec 2024
$22.87
$20.45
$18.62
$19.62
Nov 2024
$23.56
$20.78
$19.95
$20.12
Oct 2024
$23.12
$20.35
$19.42
$19.87
Change (Feb vs Jan)
-$0.68
-$0.25
-$0.30
-$0.28
Feed Market Developments
Feed costs continue to pressure dairy margins. Recent market movements show May corn closing at $4.695 per bushel, down more than 35 cents weekly, while May soybeans plunged 32 cents to $10.25. The May soybean meal contract closed at $300 per ton, down $4 this week.
Feed Futures Prices (Feb 28, 2025)
Current Price
Weekly Change
Annual Change
Corn (May 2025), $/bushel
$4.695
-$0.35
-8.2%
Soybeans (May 2025), $/bushel
$10.25
-$0.32
-10.5%
Soybean Meal (May 2025), $/ton
$300.00
-$4.00
-7.8%
Hay (Premium Alfalfa), $/ton
$235.00
-$2.50
-5.2%
The USDA’s Outlook Forum projected that farmers will plant 94 million acres of corn this spring, up significantly from 90.6 million acres last year. Using a trendline yield at a record-high 181 bushels per acre, U.S. corn production for the 2025-26 crop year is tentatively predicted to reach nearly 15.6 billion bushels – potentially the largest harvest on record.
Interestingly, farmers aren’t particularly enthusiastic about planting corn at current prices, but they’re even less thrilled about soybeans. USDA predicts farmers will plant 84 million acres of soybeans this spring, down from 87.1 million in 2024. With high input costs and relatively low crop prices, marginal farmers may pivot toward forages and specialty crops.
USDA Crop Acreage Projections (2025 vs 2024)
Crop
2025 Projected Acreage (millions)
2024 Actual Acreage
Change (millions)
Change (%)
Corn
94.0
90.6
+3.4
+3.8%
Soybeans
84.0
87.1
-3.1
-3.6%
Wheat
48.5
47.2
+1.3
+2.8%
Hay
52.3
52.8
-0.5
-0.9%
Consumer Trends Amidst Market Volatility
While market volatility dominates headlines, the underlying consumer trends shaping dairy demand are worth noting. Consumers increasingly prefer functional dairy products, low-fat options, and organic/grass-fed products. Growth in on-the-go dairy snacks and single-serve portions continues to provide bright spots in an otherwise challenging market environment.
The global dairy market is expected to grow from $649.9 billion in 2025 to $813.6 billion by 2030, suggesting that long-term demand remains strong despite current market disruptions. However, American producers may be disadvantaged if trade disputes limit their ability to capitalize on this growth.
US Consumer Dairy Price Index (2025)
Dairy Product Category
Price Index (Jan 2024=100)
Monthly Change
Annual Change
Fluid Milk
105.8
+0.3%
+3.2%
Cheese
108.2
+0.2%
+4.7%
Butter
110.5
-0.5%
+5.8%
Ice Cream
106.3
+0.1%
+3.5%
Yogurt
104.2
-0.2%
+2.8%
Trading Strategy in Uncertain Times
With 62% of traders reportedly bearish on dairy markets, stakeholders are adopting cautious approaches. Experts recommend monitoring regional production trends closely and considering hedging strategies to mitigate price volatility risks. Some farmers struggling with tight margins are exploring niche markets like direct-to-consumer raw milk sales, which can offer premiums of up to $4.50/cwt.
The milk-feed ratio, a key measure of dairy profitability, sits at a concerning 2.10, well below the five-year average of 2.45 and the 2.25 typically needed for a 5% profit margin. This tight margin environment makes the threatened tariffs all the more concerning for dairy operators still recovering from previous market disruptions.
Dairy Profitability Indicators (Feb 2025)
Indicator
Current Value
5-Year Average
Threshold for Profitability
Milk-Feed Ratio
2.10
2.45
2.25
Income Over Feed Cost
$7.92/cwt
$9.35/cwt
$8.50/cwt
Operating Margin
4.3%
6.8%
5.0%
Debt-to-Asset Ratio
0.38
0.32
<0.35
Conclusion: Industry at a Crossroads
The U.S. dairy industry is at a precarious crossroads. While some support the administration’s tough stance against Canada’s dairy policies, many farmers fear repeating the costly mistakes of past trade wars. The 2018 trade disputes resulted in a $28 billion government bailout and accelerated the decline of small dairy operations—a scenario no one wishes to repeat.
Canadian Ministers Mary Ng and Lawrence MacAulay have made their position clear regarding previous CUSMA dairy disputes:
“Canada is very pleased with the dispute settlement panel’s findings, with all outcomes favoring Canada. This is good news for Canada’s dairy industry and supply management system. The Government of Canada will continue to preserve and defend Canada’s supply management system, which supports producers by providing the opportunity to receive fair returns for their labor and investments.”
As March 4th approaches, stakeholders are watching for both the implementation of tariffs and potential retaliatory measures from trading partners. The outcome of these disputes could reshape the North American dairy trade for decades. For now, the industry must prepare for potential market disruptions while advocating for policies that support long-term sustainability rather than short-term posturing.
Canadian Public Safety Minister David McGuinty perhaps best summarized the path forward:
“When the new administration suggests that we need to bear down on this question of fentanyl, we agree. We want to see progress in cooperation because we know the best way to tackle this crisis is together.”
Whether these tariffs will lead to meaningful reforms in global dairy trade or trigger another market disruption remains to be seen. What’s clear is that dairy farmers, processors, and exporters are bracing for turbulence ahead, hoping that policy objectives can be achieved without sacrificing the health of America’s dairy industry.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Brazil’s dairy farmers are milking a price surge, but is the cream about to curdle? The industry’s riding high with spot prices hitting R$ 3.17/liter. But as UHT demand soars and imports cool, experts warn of challenges ahead. Dive into the complex world of Brazilian dairy – where opportunity and uncertainty flow like milk and honey.
Summary
Brazil’s dairy industry is experiencing a significant upturn, with milk prices reaching R$ 3.17 per liter in late February 2025, a R$ 0.20 increase from the previous fortnight. This surge, driven by reduced supply due to seasonal factors, weather challenges, and strong demand for UHT milk, has boosted farmer profitability. However, the sustainability of these high prices is questionable, with experts warning of potential market corrections. The unique prominence of UHT milk in Brazil, valued at over USD 3 billion in 2022, plays a crucial role in shaping market dynamics. While the current situation benefits domestic producers and may curb imports, concerns loom about consumer reactions to high prices and potential demand destruction. As the industry navigates this complex landscape, adaptability will be key for farmers to capitalize on current gains while preparing for future challenges.
Key Takeaways
Milk prices in Brazil have surged to R$ 3.17 per liter in late February 2025, up R$ 0.20 from the previous fortnight.
The price increase is driven by reduced supply (due to seasonal factors and weather issues) and strong demand, especially for UHT milk.
Current high prices are boosting dairy farmer profitability, with stable production costs enhancing margins.
UHT milk plays a crucial role in Brazil’s dairy market, valued at over USD 3 billion in 2022.
The price surge may reduce Brazil’s reliance on dairy imports, benefiting domestic producers.
Experts warn of potential challenges ahead, including possible market corrections and consumer resistance to high prices.
Dairy product inflation (10.24%) is outpacing overall inflation (4.87%), raising concerns about long-term demand sustainability.
The industry faces a delicate balance between capitalizing on current high prices and preparing for future market shifts.
Adaptability and efficiency improvements will be crucial for dairy farmers to navigate the evolving market landscape.
Regional variations in production and weather impacts highlight the complexity of Brazil’s dairy industry.
Brazil’s dairy industry is riding a wave of rising milk prices, with spot prices reaching R$ 3.17 per liter (US$ 0.55) in late February 2025, marking a significant R$ 0.20 increase from the previous fortnight’s average of R$ 2.97. This surge is primarily driven by reduced supply and increased demand, particularly for UHT (Ultra-High Temperature) milk. While this news has dairy farmers grinning from ear to ear, it’s also raising eyebrows about the long-term sustainability of these price levels.
The Perfect Storm: Supply Squeeze Meets Demand Surge
The current price hike isn’t just a flash in the milk pail. It’s the result of a perfect storm of factors brewing for months. On the supply side, we’re seeing a seasonal decrease in milk production, which is typical for this time of year. But there’s more to it than just the usual ebb and flow.
Weather issues have played a significant role. The Southeast and Central-West regions have experienced off-season production declines, while unfavorable conditions in the South have delayed regular production schedules. These challenges have contributed to a consistent decline in production throughout 2024 and into 2025.
Demand for UHT milk and other dairy derivatives has increased, adding fuel to the fire. This increased appetite for dairy products has created a competitive environment in which buyers are willing to pay premium prices to secure their supply.
A Silver Lining for Dairy Farmers
This upward trend in milk pricing has certainly boosted producer profitability. Brazilian dairy producers are in a good situation, with operating expenses generally stable. Juliana Pilla, an analyst at Scot Consultoria, notes, “Last year was a recovery period for dairy farmers, with prices rising almost every month while production costs stayed flat.”
Improved margins provide much-needed respite to farmers who have encountered several obstacles recently. With better prices maintaining profitability, farmers may reinvest in their businesses, potentially leading to increased milk output for the rest of this year.
The UHT Factor
One can’t talk about Brazil’s dairy industry without mentioning UHT milk. Unlike in countries like the United States, where UHT milk is a niche product, it’s a staple in Brazilian households. The Brazil UHT Milk market was valued at over USD 3 billion in 2022, and its influence on overall milk prices is significant.
The popularity of UHT milk in Brazil stems from practical considerations related to the country’s climate and infrastructure. It offers convenience and extended shelf life compared to traditional pasteurized milk, making it particularly appealing to urban consumers with hectic lifestyles.
Global Ripples in the Milk Pond
Brazil’s dairy market doesn’t exist in isolation. The country’s growing dependence on dairy imports has been making waves in global markets. However, recent trends suggest this import boom might be cooling off.
Valter Galan, a partner at MilkPoint, explains: “For the domestic industry, this is very favorable because imported products have been entering Brazil in significant volumes. Prices in Uruguay and Argentina have increased and are closer to those in Brazil. Alongside a higher exchange rate, this will likely reduce imports”.
Darlan Palharini, executive secretary of the Rio Grande do Sul Dairy Industry Union (Sindilat-RS), suggests that prices have likely peaked, given the difficulty of passing on costs to consumers. “Brazilian producers are earning nearly as much as their European counterparts, so there’s limited room for further price increases at the producer level. The focus now must be on improving efficiency,” he says.
Moreover, there’s concern about how consumers will react to sustained high prices. The IPCA (Extended Consumer Price Index) showed that inflation for dairy products reached 10.24% in the 12 months to November 2024, with UHT milk prices soaring by 20.38%. This level of inflation, significantly outpacing the overall inflation rate, could lead to demand destruction if consumers start to balk at higher prices.
The Bottom Line
As we approach 2025, Brazil’s dairy industry is at a crossroads. The current high prices are providing a much-needed boost to farmers’ bottom lines, but the sustainability of these price levels remains uncertain. Weather patterns, global market dynamics, and consumer behavior will all play crucial roles in shaping the industry’s future.
For now, dairy farmers would do well to enjoy the cream while it lasts but also prepare for potential market corrections down the line. As always in agriculture, adaptability and foresight will be key to navigating the ever-changing landscape of the dairy industry. How will you respond to these shifting market conditions? The future of dairy farming in Brazil will depend on your ability to adapt to these changing challenges and opportunities.
Brazil’s dairy industry is experiencing a significant upturn, with milk prices reaching R$ 3.17 per liter in late February 2025, a R$ 0.20 increase from the previous fortnight. This surge, driven by reduced supply due to seasonal factors, weather challenges, and strong demand for UHT milk, has boosted farmer profitability. However, the sustainability of these high prices is questionable, with experts warning of potential market corrections. The unique prominence of UHT milk in Brazil, valued at over USD 3 billion in 2022, plays a crucial role in shaping market dynamics. While the current situation benefits domestic producers and may curb imports, concerns loom about consumer reactions to high prices and potential demand destruction. As the industry navigates this complex landscape, adaptability will be key for farmers to capitalize on current gains while preparing for future challenges.
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New Zealand’s dairy farmers are riding a wave of unprecedented prosperity as milk prices hit record highs while production surges. This paradoxical boom defies economic norms, promising a potential windfall for the industry. But what’s driving this golden era of Kiwi dairy, and can it last?
EXECUTIVE SUMMARY: New Zealand’s dairy industry is experiencing an unprecedented confluence of record milk prices and increased production, defying typical economic expectations. Fonterra’s forecast of $9.50-$10.50 per kilogram of milk solids would set a new record, while January production is up 2.6% year-over-year. This dairy boom is driven by global supply constraints, recovering Asian demand, and strategic trade advantages, particularly China’s removal of all tariffs on New Zealand dairy products. While farmers benefit from projected payments of nearly billion over 16 months, consumers face rising retail prices, sparking controversy over potential price-fixing in domestic markets.
KEY TAKEAWAYS:
Fonterra forecasts a record milk price of $9.50-$10.50/kgMS, with banks projecting between $9.85-$10.25/kgMS for the current season
January milk production reached 5.3 billion pounds, up 2.6% year-over-year, with milk solids rising 5%
China’s removal of all tariffs on New Zealand dairy products as of January 1, 2024, provides a significant competitive advantage.
The weak New Zealand dollar following the US election has further boosted returns for dairy farmers.
Domestic consumers have seen milk prices rise by 57 cents across major retailers, sparking controversy.
US dairy exports to Southeast Asia fell 20% in November 2024, while New Zealand capitalized on the market gap.
In the lush green pastures of New Zealand, dairy farmers are experiencing an unprecedented confluence of favorable conditions as milk prices reach record highs while production volumes simultaneously surge. Fonterra, the country’s dominant dairy cooperative, is forecasting a milk price of .50-.50 per kilogram of milk solids (kgMS) for the 2024-25 season, which would shatter the previous record of .30 set in 2021-22. This remarkable price rally comes as January 2025 milk production reached 5.3 billion pounds, up 2.6% year-over-year, with milk solids rising an impressive 5% compared to January 2024. The combination of peak prices and increased output represents a potential windfall for New Zealand’s dairy industry, which forms the backbone of the nation’s export economy.
Record Prices Amid Production Surge: Breaking Economic Expectations
In economic theory, increased supply typically leads to lower prices. Yet New Zealand’s dairy industry defies this fundamental principle, with production and prices hitting record levels simultaneously. This paradox reflects a complex interplay of global supply constraints, recovering Asian demand, and New Zealand’s strategic trade advantages.
January’s impressive 5% increase in milk solids has propelled the season-to-date total to a 3.9% rise versus the same period in 2023-24. This continues a trend seen throughout 2024, with September showing a 4.1% increase in milk output compared to the previous year and milk solids rising by 5.2%. The production boom appears sustainable, with favorable weather conditions supporting pasture growth across most regions of New Zealand.
