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Archive for Dairy Markets – Page 8

Cream Crisis: Can U.S. Dairy Exports Drain the Butterfat Lake?

Saturday, April 12th, 2025

U.S. dairy drowning in cream: Can exports save the day? Discover why selling abroad isn’t a quick fix and what smart farmers should do now.

EXECUTIVE SUMMARY: The U.S. dairy industry faces a massive cream surplus, driven by record-high butterfat content, rebounding milk production, and weak food service demand. While exports have surged due to a significant price advantage (U.S. butter at $2.30/lb vs. Europe’s $8,600/MT), structural hurdles prevent a quick fix. These include mismatched butter standards (80% U.S. vs. 82% global), high market entry costs, and volatile tariffs (e.g., Canada’s 25% retaliation). Exports alone won’t drain the glut short-term, but long-term strategies like targeting Latin America, adapting products, and building export infrastructure offer hope. Success requires a shift from opportunistic selling to sustained international market development, potentially transforming U.S. dairy’s global role.

KEY TAKEAWAYS:

  • Cream glut stems from multiple factors: 4.43% butterfat content, 1.7% milk production surge, cheese production shifts, and weak food service demand.
  • Export growth is impressive (butter +126%, AMF +525% in early 2025) but faces hurdles like 80% vs. 82% butter standards and complex tariffs (e.g., China’s 125% on U.S. dairy).
  • Short-term export relief is unlikely due to the scale of surplus (270M lbs butter stocks) and structural barriers.
  • Long-term success requires strategic shifts: sustained market development, product adaptation (e.g., 82% unsalted butter), and targeting regions like Mexico/Central America.
  • Industry collaboration is crucial: processors must invest in export capabilities, while organizations like USDEC need to address trade barriers and provide market intelligence.
U.S. dairy exports, cream surplus, butterfat prices, anhydrous milkfat (AMF), global butter market

The dairy industry’s swimming in cream right now, with butter prices hitting rock-bottom while international markets are paying nearly double. Everyone’s asking the same question at the co-op meetings: can we export our way out of this mess? The short answer isn’t simple – while our exports are taking off, real-world hurdles mean exports alone won’t bail us out overnight. But with some smart moves, we could turn international sales from an occasional relief valve into a consistent market for our butterfat.

The Perfect Storm: How America’s Cream Glut Formed

Let’s break down how we got here:

Milk Floodgates Open: Big Herds, Bigger Output

Our cows are pumping out richer milk than ever before. Butterfat hit a whopping 4.43% earlier this year – numbers we’ve never seen before. Years of selecting components and feeding for fat have paid off too well.

“We’re making butter Americans don’t want to buy,” says Wisconsin churn operator Mark Tolbert. “Our cows keep pumping out more butterfat while processors scramble to find homes for it all.”

Milk production hasn’t dropped a bit despite losing 39% of our dairy farms between 2017 and 2022. The big operations with 1,000+ cows now make up two-thirds of all milk sales, up from 57% just five years ago.

Production jumped 1.7% late last year, dumping another 160 million pounds of milk fat onto an already flooded market. That’s a lot of butter churns running over.

Cheese Shift Dumps More Cream on Markets

The cheese side isn’t helping either. While cheese production hit a record 14.25 billion pounds last year, the high-fat varieties like Cheddar dropped by 5.8%. That trend’s continuing this year, with American-type cheese production down another 1.3% in February.

Meanwhile, those fancy new cheese plants in Wisconsin and Texas are diverting 15% of our milkfat away from butter – 50% more than last year. More cheese overall, but less fat being used up.

Food Service Weakness Compounds the Problem

Restaurants and bakeries aren’t buying like they used to. The food service sector’s been soft, hitting cream prices hard.

Cream values have tanked to decade lows—farmers now earn just $1.10 for every dollar of butterfat. That’s about as bad as the COVID crash in 2020. Butter churns are running at 92% capacity, just trying to handle all the excess cream.

Export Explosion: U.S. Butterfat’s Global Price Advantage

Here’s where things get interesting – our cheap butter looks mighty attractive overseas.

Fire Sale Prices: U.S. Butter’s Dramatic Discount

Our butter’s selling for $2.30/lb while European butter’s fetching nearly $8,600/MT – a 30% discount even after adjusting for fat differences. We’re practically giving it away compared to world prices.

RegionJan 2025 AvgFeb 2025 AvgMar 2025 AvgEarly Apr 2025 Spot/Range
U.S. CME Grade AA~$5,470/MT~$5,246/MT~$5,129/MT~$5,110-$5,180/MT
Europe (W. Europe 82% FOB)~$7,400/MT~$7,700/MT~$8,687/MT$7,975-$8,600/MT
Oceania (82% FOB / GDT)~$6,800/MT~$7,280/MT~$7,550/MT$7,400-$7,600/MT

Record-Breaking Export Growth

Buyers overseas aren’t stupid – they’re loading up on our cheap butterfat. Butter exports jumped 41% in January and then exploded by 126% in February, hitting 11.5 million pounds. For the first two months of this year, we’ve shipped 84% more butter than the same time last year.

Anhydrous milkfat (AMF) exports have gone wild – up 525% in January alone. Canada’s buying 239% more, and Mexico’s purchases jumped nearly 1,600%.

ProductJan 2025 (MT)Jan 2024 (MT)% ChangeFeb 2025 (MT)Feb 2024 (MT)% ChangeKey Destinations
Butter3,1882,261+41%5,2162,308+126%Canada, C. America, MENA
AMF3,897623+525%N/AN/AN/ACanada, Mexico, MENA
Total Butterfat7,0852,884+146%N/AN/AN/A–

For the first time in over two years, we exported more butter than we imported in February. That’s a big shift.

Why Selling Overseas Isn’t a Quick Fix

So why can’t exports solve everything? There are some real roadblocks:

The 80% vs. 82% Butter Battle

Our standard butter is 80% fat and usually salted. The rest of the world wants 82% unsalted. That’s not just a small detail – it means retooling production lines and changing processes. You can’t just take butter meant for Kroger and ship it to Saudi Arabia.

AMF: America’s Secret Export Weapon

AMF (that’s almost pure butterfat at 99%) doesn’t have the same standards problem as butter, which explains why it’s selling like hotcakes overseas. For processors looking to move butterfat fast, AMF is the easier path than reformulating butter production.

The Tariff Minefield

The trade situation is a mess right now. The White House slapped 25% tariffs on Canada and Mexico in March, and they hit back hard. Canada put 25% tariffs on our dairy, and China went nuclear with 125% tariffs on U.S. dairy products.

Trading PartnerU.S. Tariff ActionPartner Retaliation on DairyImpact on Exports
Canada25% on non-USMCA goods25% on U.S. dairy productsPotentially negates price advantage
Mexico25% on non-USMCA goodsRetaliation announced, but details pendingCreates uncertainty for the largest export market
China20% IEEPA tariff + existing tariffs125% on U.S. dairy productsChallenges the third-largest dairy market

The National Milk Producers’ Federation admits these tariffs will “certainly be a hit to our exports to China.” Even with USMCA exemptions, the uncertainty has everyone on edge.

Market Entry Costs and Historical Inertia

Breaking into export markets isn’t like selling to the following country. Companies need international sales teams, specialized paperwork experts, and relationships with buyers overseas. All that takes time and money.

The U.S. has traditionally imported butter rather than exported it, so we don’t have the connections and systems we do for powder or cheese. You can’t flip that switch overnight.

Exporting the Surplus: Short-Term Pain, Long-Term Gain

Why Exports Won’t Immediately Eliminate the Cream Glut

Let’s be realistic – exports alone can’t fix this overnight:

  1. The sheer scale of the problem is massive. Butter stocks jumped 26% in January alone to over 270 million pounds.
  2. The hurdles we discussed – different butter standards, export costs, and crazy tariff situations – all slow down the export machine.
  3. Building international relationships takes time. You can’t just call up a buyer in Saudi Arabia and ship tomorrow.

So while exports will help, we’ll likely need other fixes too – maybe producing less milk fat or finding new uses here at home.

Strategic Path Forward: Building Long-Term Export Capacity

But there’s good news for the long haul. If we play this right, exports could become a reliable outlet for our butterfat:

  1. Sustained Export Investment: Processors must stop treating exports as a dumping ground for surplus and start building a real, long-term international business.
  2. Strategic Market Targeting: Mexico and Central America make natural targets – they’re close by and have favorable trade deals like CAFTA-DR with zero dairy tariffs.
  3. Product Adaptation: Plants should consider dedicated lines for 82% unsalted butter or focus more on AMF production since it’s already selling well overseas.
  4. Enhanced Industry Collaboration: The U.S. Dairy Export Council needs everyone’s support to open doors and fight trade barriers.

Cream Rising: The Future of U.S. Butterfat Exports

This cream glut is both a crisis and an opportunity. While exports won’t immediately drain the lake, they’re becoming crucial to the solution. The export boom we’re seeing proves that when the price is right, buyers will come.

Going forward, we need a multi-pronged approach. On the export side, we must build lasting relationships, adapt our products, and navigate the trade minefield. We might need to rethink milk composition, production volumes, or processing capacity at home.

Can we export our way out of the cream glut? Not overnight. But with smart investments and a long-term view, exports can become a consistent market for our butterfat rather than just an emergency outlet when prices crash.

3 Steps to Survive the Cream Glut

  1. Audit your herd’s butterfat trends with your nutritionist. Are you still selecting and feeding for maximum components when the market’s drowning in fat?
  2. Demand export-ready pricing from your co-op. If they’re selling cream at rock-bottom prices domestically, ask what they’re doing to capture higher international values.
  3. Attend USDEC’s June webinar on navigating tariff complexities. Understanding the rapidly changing trade landscape is essential for long-term planning.

Exports might seem distant for those of us with our boots in the barn every day, but they’re becoming crucial to our bottom line. Those who see the global market as a real opportunity – not just a place to dump surplus – will still be milking cows when this shakes out. The U.S. can become a consistent global supplier of high-quality butterfat, but it’ll take patience, investment, and a long-term vision.

Learn more:

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84% Chinese Tariffs Slam US Dairy: Why Whey & Lactose Exports Face Crisis

Thursday, April 10th, 2025

84% Chinese tariffs slam US dairy exports. Prices plunge, markets scramble. Can producers pivot fast enough to survive?

EXECUTIVE SUMMARY: Escalating US-China trade tensions have triggered an 84% retaliatory tariff on critical dairy exports like whey and lactose, threatening over $500M in annual US sales. With China absorbing 42% of US whey and 72% of US lactose exports, domestic prices face collapse as surplus product floods markets. Historical parallels to 2019’s 55% export drop suggest even steeper declines now, compounded by expanded US production capacity. New Zealand and the EU stand to gain market share via trade agreements, while US producers must urgently diversify to Mexico/SE Asia and shift to value-added products like cheese. This crisis underscores the peril of over-reliance on a single export partner in volatile trade climates.