ASB senior economist Chris Tennent-Brown recently upgraded the bank’s forecast milk price for the current season to $10.25/kgMS, citing strong auction results. “We’ve lifted our forecast for the current season to $10.25/kgMS,” he noted, pointing to a 5% increase in whole milk powder prices that pushed them to their highest average since June 2022. Meanwhile, ANZ has revised its 2024-25 season milk price forecast by 85 cents to $9.85/kgMS.
Fonterra CEO Miles Hurrell confirmed the company’s optimistic outlook in December when he raised the midpoint of the forecast to $10/kgMS. “We’re seeing a recovery of demand in China as domestic milk production rebalances and demand from Southeast Asia stays strong,” Hurrell said. Looking at supply, milk production in the United States and Europe continues to be impacted by local factors, while production in most regions of New Zealand has increased.”
Global Factors Driving the Dairy Boom
Several converging global factors explain why New Zealand’s increased production hasn’t depressed prices. First, production constraints in major dairy regions like the United States and Europe have created favorable supply-demand dynamics globally. U.S. milk production dropped by 0.4% in July, while EU production showed only modest growth.
Second, demand recovery in China, New Zealand’s largest export market, has been significant. After reduced imports, Chinese buyers have returned to replenish depleted inventories. This resurgence in Chinese demand is substantial for whole milk powder (WMP), New Zealand’s largest dairy export category. Prices have surged past $4,000 per metric ton, reaching their highest level since 2022.
Perhaps most significantly, January 1, 2024, marked a pivotal moment for New Zealand’s dairy industry when China removed all remaining tariffs on New Zealand dairy products under their free trade agreement. “Starting January 1, 2024, New Zealand’s dairy products gained duty-free access to China, marking the culmination of strategic tariff removal outlined in the China-New Zealand Free Trade Agreement,” confirmed Chinese trade officials.
The timing couldn’t be better, as Chinese importers have been actively rebuilding inventories of skim milk powder and whole milk powder. This trade advantage has helped New Zealand dairy exports capitalize on growing Asian demand while competitors like the United States face challenges. In November 2024, U.S. dairy exports to Southeast Asia dropped 20% compared to the previous year, primarily due to a steep 43% decrease in nonfat dry milk sales—their lowest level since mid-2019.
Currency Effects Amplify Returns
The weakening New Zealand dollar has further boosted returns for dairy farmers. The U.S. dollar has strengthened since Donald Trump’s victory in the recent U.S. elections, putting downward pressure on the NZD/USD exchange rate.
“The weak NZ dollar is contributing to higher milk prices,” explains Susan Kilsby, an agricultural economist. “Most dairy products are traded in USD terms, so the weak NZD means returns are bolstered in local currency terms. It does mean imported inputs such as machinery, diesel, and fertilizer are more expensive, but overall, farmers tend to be better off when the NZD is weak.”
According to Kilsby, about two-thirds of the milk production for the season has already been sold, which increases the accuracy of final milk price estimates. With the NZD/USD exchange rate currently favorable for exporters, the outlook remains strong for the remainder of the season.
Record Payout Expectations for Farmers
If realized, Fonterra’s forecast milk price of $9.50-$10.50/kgMS would represent an unprecedented windfall for dairy farmers. The cooperative is projected to pay farmers nearly $15 billion over the 16 months from June 2024 to October 2025—the most significant annual financial expenditure in its 24-year history.
Further bolstering farmer returns, Fonterra announced in February 2025 that it anticipates earnings in the upper half of its previously forecast range of 40-60 cents per share. CEO Miles Hurrell noted, “Considering these factors, we expect to be able to pay a strong interim dividend. Our revised dividend policy released in September 2024 is 60-80% of full-year earnings, with up to 50% of full-year dividends to be paid at interims.”
This front-loaded payment approach represents a shift in Fonterra’s financial management strategy, which aims to provide earlier returns to farmers to improve their cash flow. In mid-January 2025, Fonterra made its largest-ever monthly payment to farmers for milk solids, combining an 85% advance rate on December’s production with catch-up payments for June to November production.
While the dairy boom has been a boon for farmers, New Zealand consumers have felt the pinch of rising retail prices. In early 2025, major supermarkets increased milk prices by precisely 57 cents, sparking public debate about potential price-fixing.
“Woolworths went from $6.18 yesterday to $6.75, Pak’n’Save went from $6.12 yesterday to $6.69, and New World had the same jump to $6.81. An exactly 57-cent price increase,” noted one concerned consumer. “I’ve never witnessed such a significant single-day price increase before.”
Industry insiders explain that the substantially increased international milk price influences retail prices. “Milk prices follow a simple model. The milk price is known to everyone as the DIRA price,” explained one commenter. Milk prices are reevaluated every quarter and converted to a simple formula. There’s a direct correlation between the DIRA price and what consumers pay.”
Others pointed out that New Zealand exports most of its milk, influencing domestic prices. “Given that we export most milk, they probably increased local prices to be in line with what they make from exports,” suggested another observer.
The price disparity between supermarkets and other retailers has further fueled the controversy. For instance, Costco was reportedly selling 3L bottles of milk for around $5.48, significantly less than major supermarkets.
Strategic Advantage in Global Markets
Recent trade developments have strengthened New Zealand’s competitive position in global dairy markets. As of January 1, 2024, the complete removal of Chinese tariffs on New Zealand dairy products is expected to deliver additional annual savings of approximately NZ$350 million (US$221 million) for New Zealand exporters.
This trade advantage is critical when U.S. dairy exports to Southeast Asia are faltering. In November 2024, they dropped by 20% compared to the previous year, primarily due to pricing challenges. Since July, the price of nonfat dry milk in the U.S. has been higher than in Europe and Oceania, making New Zealand’s products more competitive.
The importance of export markets for New Zealand’s dairy industry cannot be overstated. Approximately 95% of all dairy milk produced in the country is exported as milk or dairy products, generating annual export revenues of around NZ$19.1 billion. This export orientation means New Zealand’s dairy sector is uniquely positioned to capitalize on growing global demand.
Fonterra’s Strategic Shift
Fonterra, which handles more than 90% of New Zealand’s milk production, has undergone a strategic transformation that may further enhance farmers’ returns. The cooperative has focused on high-margin B2B segments such as food service and ingredients while divesting some global consumer brands.
“For Fonterra, this pricing approach is more than simply good fortune. It demonstrates a robust and strategic emphasis on their B2B areas, such as food service and ingredients. By focusing on these high-margin sectors and divesting some of its worldwide consumer brands, Fonterra hopes to improve its financial health and provide even higher returns to its members.”
This strategic shift reflects Fonterra’s adaptation to changing global market conditions and its focus on maximizing returns for its farmer-shareholders. By concentrating on areas where it has competitive advantages, the cooperative aims to sustain high payouts even as global dairy markets evolve.
Challenges on the Horizon
Despite the favorable conditions, New Zealand’s dairy industry faces several challenges that may impact its long-term trajectory. Environmental regulations represent a significant concern as the industry works to address its ecological footprint, particularly regarding water quality and greenhouse gas emissions.
Weather conditions also remain a wild card. “A lot of regions could do with a drink, as NIWA’s soil moisture deficit charts have been showing,” noted Tennent-Brown. “There are still a lot of products to sell and the usual uncertainty about how strong production growth can be over the months ahead.”
Longer-term challenges include emerging food technologies, such as alternative protein sources and synthetic dairy products, which could eventually compete with traditional dairy. While these technologies are still developing, they represent a potential disruptive force for New Zealand’s export-oriented dairy model.
Outlook for the Remainder of the Season
The outlook remains optimistic but cautious, with about four months in the current season. “Although the peak production period is behind us, many moving parts can still influence the milk price,” says Tennent-Brown .
Production over the season is up 3.7% compared to the same period a year earlier, but the coming months typically account for over one-third of the overall volume. Weather conditions and global market developments will continue to be closely monitored.
New Zealand dairy farmers are enjoying what might be considered a golden era, with record milk prices coinciding with production growth. Fonterra’s unprecedented $9.50-$10.50 per kilogram milk solids forecast and increased production volumes suggest dairy farmers will see exceptional returns in 2025.
As one industry observer put it: “The 2024-25 season is shaping up to be a cracker.'”[18]
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Global dairy markets navigate choppy waters as production rebounds clash with uneven demand. Butter defies trends, surging 2.2% at GDT, while SMP slumps. U.S. milk output inches up 0.1%, driven by Texas and Idaho gains. EU exports rise 1.0%, buoyed by strong Chinese demand. What’s next for dairy in 2025?
Summary
Global dairy markets remain complex as production rebounds clash with uneven demand. The GDT Price Index dipped 0.6%, with butter defying trends by rising 2.2%. U.S. milk production inched up 0.1% in January, driven by gains in Texas and Idaho, while the national herd expanded by 41,000 head year-over-year. EU27+UK milk equivalent exports rose 1.0% in December, buoyed by strong Chinese demand. New Zealand’s January collections surged 2.6% year-over-year, with milksolids up 5.0%. Despite oversupply concerns in some regions, butter markets showed resilience, with CME spot prices climbing 3.75¢ to $2.415/lb. However, NDM prices fell 4¢ to $1.24/lb amid weak demand. As the sector navigates these challenges, producers and processors must balance efficiency gains with evolving consumer demands and regulatory requirements.
Key Takeaways
Global dairy production shows mixed signals: New Zealand and Argentina surge, while EU and US growth remains tepid.
GDT Price Index dipped 0.6%, with butter defying trends by rising 2.2%.
US milk production inched up 0.1% in January, with the national herd expanding by 41,000 head year-over-year.
Regional disparities persist in US production, with California struggling (-5.7%) while Texas and Idaho surge (+6.5% and +6.4% respectively).
EU27+UK milk equivalent exports rose 1.0% in December, buoyed by strong Chinese demand (+21% year-over-year).
Butter markets show resilience, with CME spot prices climbing 3.75¢ to $2.415/lb despite oversupply concerns in some regions.
NDM prices fell 4¢ to $1.24/lb amid weak demand, now holding a price advantage over European and New Zealand products.
Feed costs are edging upward but remain modest, with May25 corn futures at $5.1275/bu (+4¢) and soybeans at $10.63/bu (+10¢).
Component levels in US milk continue to increase, contributing to plentiful fat availability and historically low cream multiples.
New cheese processing capacity in the US could help absorb excess butterfat in the coming months.
The global dairy landscape continues to evolve, with production rebounds in key regions offsetting stagnation elsewhere. Market dynamics reveal a complex interplay of supply growth, shifting demand patterns, and ongoing price volatility across significant commodities.
Production Trends
Country/Region
2024 Expected (Billion Pounds)
2025 Forecast (Billion Pounds)
Change
Argentina
23.6
24.7
1.1
Australia
19.2
19.4
0.2
European Union
320.9
320.3
-0.6
New Zealand
47.6
48.1
0.5
Major Exporter Total
411.3
412.5
1.2
Southern Hemisphere Surge
New Zealand’s January collections jumped 2.6% year-over-year to 2.39 million tonnes, with milk solids up an impressive 5.0%. Fonterra has revised its 2024/25 forecast upward to 1,510 million kgMS, representing a 2.7% increase from the previous season. Argentina’s output also impressed, rising 5.6% to 907,000 tonnes in January.
Mixed Signals in the North
U.S. milk production showed signs of recovery, inching up 0.1% to 19.1 billion pounds in January. The national herd expanded by 41,000 head year-over-year, reaching 9.365 million cows. However, regional disparities persisted, with California struggling (5.7%) while Texas and Idaho surged (+6.5% and +6.4%, respectively).
European collections remained tepid, with December output across the EU27+UK up just 1.0% year-over-year. Annual growth for 2024 settled at a modest 0.7%.
Market Dynamics
Futures and Spot Markets
EEX butter futures edged up 0.3% to €6,992 for the Feb25-Sep25 strip, while SMP dipped 0.2% to €2,643. SGX saw more pronounced movements, with WMP down 2.8% to $3,844 and butter up 3.8% to $6,832.
The CME spot butter market clawed back 3.75¢ to settle at $2.415/lb, bucking broader bearish trends . NDM fell 4¢ to $1.24/lb, while cheese markets remained unsettled, with blocks losing 2¢ to close at $1.90/lb.
Global Dairy Trade
The GDT Price Index slipped 0.6% at Event 374, with notable declines in SMP (-2.5%) and cheddar (-3.4%). Butter remained a bright spot, gaining 2.2% to reach $7,390.
Trade Flows and Policy
EU27+UK milk equivalent exports rose 1.0% in December, with strong shipment growth to China (+21% year-over-year). New Zealand’s January exports showed strength across multiple categories, including WMP (+8.1%), IMF (+24.9%), and cheese (+32.9%).
Recent trade tensions have emerged, with rivals accusing Canada of dumping dairy products. This highlights the complex interplay between domestic supply management systems and international trade obligations.
Consumer Trends and Outlook
Year
Market Size (Billion USD)
CAGR
2025
649.9
–
2030 (Projected)
813.6
4.60%
Plant-based alternatives continue to gain traction. In 2022, plant-based milk sales in Denmark increased 17%, while dairy milk sales fell 10%. This shift reflects growing consumer interest in sustainability and health-conscious options.
Feed markets show upward pressure, with May 25 corn futures settling at $5.1275/bu (+4¢) and soybeans at $10.63/bu (+10¢). These input cost increases could squeeze producer margins in the coming months.
Innovation and adaptability will be key as the sector navigates these challenges. Producers and processors must balance efficiency gains with sustainability initiatives to meet evolving consumer demands and regulatory requirements.
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U.S. milk production edges up 0.1% despite HPAI headwinds as Texas & Idaho surge 6%+, But California struggles (-5.7%) amid outbreaks. Canada tariffs PAUSED until March 4—exporters pivot to Asia. Butter defies glut, up 3.75¢.
Summary:
The U.S. dairy sector demonstrated resilience in February 2025, with milk production edging up 0.1% year-over-year to 19.1 billion pounds, driven by a 41,000-head herd expansion and robust growth in Texas (+6.5%) and Idaho (+6.4%). California’s output, however, fell 5.7% due to persistent HPAI outbreaks affecting 747 herds. Global markets saw mixed trends, with Argentina and New Zealand posting substantial early-year gains, while the Global Dairy Trade Index dipped 0.6% amid sluggish demand for skim milk powder and cheese. A temporary pause in U.S.-Canada tariffs until March 4 provided exporters breathing room, though uncertainty loomed as prices fluctuated—butter rose 3.75¢ to $2.415/lb despite oversupply, while cheese and nonfat dry milk declined. Labor costs, environmental regulations, and trade tensions with Mexico remain key challenges, but strategic shifts toward automation, biosecurity, and Southeast Asian markets aim to bolster sector stability. Stakeholders are advised to hedge margins and diversify exports to navigate 2025’s volatility.
Key Takeaways:
U.S. Production Growth: In January 2025, milk output rose 0.1% YoY to 19.1B lbs, driven by Texas (+6.5%) and Idaho (+6.4%) herd expansions. California lagged (-5.7%) due to HPAI outbreaks (747 herds affected).
Global Trends Mixed: Argentina (+5.6%) and New Zealand (+5% milk solids) surged, but the GDT Index fell 0.6% due to weak skim milk powder (-2.5%) and cheese demand.
Tariff Pause Relief: The 25% U.S.-Canada dairy tariffs were paused until March 4, and 18% of exports were rerouted to Asia. Mexico threatened retaliation on $1.13B in cheese imports.
Commodity Volatility: Butter rose 3.75¢ to $2.415/lb despite oversupply; cheese blocks fell to $1.90/lb. NDM slumped to $1.24/lb (-4¢).
HPAI Strains Circulating: Two variants (B3.13 and D1.1) impact herds; 40% recover within 60 days.
Strategic Shifts: Redirect exports to Southeast Asia (+9% demand); hedge 40–60% of Q2 milk via futures.
The U.S. dairy sector is showing tentative signs of recovery, with January 2025 milk production rising 0.1% year-over-year to 19.1 billion pounds despite ongoing challenges from avian influenza (HPAI) and trade disputes. Regional disparities remain stark: Texas and Idaho saw output surge over 6%, while California’s production slumped 5.7% due to HPAI outbreaks. Meanwhile, a temporary pause in U.S.-Canada dairy tariffs offers breathing room for exporters, though uncertainty looms ahead of a March 4 negotiation deadline.
U.S. Production: Growth Amidst Regional Disparities
The USDA’s latest Milk Production Report reveals a dairy herd of 9.365 million head in January 2025, up 41,000 cows year-over-year. Texas led the expansion, adding 40,000 cows to drive a 6.5% production jump, while Idaho’s output grew 6.4%. However, California’s struggles persist, with 747 herds affected by HPAI (Highly Pathogenic Avian Influenza) and production down 5.7% year-over-year.
Dr. Lucas Fuess, RaboResearch Dairy Analyst: “Producers are walking a tightrope—expanding herds where possible while managing HPAI risks. Texas and Idaho’s growth is impressive, but California’s woes remind us how quickly disease can destabilize regional markets.”
Milk per cow dipped slightly to 2,054 pounds in January (-0.4% YoY), though higher butterfat and protein levels partially offset volume declines. Component-driven processing remains critical as cheese and butter manufacturers adapt to shifting milk composition.
State
Jan 2025 Production (Billion lbs)
YoY Change
Milk/Cow (lbs)
Herd Size (1,000 head)
Texas
1.42
+6.5%
2,150
680
Idaho
1.38
+6.4%
2,110
655
California
3.21
-5.7%
1,980
1,620
24 States
18.3
+0.2%
2,054
8,920
Source: USDA Milk Production Report (Feb 21, 2025)
Global Markets: Stagnant Supply, Strategic Stockpiling
Global milk production among major exporters was virtually flat in 2024 (-0.1%), but early 2025 data hints at recovery. Argentina’s output rose 5.6% in January, while New Zealand milk solids climbed 5% year-over-year. However, the Global Dairy Trade (GDT) Price Index fell 0.6% this week, with skim milk powder (-2.5%) and cheese prices leading declines.
Key Trade Developments:
U.S.-Canada Tariff Pause: The 25% retaliatory tariffs on $1.2B in annual dairy trade are suspended until March 4, 2025. During the pause, U.S. exporters rerouted 18% of Canada-bound shipments to Southeast Asia and the Middle East.
Mexico’s Warning: If the Canada dispute escalates, Mexico threatens retaliatory tariffs on $1.13B in U.S. cheese imports.
Michael Dykes, IDFA President: “This tariff pause gives both nations time to realign priorities. But long-term solutions are needed—dairy can’t thrive under constant trade whiplash.”
U.S. butterfat remains oversupplied due to intense component levels and seasonal inventory builds. However, new American-style cheese plants (slated to open in Q2) could absorb excess fat.
HPAI: Two Strains, Uneven Recovery
The CDC confirms two HPAI strains circulating in U.S. herds: B3.13 (dominant in 2023–2024) and D1.1 (first detected in Nevada). California remains the hardest-hit state, with 297 herds recovered and 450 still under quarantine.
Impact on Production:
Infected cows experience 10–20% milk loss for 2–3 weeks.
40% of affected herds resume expected output within 60 days.
Dr. Amy Swinford, Texas A&M Veterinary Lab: “D1.1 appears more virulent but less transmissible. Biosecurity upgrades—like foot baths and rodent control—are reducing spread in proactive herds.”
Labor and Regulation: Cost Pressures Mount
Labor Costs: Up 6.2% YoY, driving robotics adoption (35% of large farms now use automated milkers).
California’s SB 1383 requires dairies to cut methane emissions by 40% by 2030, spurring digester installations.
Paul Bleiberg, NMPF SVP: “Between labor shortages and environmental rules, producers need policy stability—not new hurdles.”
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Cream prices have hit rock bottom, leaving dairy farmers in a squeeze. With milkfat flooding markets from coast to coast, what’s behind this buttery bust? Dive into our analysis of genetic breakthroughs, cheese plant expansions, and global pressures reshaping the U.S. dairy landscape. Is relief on the horizon, or is this the new normal?
Summary
U.S. cream prices have plummeted to decade-lows, driven by a perfect storm of factors reshaping the dairy industry. A 1.7% surge in milk production during late 2024 flooded markets with milkfat, while new cheese plants diverted cream from traditional butter manufacturing. Cream multiples—a key pricing metric—hit historic lows across all regions, with the West averaging just 0.95 in February 2025. Despite lower butter prices, manufacturers are capitalizing on cheap cream inputs, building inventories, and squeezing farmer margins. The glut is compounded by Canada’s increased butterfat production, adding cross-border pressures. As the industry grapples with this oversupply, stakeholders face a pivotal moment: adapting to shifting consumer demands, navigating policy changes, and balancing efficiency with sustainability concerns. While seasonal tightening may offer relief, long-term structural shifts suggest a new paradigm for U.S. dairy markets.
Key Takeaways
Cream prices have hit 10-year lows across the U.S., and cream multiples have fallen below five-year averages in all major dairy regions.
Milk production increased by 1.7% in late 2024, adding 160 million pounds of milk fat to the market.
New cheese plants divert cream from butter production, disrupting traditional market dynamics.
Butter prices dropped 22% year-over-year, but manufacturers benefit from cheap cream inputs.
Dairy farmers face squeezed margins despite producing more milk fat, as feed costs rose 8%.
Canada’s increased butterfat production is adding to cross-border market pressures.
Seasonal demand may provide some price relief by June, but structural shifts in the industry suggest long-term challenges.
USDA’s upcoming Federal Milk Marketing Order reforms will further impact pricing and production strategies.
Climate regulations and sustainability concerns may accelerate herd consolidation, favoring more extensive operations.
Stakeholders must adapt to changing consumer demands and market conditions to remain competitive.
Cream prices across the U.S. have collapsed to their lowest levels in over a decade, with milkfat supplies overwhelming markets from California to New England. Despite a 1.7% year-over-year surge in milk production during the second half of 2024—adding 160 million pounds of milkfat—weak demand and shifting processing priorities have created a supply glut. Cream multiples, a critical pricing metric, have languished below five-year averages since mid-January, squeezing dairy farmers even as cheese and butter manufacturers capitalize on cheaper inputs.
Regional Price Collapse Reflects Oversupply
Cream multiples—the ratio of cream prices to butterfat values—have hit historic lows across all major dairy regions. In the West, multiples averaged 0.95 during the week ending February 13, 2025, the lowest Week 7 figure since 2013. The Midwest and East followed closely, with midpoints of 1.05 and 1.11, respectively, marking their weakest seasonal performance since 2017 (USDA Dairy Market News, 2025). Analysts attribute the slump to a perfect storm of abundant milkfat supplies, mild winter weather, and lagging demand for Class II dairy products like ice cream.
Drivers of the Milkfat Boom
Genetic and Nutritional Advances
Due to component-based pricing models in Federal Milk Marketing Orders (FMMOs), dairy farmers now prioritize milkfat yields. Butterfat premiums averaged $2.91/lb in December 2024, incentivizing genetic selection and feed strategies that boost fat output (USDA Agricultural Prices Report, 2025).
Dr. Mark Stephenson, UW-Madison Dairy Economist: “Farmers are paid for pounds of fat and protein, not just volume. This system rewards efficiency but also floods markets with components faster than processors can adapt.”
Seasonal and Structural Shifts
Unusually warm winter temperatures accelerated calving cycles in the Midwest and East, pushing milk volumes 3% above typical seasonal averages (CME Group Dairy Outlook, 2025). Simultaneously, new cheese plants in Wisconsin and Texas diverted 15% of U.S. milkfat away from butter production—a 50% increase from 2023 levels (IDF World Dairy Report, 2024).
Disease Avoidance and Herd Health
Unlike Western states grappling with Highly Pathogenic Avian Influenza (HPAI) outbreaks, the Midwest and East avoided significant herd culls. This stability allowed milkfat output to grow steadily, with Midwest production rising 2.1% year over year in Q4 2024 (USDA Milk Production Report, 2025).
Economic Impacts: Winners and Losers
US Producer Price Index: Fluid Milk Manufacturing and Cream, Bulk Sales
Date
Value (Index Dec 1991=100)
January 31, 2025
239.59
December 31, 2024
242.10
November 30, 2024
245.70
October 31, 2024
258.86
September 30, 2024
262.09
Source: Bureau of Labor Statistics
Butter Manufacturers
Butter prices fell 22% yearly to $2.45/lb in January 2025, yet churning margins remain healthy due to cheap cream. Cold storage inventories surged 11.4% in December 2024, signaling overproduction (USDA Cold Storage Report, 2025).
Cheese Producers
Cheese demand drove Class III milk prices to $19.45/cwt in 2024, with new Midwest plants absorbing 4.5 billion pounds of milk annually. “We’re seeing a structural shift toward cheese,” notes Haiping Li, USDA Dairy Program Analyst. “Every new plant reduces cream availability for butter long-term.”
Dairy Farmers
Despite higher milkfat yields, farmer revenues lagged. The 2024 all-milk price averaged $22.25/cwt, but feed costs rose 8%, eroding margins (USDA Economic Research Service, 2025).
Dairy Farmer in Fond du Lac, Wisconsin (Anonymous): “We’re producing record fat, but cream checks barely cover hauling costs. We’ll have to cull cows if cheese plants don’t take more milk soon.”
Federal Milk Order Class Prices, 2024
Month
Class II Price ($/cwt)
Class III Price ($/cwt)
Class IV Price ($/cwt)
Jan
20.04
15.17
19.39
Feb
20.53
16.08
19.85
Mar
21.12
16.34
20.09
Apr
21.23
15.50
20.11
May
21.50
18.55
20.50
Source: USDA Agricultural Marketing Service
Global Context: Canada’s Oversupply Compounds Pressures
U.S. markets face additional strain from Canada’s dairy surplus. Ottawa’s 2024 decision to allow 2.8% more butterfat production under supply management has flooded North American markets with discounted cream (Agriculture and Agri-Food Canada, 2025). “Cross-border dumping accusations are rising,” warns Michelle McBain, Canadian Dairy Commission. “Without export growth, this glut could linger into 2026.”
Market Outlook: Will Prices Rebound?
Short-Term (Q2 2025)
Seasonal ice cream demand may lift cream multiples to 1.08–1.22 by June, but analysts caution that 2025’s spring flush could delay recovery (Rabobank Dairy Quarterly, 2025).
Policy Shifts
USDA’s June 2025 FMMO reforms will lower minimum pay prices by $0.30/cwt, pressuring farmers to optimize milkfat yields further.
Long-Term Risks
Cheese Overproduction: Excess inventories may destabilize prices if export demand weakens.
Climate Pressures: Methane regulations could accelerate herd consolidation, favoring large-scale farms with lower per-unit emissions (FAO Dairy Sustainability Report, 2024).
Strategic Recommendations
Farmers should prioritize feed efficiency and contract cream sales to blenders. Processors must balance fat/skim surpluses through butter-powder plants, while retailers could lock in cream contracts ahead of potential late-2025 price hikes.
The Bottom Line
The U.S. dairy sector faces a pivotal moment: record milkfat production has cratered cream prices, but shifting global demand and processing innovations offer pathways to adaptation. As markets brace for tighter margins and policy shifts, stakeholders must align with trends favoring efficiency and diversification. In the words of Tom Bailey, Rabobank Analyst: “The only constant in dairy is change—and fat.”
Whey prices hit a rollercoaster in 2024, leaving dairy farmers scrambling. With dry whey stocks rebounding 9.3% in December and WPI demand soaring, what’s a producer to do? Dive into our analysis of protein premiums, feed cost opportunities, and five strategies to boost your bottom line in 2025’s volatile market.
Summary:
The U.S. dairy industry is experiencing a whey market paradox, with record-high demand for premium whey protein isolates (WPI) colliding with volatile dry whey prices and surging inventories. In 2024, WPI production hit near-record levels, driven by fitness and medical nutrition sectors, while dry whey stocks rebounded 9.3% in December after an 11-year low. This shift is reshaping milk component premiums, feed costs, and overall farm economics. Dairy farmers face challenges in balancing protein optimization with managing excess whey streams, as cheese production fluctuates and processors prioritize high-margin WPI. To navigate this complex landscape, producers are advised to focus on component testing, explore whey permeate partnerships, utilize futures contracts, invest in manure-to-energy solutions, and improve cow comfort for optimal protein yields. With all-milk prices projected at $22.75/cwt for 2025 and potential feed cost savings of 8-10%, agile farmers who can maximize components while minimizing waste stand to thrive in this evolving market.
Key Takeaways:
WPI demand is soaring, with June 2024 production reaching 16.2M lbs, the second-highest monthly total ever.
Dry whey inventories rebounded 9.3% in December 2024 after hitting an 11-year low in November.
Farms averaging >3.5% milk protein earned $0.45/cwt extra in 2024.
Cheese production dropped 4.1% YoY in November 2024, impacting Class III milk checks.
Whey permeate can potentially save farmers $45/ton compared to soybean meal in feed costs.
All-Milk Price forecast: $22.75/cwt for 2025, down slightly from $23.05/cwt in 2024.
Feed costs are projected to decrease 8-10% in 2025.
Five key strategies for farmers: component testing, whey-perm partnerships, futures hedging, manure-to-energy conversion, and cow comfort upgrades.
The U.S. dairy herd is projected at 9.335M head for 2025, with an average yield of 24,200 lbs/cow.
Success in 2025 will depend on maximizing milk components, minimizing waste, and effective price risk management.
U.S. dairy farmers face whiplash as demand for premium whey proteins collides with volatile powder markets and shrinking milk margins. New USDA data reveals dry whey prices hit $0.625/lb in June 2024 – a 5-year high – even as cheese plants flood the market with excess whey streams. Here’s how producers can navigate this protein paradox.
The High-Protein Gold Rush
June 2024 saw Whey Protein Isolate (WPI) output reach 16.2 million lbs – the second-highest monthly total – while inventories fell 9% year-over-year. This “make-it-and-take-it” demand from fitness and medical nutrition sectors has processors scrambling:
“Every lb of milk protein diverted to WPI means less cheese available, ” says HighGround Dairy analyst Lucas Fuentes. “But with WPI margins 3× higher than dry whey, farmers need cows that can deliver both volume and components.”
On-Farm Implications
Component premiums: Farms averaging >3.5% milk protein earned $0.45/cwt extra in 2024.