KEY TAKEAWAYS:

  • Tariff Tsunami: 84% Chinese tariffs make US whey/lactose uncompetitive overnight, risking $584M in annual exports
  • History Repeating: 2019’s 25% tariff caused 55% export drop – 2025’s higher rates could be catastrophic
  • Global Reshuffle: NZ’s duty-free access and EU’s food-grade products position them to exploit US losses
  • Survival Playbook: Producers must target Mexico/SE Asia markets, pivot to cheese/butter, and lock in forward contracts
  • Domino Effect: US milk prices could follow whey’s downward spiral, squeezing margins for farmers and processors
US-China dairy tariffs, whey export crisis, lactose trade dispute, dairy market impact, agricultural trade war

The escalating trade war between the United States and China has thrown a massive wrench into the dairy export machine. With retaliatory tariffs reaching 84% on critical dairy ingredients like whey and lactose, over $500 million in US dairy exports to China hang in the balance. This trade disruption comes at the worst possible time – just as US processors have expanded production capacity and China’s domestic milk output is forecast to decline by 2.6% in 2025.

The Tariff Time Bomb: A 90-Day Fuse

The US-China trade relationship deteriorated quickly in early 2025, with tariffs skyrocketing through tit-for-tat retaliations.

What began as manageable trade friction has morphed into a full-blown trade war:

  • February 4: The US imposed an initial 10% tariff on Chinese goods
  • March 3-4: US tariffs jumped to 20%
  • March 10: China retaliated with 10% tariffs on US dairy products
  • April 2: The US announced “Reciprocal Tariffs” with a baseline 10% global tariff and an additional 34% on China
  • April 4-8: China announced a matching 34% retaliatory tariff
  • April 9: The US paused new tariffs for most countries but dramatically increased the China-specific rate to 125%
  • April 10: China matched with an 84% retaliatory tariff on US goods

This lightning-fast escalation has created a perfect storm for US dairy exporters. Unlike previous trade disputes, China has explicitly denied exemptions for agricultural tariffs, removing potential avenues for relief.

“China’s 84% tariff on US goods came into force Thursday, April 10,” confirms the National Milk Producers Federation. “The tariffs will certainly hit our exports to China.”

Why This Matters: The China Dependency

The Chinese market represents an outsized portion of US dairy ingredient exports, making it virtually impossible to pivot quickly to alternative destinations without significant price concessions.

China is the third biggest export market for US dairy, with 385,485 metric tons worth $584 million exported in 2024. While this represents growth of 29% over the past decade, recent trends were already concerning – US dairy exports to China fell by 9% in 2024 compared to 2023.

For whey products specifically, the dependency is even more pronounced:

  • China purchased 42% of all US whey exports in 2024
  • For lactose, China absorbed 110,000 metric tons, representing 72% of China’s total lactose imports

Phil Plourd of Ever.ag captures the industry sentiment: “China takes a lot of US whey products – dry whey, whey protein concentrates, permeate, lactose. US manufacturers and marketers had to be very concerned about the initial 34% levy announced by China. Today, we’re up to 84%, making things more challenging.”

The Fallout: Price Collapse and Supply Chain Disruption

The ramifications extend beyond just lost sales volumes. The entire market dynamics for whey and lactose face significant disruption.

Lessons from 2019

We’ve seen this movie before, but the 2025 version looks considerably worse. During a similar trade dispute in 2019, when China imposed a 25% tariff on US whey products:

  • US exports of dry whey and permeate to China plummeted by 55%
  • Domestic dry whey prices collapsed by over 35%
  • Lactose exports fell 33%

With tariffs now more than triple those 2019 levels and US production capacity expanded, the market impact could be devastating. RaboResearch expects the US dry whey and milk markets to respond similarly to 2019 but with potentially more severe consequences.

The New Zealand Advantage

New Zealand enjoys a massive competitive edge thanks to its Free Trade Agreement with China, which grants duty-free access. This creates a price gap that’s nearly impossible for US exporters to overcome.

The 84% tariff makes US dairy exports to China effectively 104% more expensive than New Zealand’s duty-free shipments. New Zealand is already China’s largest dairy supplier, accounting for 51% of imports in the first half of 2024.

Global Winners and Losers

The disruption of established US-China trade channels creates opportunities and challenges across the global dairy landscape.

Who Stands to Gain?

The clear winners include dairy exporters from regions with better market access to China:

New Zealand: With its Free Trade Agreement granting duty-free access, New Zealand is perfectly positioned to capitalize on US exclusion.

European Union: Already supplying 35% of China’s whey imports, the EU stands to capture additional market share, particularly in higher-value segments. EU milk production is forecast to increase by 0.5% year-on-year in 2025.

South America: Argentina has the potential to increase milk production (forecast +4% in 2025) and strengthen its position as a dairy exporter.

Can Anyone Fully Replace US Supply?

Despite opportunities for competitors, the ability of alternative suppliers to fully replace US volumes appears limited:

  • Production Constraints: Milk production growth in the EU is projected to be modest (around 0.5% in 2025)
  • Different Product Profiles: Much of EU lactose exports to China are higher-quality, higher-priced materials, making them imperfect substitutes for US feed-grade lactose
  • China’s Shrinking Demand: China’s milk production is forecast to decline by 2.6% in 2025, marking the second consecutive year of contraction

Your Survival Playbook: Strategic Moves for Dairy Producers

With the Chinese market effectively closed by prohibitive tariffs, US dairy stakeholders must rapidly pivot to minimize damage:

1. Diversify Export Markets

Mexico and Southeast Asia represent the most promising alternatives. US dairy exports to Mexico rose 8% in value in February 2025, while February exports to China increased 4% before the tariff spike.

Focus on cheese and high-value products – cheese exports to China jumped 649% in February 2025 compared to the previous year, showing strong demand for specialty products even amid trade tensions.

2. Shift Product Mix

The market signals are clear – commodity ingredients face the biggest hit while value-added products show resilience:

  • Cheese exports boomed 14% in February 2025
  • Butter shipments surged 126%
  • Meanwhile, nonfat dry milk collapsed by 28%

This divergence suggests producers should prioritize milk components (fat and protein) that support higher-value product streams rather than focusing on volume.

3. Lock in Contracts and Hedge

With milk futures having already dropped 12% on tariff threats alone, forward contracting and price hedging are essential risk management tools. The 90-day tariff pause for most countries provides a brief window to secure alternative arrangements.

The Bottom Line

The 84% tariff wall between America’s massive whey and lactose production and China’s substantial ingredient demand represents a seismic disruption in the global dairy trade. While diplomatic solutions remain possible, the immediate outlook indicates significant pain for US producers and international supply chain adjustments.

The crisis underscores the inherent risks of concentrated export dependence for US dairy stakeholders. Smart producers will use this wake-up call to accelerate market diversification, shift toward value-added products, and implement robust risk management strategies.

Rabobank’s Q1 Global Dairy Quarterly report notes that global dairy prices are expected to remain elevated despite modest global supply growth of 0.8% in 2025. This suggests that producers who can navigate the trade turbulence and access alternative markets may still find profitable opportunities amid the chaos.

Your Move: Is your operation ready to pivot from China’s dependency to new markets and product streams? The dairy operations that survive and thrive will adapt fastest to this new trade reality.

Learn more:

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Dairy’s Perfect Storm: Market Mayhem Reshapes Farm Profitability in 2025

Thursday, April 10th, 2025

Dairy crisis 2025: Plummeting prices, trade wars & butterfat glut crush farmers—survival strategies to weather the storm inside.

Dairy market crisis 2025, milk price collapse, butterfat oversupply, dairy trade tariffs, dairy farm survival strategies

EXECUTIVE SUMMARY: U.S. dairy farmers face a triple threat in 2025: milk prices nosedived (Class III at $16.86/cwt, -15% since January), retaliatory tariffs slashed exports to key markets, and a butterfat glut from record-high components and surging imports. Feed cost relief offers limited respite, while beef-on-dairy breeding risks long-term herd shortages. Survival hinges on locking feed prices, maximizing beef revenue, and deploying risk management tools like DMC. Farmers must balance short-term cash flow with strategic herd planning to endure the downturn.

KEY TAKEAWAYS:

  • Milk price collapse: Futures dropped $2.50/cwt since January, erasing $25K/month for 1M-lb herds.
  • Butterfat paradox: 4.4% milk components + 172M lbs imported butter = price crash despite production success.
  • Feed relief: Corn ($4.20/bushel) and alfalfa ($210/ton) prices down 14% and 9%—lock savings now.
  • Beef-on-dairy gamble: 7.9M beef semen units sold in 2024 boost cash flow but risk 20-year lows in replacement heifers.
  • Risk management critical: Tools like DMC and Dairy-RP stabilize margins amid volatility.

The optimism of January has evaporated as plummeting milk prices, trade wars, and butterfat oversupply create unprecedented challenges for dairy producers. Yet, within this turbulence lie strategic opportunities for those who can adapt.

The Vanishing Promise of 2025

At the start of 2025, dairy farmers had every reason to feel optimistic. Domestic retail sales climbed $2 billion over the previous year to $78 billion, while restaurant sales surged from $93.7 billion in March 2024 to $97.6 billion by November 2024. Export markets were equally promising, with international cheese shipments growing by 17% to hit a record 1.13 billion pounds and overall dairy exports reaching .2 billion—second only to the .5 billion all-time high in 2022.

But that optimism didn’t last long. By February 2025, restaurant sales had dipped to $95.5 billion—a seven-month low—and escalating tariffs on U.S. dairy exports made international buyers hesitant. Meanwhile, U.S. dairy farmers continued producing record levels of components like butterfat and protein, further saturating the market and sending futures contracts into a tailspin.

“The current market downturn, following a period of relative optimism, may accelerate underlying industry trends,” notes Dr. Mark Stephenson, dairy economist at the University of Wisconsin-Madison. “Operations with weaker financial positions or higher production costs could face heightened pressure, potentially leading to further consolidation within the sector as more resilient farms find opportunities to expand.”

The Price Plunge: $2.50/cwt Vanishes Overnight

Milk prices have taken a nosedive in early 2025, erasing significant revenue for dairy farmers across the country and dropping by $2.57 per hundredweight (cwt), settling at an average between January and April of $16.86/cwt for April-to-June contracts. Class IV futures fell even further, losing $2.73/cwt during the same period.

Month/ContractClass III ($/cwt)Class IV ($/cwt)Key Event
Jan 2025 (Peak)$20.34$20.73Tariff talks begin
Feb 2025$20.18$19.90Restaurant sales dip
Mar 2025$18.62$18.21Retaliatory tariffs imposed
Apr-Jun 2025 Futures$16.86$17.77Record butter imports reported

Source: CME Group, USDA AMS

For farmers producing one million pounds of milk monthly, this price drop translates to roughly $25,000-$27,500 less revenue every month—a devastating hit to cash flow and profitability.

“A drop like this isn’t just numbers on paper—it’s a real gut punch when you’re trying to pay feed bills or make loan payments,” says John Newton, Chief Economist at the American Farm Bureau Federation.

Demand-Side Worries: Restaurants and Exports Falter

The food service sector—responsible for half of all dairy consumption—has shown troubling signs of weakening demand in recent months. Restaurant sales fell from $97 billion in December 2024 to $95.5 billion by February 2025, marking a noticeable decline as consumers tighten discretionary spending on dining out.

Export markets aren’t faring much better due to escalating trade tensions with key partners like Canada, Mexico, and China—countries that collectively account for half of U.S. dairy exports by volume and over 40% by value. Retaliatory tariffs imposed by these nations have made U.S.-produced dairy less competitive globally.