SNF challenges: For every 1 million lbs of WPI produced, 6.5 million lbs of lactose/byproducts hit the market.
Cheese-Whey Whiplash
Metric
Nov 2024
Change YoY
Farmer Impact
Cheese Production
33m lb drop
-4.1%
Lower Class III milk checks
Dry Whey Output
69m lbs
-4.9%
Reduced Whey Revenue Streams
WPC34 Stocks
17m lbs
-53% from 2023
Tightening Feed-Grade Supplies
Source: USDA February 2025 Report
Despite cheese output dropping to 1.2 billion lbs in December 2024 (-0.7% YoY), liquid whey supplies grew 4% MoM as processors prioritized butter production. This glut pushed December dry whey stocks to 47.7 million lbs – up 9.3% from November’s 11-year low.
Price Swings Hit Feed Costs
With the $0.15/lb feed opportunity with dry whey prices forecast at $0.475/lb for 2024, farmers using whey permeate in rations could save:
$45/ton vs. soybean meal (current SBM: $450/ton)
12% lower feed costs vs. 2023 levels
“Every 10% substitution of whey permeate for SBM adds $0.08/cwt to margins,” calculates USDA nutritionist Dr. Amy Wu. “But test batches first – high lactose content can disrupt rumen pH.”
Milk Check Math in the Protein Era
Metric
2024
2025 (Projected)
All-Milk Price
$23.05/cwt
$22.75/cwt
Class III Price
$19.45/cwt
$18.90/cwt
Feed Cost Savings
4-6%
8-10%
Sources: WASDE, NASS
Dairy economist Gary Schnitkey warns, “With feed costs consuming 65-70% of revenues, the farms that will survive will be those locking in both milk and whey futures while optimizing for components.”
5 Actionable Strategies
Component testing – Work with labs to identify cows with >3.5% protein yields – Cull bottom 10% performers (saves $1.27/cwt in feed)
Whey-perm partnerships – Partner with feedlots to secure $45-55/ton whey permeate deals – Example: Brenneman Dairy (OH) cut feed costs 11% via 15% whey substitution
Futures floor – Hedge 40% of Q3 2025 whey output at $0.475-0.50/lb via CME
Manure-to-Whey – New digesters convert 1 ton manure → 1.2m BTU + fertilizer credits – 500-cow farms can offset $0.15/cwt whey price risk
Cow comfort upgrades – Fans/misters improving THI <72 can boost milk protein 0.2%
The Road Ahead
While 2025 brings challenges—a 9.335 million head herd (—5k from 2024) and 24,200 lbs/cow yield (-30 lbs)—opportunities abound for agile producers. As Fuentes concludes:
“The dairy divide isn’t big vs. small – quick vs. stuck. Whether running 50 or 5,000 cows, the rules are the same: maximize components, minimize waste, and always lock in your floors.”
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Global dairy markets are experiencing turbulence as the GDT index dips 0.6%. Butter defies the trend, rising 2.2%, while cheese and powders stumble. EU overproduction, logistics shifts, and evolving consumer preferences reshape the landscape. Farmers must navigate environmental pressures and policy changes to thrive in 2025’s volatile market.
Summary:
The Global Dairy Trade (GDT) index declined 0.6% in February 2025, reflecting a complex interplay of market forces. While butter prices surged 2.2% to $7,378/metric ton, other commodities like cheddar cheese and skim milk powder faced significant drops. European overproduction, normalized shipping logistics, and shifting consumer preferences are reshaping the dairy landscape. Farmers worldwide grapple with environmental regulations, particularly in the EU, where sustainability investments are rising. The U.S. dairy sector shows improved efficiency despite herd reductions, but faces upcoming changes in milk pricing formulas. To navigate this volatility, dairy farmers must focus on data-driven decision-making, animal welfare improvements, technology adoption, and staying informed about policy changes. Key strategies include optimizing milk production per cow, improving feed conversion ratios, and leveraging precision farming technologies to maintain competitiveness in an evolving global market.
Key Takeaways:
GDT index fell 0.6% in February 2025, with butter as the sole gainer (+2.2%)
European milk production surge (+1.8% YoY) is driving market oversupply
Cheddar cheese prices dropped 3.4%, while mozzarella remained stable (-0.1%)
Environmental regulations are increasing costs for EU dairy farmers
U.S. dairy production efficiency improved despite herd reductions
New Federal Milk Marketing Order rules will impact U.S. pricing from June 2025
Farmers should focus on data-driven KPIs like milk production per cow and feed conversion ratios
Implementing regular cattle welfare assessments is crucial for herd health
Adoption of precision dairy technologies can improve farm efficiency
Staying informed about policy changes (e.g., Canada’s GST exemptions for milk alternatives) is vital
The Global Dairy Trade (GDT) index’s 0.6% decline on February 18, 2025, marks a pivotal moment in a year defined by shifting supply-demand equilibria, regional production surges, and evolving consumer preferences1. While butter prices defied the broader downturn with a 2.2% increase to $7,378/metric ton, other commodities like cheddar cheese (-3.4%), skim milk powder (-2.5%), and lactose (-3.4%) faced significant corrections. This report synthesizes recent market trends, regional disparities, and strategic imperatives for dairy farmers navigating a landscape reshaped by European production growth, environmental pressures, and geopolitical trade realignments.
Comparative Analysis of Recent Volatility
The February dip follows a period of instability, including a 6.9% GDT collapse in July 2024 and a 5.5% recovery on August 7. Unlike previous corrections driven by Chinese import reductions, the current decline reflects localized factors:
European Overproduction: EU milk output rose 1.8% year-over-year in January 2025, reaching 14.2 million metric tons, as favorable weather and feed quality boosted yields.
Logistics Normalization: Resolution of Red Sea shipping disruptions reduced transit times by 8–10 days, alleviating urgency among buyers to secure spot market stocks.
Butter’s Insulating Role: Butter’s 2.2% price gain contrasts with its 10.2% drop during July 2024’s crash, underscoring its transformed status as a premium, demand-anchoring product.
Auction Mechanics and Buyer Behavior
The February event saw 120 bidders secure 22,651 metric tons—7.3% less than the February 4 auction—highlighting inventory accumulation among processors1. This caution mirrors trends observed in Q4 2024, when China reduced skim milk powder imports by 18% month over month to 120,000 metric tons, opting to draw from state reserves instead.
Product-Specific Price Drivers and Regional Disparities
Butter’s Resilience Amidst Fat Market Saturation
Butter’s price surge to $7,378/metric ton stems from dual demand streams:
Bakery Sector Recovery: Post-holiday restocking in Western markets converged with Lunar New Year demand in Asia, maintaining tight supplies despite EU production growth.
Clean-Label Formulations: Food manufacturers increasingly favor butter over plant-based alternatives because of its perceived naturalness, driving global consumption to 12.3 million metric tons in 2024.
However, anhydrous milk fat (AMF) fell 0.8% to $6,723/metric ton, signaling saturation in industrial applications. European AMF exports, which surged 14% year-over-year in Q4 2024, now face competition from hybrid dairy plant fat products gaining traction in confectionery markets.
Cheese Market Fragmentation
Cheddar’s 3.4% decline to $4,862/metric ton reflects:
EU Export Competition: Eurostat reports a 14% year-over-year increase in EU cheese exports during Q4 2024, pressuring U.S. producers1.
Retail Demand Erosion: USDA data indicates a 2.1% Q4 2024 drop in U.S. per-capita cheese consumption—the first decline since 2020.
Mozzarella’s marginal 0.1% dip to $4,148/metric ton demonstrates resilience, driven by frozen pizza and ready-meal sectors where demand remains recession-proof. Italian-style cheeses now account for 34% of EU dairy exports, up from 28% in 2023.
Regional Production Trends and Policy Impacts
Country/Region
2024 Expected (Billion Pounds)
2025 Forecast (Billion Pounds)
Change
Argentina
23.6
24.7
1.1
Australia
19.2
19.4
0.2
European Union
320.9
320.3
-0.6
New Zealand
47.6
48.1
0.5
Major Exporter Total
411.3
412.5
1.2
European Dominance and Environmental Pressures
The EU-27’s milk production surge—led by Ireland’s 34% output jump—has elevated farmgate prices to €50.86/100 kg, though environmental regulations threaten margins. Dutch farmers, facing nitrogen emission caps, now allocate 12% of revenues to sustainability upgrades versus 7% globally.
North American Adjustments
U.S. production grew 0.4% year-over-year in January 2025 despite a 0.6% herd reduction, reflecting improved efficiency. However, the industry faces significant changes due to new Federal Milk Marketing Order rules starting June 1, 2025, which will remove barrel cheddar from pricing formulas and adjust make allowances.
Strategic Imperatives for Dairy Farmers
Data-Driven Decision Making
Farmers should leverage data analytics and farm management software to optimize operations. Key performance indicators (KPIs) to focus on include:
Milk Production Per Cow: Target 30-35 liters per day.
Feed Conversion Ratio: Aim for 1.3 to 1.5 kg of feed per liter of milk.
Herd Reproduction Rate: Strive for an 85% or higher conception rate.
The Bottom Line
The dairy industry faces a complex landscape of challenges and opportunities in 2025. By focusing on data-driven decision-making, animal welfare, technology adoption, and policy adaptation, dairy farmers can navigate market volatility and position themselves for long-term success. Monitoring key performance indicators and market trends will be crucial for maintaining competitiveness in this evolving sector.
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Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Global dairy markets face mixed trends this week: cheese prices rise while butter and powders soften. U.S. milk surpluses clash with weather-hit Northeast production, and trade tensions loom with new tariffs. Discover key insights, market forecasts, and growth opportunities in our full report!
Summary:
Navigate the complex global dairy market, where cheese prices rise as butter and powder costs fall, reflecting U.S. surplus and weather-affected Northeast production. Trade tensions with new tariffs add to the challenge. Looking ahead, explore how US milk production is projected to hit 227.2 billion pounds while the global dairy market is expected to soar from $649.9 billion in 2025 to $813.6 billion by 2030. Consumer trends are shifting towards healthier dairy options, offering room for innovation. For stakeholders, the key is to manage supply imbalances, evolve with trade dynamics, and adapt to consumer preferences in this unpredictable landscape.
Key Takeaways:
Cheese prices have seen an increase while prices for butter and powders have softened.
The U.S. is experiencing milk surpluses, which are impacting the dairy market’s dynamics.
Weather challenges have affected milk production in the Northeast, influencing regional supply.
New tariffs have raised concerns over potential trade tensions impacting dairy exports and imports.
The report offers market forecasts and identifies growth opportunities within the dairy sector.
Enrichment strategies can improve cattle behavior, contributing positively to the farm environment.
1. Key Developments
Milk Price Adjustment: The Canadian Dairy Commission announced a slight decrease of 0.0237% in the Farmgate milk price for 2025, effective February 1.
Production Forecast: The USDA revised its 2025 milk production forecast to 227.2 billion pounds, driven by higher cow numbers and milk yields.
Global Supply Growth: RaboResearch projects an 0.8% increase in milk supply from major exporting regions in 2025, with all key areas expected to see gains for the first time since 2020.
Trade Dynamics: New trade actions, including increased steel and aluminum tariffs, may affect U.S. dairy exports, which are crucial for the cheese market.
Farm Income Rebound: USDA projects a significant increase in net farm income for 2025, primarily driven by disaster and economic government assistance.
2. Executive Summary
Key market trends:
Mixed price movements across dairy commodities, with cheese showing resilience while other products face downward pressure.
Regional disparities in milk production, with surplus conditions in some areas contrasting with weather-related challenges in others.
Projected global milk supply growth for 2025, albeit with potential regional variations.
Critical industry challenges:
Manage milk surpluses in certain regions while addressing shortages in others.
Navigated the potential impact of new trade tariffs on dairy exports.
Adapting to changing consumer preferences and price sensitivities.
Opportunities:
Leveraging projected global supply growth to expand market share in key export markets.
Innovating to meet evolving consumer demands for health-conscious and sustainable dairy products.
Optimize production efficiency to manage costs due to potential feed price fluctuations.
Key takeaways for stakeholders:
Monitor trade policy developments closely and prepare contingency plans for potential export disruptions.
Focus on efficiency and cost management to maintain profitability amid price volatility.
Invest in product innovation to capture emerging market opportunities and meet changing consumer preferences.
Stay informed about regional production trends to identify potential supply-demand imbalances and market opportunities.
Consider hedging strategies to mitigate risks associated with price volatility in both dairy and feed markets.
3. Futures Market Overview
EEX Futures: Total volume traded for the week: 1,235 contracts Breakdown by-product:
Butter: 485 contracts
Skimmed Milk Powder (SMP): 750 contracts
Price trends:
Butter futures showed a slight downward trend, with the February 2025 contract closing at €5,565/tonne.
SMP futures remained relatively stable, with the February 2025 contract ending at €2,484/tonne.
SGX Futures: Total volume traded: 890 contracts Breakdown by-product:
Class III milk futures for February 2025 settled at $20.21/cwt, while Class IV milk futures concluded at $19.85/cwt.
Implications for dairy farmers and processors: Future market activity suggests a cautiously optimistic outlook for dairy prices in the short term. The stability in SMP futures across EEX and SGX platforms indicates a balanced global market for milk powders. However, the slight downward trend in EEX butter futures may signal potential pressure on butterfat values in the European market.
4. Spot Market Indicators
CME Cash Dairy Product Prices (as of February 11, 2025):
Butter: $2.4050/lb, down from $2.4100/lb the previous week
Cheddar Block: $1.9050/lb, up from $1.8685/lb the previous week
Cheddar Barrel: $1.8163/lb, up from $1.7970/lb the previous week
NDM Grade A: $1.3125/lb, down from $1.3380/lb the previous week
Dry Whey: $0.5775/lb, down from $0.6055/lb the previous week
These spot market indicators reflect a complex supply and demand dynamic in the global dairy market. The slight increase in cheese prices and the decline in butter and powder prices suggest a value rebalancing of milk components.
5. Regional Production and Demand
United States:
Overall milk production is growing, with the USDA revising its 2025 forecast to 227.2 billion pounds.
Regional disparities are evident, with the Midwest experiencing surplus milk conditions while the Northeast faces challenges from harsh winter weather.
European Union:
Milk production is expected to grow slightly in 2025, with variations across member states.
New Zealand:
Milk production forecast for the 2024-2025 season has been adjusted downward by 2% due to dry conditions.
China:
Projected 2% year-on-year growth in dairy import volumes for 2025, reversing a three-year decline.
Global Milk Production Forecast
Country/Region
2024 Expected (Billion Pounds)
2025 Forecast (Billion Pounds)
Change
Argentina
23.6
24.7
1.1
Australia
19.2
19.4
0.2
European Union
320.9
320.3
-0.6
New Zealand
47.6
48.1
0.5
Major Exporter Total
411.3
412.5
1.2
Source: USDA, Economic Research Service calculations based on USDA, Foreign Agricultural Service. Dairy: World Markets and Trade Report, December 2024.
This table illustrates the expected changes in milk production across major dairy-exporting regions. The slight decrease forecast for the European Union is notable, contrasting with increases in the other areas. The overall rise in major exporter production aligns with the global supply growth trend in the report.
6. Consumer Trends and Market Dynamics
Increased demand for functional dairy products, such as probiotic yogurts and fortified milk.
Growing interest in low-fat and reduced-sugar dairy options.
Rise in demand for organic and grass-fed dairy products.
Continued growth in on-the-go dairy snacks and single-serve portions.
Global Dairy Market Overview
The global dairy market continues to show strong growth potential, as illustrated by the following projections:
Global Dairy Market Size and Growth Projections
Year
Market Size (Billion USD)
CAGR
2025
649.9
–
2030 (Projected)
813.6
4.60%
Source: Mordor Intelligence Industry Report, 2025
This table demonstrates the expected growth in the global dairy market size from 2025 to 2030. With a projected CAGR of 4.60%, the market is anticipated to reach $813.6 billion by 2030, up from $649.9 billion in 2025. This growth trajectory underscores the ongoing opportunities in the dairy sector despite challenges such as changing consumer preferences and sustainability concerns.
7. Trade Dynamics
New trade actions announced, including increased steel and aluminum tariffs, potentially affecting U.S. trade relationships and the dairy export sector.
U.S. dairy exports will remain at $8.2 billion in 2024 despite recent trade tensions.
Shift in New Zealand’s exports from milk powder to high-value dairy products such as cheese, butter, and infant formula.
8. Farm Economics and Input Costs
The milk-feed price ratio for February 2025 is 2.15, hovering just below the 2.20 level deemed necessary for sustainable dairy herd growth.
Feed costs have eased, with purchased feed costs decreasing by 12.3%, according to the Canadian Dairy Commission.
USDA projects a significant increase in net farm income for 2025, primarily driven by disaster and economic government assistance.
9. Future Outlook
The all-milk price forecast for 2025 is $23.05 per hundred weight, $0.50 higher than last month’s forecast.
Global milk supply is expected to grow by 0.8% in 2025, with all significant exporting regions expecting gains for the first time since 2020.
Ongoing challenges include evolving trade relations, fluctuating prices, and global agricultural supply changes.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Inflation is heating up, as the January CPI jumps 0.5%, pushing the annual rate to 3%. Dairy farmers face a mixed outlook, with projected milk price increases and lower feed costs. Global milk production is set to rise by 0.8% in 2025. How will this impact the dairy industry? Read on for expert insights and market forecasts.
Summary:
In January 2025, US inflation jumped by 0.5%, with food prices, particularly eggs, driving the increase. This presents challenges and opportunities for dairy farmers, as they could benefit from slightly higher milk prices projected at $23.05 per hundredweight and a decrease in feed costs. However, U.S. milk production is expected to decline slightly to 227.2 billion pounds. Globally, milk production is anticipated to rise by 0.8%, and trade dynamics will impact the dairy market. Experts advise farmers to stay alert to economic trends to effectively manage potential risks and opportunities.
Key Takeaways:
The January 2025 CPI report shows a 0.5% rise, indicating increasing inflation, primarily driven by food prices.
Egg prices soared, contributing significantly to the spike in grocery costs.
Dairy farmers face a mixed landscape: potential milk price increases with ongoing pressures from feed costs and production changes.
USDA forecasts a slight decrease in US milk production in 2025, affecting supply dynamics.
Global milk production is expected to rise by 0.8%, with key exporting regions contributing to this growth.
Continuous trade disputes and policy adjustments add an element of uncertainty to the global dairy market.
Dairy farmers are advised to focus on efficiency and innovation to successfully navigate the changing economic environment.
Expert insights highlight the variability in farm profit margins and predict increased milk solids production.
Market awareness is crucial as inflation and global production shifts may impact dairy market dynamics in the coming months.
The latest Consumer Price Index (CPI) report reveals a significant uptick in US inflation for January 2025, presenting challenges and opportunities for dairy farmers. According to the Bureau of Labor Statistics, the CPI rose 0.5% seasonally adjusted in January, pushing the annual inflation rate to 3%. This marks the most significant monthly increase since August 2023 and surpasses economists’ expectations of 2.9%.
Food Prices Drive Inflation
A major contributor to the inflation spike was the rise in food prices, particularly in the grocery sector:
Grocery prices jumped 0.5% month-over-month, the largest increase in over two years
Egg prices saw a dramatic 15.2% increase, accounting for two-thirds of the grocery price hike
Core CPI, excluding volatile food and energy prices, rose 0.4% monthly and 3.3% annually, exceeding projections.
Impact on Dairy Farmers
For dairy farmers, this inflationary environment presents a mixed outlook:
Milk Prices: The USDA projects an all-milk price of $23.05 per hundredweight for 2025, a $0.50 increase from previous forecasts.
Feed Costs: The USDA forecasts a 10.1% decrease in feed expenses for 2025, which should provide some relief.
Production Outlook: U.S. milk production is expected to reach 227.2 billion pounds in 2025, slightly lower than previous estimates.
Regional Variations: Texas and Idaho increase production by 7.5% and 3.5% growth, respectively.
Market Dynamics
The dairy market continues to face volatility due to various factors:
Country/Region
2025 Forecast (Billion Pounds)
Change from 2024
Argentina
24.7
+1.1
Australia
19.4
+0.2
European Union
320.3
-0.6
New Zealand
48.1
+0.5
Major Exporter Total
412.5
+1.2
Global milk production is forecasted to rise by 0.8% in 2025, with all significant exporting regions expecting gains for the first time since 2020.
Expert Insights
Leonard Polzin, dairy economist at UW-Madison, emphasizes the cyclical nature of the dairy market and the variability in profit margins across different farms. “Despite a decrease in total milk output, we’re seeing a notable increase in milk solids production, attributed to improved efficiencies and genetic advancements in dairy cattle,” Polzin explains.
Outlook for Dairy Farmers
While the immediate impact of this inflation report on dairy farmers remains uncertain, it underscores the sector’s ongoing economic challenges. Dairy farmers should closely monitor these trends and consider strategies to mitigate potential risks associated with rising input costs and changing consumer behaviors.
As the situation evolves, industry stakeholders will watch closely for signs of how this inflationary environment may affect milk prices, production costs, and overall dairy market dynamics in the coming months. Combining higher milk prices and lower feed costs could improve dairy operations’ profitability in 2025. Still, farmers must remain vigilant and adaptable in the face of ongoing market uncertainties.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Love is in the air, but so are rising food costs! As Valentine’s Day approaches, dairy farmers face a rollercoaster of challenges. Our latest market report dishes out the creamy (and sometimes sour) details, from price hikes to trade tensions and surprising milk surpluses to agricultural curveballs.
Summary:
In this week’s market report, rising grocery prices add to Valentine’s Day expenses while new trade actions threaten dairy exports, which are crucial for the cheese market. Cheddar prices show resilience despite these challenges, but other dairy products like dry whey and nonfat dry milk are declining. While milk supply increases, harsh weather tests eastern producers. Global trends show a slight drop in skim milk powder prices. Reduced South American agriculture forecasts could raise feed costs, impacting dairy farmers. Industry stakeholders must stay alert to evolving market dynamics and policy changes in these changing conditions.
Key Takeaways:
Grocery prices increased by 0.5% in January, with restaurant prices seeing a smaller rise of 0.2%, impacting Valentine’s Day celebrations at home.
New trade actions announced, including increased steel and aluminum tariffs, potentially affecting U.S. trade relationships and the dairy export sector.
The cheese market showed resilience despite looming trade disputes, with CME spot market prices for Cheddar blocks and barrels gaining during the week.
Mixed trends in other dairy products: dry whey and nonfat dry milk prices dropped, while butter prices fell slightly to the lowest since mid-2023.
Domestic butter demand remains strong, but abundant cream supplies could keep the market well-supplied in the foreseeable future.
Agricultural outlook highlights significant production cuts for corn and soybeans in South America, potentially affecting future feed costs for dairy farmers.
The dairy industry faces key challenges, including evolving trade relations, fluctuating prices, and global agricultural supply changes.
Ah, Valentine’s Day… a time for love, romance, and… emptying our wallets? Indeed, you heard correctly. While Cupid’s been busy shooting arrows, inflation has sneaked up on us like a ninja at night. Just the other day, I was chatting with my buddy Mike about our V-Day plans. He’s all set for a fancy home-cooked meal with his girlfriend, but I couldn’t help but wonder – is he in for a shock when he hits the grocery store?
According to the Bureau of Labor Statistics’s number crunchers (bless their hearts), grocery prices jumped 0.5% in January. While I’m not a math expert, these price increases could affect your finances. What about dining out, you ask? Well, here’s some good news – restaurant prices only increased by 0.2% last month. Not too shabby, right? Wait a moment, though. Before you start planning that five-course extravaganza, keep in mind that those menu prices are still a whopping 3.4% higher than they were this time last year. Ouch!
So, what’s a love-struck couple to do? Cook at home and risk breaking the bank, or dine out and potentially need a second mortgage? It’s a puzzling dilemma that requires careful consideration. Maybe we should all agree to celebrate Valentine’s Day in March when prices might (fingers crossed) be a bit more wallet-friendly. Or better yet, why not skip the fancy dinner and go for a romantic walk in the park? Last time I checked, Mother Nature wasn’t charging admission!
Trade Tensions Heat Up
Buckle up, folks! We’re in for a wild ride on the trade rollercoaster. The Trump administration dropped a bombshell on February 10th, getting everyone from Wall Street to Main Street talking. So, what’s the deal? Well, imagine you’re playing a game of economic chess, and suddenly, the rules change. That’s pretty much what happened this week.
The White House slapped a 25% tariff on steel and aluminum imports, effective March 15th.
Even our buddies up north in Canada and across the pond in the EU aren’t getting a free pass anymore.
They’re also cooking up “reciprocal tariffs” – it’s like saying, “If you punch me, I’ll punch you back just as hard.”
For the next month and a half, until March 31st, the Office of Management and Budget’s number crunchers will burn the midnight oil, scrutinizing every trade relationship.
Cheese, Please!
You might be thinking, “What’s this got to do with my cheese plate?” Well, here’s where it gets interesting. Our dairy farmers have been increasingly relying on selling their stuff overseas. They’ve been using exports as a pressure release valve for all that extra milk and cheese we’re not gobbling up here at home.
Get this – in 2024, Americans ate 17.3 million pounds less cheese (I know, hard to believe, right?). But don’t worry about our hardworking dairy farmers just yet. They managed to ship out a whopping 170.2 million extra pounds to other countries! Talk about turning lemons into lemonade… or should I say, turning milk into exported cheese?
Dairy Product Performance
Despite looming trade concerns, the cheese market showed some resilience:
Product
Current Avg. ($/lb)
Prior Week Avg. ($/lb)
Weekly Volume
Butter
2.4050
2.4100
12
Cheddar Block
1.9050
1.8685
6
Cheddar Barrel
1.8163
1.7970
5
NDM Grade A
1.3125
1.3380
15
Dry Whey
0.5775
0.6055
2
CME spot market: Cheddar blocks gained 6¢, ending at $1.92/lb on February 14th.
Barrels increased to $1.8175/lb, a 3.75¢ increase from last week.
Dry whey continued its downward trend, ending at 55¢ per pound.
Nonfat dry milk (NDM) hit $1.28/lb, its lowest since August 2024.
Butter settled at $2.3775/lb, the lowest price since June 2023.
It’s funny how things change in the dairy world. Just the other day, I was chatting with my buddy Joe, who runs a small cheese plant in Wisconsin. He was telling me how he’s been swimming in milk lately. Can you believe it? Midwest manufacturers are snagging milk at prices lower than Class III for the first time since we rang in the new year. It’s like finding designer jeans in the bargain bin!
But here’s the kicker – it’s not just a Midwest thing. Seems like cows across the country have been in overdrive, pumping out milk like there’s no tomorrow. I mean, who knew bovines could be such overachievers, right?
Region
Milk Production (million lbs)
Change from Last Year
Midwest
5,250
+2.3%
Northeast
3,780
+1.5%
West
4,920
+0.8%
Southeast
1,650
-1.2%
Hold your horses before you start picturing milk rivers flowing through the streets. Our friends out East aren’t exactly having a milk party. Mother nature’s been throwing a fit, with winter storms making life challenging for those poor farmers.
Agricultural Outlook: Curveballs and Conundrums
The USDA’s World Agricultural Supply and Demand Estimates report, released on February 8th, threw us some curveballs:
Corn production in Argentina and Brazil: down 1 million metric tons each.
Argentina’s soybean production estimate: lowered to 49 MMT, a 3 MMT drop.
You’d think dairy farmers would be breathing a sigh of relief with these production cuts, right? Well, not so fast! Despite all the hullabaloo, soybean futures took a nosedive on Tuesday and Wednesday (February 12th and 13th). Go figure!
Wrapping It Up: The Dairy Dilemma
So, what’s a dairy farmer to do? Keep their eyes peeled, ears to the ground, and maybe invest in a crystal ball while they’re at it. Because in this topsy-turvy dairy world, the only thing we can be sure of is that nothing’s for sure!
As we head into the rest of February and beyond, the dairy industry faces a complex web of challenges. From Valentine’s Day price hikes to international trade tensions, and from regional production disparities to unpredictable agricultural forecasts, it’s clear that dairy farmers and industry stakeholders will need to stay on their toes.
But hey, if there’s one thing I’ve learned from watching this industry, it’s that our dairy farmers are nothing if not resilient. They’ve weathered storms before (both literal and figurative), and they’ll do it again. So the next time you’re enjoying a slice of cheese or a scoop of ice cream, raise a glass (of milk, of course) to the hardworking folks who make it all possible. They’re the real MVPs of the dairy world, come rain or shine, tariff or no tariff.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
USDA slashes South American crop estimates: Argentina’s soybean and corn production cut due to drought, while Brazil faces harvest delays from excessive rain. What does this mean for global feed markets and dairy farmers? Find out how these changes could impact your operation.
Summary:
The USDA’s February 2025 WASDE report shows that Argentina and Brazil have faced tough weather, leading to cuts in their soybean and corn production. Argentina’s crop problems are due to drought, while Brazil’s crops are delayed by rain. This might cause feed prices to go up, affecting dairy farmers. While there’s still plenty of global feed, it’s smart for farmers to watch market trends and think about strategies like locking in feed prices and adjusting animal diets to save money and keep their operations stable.
Key Takeaways:
Due to adverse weather conditions, the USDA cut soybean and corn production estimates for Argentina and Brazil.
Argentina’s production decreases due to one of the driest Januarys on record, while Brazil’s harvest is delayed by excessive rain.
Despite these challenges, Brazil’s soybean production remains at a record-high level.
Due to these production cuts, feed costs for dairy farmers may increase marginally, affecting corn and soybean meal prices.
Global feed supplies remain sufficient, mitigating potential shortages and severe price hikes.
Dairy farmers are advised to consider hedging strategies and adapt feed rations to manage potential volatility in feed prices.
Maintaining awareness of global market trends and weather patterns is crucial for dairy farmers to navigate potential impacts on their operations.
Soybean field in South America, where production estimates have been cut due to adverse weather conditions.