“This reliance on exports makes the U.S. dairy sector increasingly susceptible to geopolitical tensions and trade policy decisions,” explains Tom Vilsack, president and CEO of the U.S. Dairy Export Council.

The Butterfat Paradox: Record Production Meets Import Flood

U.S. dairy farmers have achieved remarkable success in boosting milk components over the years—average butterfat levels have climbed from 3.70% to 4.40% over two decades—but this triumph has created new challenges in today’s saturated market.

Metric2024 Value2023 ValueChange
U.S. Butterfat Production4.40% avg4.25% avg+0.15%
Butter Imports172M lbs118M lbs+46%
Butter Stocks (Dec)97M lbs90M lbs+7%
CME Butter Price (Apr ’25)$2.33/lb$2.89/lb-19%

Source: USDA Milk Production, USDA FAS

Despite record butterfat production domestically, processors are overwhelmed with cream supplies. At the same time, butter imports continue flooding into the U.S.—up 46% year-over-year from countries like Ireland and New Zealand.

“We’re drowning in cream while still importing butter—it makes zero sense,” says Mary Ledman, Global Dairy Strategist at Rabobank.

Beef-on-Dairy Strategy: Short-Term Gain vs Long-Term Risk

Many farmers have turned to beef-on-dairy breeding strategies to capitalize on strong beef markets while reducing reliance on low-value bull calves from traditional Holstein breeding programs.

Beef semen sales hit a record 7.9 million units in 2024—a clear sign that producers prioritize short-term cash flow over herd expansion.

“Beef prices are saving us right now—but replacement heifers are scarce as hen’s teeth,” warns Dr. Albert De Vries from the University of Florida.

While this strategy provides immediate financial relief through premium crossbred calves fetching up to $300 per head, it risks creating long-term shortages in replacement heifers for herd growth and sustainability.

The Bottom Line: Survival Strategies for Dairy Farmers

1. Lock In Feed Costs While Prices Are Low

Corn prices are down significantly at $4.20/bushel (-14% year-over-year), while alfalfa hay is averaging $210/ton (-9%). Securing feed contracts now can protect margins against future price volatility during summer droughts or other disruptions.

2. Milk Every Penny from Beef Markets

Strong beef prices provide a lifeline for cash flow through crossbred calves and cull cows—but balancing short-term gains with long-term herd needs is critical, given replacement heifer shortages.

3. Use Risk Management Tools

With milk prices tumbling—Class III futures averaging .86/cwt—programs like Dairy Margin Coverage (DMC) and Dairy Revenue Protection (Dairy-RP) are essential tools for stabilizing farm finances during volatile times.

“Risk management isn’t optional anymore—it’s survival,” says John Newton.

Learn more:

Join the Revolution!

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.

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U.S. Dairy Farmers Unlikely to Cash in on Chinese Demand

Wednesday, April 9th, 2025

84% tariffs slam U.S. dairy exports to China. Why can’t farmers capitalize on China’s milk shortage despite crashing prices & production?

EXECUTIVE SUMMARY: China’s dairy production is plummeting (-9.2% in 2025), but U.S. farmers face insurmountable barriers: 84% retaliatory tariffs, New Zealand’s duty-free dominance, and China’s lactose-intolerant population. While milk prices crashed by 15% and skim powder production dropped by 30%, structural issues like shrinking birth rates and economic stagnation limit demand. With FTAs favoring competitors and trade tensions escalating, experts urge dairy producers to pivot to Mexico, Southeast Asia, and value-added niches instead of chasing China’s shrinking market.

KEY TAKEAWAYS:

  • 84% tariffs make U.S. dairy exports to China 104% more expensive than New Zealand’s duty-free shipments.
  • New Zealand controls 46% of China’s import market—their FTA advantage is irreversible without policy shifts.
  • China’s milk consumption growth is capped by lactose intolerance (87% in teens) and declining birth rates.
  • Diversify or die: USDA grants and co-ops offer lifelines for exploring Latin America, MENA, and specialty markets.
  • Economic headwinds (real estate crisis, youth unemployment) slash Chinese spending on “non-essential” dairy.
U.S. dairy exports, China dairy market, 84% tariffs, New Zealand dairy dominance, trade war impact

China’s dairy sector is shrinking fast, with milk collections down 9.2% in early 2025 compared to last year. Milk prices have dropped 15%, and skim milk powder production has plummeted by more than 30%. While this might sound like an opportunity for U.S. dairy exports, the reality is much more brutal.

Why China’s Dairy Market is Shrinking

After years of pushing hard to expand its dairy industry, China is now dealing with serious oversupply problems. Between 2018 and 2023, their milk production jumped by 27% (24.7 billion pounds) as part of their national plan to rely less on imports.

“Dairy production has remained stable, and the number of cows has been gradually adjusted,” China’s agriculture ministry stated in December 2024. “While the oversupply of milk will continue in the first half of 2025, it is expected that supply and demand imbalances will ease in the second half of the year.”

The problem? Chinese consumers aren’t drinking enough milk to keep up with all this production. Raw milk prices crashed from 4.38 yuan/kg in 2021 to just 3.14 yuan/kg by September 2024 – a brutal 28% drop forcing many smaller farms out of business.

Why China Isn’t Buying

Trouble Digesting Milk

Let’s face it – many Chinese people simply can’t comfortably digest milk. Studies show that lactase deficiency affects about 38.5% of Chinese children aged 3-5, jumping to a whopping 87% in older kids. This biological reality means milk has never been a staple in Chinese diets.

Declining Birth Rates

China’s birth rate has fallen, dropping from 13.03 births per thousand people in 2013 to just 6.39 in 2023. This hits infant formula sales hard – historically a major driver for dairy imports.

There was a small bump in 2024 during the “Year of the Dragon” (considered lucky in Chinese culture), but that’s a blip in the long-term downward trend.

Economic Challenges

China’s economy struggles with real estate problems, high youth unemployment, and weak consumer confidence. As USDEC notes: “China’s economy continues to be challenged on multiple fronts—a real estate crisis; elevated youth unemployment; underfunded local governments; deflation; and disappointing GDP growth—not to mention potential fallout from trade battles with the U.S.”

When money’s tight, dairy products are often the first thing cut from shopping lists.

The Competitive Landscape: Why New Zealand Wins

  • New Zealand’s Duty-Free Advantage: As of January 1, 2024, all New Zealand dairy products enter China completely duty-free. This gives Kiwi producers roughly $350 million in annual tariff savings compared to U.S. suppliers.
  • Dominant Market Position: New Zealand commands a 46% share of China’s dairy import market. Their exports to China jumped significantly in late 2024, especially milk powder, butter, and cheese.
  • U.S. Export Decline: Meanwhile, U.S. dairy exports to China tanked in 2024, falling to $584 million – the lowest since 2020. Overall volume dropped 9%, according to USDEC.

Bottom Line: New Zealand’s free trade advantage is practically impossible to overcome without significant policy changes. Any import opportunities created by China’s production decline will benefit New Zealand, not U.S. producers.

The Trade War Impact: 84% of Tariffs Close the Door

The trade relationship between U.S. dairy and China has gone from bad to worse. Here’s how quickly things escalated:

Tariff Timeline:

  • February 1, 2025: U.S. slaps 10% tariff on all Chinese imports
  • March 3, 2025: U.S. increases tariff to 20%
  • March 4, 2025: China announces 10% retaliatory tariff on U.S. dairy (effective March 10)
  • April 2, 2025: U.S. imposes additional 34% “reciprocal” tariff
  • April 4, 2025: China matches with a 34% retaliatory tariff (effective April 10)
  • April 9, 2025: U.S. increases reciprocal tariff to 84%
  • April 9, 2025: China immediately matches with an 84% retaliatory tariff (effective April 10)

“China will impose a 10% tariff on US dairy products starting March 10 as the trade war intensifies,” reported The Bullvine in early March.

As of today (April 9, 2025), the U.S. has just announced an increase of its tariff on China from 34% to 84%, with China immediately matching. Starting tomorrow, virtually all U.S. dairy products entering China will face an additional 84% tariff on top of existing rates – effectively slamming the door shut on exports.

Quick Takeaways for Dairy Farmers

  • Small Operations: Focus on domestic specialty markets; consider joining cooperatives with diversified export portfolios
  • Medium Operations: Explore USDA Market Access Program funding for new market development in Southeast Asia and Latin America
  • Large Operations: Evaluate product mix to target markets less impacted by tariffs; consider joint ventures with partners in FTA countries

Bottom Line for Dairy Producers

The brutal truth? U.S. dairy producers shouldn’t expect any meaningful export opportunities to China shortly. The triple whammy of sky-high tariffs, weak Chinese consumer demand, and competition from duty-free suppliers like New Zealand create a perfect storm that effectively locks us out of the market.

3 Steps for Farmers:

  1. Explore USDA Market Access Program grants for export market development (applications due June 14, 2025)
  2. Contact your co-op or industry association about market diversification strategies
  3. Look beyond China to Mexico, Southeast Asia, and the Middle East/North Africa markets

This trade war highlights why putting all your eggs in one export basket is risky. The most brilliant move now is to diversify your markets and focus on regions where U.S. dairy still has competitive advantages.

Learn more:

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Global Dairy Markets April 7th, 2025: Regional Divergence Amid Trade Tensions

Monday, April 7th, 2025

Global dairy markets split: Europe slumps as Oceania booms. Trade wars ignite. Smart farmers chase fat percentages to survive 2025 chaos.

EXECUTIVE SUMMARY: Global dairy markets face stark regional divides, with European futures declining (-0.8% butter, -1.2% whey) despite physical prices holding 31.9% above 2024 levels, while Oceania milk production grows (+1.2% NZ). Escalating U.S.-China trade tensions threaten exports as cheese emerges as a bright spot (+19% EU prices). Farmers must prioritize component efficiency (4.33% Belgian milkfat), diversify trade routes, and leverage futures markets to navigate volatility. With EU production declining (-5% Belgium) and component-driven profits rising, strategic agility separates survivors from casualties.

KEY TAKEAWAYS:

  • Regional Rift Deepens: Europe’s bearish futures (-0.8% butter) clash with Asia’s bullish SGX trades (+1.0% SMP).
  • Component Efficiency Pays: Belgian milk’s 4.33% fat content offsets volume losses, proving quality trumps quantity.
  • Trade Wars Reshape Flows: U.S. cheese exports hit records (+7.3%) despite China’s 34% retaliatory tariffs.
  • Cheese Dominates Margins: EU cheese prices (+19% YoY) outshine sliding butter, signaling processor priorities.
  • Oceania Quietly Wins: NZ milk collections (+1.2%) and efficient culling (+9.1%) showcase sustainable growth models.
global dairy trends, dairy market analysis 2025, milk production decline, trade war impact on dairy, cheese production growth

This week, the global dairy landscape presents a stark contrast, with European futures markets trending downward while physical markets remain substantially above year-ago levels. Oceania continues showing production growth in stark contrast to European declines, creating regional supply imbalances that smart producers are turning into profit opportunities. Meanwhile, Trump’s sweeping tariffs have triggered retaliatory measures from key dairy-importing nations, threatening established trade flows as U.S. exports already showed weakness.

FUTURES MARKETS REVEAL BATTLE BETWEEN EUROPEAN BEARS AND ASIAN BULLS

European traders hit the panic button last week, with EEX futures declining across all significant categories despite robust year-over-year gains. Butter futures led the slide, dropping 0.8% to €7,201 for the April-November strip, with open interest reduced by 28 lots to 2,831 lots. This reduction suggests traders are cutting their exposure amid increasing uncertainty.

SMP wasn’t spared either, sliding 0.5% to €2,494 despite a substantial increase in open interest by 724 lots to 5,512 lots. Whey futures performed worst, tumbling 1.2% to €904, reflecting challenges in the protein ingredient sector.

Meanwhile, Singapore’s SGX painted a dramatically different picture with mostly positive price movements:

ProductPrice ChangeNew Average Price
WMP+0.6%$3,797
SMP+1.0%$2,837
AMFUp$6,666
Butter+0.4%$6,871

This stark divergence between European and Asian futures suggests regional factors drive trader sentiment, with European concerns about economic headwinds constraining dairy demand while Asian markets remain comparatively optimistic.

EU PHYSICAL MARKETS: SHORT-TERM BLUES, LONG-TERM GREEN

Don’t let this week’s dips fool you. The EU’s dairy quotation system revealed short-term pressure despite substantial year-over-year strength. The butter index dropped 0.7% to €7,568, with Dutch butter taking the biggest hit at 1.3% (€100) to €7,400. German butter slipped 0.7% to €7,475, while French butter remained steady at €7,830.

The annual comparison is genuinely eye-popping – the butter index stands at a staggering 31.9% (€1,831) above last year’s levels. This massive annual appreciation has been a boon for European dairy producers, who’ve maintained production despite rising costs and regulatory pressures.

SMP followed a similar pattern, with the index losing 0.7% to €2,422 yet remaining 3.7% (€87) above year-ago levels. Whey prices also weakened to €875 but stand an impressive 36.3% (€233) above 12 months ago. Only WMP provided a weekly bright spot, with the index gaining 0.8% to €4,435, driven by a substantial 2.5% rise in French WMP.

CHEESE INDICES: THE REAL MONEY MAKERS

European cheese indices all posted modest weekly declines but maintained impressive annual gains that suggest fundamental strength in the category:

Cheese TypeWeekly ChangeNew PriceYoY Gain
Cheddar Curd-0.7%€4,795+18.2%
Mild Cheddar-0.4%€4,810+19.1%
Young Gouda-0.9%€4,380+13.1%
Mozzarella-1.3%€4,284+19.2%

Despite short-term fluctuations, these substantial year-over-year gains across all cheese categories point to strong structural support for cheese values. This aligns with the EU dairy forecast for 2025, which projects increased cheese production even as milk production declines – a clear sign that processors prioritize this high-value segment.

GDT AUCTION: POWDER POWER PLAY

The latest Global Dairy Trade auction (TE377) saw the overall index climb 1.1% to $4,250. SMP emerged as the star performer with a robust 5.9% gain to $2,876, while WMP edged down just 0.1% to $4,062.

The divergence between European and Oceanic powder values was highlighted by Solarec’s Belgian Regular WMP selling at $4,665 compared to Fonterra’s $3,980. Butter experienced the most significant decline among major products, falling 3.9% to $7,895, while AMF bucked the fat trend by rising 2.4% to $6,695. With 17,643 tonnes sold to 163 bidders, the auction demonstrated healthy participation despite market uncertainty.

PRODUCTION PATTERNS: OCEANIA SURGES WHILE EUROPE CONTRACTS

The most striking feature of this week’s data is the dramatic regional divergence in milk production. Fonterra reported New Zealand milk collections were up 1.2% year-over-year to 133.7 million kgMS, driven primarily by South Island’s impressive 2.9% growth. Fonterra Australia collections also grew by 1.6% to 8.2 million kgMS.

This Oceanic growth presents a stark contrast to European struggles:

CountryFeb 2025 ProductionYoY Change
Spain579kt-1.2%
Italy1.06 million tonnes-1.0%
Belgium340kt-5.0%

Belgian producers face the most dramatic challenges, with February collections plummeting 5.0% and cumulative production down 4.2% for 2025. This aligns with broader projections for EU dairy in 2025, which forecast a 0.2% overall decline in milk production due to shrinking cow herds, environmental regulations, and disease pressures.

COMPONENT EFFICIENCY: THE NEW BATTLEGROUND

Looking beyond raw volumes, component data reveals significant variations in milk quality that impact processor returns. Belgian milk posted the highest component levels with 4.33% milkfat and 3.53% protein, followed by Italian milk at 4.05% and 3.49% protein. Spanish milk recorded relatively lower components at 3.88% milkfat and 3.40% protein.

This variation explains why Spanish milk solids collections grew slightly (+0.2%) despite volume declines, while Italian milk solids remained flat and Belgian milk solids fell less dramatically (-3.3%) than their volume drop. The growing gap between volume and component trends underscores the industry’s increasing focus on nutritional density rather than raw output.

NZ DAIRY COW CULLING: FEWER, BETTER COWS

In a seemingly counterintuitive trend, New Zealand dairy cow slaughters increased 9.1% year-over-year to 76,649 head in February despite the growth in milk production. This suggests Kiwi producers achieve greater efficiency with fewer animals, likely through improved genetics and management practices.

The 12-month rolling dairy cow slaughter total was 771 thousand head, still 4.9% below the same period last year. This indicates a longer-term moderation in culling rates after more aggressive herd reductions in prior years.

TRADE WAR FALLOUT: DAIRY IN THE CROSSHAIRS

This week, the elephant in the room is the dramatic expansion of global trade tensions following Trump’s “Liberation Day” tariff announcements. Speaking from the Rose Garden, Trump implemented sweeping tariffs on more than 180 countries and territories, using the trade deficit in each relationship as the basis for tariff calculations.

While Canada and Mexico were spared, many key markets for U.S. dairy products were hit. China swiftly announced retaliatory 34% tariffs on U.S. products, mirroring the percentage in the administration’s list. This comes on top of existing tariffs from earlier conflicts.

The timing couldn’t be worse for U.S. dairy exports, which already showed weakness. After adjusting for leap day, February exports fell 4.3% year-over-year, with particularly sharp declines in nonfat dry milk shipments, which hit their lowest February volume since 2016. Southeast Asian demand for milk powder has been notably weak.

The news wasn’t bad – U.S. cheese exports rose 7.3% to 99 million pounds, the largest February volume ever recorded. Butter exports also soared 134.2%, while anhydrous milkfat shipments increased nearly tenfold compared to February 2024.

5 SURVIVAL STRATEGIES FOR DAIRY FARMERS

The current global dairy environment presents both significant challenges and strategic opportunities:

  1. Component Over Volume – The growing divergence between volume and milk solids trends underscores the importance of breeding and management decisions that maximize component efficiency rather than raw output.
  2. Regional Strategies Must Differ – European producers face regulatory and cost constraints that necessitate a more significant focus on value-added processing. In contrast, Oceania producers may have more opportunity for volume growth.
  3. Cheese Holds Particular Promise – With cheese indices showing the most substantial year-over-year gains, processors will likely continue shifting milk toward this category, especially in Europe, where cheese production is forecast to increase.
  4. Trade War Demands Contingency Planning – Producers and processors heavily dependent on export markets must develop alternatives for potential disruption of established trade flows. Asian markets beyond China may present growing opportunities as trade patterns shift.
  5. Price Volatility Requires Sophisticated Risk Management – The divergence between European and Asian futures markets highlights the value of a diversified approach to hedging across multiple exchanges.

THE BOTTOM LINE: THINK GLOBAL, ACT LOCAL

The global dairy market continues sending contradictory signals that challenge straightforward interpretation. Short-term European weakness contrasts with robust year-over-year gains. Production trends show dramatic regional divergence, with Oceania growing while Europe contracts. Meanwhile, the escalating trade war adds significant uncertainty to market projections.

Smart dairy producers will look beyond immediate price signals to understand the structural factors driving longer-term trends. Focusing on efficiency improvements, component optimization, and strategic product mix decisions will prove more valuable than reactive responses to weekly market fluctuations.

This market isn’t for the faint-hearted. European producers are walking a tightrope between component premiums and volume cliffs. U.S. exporters are caught in a geopolitical meat grinder. Oceania? They’re just quietly printing money while the Northern Hemisphere fights.

The playbook’s clear: Think global, act local, and never stop chasing components. Because in this market, fat percentage isn’t just a number – it’s your lifeline.

Learn more:

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44% Tariff Shock: China’s Retaliation Threatens $485M in U.S. Dairy Exports

Sunday, April 6th, 2025

Trade war escalates as 44% tariffs threaten $485M in U.S. dairy exports. China retaliates, H5N1 spreads – survival strategies for farmers revealed.

EXECUTIVE SUMMARY: The U.S. dairy sector faces a perfect storm as President Trump’s “Liberation Day” tariffs trigger China’s retaliatory 44% duties, putting $485M in exports at immediate risk. February data reveals collapsing powder sales (-53% in SE Asia) but record cheese exports (+7.3%), while butter shipments surge 134%. Simultaneously, H5N1 outbreaks cost farms up to $1.2M, and EU geographical indications threaten $59B in U.S. cheese revenue. Producers must act now: lock in feed prices, shift milk classes, and leverage USDA support programs to survive this unprecedented crisis.

KEY TAKEAWAYS:

  • China’s 44% tariff wall could erase 83% of $584M annual U.S. dairy exports within months
  • Butter exports (+134%) and cheese (+7.3%) shine while powder collapses (-53% in SE Asia)
  • H5N1 costs hit $372K testing/$1.2M culling for large herds – apply for USDA aid NOW
  • EU’s cheese name grab threatens $59B over 10 years – fight for “parmesan” labeling rights
  • 5 survival moves: Hedge feed, shift to Class IV, demand USMCA enforcement, chase new markets, use H5N1 funds
trade war dairy exports, U.S. dairy tariffs, H5N1 dairy impact, global dairy markets, cheese export growth

The dairy world is caught in the crossfire of an escalating global trade war following President Trump’s sweeping “Liberation Day” tariffs announced this week. These aggressive new measures, affecting more than 180 countries and territories, have triggered immediate retaliation from China and sent financial markets tumbling. For dairy farmers worldwide, this dramatic shift in trade policy creates both immediate challenges and potential opportunities depending on your location and export exposure.

TRADE WAR BOMBSHELL: HOW “LIBERATION DAY” RESHAPES GLOBAL DAIRY MARKETS

The long-anticipated tariffs hit harder than most analysts expected, with a baseline 10% levy on all imports starting April 5, followed by steeper rates kicking in from April 9. While Canada and Mexico escaped unscathed from this latest round, key dairy importers without significant new barriers.

China wasted no time firing back, announcing a matching 34% tariff on all U.S. products starting April 10. This comes on top of existing 10% tariffs from previous trade disputes, creating a crushing 44% total barrier for U.S. dairy exports to America’s third-largest dairy market worth $584 million in 2024. Industry analysts project this could erase 83% of this trade within months – putting $485 million at immediate risk.