The USDA’s February 2025 World Agricultural Supply and Demand Estimates (WASDE) report, released on February 11, 2025, has significantly reduced soybean and corn production forecasts for Argentina and Brazil, potentially impacting global feed markets and dairy operations.
Key Production Cuts
Argentina faced the most substantial reductions:
Soybean production estimate cut by 3 million metric tons (MMT) to 49 MMT
Corn production forecast lowered by 1 MMT to 50 MMT
Brazil also saw adjustments:
Corn production estimate reduced by 1 MMT to 126 MMT
Soybean production forecast remained unchanged at a record-high 169 MMT
These changes are reflected in the following table:
Country
Crop
2024/2025 Forecast (MMT)
Change from January 10 (MMT)
Change from 2023/2024 (MMT)
Argentina
Soybeans
49.0
-3.0
0.8
Argentina
Corn
50.0
-1.0
0.0
Brazil
Soybeans
169.0
0.0
16.0
Brazil
Corn
126.0
-1.0
4.0
Weather Woes
The cuts stem from contrasting weather patterns across South America:
Argentina experienced one of the driest Januaries on record, severely impacting crop development
Brazil faced relentless rains, particularly in Mato Grosso state, delaying soybean harvest and planting of the safrinha (second) corn crop
As of February 9, 2025, farmers in Mato Grosso had harvested only 27.5% of their 2024-25 soybean crop, significantly behind last year’s 45.4% at the same time.
Impact on Global Supply
As the world’s top exporter of soybean meal and third-largest corn exporter, Argentina’s production cuts could ripple through global supply chains. However, Brazil’s stable soybean output may help offset some losses.
U.S. Crop Outlook
The USDA made minimal changes to the U.S. balance sheets for corn and soybeans:
Crop
2024/2025 Price Forecast
Change from January 10
Change from 2023/2024
Corn
$4.35/bushel
+$0.10
-$0.20
Soybeans
$10.10/bushel
-$0.10
-$2.30
Wheat
$5.55/bushel
No change
-$1.41
U.S. Ending Stocks
Crop
Feb 2025 (Million Bushels)
Avg Estimate
Jan 2025
2023-24
Corn
1,540
1,537
1,540
1,763
Soybeans
380
382
380
342
Wheat
794
800
798
696
World Ending Stocks
Crop
Feb 2025 (MMT)
Avg Estimate
Jan 2025
2023-24
Corn
290.3
293.1
293.3
317.5
Soybeans
124.3
128.5
128.4
112.4
Wheat
257.6
258.7
258.8
267.5
Implications for Dairy Farmers
Feed Costs
The most immediate concern for dairy farmers is the potential impact on feed costs:
Corn Prices: The U.S. corn price forecast increased by 10 cents to $4.35 per bushel. This could lead to marginally higher feed costs, but the global corn supply remains ample, which should help moderate any price increases.
Soybean Meal: With Argentina’s reduced soybean production, protein supplement costs for dairy rations could rise. However, Brazil’s stable soybean production may help offset this impact.
Feed Availability
Despite production cuts in South America, global feed supplies remain abundant and relatively inexpensive. This is positive news for dairy farmers, as it suggests that feed shortages are unlikely in the near term.
Long-term Planning
Dairy farmers should consider the following when planning for the coming months:
Hedging Strategies: With the potential for feed price volatility, farmers might want to consider locking in feed prices for the coming year to protect against possible increases.
Ration Adjustments: If soybean meal prices increase significantly, farmers may need to explore alternative protein sources or adjust their feed rations to optimize costs while maintaining milk production.
Crop Diversification: For dairy farmers who also grow their feed crops, the weather-related challenges in South America highlight the importance of crop diversification and resilient farming practices.
Milk Prices
While the WASDE report doesn’t directly address dairy markets, changes in feed costs can indirectly impact milk production costs and, consequently, milk prices. If feed costs remain stable or increase only slightly, it could help maintain favorable margins for dairy operations.
Expert Analysis
“Farmers are harvesting their soybeans between showers and at high moisture levels to guarantee that the crop is put in storage before more rain keeps [farmers] out of the field,” reported the Soybean and Corn Advisor.
Looking Ahead
More rain will be needed in Argentina to avoid additional yield cuts. Meanwhile, the quality of Brazil’s soybean crop remains uncertain due to high moisture levels during harvest.
As the situation evolves, dairy farmers should closely monitor market trends and be prepared to adjust strategies to maintain profitability in the face of potential feed market fluctuations.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Dairy markets swing wildly as trade tensions boil over. The March Class III contract lurched more than a dollar in a single day, leaving farmers scrambling. With U.S. tariffs rising and China retaliating, the global dairy landscape faces an economic battle. Who will emerge victorious in this high-stakes game of dairy dominance?
Summary:
The global dairy market is facing challenges due to trade tensions and changes in production. In February 2025, there was significant activity, with EEX futures trading 2,100 tonnes of dairy products. Butter futures decreased while SMP futures went up. The Global Dairy Trade auction index increased by 3.7%. Regionally, Ireland and Poland saw strong milk production growth, while milk prices in China increased slightly after a long decline. In the U.S., trade issues impacted milk powder exports, but cheese exports to Mexico did well. With mixed results worldwide, dairy farmers must focus on being efficient and adaptable to navigate these changing market conditions.
Key Takeaways:
Global milk supply forecasted to grow by 0.8% in 2025, with all significant exporting regions expecting gains for the first time since 2020.
Trade tensions between the U.S. and Canada may disrupt established trade flows, influencing global dairy markets.
EU milk production shows recovery, but an overall decline is expected due to environmental and regulatory challenges.
U.S. dairy exports are mixed, with cheese exports booming despite a sharp decline in milk powder production.
China’s dairy market stabilizes, with import growth projected and farmgate milk prices rising for the first time in over two years.
Fluctuating prices and shifting production patterns reshape the global dairy landscape, presenting challenges and opportunities.
Dairy farmers are encouraged to adopt risk management, explore value-added products, and leverage emerging markets for growth.
Emphasis on efficiency and adaptability is crucial for dairy farmers to thrive in a dynamic and evolving market environment.
During a volatile week in the financial markets, dairy market prices fluctuated significantly due to escalating trade tensions. The March Class III contract swung more than a dollar in a single day, causing farmers and traders to react quickly to the rapid price changes. As the U.S. ratchets tariffs and China retaliates with precision strikes, the global dairy landscape finds itself caught in an escalating economic battle. Recent data from key exchanges and industry reports reveal a sector teetering between opportunity and crisis – but who will emerge victorious in this high-stakes game of global dairy dominance? As exports increase, production changes, and consumer preferences evolve, dairy farmers worldwide deal with a highly dynamic market. Will they adapt swiftly to seize new opportunities or falter under the pressures of volatility?
Market Dynamics
Global milk production is forecasted to rise by 0.8% in 2025, driven by technological advancements, shifting consumer preferences, and improved farming practices across major exporting regions, marking the first simultaneous growth since 2020. This increase is influenced by higher prices paid to farmers for milk, lower costs for animal feed, and better weather conditions, indicating a possible positive change for the global dairy sector. This growth is driven by increased profitability for dairy farmers. Additionally, more affordable feed costs and favorable weather patterns support higher yields.
Although there are positive expectations, the dairy market continues to be unstable for various reasons. A substantial increase in dairy processing capacity, particularly in the United States, is expected to reshape regional milk markets. China’s projected 2% year-on-year increase in dairy imports for 2025 could significantly impact global trade flows and prices. Additionally, ongoing trade disputes, especially between the United States and Canada, threaten to disrupt established trade patterns.
Combining these factors results in a complicated and ever-changing global market landscape for dairy farmers and processors. Consumer demand fluctuations, driven by economic pressures and changing preferences, influence the market. While feed costs are currently favorable, they remain subject to fluctuations in the global commodity market. As the industry navigates these challenges and opportunities, adaptability and strategic planning will be crucial for success in the evolving global dairy landscape 2025.
Country/Region
2024 Expected (Billion Pounds)
2025 Forecast (Billion Pounds)
Change
Argentina
23.6
24.7
1.1
Australia
19.2
19.4
0.2
European Union
320.9
320.3
-0.6
New Zealand
47.6
48.1
0.5
Major Exporter Total
411.3
412.5
1.2
Source: USDA, Economic Research Service calculations based on USDA, Foreign Agricultural Service. Dairy: World Markets and Trade Report, December 2024.
Regional Production Trends
European Union
In 2025, the European Union’s dairy industry shows varied trends among its member countries. While some countries show promising growth, EU milk production is forecast to decline marginally.
Ireland stands out with a remarkable 30.1% year-over-year increase in December collections, showcasing the country’s strong recovery and efficient dairy farming practices. This surge is attributed to favorable weather conditions, improved feed quality, and strategic investments in dairy infrastructure. Poland and Spain also posted gains, with solid milk production up by 3.4% and 0.7% respectively in December. Poland’s growth is driven by ongoing consolidation in the dairy sector and investments in modern farming technologies. Spain’s modest increase reflects a gradual recovery from past obstacles, including economic downturns and supply chain disruptions, showcasing the industry’s resilience and adaptive strategies.
Despite these positive indicators, the EU as a whole faces headwinds. It is predicted that milk output will slightly decrease to 149.4 million metric tons (MMT) in 2025, a drop from 149.6 MMT in 2024. This decline is attributed to several factors:
Declining cow numbers: Stricter environmental regulations and farm consolidation are reducing overall herd sizes across the EU.
Tight farmer margins: Rising input costs, particularly for feed and energy, are squeezing profitability for many dairy farmers.
Environmental regulations: The EU’s Green Deal and Farm to Fork strategy impose stricter sustainability requirements, forcing some farmers to reduce production or exit the industry.
Disease outbreaks: Concerns about diseases like bluetongue in some regions are impacting production and trade.
The European dairy industry is also experiencing a shift in product focus. Cheese manufacturing is set to be a primary focus due to high local and international demand. This focus on cheese may come at the expense of butter, non-fat dry milk, and whole milk powder production.
Looking ahead, the EU dairy sector must balance environmental sustainability with economic viability. Innovations in feed efficiency, animal welfare, and sustainable farming practices will be crucial for maintaining the EU’s position in the global dairy market.
United States
In 2025, the U.S. dairy industry grapples with diverse challenges, including labor shortages and environmental regulations, alongside promising prospects such as export market growth and technological advancements. While milk production shows signs of growth, there are significant variations across product categories and regions.
Cheese production experienced a dip of 0.7% year-over-year in December, totaling 1.2 billion pounds. This decrease is primarily attributed to shifts in consumer demand and increased competition from plant-based alternatives. However, the export market tells a different story, with cheese shipments surging by 21% compared to December 2023. This export boom is driven by strong demand from key markets like Mexico and South Korea and favorable exchange rates.
Regional variations in milk production are becoming more pronounced. Texas and Idaho are leading the charge, with production increases of 7.5% and 3.5%, respectively. These states benefit from:
Large-scale, efficient dairy operations
Favorable climate conditions for year-round production
Strategic investments in processing capacity
Other major dairy states also see increased milk production, albeit at more modest rates. Factors contributing to this growth include:
Improved cow genetics, leading to higher per-cow yields
Adopt advanced technologies like robotic milking systems
Optimized feed management practices
However, challenges remain for the U.S. dairy sector:
Labor shortages continue to impact farm operations and processing facilities
Environmental regulations, particularly regarding methane emissions, are becoming more stringent
Volatility in feed costs affects profitability
The USDA forecasts overall U.S. milk production to reach 227.2 billion pounds in 2025, slightly lower than previous estimates due to decreased milk per cow yields and adjustments in dairy cow inventories, signaling potential challenges for the industry.
Adaptability and innovation will be key as the U.S. dairy industry navigates these complex dynamics. Farmers and processors are likely to focus on:
Diversifying product offerings to meet changing consumer preferences
Investing in sustainability initiatives to meet regulatory requirements and consumer expectations
Explore new export markets to capitalize on strong global demand
Oceania
The Oceania region, particularly New Zealand, plays a crucial role in the global dairy market. The strong participation in the latest Global Dairy Trade (GDT) event, with 182 bidders competing for 23,854 tonnes of product, underscores the region’s importance in setting global dairy price trends.
New Zealand‘s dairy sector is anticipating significant seasonal peaks in production for 2025.
Favorable weather conditions: La Niña weather patterns are expected to bring adequate rainfall, supporting pasture growth.
Herd management improvements: Farmers focus on breeding programs and animal health to increase per-cow productivity.
Environmental regulations: New Zealand’s government is implementing stricter environmental policies, which may impact production practices.
Land use competition: Increasing pressure from alternative land uses, such as forestry and horticulture, could limit dairy expansion.
Labor shortages: Like many countries, New Zealand is grappling with agricultural labor shortages.
Australia, the other major player in Oceania’s dairy sector, is expected to see modest growth in milk production. The country is recovering from previous droughts and focusing on rebuilding its dairy herd.
Both countries will likely benefit from strong global demand, particularly from Asian markets. However, they must navigate changing consumer preferences, especially the growing demand for plant-based alternatives.
China
China, the world’s largest dairy importer, shows signs of market stabilization, with potential significant impacts on global dairy trade. Farmgate milk prices in January increased for the first time in 27 months, signaling a possible turning point in the country’s dairy sector.
However, at 3.12 Yuan/Kg, prices remain 14.5% below year-ago levels, indicating ongoing challenges for domestic producers. This price pressure has led to:
Consolidation in the dairy farming sector, with smaller farms exiting the market
Increased focus on efficiency and productivity among more extensive operations
Government initiatives to support the domestic dairy industry
In 2025, China’s milk production will fall by 1.5% year-on-year. This decline is attributed to:
Shift towards more extensive, more efficient dairy operations
Despite the projected decrease in domestic production, China’s dairy market remains dynamic:
Consumer demand for dairy products continues to grow, particularly in urban areas
The government is promoting increased dairy consumption for nutritional benefits
E-commerce and innovative dairy products are expanding market reach
China’s dairy imports are projected to grow by 2% year-on-year in 2025, ending a three-year decline. This increase could significantly impact global dairy trade flows and prices.
Key factors to watch in China’s dairy sector include:
Government policies supporting domestic production vs. import reliance
Changing consumer preferences, especially among younger demographics
Developments in China’s trade relationships with major dairy exporting countries
As China’s dairy landscape evolves, it will play a pivotal role in shaping global dairy markets, influencing everything from commodity prices to product innovation.
Trade Tensions and Market Volatility
The dairy industry is central to a complex web of international trade disputes, with recent developments creating significant market uncertainty. The U.S., Mexico, and Canada have agreed to a 30-day détente, temporarily easing tensions in North American trade relations. This short-term truce is aimed at addressing shared concerns over drug trafficking across borders, highlighting the interconnected nature of trade and broader geopolitical issues.
However, escalating trade conflicts with China overshadow the respite in North American tensions. The U.S. has implemented a sweeping 10% tariff increase on Chinese imports, which has prompted swift retaliation from Beijing. China’s response, characterized by targeted sanctions, demonstrates a strategic approach to economic warfare, potentially impacting specific sectors of the U.S. economy while minimizing domestic economic disruption.