MarketExport Value (2024)Key Products Affected
Mexico$2.47 BillionCheese, NFDM, Whey
Canada$1.14 BillionFluid Milk, Yogurt
China$584 MillionInfant Formula, Whey
Japan$394.61 MillionCheese, Ice Cream
South Korea$385.66 MillionCheese, Lactose
Philippines$364.98 MillionNFDM, Whey
Indonesia$244.83 MillionNFDM, Butteroil
Australia$173.87 MillionCheese, Specialty Products
European Union$167.14 MillionWhey Proteins
Dominican Republic$134.7 MillionCheese, NFDM

The European Union, a significant cheese exporter to the U.S., faces a challenging position. Alexander Anton of the European Dairy Association emphasized: “Our sector is already under enormous pressure from China’s anti-subsidy investigation and ongoing global market challenges. Now, U.S. tariffs risk compounding that crisis.”

FEBRUARY EXPORT DATA REVEALS TROUBLING SIGNS BEFORE THE TARIFF WAR ERUPTED

The latest export data from February showed U.S. dairy exports slipping 4.3% year-over-year (adjusted for leap day), with sharp divergences between products hinting at challenges that predated the current tariff crisis.

ProductFeb 2025 VolumeYOY ChangeKey Markets Impacted
Cheese99M lbs+7.3%South Korea (+50%)
Butter18.7M lbs+134.2%Middle East, Canada
NFDM/SMP177.36M lbs+0.2%SE Asia (-53%)
Dry Whey57.35M lbs-10.3%China (-58%)
Whey Protein Isolate12.1M lbs+14.2%Global Sports Nutrition

Nonfat dry milk/skim milk powder (NFDM/SMP) exports plummeted to their lowest February volume since 2016, with Southeast Asian sales collapsing dramatically. This drop pushed U.S. NFDM/SMP exports to troubling lows – a concerning sign for America’s leading dairy export product.

The bright spot? Cheese exports maintained their strong growth trajectory, improving 7.3% year-over-year and setting an all-time February record at 99 million pounds. Growth across diverse markets compensated for a 5.9% drop in cheese exports to Mexico.

Butter exports delivered the most dramatic performance, soaring 134.2% as U.S. butterfat prices sat at a significant discount compared to European and Oceanian competitors. This price advantage could prove pivotal as trade barriers reshape global dairy flows. Anhydrous milkfat shipments also skyrocketed to 7.5 million pounds, nearly ten times the volume shipped in February 2024.

WHY GLOBAL DAIRY PRODUCERS MUST PREPARE FOR MARKET UPHEAVAL

The tariff fallout varies dramatically depending on where your farm sits globally. The outlook appears grim for European producers, particularly Irish dairy farmers exporting Kerrygold butter to the U.S…

The Irish Farmers Association warns: “Kerrygold is now the second best-selling butter brand in the U.S., where we sent almost €500m of product in 2024. The fact that New Zealand only has a 10% tariff for dairy products while the EU will have 20% tariffs will leave us at a competitive disadvantage.”

New Zealand, meanwhile, finds itself in a relatively stronger position despite the turmoil. Agriculture Minister Todd McClay offered an optimistic assessment: “While these tariffs create additional costs that will largely be passed on to consumers, New Zealand is in a stronger position than many other countries, some facing higher tariff barriers.”

Australian dairy exports, primarily cheese and curd, reached record highs last year, with volume lifting 17.5% year-on-year. The country faces only the baseline 10% tariff, potentially giving it a competitive edge against European rivals hit with the 20% rate.

THE HIDDEN COST CRISIS: HOW EQUIPMENT TARIFFS ADD $45.65 PER COW

While Canada escaped new tariffs in this round, existing 25% steel and aluminum duties directly hit equipment costs for dairy operations on both sides of the border. A New York dairy co-op’s analysis shows these tariffs added $21,000 to a 460-cow barn renovation – $45.65 per cow in hidden costs before milk even hits the tank.

AJ Wormuth, who manages 3,600 dairy cows at Half Full Dairy in upstate New York, reports accelerating a barn renovation after being informed that metal stall costs would increase by $21,000 due to these steel tariffs. “We’re facing a double challenge — lower prices coupled with increasing costs,” Wormuth explains.

The concerns are equally pressing for smaller operations like Annie Watson’s 70-cow organic dairy in Maine. She calculates that tariffs could increase her grain expenses from Canada by $1,200 monthly. “It would be more manageable if many of our organic dairy farmers weren’t already financially struggling due to market conditions,” notes Watson.

CME MARKET REACTION: WHICH DAIRY COMMODITIES FACE THE BIGGEST PRESSURE?

This week’s CME spot market movements offered a glimpse into immediate market reactions to the tariff drama, with most dairy commodities facing downward pressure:

Butter took the biggest hit, falling 5.5¢ to settle at $2.295/lb with a heavy trading volume of 28 loads. With U.S. butter production jumping 6.3% year-over-year in February amid rising milk fat tests (now at 4.43%, up 0.13% from last year), the market faces significant oversupply challenges that exports might have helped alleviate before tariff barriers emerged.

Nonfat dry milk slipped a modest half-cent to $1.1575/lb, but concerning fundamentals lurk beneath this relatively stable price. Manufacturers’ NDM inventories have ballooned to 329.14 million pounds, a shocking 57% increase from last year, while domestic and international demand remains sluggish.

Dry whey continued downward, losing a penny to settle at 49¢ per pound. The ongoing preference for higher-protein products (whey protein isolate production jumped 14.2% while dry whey production fell 10.3%) hasn’t provided price support, and the escalating China trade conflict threatens to undermine export prospects further.

The cheese markets showed surprising resilience amid the turmoil. Cheddar blocks inched up half a cent to $1.64/lb on heavy volume (47 loads traded, including 24 on Tuesday alone), while barrels gained 2.5¢ to reach $1.66/lb, inverting the typical block-barrel spread. This strength comes despite February cheese production climbing 1.3% year-over-year to 1.115 billion pounds.

H5N1 CRISIS: THE PERFECT STORM THREATENING DAIRY FARM SURVIVAL

As if trade wars weren’t enough, the dairy industry simultaneously battles an unprecedented H5N1 avian influenza outbreak in cattle. Since the first detection on March 24, 2024, the virus has spread to at least 192 dairy herds across 13 states. This biosecurity crisis adds another layer of complexity, with mandatory testing now required for interstate cattle movement.

Cost FactorSmall Farm (70 cows)Large Farm (3,000 cows)
Testing$8,700$372,000
Milk Loss (14 days)$11,200$480,000
Culling$28,000$1.2M

The USDA has committed $200 million to combat the spread, offering up to $10,000 per farm for veterinary costs and testing. With the American Association of Bovine Practitioners estimating economic impacts of $100-$200 per cow, this represents yet another financial pressure point for dairy operations already struggling with trade disruptions.

THE $59 BILLION THREAT: WHY EU CHEESE NAME RESTRICTIONS COULD DEVASTATE U.S. PRODUCERS

Beyond immediate tariff concerns lurks another trade dispute with potentially devastating consequences. The EU’s aggressive stance on geographical indications for cheese names threatens to cost U.S. dairy producers $59 billion over the next decade, according to a new report by Informa Economics IEG.

U.S. cheesemakers face restrictions on using terms like “parmesan,” “feta,” and “gorgonzola” – names many American producers consider generic. Wisconsin cheesemaker Sarah Pratt bluntly says, “They want to steal ‘parmesan’ from our vocabulary like they stole our grandfathers’ recipes.”

5 SURVIVAL STRATEGIES EVERY DAIRY PRODUCER NEEDS NOW

The long shadow of a trade war has impacted dairy futures significantly, with Class III contracts dipping below $18/cwt through August. This comes at a particularly challenging time for farm profitability – February’s milk margin over feed cost fell to $13.12/cwt, down 73¢ from January.

MarketNew Tariff RateProjected Export LossAt-Risk Jobs
China44% (cumulative)$485M (83% of 2024)8,200
EU20%$67M annual1,400
Southeast Asia10-15%$214M annual3,700
South Korea10%$38.5M annual650

The silver lining? Feed costs appear to be headed lower. May soybean futures plunged to $9.77/bu following China’s retaliatory tariff announcement, while May corn settled at $4.60/bu. This potential operating cost relief may help offset some milk price pressure.

For forward-thinking dairy producers, several strategic priorities emerge:

  1. Lock in feed prices NOW using CME’s discounted DEC25 corn futures at $4.18/bu to protect against future volatility.
  2. Demand USDA enforce USMCA Chapter 32 to break Canada’s tariff-rate quota manipulation that blocks U.S. access to promised markets.
  3. Shift 15% of milk to Class IV before June, hedging windows close to diversify revenue streams.
  4. Apply for H5N1 support programs, including the $10,000 per farm veterinary reimbursement and $2,000 monthly PPE allowance from USDA.
  5. Explore alternative export markets in Southeast Asia and the Middle East, where U.S. butter exports grew 776% year-over-year in recent data.

The coming months will reveal whether this trade war becomes a prolonged reality or another chapter in ongoing negotiations. What’s certain is that global dairy markets face a significant adjustment period as trade flows recalibrate to this new reality – creating both challenges and opportunities for adaptable dairy businesses worldwide.

Leonard Poen of the University of Wisconsin-Madison extension warns that retaliatory tariffs could decrease the income of a medium-sized farm in Wisconsin with about 250 cattle by up to $56,000 per year. “I don’t think any part of the supply chain is going to be insulated from this,” he cautions.

As Agriculture Secretary Brooke Rollins explores methods to “potentially alleviate any economic disasters that might befall some of our farmers,” the industry must prepare for a prolonged period of volatility. Those who implement strategic responses and remain adaptable to changing conditions will be best positioned to weather this storm and potentially emerge stronger when trade relationships stabilize.

Learn more:

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U.S. Dairy Exports in February 2025: How Can Record Values Coexist with Plummeting Volumes?

Thursday, April 3rd, 2025

Cheese exports boom 14% while NFDM crashes 28%: How U.S. dairy walks the tariff tightrope between record profits and market chaos.

EXECUTIVE SUMMARY: February 2025 revealed a divided U.S. dairy export landscape: Cheese and butter shipments surged (14% and 126%, respectively) despite Canadian tariffs, while nonfat dry milk collapsed (-28%) amid global oversupply. Trade tensions with Canada and Mexico threaten $1.43B in exports as H5N1 protocols add logistical hurdles. Rabobank forecasts modest 0.8% global milk growth, intensifying competition. The article exposes how breed selection (Jerseys vs Holsteins), blockchain traceability, and premiumization strategies will determine winners in this high-stakes market reshaped by disease risks and protectionist policies.

KEY TAKEAWAYS

  • Value Over Volume: Cheese/butter exports now drive 63% of dairy export value growth
  • Trade War Fallout: Canada’s TRQ System Blocks $210M in Potential Annual U.S. Dairy Sales
  • Disease = Dollars: H5N1 testing delays cost exporters $18/lb in EU market penalties
  • Breed Calculus: Jerseys’ 5.86% ROI outpaces Holsteins in component-driven export markets
  • Tech Edge: Blockchain adoption boosts export margins 22% (DeGroot Dairy case study)
U.S. dairy exports 2025, cheese exports growth, NFDM market decline, dairy trade tariffs, H5N1 impact

The numbers tell a conflicting story: While U.S. dairy exports hit $723.5 million in February 2025 (an 8% annual increase), nonfat dry milk shipments cratered by 28%. Cheese and butterfat sales soar even as trade wars loom. What does this paradox mean for dairy farmers and global markets? Let’s dissect the chaos.

The Export Tightrope: Walking Record Values and Market Volatility

The U.S. dairy sector’s export performance in early 2025 resembles a high-stakes balancing act. Total export value surged to $1.43 billion in January-February (+14% year-over-year), yet volume declines in key categories reveal vulnerabilities.

The Mexico Factor: Stability Amidst Storm Clouds

Mexico retained its position as America’s top dairy buyer at $396.2 million (+10%) for January-February, but cracks emerged:

  • Cheese exports to Mexico fell 5% by volume despite global growth
  • Reliance on a single market now represents 27.7% of total U.S. dairy exports

“Any disruption in trade flow is troubling,” warns Jaime Castaneda of the National Milk Producers Federation. With 40% of exports flowing to Mexico and Canada, this concentration risk keeps analysts awake at night.

“President Trump isn’t going after the system of supply management as much as looking to dump surplus subsidized U.S. dairy products on the Canadian market,” counters Pierre Lampron, President of Dairy Farmers of Canada, highlighting the Canadian perspective on trade tensions.

Cheese & Butter: The Unlikely Heroes

Cheese Exports Break Barriers

MarketVolume (Million lbs)Change vs. 2024
South Korea25.6+40%
Japan19.2+10%
Australia13.0+37%
Canada8.4+19%

Source: USDA Foreign Agricultural Service, February 2025 Export Data

Cheese exports hit $223.7 million in February (+14% value), proving premium products can defy economic gravity. South Korea’s 40% volume surge reflects strategic market diversification.

“We had a record year in 2024 as a nation. We exported 1.1 billion pounds of cheese to other countries,” notes John Umhoefer, Wisconsin Cheese Makers Association Executive Director. “We like trade issues to get resolved as fast as possible. We like the free and fair trade to flow in both directions.”

Butter’s Shock Surge: 126% Volume Jump

Butter exports defied Canada’s 25% retaliatory tariffs, reaching 11.5 million pounds in February. “This isn’t your grandfather’s commodity market,” notes IDFA’s Becky Rasdall Vargas. “Innovative packaging and targeted marketing are unlocking new demand channels.”

The Powder Crisis: NFDM Exports Crash 28%

While cheese thrives, nonfat dry milk (NFDM) tells a different story:

February 2025 Powder Performance

  • NFDM: 106.9M lbs (-28%)
  • Whey Protein Concentrate: 21.3M lbs (-29%)
  • Lactose: 73.1M lbs (-7%)

Source: USDA FAS Export Data, February 2025

“Powders are the canary in the coal mine,” explains dairy economist Chuck Nicholson. “Trade disputes and global oversupply first hit them.” With China reducing imports (-4% to the Philippines), the U.S. faces a $210M quarterly powder shortfall.

H5N1 Testing Protocols: Impact on Export Compliance

The USDA’s National Milk Testing Strategy (NMTS), implemented in December 2024, has added a layer of complexity to exports. According to a USDA whistleblower report, delayed test results have impacted EU shipments, with some containers held at ports awaiting clearance.

“The D1.1 outbreaks in Nevada and Arizona were identified through silo testing before affected cattle developed clinical signs, providing evidence that the NMTS is working,” reports the American Veterinary Medical Association. This early detection system has prevented three potential outbreaks in February alone but has created logistical challenges for exporters facing tight shipping deadlines.

Trade Wars & Tariffs: The Double-Edged Sword

Canada’s TRQ System: Protectionism or Fair Play?

President Trump’s criticism of 250-390% Canadian dairy tariffs misses nuance. Under USMCA:

  • 85-100% of Canadian TRQs go to domestic processors
  • U.S. exports face 0% tariffs below quotas
  • 2024 saw $1.1B in duty-free U.S. dairy to Canada (+55% since 2020)

“By 2024, as a result of trade concessions, some 18% of our domestic milk production will be outsourced to dairy farmers in other countries at a time when Canadians are more aware than ever of the importance of ensuring our food security,” states Pierre Lampron of Dairy Farmers of Canada, highlighting concerns about the impact of trade agreements on Canadian producers.

“Our issue isn’t tariffs—it’s accessing the quotas,” clarifies Rasdall Vargas. Canadian processors dominate TRQ allocations, creating “invisible trade barriers.”

The Innovation Imperative: Data-Driven Dairy

DeGroot Dairy Case Study: Blockchain Implementation

Wisconsin’s DeGroot Dairy implemented blockchain traceability in 2024, resulting in a 22% increase in EU export margins. Their system tracks milk from individual cow groups through processing, providing verifiable documentation for export certification.

“Blockchain isn’t just buzzword technology—it’s solving real problems for our export program,” explains Sarah DeGroot, export manager. “When H5N1 testing requirements changed overnight, our digital documentation allowed us to adapt immediately while competitors were stuck with paperwork delays.”

5 Data Points Revolutionizing Exports:

  1. Real-time tariff impact modeling
  2. Blockchain traceability for premium markets
  3. Predictive analytics for H5N1 risk zones
  4. Dynamic pricing engines for cheese varieties
  5. Social media sentiment tracking in target markets

Bullvine’s 2024 investigation into farm data systems revealed top performers achieve 19% higher export margins through predictive logistics.

Global Market Context: Rabobank’s Outlook

Rabobank’s Q1 2025 Global Dairy Quarterly report titled “Modest growth amid trade shifts” provides a crucial context for U.S. export performance. The bank projects milk production in the Big Seven dairy-export regions to expand by 0.8% year-on-year for 2025.

“US supply expansion is expected in 2025, but it’s likely to be modest at sub-1%,” notes Michael Harvey, RaboResearch senior dairy analyst. This limited growth helps explain why export values remain strong despite volume challenges in some categories.

In contrast, Rabobank’s analysis of Northwestern Europe forecasts a potential 20% drop in milk production by 2035 unless the industry adapts. “To counterbalance the rising costs, companies should shift their focus on producing high-value dairy products,” recommends Richard Scheper, Rabobank dairy analyst, aligning with the U.S. shift toward value-added exports.

The Bottom Line: Navigating the New Dairy Geopolitics

Three make-or-break factors for 2025:

  1. Trade Agility: With 18% of U.S. milk production exported, rapid response to tariff changes is critical.
  2. Value-Add Focus: Cheese/butter growth proves premiumization beats commodity reliance.
  3. Disease Diplomacy: Transparent H5N1 management could become a market differentiator.

“This isn’t about surviving 2025—it’s about dominating 2030,” declares IDFA CEO Michael Dykes. As global dairy demand grows 2.3% annually, U.S. exporters must master this high-wire act.

Your Move: Will your operation chase volatile commodity markets or build value-added resilience? Share your strategy in the comments—the most innovative response wins a Bullvine analysis of your export potential.

Learn more:

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GDT’s Q1 Slump Meets Genetic Surge: Dairy’s Profit Paradox Unpacked

Tuesday, April 1st, 2025

Dairy’s profit paradox: GDT prices rise, but are farmers cashing in? Explore how genetics and global trends redefine milk margins in 2025.

EXECUTIVE SUMMARY: The latest Global Dairy Trade auction broke a months-long losing streak with a 1.1% index rise, yet the results reveal deeper industry challenges. While skim milk powder surged 5.9%, butter and other key commodities fell, highlighting uneven recovery across dairy markets. Meanwhile, genetic advancements are reshaping profitability by prioritizing component yields like butterfat and protein over raw volume. Countries like New Zealand and Australia showcase contrasting models of crisis response, from cooperative stability to retail-driven vertical integration. However, escalating feed costs threaten to erase gains for high-genetic herds, exposing the disconnect between commodity price increases and farmgate profitability. Dairy producers must navigate volatile short-term markets while leveraging genetic strategies to secure long-term margins.

KEY TAKEAWAYS:

  • Auction Insights: GDT index rose 1.1%, but uneven product performance signals fragile market recovery.
  • Genetic Revolution: High-component herds achieve profitability despite stagnant commodity prices.
  • Global Models: NZ’s cooperative pricing vs Australia’s retail-driven vertical integration offer contrasting solutions.
  • Profit Disconnect: Rising feed costs threaten margins even as auction prices climb.
  • Action Plan: Producers should focus on genetic audits, contract flexibility, and component-focused production strategies.
GDT auction results, dairy genetics innovation, milk component profitability, global dairy markets, sustainable dairy farming

The dairy sector’s opening months of 2025 have revealed a stark contradiction – while global commodity markets wobble, genetic breakthroughs are quietly rewriting milk’s economic DNA. This collision of short-term volatility and long-term transformation demands urgent analysis from every producer holding a milking claw.

Breaking News: Q1 Auction Sets Stage for Turbulent Year

January’s Global Dairy Trade auction delivered a 1.4% index decline, continuing 2024’s downward trend despite pockets of strength in mozzarella (+3.6%) and butter. With 143 successful bidders moving 17,643 tonnes, the results confirmed three critical realities:

  1. Protein Power: Skim milk powder’s 5.9% drop contrasts sharply with cheese gains, exposing shifting demand patterns
  2. Geopolitical Drag: China’s uneven recovery and Southeast Asia’s import fluctuations continue destabilizing traditional markets
  3. Processor Calculus: Rabobank’s “balanced but brittle” assessment masks looming supply chain reconfigurations

The real story lies beneath these numbers – a fundamental mismatch between commodity pricing mechanisms and on-farm profitability drivers.

Feature Deep Dive: Genetics Rewrite the Profit Equation

While markets falter, U.S. herds are achieving once-unthinkable component averages – 4.23% butterfat and 3.29% protein – through genomic leaps accounting for 70% of recent gains . This revolution demands recalculating every aspect of dairy economics:

The New Milk Math

This updated genetic index prioritizes component value over raw volume, reflecting market realities where 1lb of fat now outearns 2.3kg of protein . Western Megadairies and Midwest family farms converge on three strategies:

  1. Sexed Semen Stratification: 61% of U.S. herds now use elite genetics on the top 30% of cows
  2. Embryo Acceleration: The top 5% of females contribute 40% of genetic progress through IVF programs
  3. Feed Cost Hedging: $3.20/lb fat values justify premium forage investments

Global-Local Collision: Two Models Emerge

New Zealand’s Cooperative Calculus

Fonterra’s milk price manual reveals a risk-sharing model where:

  • 73% of commodity returns flow directly to farmers
  • Processors absorb currency/transport volatility
  • “Permanent supply shocks” trigger automatic renegotiations

Australia’s Vertical Experiment

The Saputo-Coles $70M plant deal creates a stark countermodel:

  • Retailers now control 22% of NSW/Victoria processing
  • Five-year tolling agreements lock in supply chains
  • ACCC approval despite 14% raw milk buyer reduction

These competing approaches – cooperative stability vs vertical integration – frame dairy’s global crossroads.

Controversy Corner: The Price-Profit Disconnect

Challenge Convention: “Strong auctions don’t equal strong margins”

While GDT’s mozzarella bounce made headlines, feed costs have erased 63% of those gains for component-focused herds. This equation explains why 41% of high-genetic herds maintained profits despite Q1’s index drop – their component surge offset stagnant prices.