The ripple effects of these trade tensions are already evident in the dairy market. U.S. milk powder exporters, traditionally reliant on robust international demand, are adopting a cautious stance. The USDA’s Dairy Market News reports that Mexican demand for U.S. milk powder has become “subdued,” a concerning development given Mexico’s status as a key market for U.S. dairy exports. In 2024, Mexico imported approximately 576,000 metric tons of U.S. dairy products, making it the largest export destination for American dairy.
This hesitancy extends beyond international buyers, with domestic purchasers also showing reluctance. Market analysts note a “chilling effect” on U.S. buyers, who are wary of committing to purchases in such an unpredictable environment. This cautious approach is encapsulated in the industry phrase of avoiding “catching the proverbial falling knife,” reflecting fears of buying into a declining market.
These trade conflicts affect more than just milk powder; they extend to other dairy products. The dairy commodity spectrum, including cheese, butter, and whey products, faces potential disruption. For instance, U.S. cheese exports to Mexico, which saw a 36% year-over-year increase in August 2024, could be at risk if current trade uncertainties persist or escalate.
Looking ahead, the industry faces several critical junctures that could further shape market dynamics:
The conclusion of the 30-day North American détente could lead to a more stable trading environment or a return to heightened tensions.
Potential expansion of Chinese tariffs to include key dairy products like whey, which have so far been spared but remain vulnerable.
The upcoming 2026 review of the U.S.-Mexico-Canada Agreement (USMCA) could reshape the North American dairy trade for years.
In this volatile climate, dairy producers and exporters must remain agile, ready to adapt to rapidly changing market conditions. Diversification of export markets, exploration of value-added product lines, and close monitoring of international trade policies will be crucial strategies for navigating these turbulent waters.
Production Shifts and Export Trends
The U.S. dairy industry is experiencing significant shifts in production patterns and export trends, with notable divergences between milk powder and cheese sectors.
Milk Powder Production Decline
U.S. milk powder output has substantially declined, with December production 15% lower than the prior year. This trend extends beyond a month, as 2024 milk powder production slumped 13% to reach the lowest annual total since 2013. Several factors contribute to this decline:
Shifting consumer preferences: Domestic consumers increasingly opt for alternative dairy products, reducing demand for traditional milk powder.
Processing capacity reallocation: Many processors have shifted their focus to higher-value products like cheese and specialty ingredients, reducing capacity dedicated to milk powder production.
Feed cost fluctuations: Rising feed costs have impacted milk production, with some farmers reducing herd sizes or shifting to alternative feed strategies.
Environmental regulations: Stricter environmental policies in some states have reduced dairy herd sizes, impacting milk availability for powder production.
Booming Cheese Exports
U.S. cheese exports are experiencing unprecedented growth compared to the milk powder sector. The U.S. exported 97 million pounds of cheese in December, marking a 21% increase compared to December 2023. This export surge has led to a record-breaking utilization of domestic production, with exports accounting for 8% of U.S. cheese production in 2024. Key drivers of this cheese export boom include:
Competitive pricing: U.S. cheese prices have become more competitive globally, attracting international buyers.
Product diversification: American cheesemakers have expanded their product range, catering to diverse international tastes and preferences.
Quality improvements: Investments in cheese-making technology and processes have enhanced the quality and consistency of U.S. cheese, making it more appealing to foreign markets.
Trade agreements: Favorable trade agreements, particularly with Mexico and South Korea, have facilitated increased cheese exports.
Marketing efforts: Aggressive marketing campaigns by U.S. dairy organizations have successfully promoted American cheese in key international markets.
Market Implications
These contrasting trends in milk powder production and cheese exports have significant implications for the U.S. dairy industry:
Processor strategy shifts: More processors may pivot towards cheese production, given the strong export demand and higher profit margins than milk powder.
Farm-level impacts: Dairy farmers may need to adjust their production strategies to meet the changing demand, potentially focusing on milk composition that favors cheese production.
Global market positioning: The U.S. is strengthening as a significant cheese exporter while potentially ceding ground in the global milk powder market.
Supply chain adaptations: U.S. dairy exports’ logistics and supply chain are likely to evolve, with increased focus on cheese transportation and storage.
As these trends unfold, the U.S. dairy industry must remain agile, adapting to changing global demand patterns and market opportunities. The contrasting fortunes of milk powder and cheese sectors underscore the importance of diversification and market responsiveness in the dynamic global dairy trade landscape.
Price Movements and Future Outlook
Year
All-Milk Price Forecast (USD/cwt)
2025
23.05
2026
19.00
2027
19.10
2028
19.30
2029
19.50
2030
19.70
Source: USDA, Economic Research Service
The dairy market is experiencing significant price fluctuations across various products, reflecting the complex interplay of supply, demand, and global trade dynamics.
CME Spot Market Trends:
The CME spot nonfat dry milk (NDM) fell 1.5¢ to $1.33 per pound, reaching its lowest point since August. This decline suggests an oversupply in the milk powder market, potentially due to weakened export demand or increased domestic production. The drop in NDM prices could impact Class IV milk prices, as NDM is a key component.
Similarly, CME spot Cheddar blocks also decreased, falling 1.75¢ to $1.86 per pound. This downward movement in cheese prices may indicate softening demand or increased production, which could pressure Class III milk prices.
Global Dairy Trade (GDT) Auction Results:
Unlike the CME spot market, the GDT auction demonstrated strength in powder markets. Whole milk powder (WMP) values jumped 4.1%, while skim milk powder (SMP) prices leapt 4.7%. These significant increases suggest robust international demand, particularly from key importing regions like Southeast Asia and China. The divergence between domestic U.S. prices and international auction results highlights the global nature of dairy trade and the potential for arbitrage opportunities.
Future Price Outlook:
The average milk price is forecast to rise by 5% in 2025 compared to 2024, driven by favorable trends in recent Global Dairy Trade auctions. This projection indicates a generally optimistic outlook for global dairy markets, supported by expectations of continued strong demand and potentially tightening supplies in major exporting regions.
However, the U.S. market presents a contrasting picture, with projections of a decrease of 30 cents per hundredweight in all milk prices. This discrepancy between global trends and U.S. forecasts could be attributed to several factors:
Domestic Supply and Demand Balance: The U.S. might increase milk production or face lower domestic demand than global markets.
Export Competitiveness: A stronger U.S. dollar or increased competition from other exporting nations could impact the U.S.’s position in global markets.
Policy Changes: Potential shifts in U.S. dairy policy or trade agreements could influence domestic pricing.
Regional Variations: The U.S. forecast may be more heavily influenced by specific regional production trends or processing capacities.
Implications for Dairy Farmers:
These price movements and forecasts present a complex picture for dairy farmers. While global markets show signs of strength, U.S. producers may face challenges if domestic prices remain suppressed. Farmers must closely watch local and international market trends, adjust their production strategies, and explore new market opportunities to maximize their returns in this changing environment.
The Bottom Line
As the global dairy market navigates through unprecedented volatility in early 2025, dairy farmers worldwide find themselves at a critical juncture. The rising milk supply, shifting trade dynamics, and evolving consumer preferences create challenges and opportunities. While farmgate prices generally improve in many regions, trade tensions and potential tariffs loom large, particularly for U.S. producers eyeing the Mexican market. Success in this dynamic environment will hinge on adaptability and strategic foresight. Dairy farmers must focus on efficiency, embrace risk management strategies, and explore diversification opportunities. Whether investing in value-added products, adopting new technologies to address labor shortages, or implementing sustainable practices to meet evolving regulations, the path forward requires innovation and resilience. In 2025, the global dairy industry is positioned for growth but faces the risk of rapid changes due to geopolitical factors. Farmers who stay informed, remain flexible in their approaches, and capitalize on emerging market trends will be best positioned to thrive in this complex and ever-changing dairy ecosystem.
How is your operation adapting to these market trends? Share your experiences and strategies in the comments below.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Dairy markets experienced unprecedented turbulence this week as trade tensions rattled the industry. The March Class III futures contract swung dramatically, moving more than $1 daily amid U.S. trade disputes with China and temporary détente with Mexico and Canada. Record cheese exports and shifting production patterns signal more volatility ahead.
Summary:
The dairy markets experienced unprecedented volatility this week amid escalating trade tensions. The March Class III futures contract demonstrated extreme instability, swinging more than $1 daily, while a 30-day trade détente with Mexico and Canada provided temporary relief. However, a new 10% U.S. tariff on Chinese imports sparked retaliation, though China notably spared dairy products. Market impacts were immediate, with CME spot prices declining across commodities – nonfat dry milk fell 1.5¢ to $1.33 per pound, Cheddar blocks dropped 1.75¢ to $1.86, and barrels decreased 3¢ to $1.78. Despite these challenges, U.S. cheese exports hit record levels in December, up 21% year-over-year, though milk powder exports slumped 23% to their lowest December level since 2016. The industry faces continued uncertainty as Mexico threatens higher tariffs on U.S. cheese if trade tensions resurface next month.
Key Takeaways:
March Class III futures experienced extreme volatility, swinging more than $1 in a single day on Monday, from 39¢ down to 71¢ up.
The U.S., Mexico, and Canada agreed to a 30-day trade détente, while the U.S. imposed a 10% tariff on Chinese imports. China retaliated but notably excluded whey and soybeans from tariffs.
CME spot prices declined across major dairy products: NDM fell 1.5¢ to $1.33/lb, Cheddar blocks dropped 1.75¢ to $1.86, and barrels decreased 3¢ to $1.78.
U.S. milk powder exports fell 23% year-over-year in December 2024, reaching the lowest December level since 2016.
December milk powder production was down 15% from the previous year, with 2024 total production dropping 13% to the lowest level since 2013.
Cheese production patterns shifted significantly in 2024: Gouda jumped 30.2%, Mozzarella rose 3.6%, while Cheddar fell 6.1%.
U.S. cheese exports hit record levels in December at 97 million pounds, up 21% from December 2023, with exports using 8% of total production in 2024.
Mexico dominated cheese exports, with shipments 30% higher than 2023, accounting for 38% of total U.S. cheese exports.
U.S. dairy heifer numbers have reached their lowest point since 1978, suggesting potential future supply constraints.
The Zisk app forecasts improved profitability for dairy farms in 2025, particularly for larger herds in the Southeast and Northeast regions.
A cheesemaker inspecting cheese wheels during the aging process, showcasing the careful monitoring required in cheese production amid current market volatility
Wild price swings hit dairy markets this week as trade tensions flared up. The March Class III milk futures contract moved up and down by more than $1 in a single day on Monday, showing just how uncertain things are right now.
Trade Situation
The U.S. made a 30-day deal with Mexico and Canada to pause new tariffs while they worked on border issues. Things with China are different – the U.S. put a 10% tax on Chinese goods, and China hit back with taxes on some U.S. products. For now, China isn’t taxing whey or soybeans, but that could change.
Market Prices Today
CME Spot Price Changes
Price
Change
Nonfat Dry Milk
$1.33/lb
-1.5¢
Cheddar Blocks
$1.86/lb
-1.75¢
Cheddar Barrels
$1.78/lb
-3¢
Uncertainty has pushed dairy prices lower across the board. Nonfat dry milk dropped 1.5¢ to $1.33 per pound, marking its lowest point since August. Cheddar blocks fell 1.75¢ to $1.86, while Cheddar barrels went down 3¢ to $1.78.
Production Changes
Cheese Production Changes 2024
% Change
Gouda
+30.2%
Mozzarella
+3.6%
Cheddar
-6.1%
Cheesemakers are shifting their production strategies significantly. Gouda production has surged by 30.2%, and Mozzarella output increased by 3.6%, setting new records. Meanwhile, cedar production has fallen by 6.1%. These changes reflect a move toward products that are popular with foreign buyers or ready for immediate consumption.
December Dairy Export Metrics
Change vs 2023
Total Cheese Exports
+21%
Milk Powder Exports
-23%
Cheese to Mexico
+30%
Share of Production Exported
8%
Total cheese exports hit a record in December at 97 million pounds. However, milk powder isn’t performing as well, with production falling 15% in December and exports dropping 23% to the lowest December numbers since 2016.
What This Means for Farmers
The outlook contains both positive and negative elements for dairy farmers. Larger farms in the Southeast and Northeast might see better profits in 2025. Cheese exports remain strong, especially to Mexico. However, due to trade uncertainty, farmers face significant challenges with unpredictable milk prices. There’s also concern that Mexico might tax U.S. cheese if trade talks go badly.
Smart Moves for Farmers
To handle these challenges, farmers should consider looking for different places to sell their milk and focus on producing high-quality components like fat and protein. Using futures contracts to protect against price drops and keeping up with market news and changes are essential strategies. Feed costs need careful watching, too.
The dairy market is tough right now, but farmers who stay informed and plan will be in the best position to handle whatever comes next.
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U.S. cheese production hit a record 14.25B lbs in 2024, driven by Italian styles like Mozzarella (+3.6%) while Cheddar fell to a 4-year low (-6.1%). Farmers adapted to milk shortages by prioritizing exports and high-component milk, reshaping dairy strategies amid EU tariff risks.
Summary:
In 2024, the U.S. achieved a record cheese production of 14.25 billion pounds, mainly due to increased demand for Italian cheeses like Mozzarella. While Cheddar production dropped to its lowest level since 2020, farmers focused on exporting and improving milk quality to boost profits. Gouda also saw significant growth due to demand in Asia, though future EU tariffs could pose challenges. As the industry adapts to changing markets and milk supplies, strategies like hedging and regional planning will be essential to sustain growth amid shifting domestic and international pressures.
Key Takeaways:
Record Output: U.S. cheesemakers produced 14.25B pounds (+41.76M YoY), driven by Italian styles like Mozzarella (+3.6%) and Gouda (+30.2%) despite milk shortages.
Italian Cheese Surge: Italian cheeses surpassed 6B pounds (+2.4% YoY), with exports offsetting domestic foodservice declines.
Cheddar Decline: Cheddar fell to 3.85B pounds (-6.1%), lowest since 2020, due to scarce milk, high restaurant prices, and shifts to Gouda.
Price Volatility: Monthly Cheddar production drops caused spring/fall price spikes (peaking at $1.92/lb vs 5-year avg $1.68).
Export Risks: Gouda/Mozzarella farmers face EU tariff threats, shipping cost hikes (+22% YoY), and currency risks (Mexican peso volatility cut profits 4%).
U.S. cheese production hit a historic 14.25 billion pounds in 2024 (+41.76M YoY), powered by Italian-style cheeseslike Mozzarella while Cheddar output fell to a 4-year low. Farmers must now compete on milk components, not just volume.
Table 1: 2024 U.S. Cheese Production Trends
Cheese Type
Production (B lbs)
YoY Change
Key Driver
Source
Italian
6.00
+2.4%
Mozzarella exports (+3.6%)
USDA Jan-Nov 2024
Cheddar
3.85
-6.1%
Domestic demand slump
USDA Dec 2024
Gouda
0.080
+30.2%
Asian market expansion
EU Commission Q4 2024
Italian Cheese Drives Growth
Italian cheese crossed 6 billion pounds (+2.4% YoY) for the first time, led by:
Mozzarella exports: 38% shipped to Mexico/Asia (USDA Jan- Nov 2024)
Component premiums: up to $0.20/cwt bonuses for high-fat milk (Dairy Farmers of America Q3 2024)
Jersey herds: 18% YoY growth for butterfat optimization
Why it matters: Jersey cows now yield $2.18/cwt premiums over Holsteins (USDA 2024), reshaping herd genetics.