Your Profit Playbook

  1. Genetic Audit
    1. Re-run breeding decisions through NM$ 2025’s feed efficiency lens
    1. Target 4.5% butterfat thresholds through genomic culling
  2. Contract Calculus
    1. Weigh Fonterra-style risk sharing against Coles-like vertical offers
    1. Model 5-year feed cost scenarios against component potential
  3. Market Hedge
    1. Allocate 30% of production to cheese-focused components
    1. Explore specialty fat premiums through AMF partnerships

The Bullvine Bottom Line

Dairy’s 2025 inflection point demands a dual vision: navigate quarterly auctions while building a decade-long genetic advantage. As markets reward component density over raw volume, the herds that thrive will treat every heifer as a futures contract and every AI straw as a strategic asset.

Learn more:

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April 2025 Dairy Risk Management Calendar

Thursday, March 27th, 2025

2025’s dairy crisis hits hard: Herd math fails as milk prices crash 18%. Can new risk strategies salvage your milk check before summer?

EXECUTIVE SUMMARY: The 2025 dairy market faces unprecedented challenges, with milk prices plummeting $1.95/cwt since January, export opportunities shrinking 12%, and productivity dropping 3.2% despite larger herds. While traditional safety nets like DMC sit .44 above triggers, emerging strategies – from component-focused culling (butterfat up 2.2%) to strategic Chicago puts – offer hope. Producers must rethink risk management timelines and milk quality priorities to survive the margin squeeze with replacement heifer inventories down 37,000 head and feed savings potential ($0.59/bu corn).

KEY TAKEAWAYS:

  • DMC’s Diminishing Returns: February’s $13.94 margin leaves a $4.44 buffer – pair with futures to avoid coverage gaps
  • Component Cash Cow: Butterfat/protein growth (2.2%) now outpaces volume – test herds above 4.1% BF
  • Export Window Cracked: EU’s 1.8% milk slump offers cheese opportunities if tariff timing aligns
  • Heifer Math Matters: 37K fewer replacements means cull decisions impact 2026’s genetic pipeline
  • Feed Cost Lifeline: $4.07 corn (-14% YoY) demands ration renegotiations to offset price declines
2025 dairy crisis, milk price crash, dairy margin coverage, dairy risk management, herd productivity decline

The spring flush has arrived, but this year brings a challenging combination of falling milk prices, softening exports, and risk management strategies that worked in January but may leave your operation vulnerable by summer. If you haven’t updated your approach since the year began, now’s the time.

The Shifting Landscape of 2025’s Dairy Margins

Three significant market shifts are reshaping dairy profitability this spring:

  1. Export markets cooling – While EU milk production fell 1.8% and New Zealand grew just 0.7%, China’s domestic push and Southeast Asian tariffs have cut U.S. export opportunities by 12% year-over-year [USDA ERS].
  2. Production paradox – February 2025 saw a 62,000-head herd expansion (9.405M cows) despite plunging productivity – milk per cow dropped 3.2% (61 lbs monthly) compared to February 2024 [USDA Milk Production Report].
  3. Risk management recalibration is needed. DMC’s February margin, at $13.94 (the projected peak in 2025), is $4.44 above triggers, requiring producers to reassess coverage strategies [HighGround Dairy].

During a recent visit to the Johansen operation in Wisconsin, third-generation farmer Mark shared his perspective while maintaining equipment: “DMC looked solid in January. Now, I’m looking at feed contracts that don’t align with Class III futures at .10 – down .95 from January’s peak. It’s keeping me up at night.”

DMC: Understanding the Limitations

HighGround Dairy’s analysis shows that DMC has triggered payments in 65% of months since 2015—an impressive figure that deserves careful context.

Current market realities:

  • January’s $13.85/cwt margin resulted in no payments
  • February’s forecast of $13.94 remains $4.44 above the trigger level
  • 2025’s projected average margin ($10.20) provides limited protection

Dairy-RP: Timing Matters More Than Ever

The Q3 Coverage Window

April’s Dairy-RP window for July-September coverage requires urgent attention. With Class III futures at $19.10 (down $1.95 from January’s $21.05), producers face critical decisions:

  • Secure coverage now at current levels
  • Monitor markets closely for potential improvements

LGM-Dairy: Reading Between the Lines

Understanding the Full Financial Picture

LGM’s 11-month coverage window offers flexibility but requires careful consideration:

  • Premium payment timing can strain cash flow when margins tighten
  • May 2025-March 2026 coverage locks in today’s feed/milk ratio

Strategic Herd Management

Production Trends and Hard Choices

USDA’s February data reveals a 37,000-head drop-in replacement heifers – your next springer just got 8% pricier [USDA Cattle Inventory Report]. Meanwhile, fluid milk utilization hit a historic low – Class I now accounts for just 20% of shipments [FMMO].

Dr. Tara Voss, UW Extension dairy geneticist, explained the productivity puzzle: “Producers culling sub-25K lb cows are removing animals that still help cover fixed costs. Focus on components – the 2.2% annual growth in butterfat/protein outpaces volume gains.”

Practical Approaches for Today’s Market

  1. Diversify Risk Tools – Pair Tier II DMC with Chicago puts if milking 250+ head.
  2. Leverage Feed Savings – With corn at $4.07/bu (down $0.59 from 2023), renegotiate rations.
  3. Monitor Export Windows – Europe’s 1.8% milk slump creates cheese opportunities if tariffs permit

Learn more:

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Butter Glut 2025: Why Your Cream Check’s About to Get Creamed

Tuesday, March 25th, 2025

Butter stocks hit 305M lbs – highest since 2021. CME prices plunge 25¢ as spring flush threatens profits. Can farmers pivot before margins melt?

EXECUTIVE SUMMARY: The USDA reports U.S. butter stocks surged to 305.53 million pounds in February 2025, the highest February level since 2021, driven by recovering milk production and cheap cream. CME spot prices dropped 25¢ to $2.30/lb, pressuring dairy profits as spring flush threatens further oversupply. While cheese inventories remain 5.3% below 2024 levels, farmers face a critical juncture: hedge strategically, diversify into specialty cheeses, or risk margins evaporating like “a Popsicle in a calf pen.” Immediate action is urged to navigate volatile pricing and June’s federal milk formula overhaul.

KEY TAKEAWAYS:

  • Butter glut alert: 305M lbs in cold storage (+2.6% YoY) forces prices to 3-year lows ($2.30/lb).
  • Cheese breather: Stocks down 5.3% YoY, but mozzarella/parmesan hit records amid pizza demand.
  • Spring flush risk: Rising milk volumes could push butter prices below $2.00 without aggressive hedging.
  • Profit math: 1 lb butter ≈ 2 bushels corn – a margin-crushing trade for minor operations.
  • Survival playbook: Size-specific strategies from Class III futures to artisanal cheese shifts.
butter glut 2025, CME butter prices, dairy market trends 2025, spring milk production, dairy hedging strategies

February’s USDA Cold Storage report confirms what dairy farmers already knew: Butter stocks are overflowing, hitting 305.53 million pounds – the highest February level since 2021. While cheese inventories remain 5.3% below last year’s levels, the butter glut has sent CME spot prices tumbling to $2.30/lb, down 25¢ since January. Here’s how this impacts your operation – and why spring flush might worsen things.

BUTTER: THE COLD STORAGE COW IN THE ROOM

  • Stocks: 305.53 million lbs (Feb 2025) vs. 297.69 million lbs (Feb 2024)
  • Price Trend: CME spot butter at $2.30/lb, down 25¢ YTD
  • Cream Costs: Multiples below 1.00 for central region churns

Why Farmers Should Care
“That 25¢ price drop? It’s like losing a full diesel tank off your margin – every 1,000 pounds you’re hauling to market just became heavier.”

Churns are humming with cream – milk production is recovering, butterfat tests are up, and cream multiples are trading at fire-sale levels (below 1.00 in the Midwest). However, while domestic demand holds steady, consumers are increasingly reaching for imported butter. The result? U.S.-produced butter piles up faster than a spring calf gains weight.

Price Pressure Points

FactorImpact
Spring FlushMore cream = more churns = more butter
CME Rule ChangeOlder butter excluded from trading (post-12/1/24)
Consumer ShiftsImported butter displaces domestic stocks

“Tracking butter stocks is like watching a stubborn calf learn to nurse – predictable in theory, messy in practice. Here’s why…”

CHEESE: THE SILENT SPOKESPERSON

  • Total Cheese Stocks: 1.38 billion lbs (-5.3% YoY)
  • American Cheese: 783 million lbs (-5.7% YoY)
  • Italian Cheeses: 16 million lbs below forecasts (mozzarella/parmesan hit records)

Regional Reality Check
The East North Central region (IL, IN, MI, OH, WI) still holds half the nation’s specialty cheese inventory. While Italian cheeses lagged, mozzarella and parmesan posted February records – a nod to pizza chains and pasta demand.

The Silver Lining
Cheese stocks are underwhelming, not overflowing. This tightness could soften the blow of butter’s price collapse – but only if you’re diversified.

ACTION PLAN: TURNING GLUT INTO GAIN

1. Hedge Strategically

Farm SizeStrategy
Large40-50% hedging at $18.53/cwt Class III
MidForward contract 30-40% through Q2
SmallExplore specialty cheeses (e.g., artisanal gouda)

2. Monitor the Federal Order Changes
June 1, 2025, marks a milk pricing formula overhaul. Producers should:

  • Track USDA’s Q2 forecasts (e.g., cheese at $1.8200 vs. current $1.6200)
  • Prepare for volatility – stock deviations could trigger price swings

3. Profitability Math
“At $2.30/lb butter, you’re essentially trading 1 lb of butter for 2 bushels of corn – a tough math for profit margins. Hedge early or risk getting milked.”

The Bottom Line

Butter stocks aren’t just numbers—your equity is in a freezer, melting faster than a Popsicle in a calf pen. With spring flush looming and prices below $2.40/lb, 2025 demands sharp hedging and diversified risk management. Stay vigilant—the market’s about to churn harder than a fresh bulk tank lid.

Read more:

  1. CME Dairy Market Report (March 20, 2025): Class III Futures Surge Above USDA Forecast, Cheese Blocks Rally Amid Strong Dry Whey Bidding
    Delves into CME price volatility, global milk production trends, and export shifts impacting butterfat and cheese markets.
  2. USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers
    Breaks down USDA’s revised forecasts for milk production, all-milk prices, and export competitiveness, with actionable strategies for farmers.
  3. Why 2025 Could Be the Most Profitable Year for Dairy Farmers Yet: Navigating the Highs and Lows of Dairy’s Global Marketplace
    Examines $8 billion in dairy processing investments, price risks from oversupply, and opportunities in component optimization.

Join the Revolution!

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Cheese Yields Hit Historic Highs—But Who’s Getting the Slice? Dairy Farmers vs. Processors in Battle for Component Value

Monday, March 24th, 2025

Dairy’s billion-dollar battle: Farmers vs. processors over cheese yields’ 12.5% surge. Who profits?