Table 2: Cheddar Price Volatility (2024)
Period
Avg Price ($/lb)
Peak Price ($/lb)
5-Year Avg ($/lb)
Spring
1.85
1.92
1.68
Fall
1.78
1.89
1.68
Source: CME Group (2/9/2025), USDA AMS
Cheddar’s Decline Reshapes Markets
American cheese output fell 3.9%, with Cheddar plunging to 3.85B pounds (-6.1%)—lowest since 2020. Farmers faced:
Processed cheese slump: Demand for slices fell 9% (CME Group 2/9/2025)
Milk cuts: 23% fewer Cheddar plant contracts
Cheddar Farmers
Italian/Gouda Suppliers
2025 Risk
Domestic demand shifts
EU trade rule changes
Opportunity
New processing plants
Asian export growth
Table 3: U.S. Cheese Export Markets (2024)
Region
% of Exports
Key Product
Growth vs 2023
Mexico
38%
Mozzarella
+17%
Asia
29%
Gouda
+25.6%
EU
16%
Specialty
-4% (Tariff risk)
Source: USDA FAS (2024), Pecorino Romano Consortium
Gouda’s 30% Surge Faces EU Hurdles
Gouda production jumped to 80.27M pounds (+30.2%), driven by Asian markets, but EU tariffs threaten $0.15/lbprofits (EU Commission Q4 2024). Farmers near Wisconsin (+14%) and Idaho (+9%) plants gained:
Stable contracts: 64% include currency hedging
Regional buyers: new processors in export zones
Strategic Shifts for 2025
Test milk monthly: butterfat/protein checks for premiums (USDA §120.5)
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Dairy farmers face a perfect storm as 2025 margins tighten to $10.14-$12.47/cwt. Despite global price surges, domestic demand plummets by 20%. With feed costs rising and regional disparities widening, operators must navigate complex market forces. Will your strategy beat the 37% profitability threshold?
Summary:
The market outlook paints a complex picture for U.S. dairy farmers. While the Global Dairy Trade auction showed unexpected strength with whole milk powder up 4.1%, skim milk powder up 4.7%, and butter up 3.4%, domestic demand in the U.S. plummeted in December 2024. Cheese consumption fell 3.1%, butter 7.0%, and nonfat dry milk 20.2%. U.S. milk equivalent exports were down 2.6% year-over-year, with nonfat dry and skim milk powder exports dropping 23.4%. The margin dashboard projects tightening margins for dairy farmers, ranging from $10.14 to $12.47 per cwt through November 2025. Regional variations are significant, with Wisconsin having the highest projected margin at $11.75/cwt and California having the lowest at $9.09/cwt. The report highlights the need for farmers to navigate carefully between export opportunities and weakening domestic demand while managing feed costs, which are projected to rise in 2025.
Key Takeaways:
Dairy farmers’ profit margins vary significantly by region, with the Midwest showing higher returns than areas like the Southwest.
Feed costs are rising, drastically impacting profitability due to its substantial share in dairy farming budgets.
The Midwest benefits from lower feed costs, but labor shortages present ongoing challenges for farmers.
Southwest dairy farms face tighter margins due to higher operational costs and fluctuating milk prices.
To counteract financial pressures, adopting export strategies, innovative feeding practices, and exploring new product lines are recommended.
Upcoming USDA events and webinars offer opportunities for farmers to collaborate and explore solutions in the current economic climate.
Empty shelves tell the story: U.S. dairy demand plummets 20.2% in December 2024. As domestic consumption falters (-3.1% cheese, -7% butter), farmers face tightening margins and export reliance. Will 2025’s $10.14–$12.47/cwt projections leave your operation stocked for survival?
Midwest operators lead with $11.75/cwt margins, while Texas operators grapple with $10.65 returns. American dairy farmers face unprecedented margin compression in 2025, with projections showing national averages of $10.14-$12.47/cwt through November. While Global Dairy Trade (GDT) auctions show 4.1% gains for whole milk powder, the collapse of December’s domestic demand (-20.2 % for nonfat dry milk) creates complex regional challenges.
Regional Realities Demand Tailored Responses
Margin Disparities Emerge
Region
Margin (USD/cwt)
Key Challenge
Midwest
11.75
Labor costs
Northwest
10.84
Water Access
Southwest
10.65
Feed logistics
Source: USDA/CME State Profiles
Strategic Implications
While Wisconsin’s $11.75/cwt margins lead the nation, Texas operators face dual pressures of $12.04 feed costs and tightening credit markets. California’s $9.09 margins now require 18% greater efficiency than 2024 averages to maintain profitability.
Operational Shifts by Region
Midwest Opportunities
Lock March corn at $4.93 before seasonal demand spikes
Leverage 21.1% cheese export growth through Great Lakes ports
Southwest Challenges
Operators must develop tailored strategies to address these geographic disparities. For Northwest operators facing $11.10/cwt feed costs, three immediate actions emerge:
Implement RFID feed tracking to reduce waste by 9%
Shift 15% of production to value-added butter markets
Dairy operators face a pivotal moment as 2025 projections reveal margins tightening to $9.09-$11.75/cwt nationwide. Regional disparities call for tailored strategies, such as leveraging Wisconsin’s labor-cost advantages against California’s $11.91/cwt feed cost crunch. While export markets offer a silver lining with a +4.1% increase in Global Dairy Trade (GDT) gains, the domestic demand downturn (-20.2% for nonfat dry milk) urges farmers to focus on efficiency tools such as precision feeding or transitioning to value-added shifts—like seeing a 14% rise in buttermilk production. Due to this tightness in margins, there is no room for guesswork. Operators must lock in favorable corn futures at $4.93 for March 2025 immediately. Operators must lock in favorable corn futures at $4.93 for March 2025 to surpass the 37% profitability threshold. Will your operation surpass the 37% profitability threshold?
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
A 19-year tariff phaseout has unlocked Central America’s dairy market, but melting ice cream and EU rivals threaten gains. Will farmers seize the moment or stall?
Summary:
The CAFTA-DR trade deal, finalized after nearly 20 years, boosted U.S. dairy exports from $40 million pre-2006 to $441 million by 2025, thanks to the complete removal of tariffs. This expansion has made Central America an essential market for American dairy, particularly in cheese, milk powders, and whey. However, exporters still face non-tariff challenges like high port fees in Nicaragua, approval delays in El Salvador, and competition from the EU and New Zealand. As U.S. dairy farmers adapt to these hurdles, they must invest in technology and forge co-op partnerships to stay competitive.
Key Takeaways:
U.S. dairy exports surged to $441 million following the full implementation of the CAFTA-DR trade deal.
Cheese exports dominate the CAFTA-DR dairy trade, leading with over half of the market share.
While tariffs have been eliminated, non-tariff barriers such as high port fees and lengthy approval processes remain challenges.
The CAFTA-DR region is now the third-largest market for U.S. dairy exports, emphasizing its significance.
Global competition is intensifying, with rival trade deals potentially impacting U.S. market share.
Dairy farmers must adapt strategies based on farm size to leverage export opportunities and remain competitive.
Future growth will depend on expanding into new markets, adopting technology, and strategic policy negotiations.
Small and medium farms may rely on cooperative agreements to achieve export success.
The demand for advanced technology, such as blockchain for product tracking, may pose financial challenges for smaller farms.
Six CAFTA-DR countries fueled a 1,117% surge in U.S. dairy exports since 2006. Central America now ranks as the third-largest market for American milk, cheese, and whey
At midnight on January 1, 2025, U.S. dairy tariffs vanished across Central America under the fully implemented CAFTA-DR trade deal, capping a 19-year phaseout that supercharged exports from $40 million pre-2006 to $441 million today. Cheese shipments charge $238 million annually, with milk powders ($120M) and whey ($35M) rounding out a market critical to absorbing America’s growing milk surplus.
Category
2006 Exports
2023 Exports
2025 Projections
Growth (%)
Cheese
$34m
$238m
$264m
+595%
Milk powders
$3.2m
$120m
$135m
+3,650%
Whey products
$2.8m
$35m
$48m
+1,150%
Total
$40m
$441m
$527m
+1,217%
How CAFTA-DR Reshaped Dairy Trade
The agreement, negotiated by the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC), began lowering tariffs in 2006. This slow-but-steady approach allowed farmers to adapt:
Cheese exports surged by 595%, representing 54% of the CAFTA-DR dairy trade.
Milk powders supported Guatemala’s $2.1B bakery industry growth.
Whey became a staple in 72% of regional animal feed mixes
Jaime Castaneda from NMPF highlighted that the patience invested in CAFTA-DR led to a tenfold increase in dairy exports over the 19 years. “But tariffs alone aren’t magic—trust took 7,000 farm visits and 19 years of problem-solving.”
The payoff? Central America now ranks as the third-largest U.S. dairy export market, trailing only Mexico and Canada.
Zero Tariffs ≠ Smooth Sailing
Country
Tariff Status
Key Non-Tariff Barrier
Avg. Delay/Cost
El Salvador
0% since 2025
Facility registrations
72 days
Nicaragua
0% since 2025
Port inspection fees
+$42k/shipment
Guatemala
0% since 2025
Labeling disputes
21% rejections
Dominican Republic
0% since 2025
Quota administration
+$15k/compliance
However, despite the achievement, exporters now face new challenges:
Nicaragua’s 33% port fees increased shipment costs by $42,000 per shipment in 2024.
El Salvador’s 72-day approvals: Delays tripled since 2023
Canada’s retaliatory 25% border tax puts $578 million in annual U.S. dairy sales at risk due to Canada’s retaliatory 25% border tax.
“My ice cream melted in Costa Rican customs last month—$12,000 gone because paperwork ‘wasn’t shiny enough,’” says Idaho farmer Kaitlyn Voeller. USDEC’s Sarah Schmidt notes progress: “We’ve resolved 14 non-tariff barriers since July 2024, but it’s Whac-A-Mole. For every successful resolution, three new issues arise, creating a continuous cycle of challenges.”
Global Rivals Race Ahead
While U.S. farmers celebrate CAFTA-DR, competitors gain ground:
Competitor
Recent Trade Deal
U.S. Dairy Risk
EU
Japan FTA (87k-ton cheese quota)
\$1.3B loss by 2030
New Zealand
Vietnam 45% tariff cuts
Whey share ↓ 8%
Canada
Retaliatory 25% border tax
\$578M at risk
Sarah Schmidt warns that the EU is making agreements while the U.S. is still in discussions. “If we delay discussions with Kenya and Indonesia, we risk losing a generation of farms.”
Farm Size Dictates Strategy
With U.S. milk production hitting 227.2B pounds in 2025 (USDA), survival hinges on exports:
Small farms (50–500 cows): Pool through co-ops like Dairy Farmers of America’s new Guatemala contracts
Mid-sized (500–5K cows): Target niches like Honduras’ 340% rise in artisanal cheese demand
Large operations (5K+ cows): Invest in dedicated plants, e.g., Lupino Farms’ $220M Texas facility
Ben Strauss, an Ohio dairy farmer with 180 cows, credits his farm’s survival to the strategic decision to sell 40% of his milk to CAFTA-bound gouda cheese products. “But for $3,000 per heifer, margins vanish faster than morning fog for dairy farmers.”
Navigating the Future: The Crucial Decade for Milk’s Survival
The USDA aims to target new middle-class consumers in Asia by 2030 and capture a share of the 2.1 billion potential customers in CAFTA-adjacent markets like Colombia.
Tech Upgrades: Costa Rican buyers now require Blockchain shelf-life tracking systems, which cost $15K each. However, 83% of small farms cannot afford this upgrade.
Policy conflicts are escalating, with battles over Canada’s border tax, the EU’s Philippines dairy pact, and ongoing negotiations with Kenya and Indonesia.
Castaneda emphasizes that while CAFTA-DR marks a significant milestone, the crucial task now is to shape the future to prevent being overtaken by competitors proactively.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
Global dairy markets surge as GDT index hits 30-month high! Farmers worldwide are looking for opportunities amid rising prices for key products. From supply chain shifts to regional strategies, discover what the latest auction results mean for your bottom line. Is this the turnaround the industry’s been waiting for?
Summary:
The Global Dairy Trade auction brought a significant 3.7% rise in the GDT index, which peaked in July 2022. Prices jumped for key products like lactose, driven by demand in Asia. Increased bidder activity and higher average prices also marked this strong recovery. Factors like rising Chinese imports and European cheese premiums influence the market, while low US heifer numbers pose challenges. Farmers should focus on opportunities with skim and whole milk powders, manage risks from US-Canada tariffs and fluctuating feed costs, and use strategic approaches for market shifts.
Key Takeaways:
The GDT index rose by 3.7%, reaching its highest point since July 2022, indicating a positive trend in global dairy markets.
The average price per metric tonne increased to €4,181, showcasing a robust rebound in market confidence.
Lactose experienced the most significant price increase, driven by rising Asian demand for pharmaceuticals and processed foods.
Participation from bidders increased significantly, reflecting heightened interest and competition in the market.
Key products like Skim Milk Powder (SMP) and Whole Milk Powder (WMP) saw substantial gains, marking them as products for potential profitability.
Despite overall positive trends, challenges remain with reduced auction volumes and ongoing geopolitical tensions impacting trade dynamics.
Farmers are encouraged to capitalize on current premium prices by focusing on value-added production, particularly for butter and cheddar.
Understanding regional demand and adapting strategies to meet these needs can bolster opportunities, especially in North America and Oceania.
With volatile feed costs, prudent risk management and planning are crucial for farmers navigating the current market environment.
The Global Dairy Trade (GDT) auction has recently marked a significant milestone, reaching its highest index value in 30 months. This achievement is a crucial indicator of vitality within the global dairy markets, illustrating a much-anticipated rebound that resonates positively with dairy farmers worldwide.
Key Results: Strong Rebound Continues
The Global Dairy Trade (GDT) index surged 3.7% in Event 373 (February 4, 2025), hitting 1,264 points – its highest level since July 2022[1]. This marks the second consecutive gain after January’s 1.4% rise, signaling renewed market confidence.
Key metrics:
Average price: €4,181/metric tonne (+3.7% vs. January)
Volume sold: 23,854MT (down 21% from January’s 30,156MT)
Bidder activity: 182 participants (+39 from January)
Product
Price Change
Avg. Price (€/MT)
Lactose
+17.7%
1,022
Skim Milk Powder (SMP)
+4.7%
2,759
Whole Milk Powder (WMP)
+4.1%
4,058
Cheddar
+3.7%
4,891
Butter
+3.4%
7,029
Butter Milk Powder
-0.4%
3,009
Mozzarella
-0.1%
4,046
Standout: Lactose prices exploded amid growing Asian demand for pharmaceuticals and processed foods.
Bullvine Daily is your essential e-zine for staying ahead in the dairy industry. With over 30,000 subscribers, we bring you the week’s top news, helping you manage tasks efficiently. Stay informed about milk production, tech adoption, and more, so you can concentrate on your dairy operations.
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