EXECUTIVE SUMMARY: The U.S. dairy industry has seen a 12.5% surge in cheese yields since 2010, driven by higher butterfat (4.23%) and protein (3.29%) levels in milk. This shift adds $2.50+ in value per hundredweight, fueling a $8 billion processor expansion. However, farmers argue outdated Federal Milk Marketing Orders (FMMOs) undervalue their contributions, with 58% of milk checks tied to butterfat and 31% to protein. The USDA’s 2025 FMMO reforms aim to modernize pricing but delay risk perpetuating inequities. Higher yields also offer environmental benefits, reducing water and feed use. The industry faces a crossroads: equitable value distribution or prolonged conflict between producers and processors.

KEY TAKEAWAYS

  • 12.5% cheese yield surge since 2010 drives billion-dollar value shift, with 100 lbs milk now yielding 11.41 lbs cheese.
  • Farmers demand fair pay for higher components as processors expand capacity; 58% of milk checks are tied to butterfat.
  • 2025 FMMO reforms modernize pricing (e.g., 91% butterfat recovery, updated make allowances), but delays spark equity debates.
  • Sustainability wins: Higher yields cut water, feed, and land use, boosting export competitiveness.
  • Call to action: Transparent pricing, advocacy for FMMO updates, and direct marketing urged to capture value.

In a dairy industry where margins are measured in tenths of a percent, the 12.5% surge in cheese yields since 2010 has sparked a gold rush—and a fierce debate over who deserves the treasure. As butterfat and protein levels reach unprecedented heights, dairy farmers and processors are locked in a battle for value, with billions at stake.

The Component Revolution: From Plateau to Profit Goldmine

For six decades, the dairy industry operated on a simple truth: 100 pounds of milk reliably yielded 10 pounds of cheese. This consistency was rooted in milk’s composition, which held butterfat steady at 3.65–3.69% and protein at 3% from the 1950s to 2010. But the past 15 years have rewritten the rulebook.

Butterfat levels now average 4.23%, a 16% jump since 2010, while protein has climbed to 3.29%. These gains—driven by genetic advancements, precision nutrition, and regional specialization—have transformed the economics of cheese production. Today, 100 pounds of milk yield 11.41 pounds of cheese, a 12.5% increase from 2010. At current wholesale prices, this shift adds roughly $2.50 in value per hundredweight of milk—a windfall worth billions annually.

Regional Leaders: The Pacific Northwest leads the charge, with butterfat averaging 4.3% and protein at 3.4%. The Upper Midwest, once a laggard, now boasts 4.12% butterfat and 3.22% protein. These disparities highlight growing competitive advantages for producers in high-component regions.

Processing Perfection vs. Real-World Reality

The 11.41-pound figure represents “processing perfection,” but debate rages over its feasibility. At the 2024 International Dairy Foods Association’s Dairy Forum, processors split into three camps:

  1. Skeptics: Argued that capturing all solids is impossible due to whey losses.
  2. Optimists: Claimed yields could exceed 12 pounds with advanced techniques.
  3. Pragmatists: Accepted the metric as a benchmark for efficiency.

Case Study: One processor reduced daily milk intake by two semi-truckloads while maintaining output by optimizing solids capture. Another executive reported achieving 12 pounds of cheese per 100 pounds of milk in 2023, citing superior regional components and refined processes.

The Billion-Dollar Question: Who Profits from Higher Yields?

While farmers engineered this revolution, processors are capitalizing on its spoils. The dairy industry is investing $8 billion in new plants through 2026, aggressively expanding cheese production capacity. Meanwhile, milk prices remain stagnant, raising questions about fair compensation.

The Math of Inequity:

  • 58% of milk check revenue now comes from butterfat alone.
  • Protein contributes 31%, leaving just 11% tied to volume.
  • Yet, Federal Milk Marketing Orders (FMMOs) still use outdated component standards set in 2010.

Farmers’ Frustration: “We’re producing milk that’s worth more per pound, but our checks aren’t reflecting that,” says Tom H., a Wisconsin producer who boosted herd butterfat from 3.8% to 4.4% in five years. “Our income per cow is up 15%, but imagine what we could achieve with fair pricing.”

The Future of FMMOs: 2025 Reforms Bring Modernization

The USDA’s final rule amending all 11 FMMOs, effective June 1, 2025, represents the most significant pricing overhaul in decades. Key changes include:

Table 1: 2025 FMMO Amendments – Key Changes

CategoryCurrent Standard2025 Amendment
Milk Composition Factors3.25% true protein, 5.75% other solids3.3% true protein, 6% other solids, 9.3% nonfat solids
Class I Pricing“Higher-of” Class III/IVClass III or IV skim milk price
Make AllowancesVaries by product$0.2519/lb for cheese, $0.2272/lb for butter, $0.2393/lb for NFDM, $0.2668/lb for dry whey
Butterfat Recovery90% in Class III formulas91% recovery rate

Implementation Timeline:

  • June 1, 2025: Most changes take effect, including updated make allowances and Class I pricing.
  • Dec. 1, 2025: Skim milk composition factors updated to reflect modern component levels.

Referendum Approval:

  • Producer Majority: Two-thirds of voting producers in each FMMO approved the amendments.
  • Volume Majority: Two-thirds of the pooled milk volume in each FMMO supported the reforms.

Industry Reactions:

  • Gregg Doud (NMPF): “This final plan will provide a firmer footing and fairer milk pricing, which will help the dairy industry thrive.”
  • Michael Dykes (IDFA): Supported reforms to modernize pricing structures.

Sustainability’s Silver Lining

Higher yields aren’t just a profit play but an environmental win. With more cheese from less milk:

  • Water Use Drops: Less milk needed per pound of cheese reduces processing water consumption.
  • Feed Efficiency Improves: Cows producing higher-component milk may require less feed per output unit.
  • Export Competitiveness: Lower unit costs make U.S. cheese more competitive globally.

Market Growth: Cheese, butter, and yogurt sales have surged 15.4% ($10.1B) over three years, driven by innovation and convenience trends. Higher component yields directly fuel this growth, as seen in CoBank’s analysis of dairy market expansion.

The Value Capture Formula: Are You Getting Paid for Your Genetics?

To assess whether you’re capturing the actual value of your components, use this simplified model:

  1. Calculate Component Gains:
    1. Butterfat: (Current test – 3.65%) × 2.5 (pounds of cheese per 0.1% increase)
    1. Protein: (Current test – 3.00%) × 1.2 (pounds of cheese per 0.1% increase)
  2. Multiply by Milk Volume:
    1. Total cheese gain = (Butterfat + Protein gains) × Hundredweights produced
  3. Compare to Component Premiums:
    1. Subtract premiums from projected cheese value to identify gaps.

Example: A 1,000-cow herd producing 4.2% butterfat and 3.3% protein:

  • Butterfat Value: (4.2 – 3.65) × 2.5 × 1,000 cwt = $2,750/month
  • Protein Value: (3.3 – 3.0) × 1.2 × 1,000 cwt = $420/month
  • Total: $3,170/month in unclaimed value if premiums lag.

The Bottom Line

The dairy industry’s component revolution is irreversible. Farmers have proven they can drive genetic and nutritional excellence. Now, the fight is over who controls the profits.

For Farmers: Prioritize components over volume. Invest in genetics, nutrition, and data tools to maximize butterfat and protein. Calculate your actual value and demand fair compensation.

For Processors: Share the spoils. Transparency in pricing and partnerships with progressive producers will ensure long-term supply chain resilience.

For Regulators: Update FMMO standards now. Delaying recognition of today’s milk composition exacerbates inequities.

The cheese yield explosion isn’t just about numbers—it’s about justice. One processor quipped, “If you’re not making more cheese per vat, you’re losing money. If farmers aren’t making more money per cow, they’re losing patience.” The industry must continue the status quo or forge a future where value flows equitably from farm to factory.

Learn more

  1. Is the Federal Milk Marketing Order Reform Benefiting Dairy Farmers or Only the Processors?
    Explores tensions between farmers and processors over FMMO reforms, including referendum outcomes and pricing fairness.
  2. Cheese Makers Crushing It While Powder Pushers Panic: Global Dairy Trade Signals Market Divide
    Analyzes the cheese vs. powder market divide, highlighting regional advantages and strategies for capturing cheese premiums.
  3. Why Milk Components Trump Production in Unlocking Profits
    Details the shift from volume to component-focused dairy farming, with genetic strategies to maximize butterfat and protein.

Join the Revolution!

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.

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China’s Dairy Powder Crisis: U.S. Exports Hit Historic Low – Structural Shifts Reshape Global Trade

Monday, March 24th, 2025

U.S. dairy faces a crisis as SMP exports to China hit ZERO. Can they reclaim the market? The Bullvine dives into the numbers, geopolitical stakes, and strategies to survive.

EXECUTIVE SUMMARY: U.S. skim milk powder (SMP) exports to China collapsed in early 2025, with zero shipments in February—the first complete halt since 2019. This downturn stems from steep price disadvantages ($27/MT premium over EU/NZ) and China’s aggressive domestic production growth, which achieved 85% dairy self-sufficiency by 2023. New Zealand and the EU now dominate China’s SMP/WMP markets, leveraging tariff-free access and strategic product adjustments. Deflation (-0.7% CPI in February) and oversupply risks threaten U.S. dairy, particularly with new cheese capacity straining export-dependent markets. To recover, U.S. exporters must pivot to butter/cheese production, lobby for tariff parity, and innovate SMP blends tailored to Chinese processors. The stakes are clear: adapt or lose global relevance.

KEY TAKEAWAYS:

  1. U.S. SMP Collapse: Zero exports to China in February 2025 reflect pricing gaps ($27/MT premium) and China’s self-sufficiency surge.
  2. NZ/EU Dominance: New Zealand’s tariff-free access and EU’s geopolitical alignment capture China’s shrinking SMP/WMP demand.
  3. Deflation + Oversupply: China’s economic slump and U.S. cheese overproduction risk price crashes and plant closures.
  4. Strategic Imperatives: Shift to butter/cheese, demand tariff relief, and innovate SMP blends to regain market share.

February 2025 delivered a gut punch to U.S. dairy: SMP exports to China plunged to their lowest level since 2013, with zero shipments recorded for the first time since the 2019 trade war. As EU and New Zealand suppliers dominate, The Bullvine investigates why American dairy is losing ground and what farmers must do to survive.

The U.S. SMP Collapse: Price Wars and Domestic Surges

China’s skim milk powder (SMP) imports from the U.S. collapsed in early 2025, with January shipments down 60% year-over-year and zero exports in February—the first complete shutdown since May 2019. This crisis stems from two forces:

  1. Price Disadvantage: U.S. SMP traded at a $27/MT premium over EU and New Zealand competitors in late 2024, driven by tight domestic supplies (-14% SMP production in 2024).
  2. China’s Milk Self-Sufficiency: Rabobank confirms China achieved 85% dairy self-sufficiency by 2023, surpassing its 2018 target through large-scale farm expansions and improved yields. Domestic raw milk production surged 10 million metric tons (MMT) from 2018–2023, slashing import reliance.

Winners and Losers in China’s Shifting Market

MetricNew ZealandEUU.S.
SMP Market Share (2024)68%RisingCollapsed
WMP Dominance90% of China’s importsLimited0% (Feb 2025)
Key LeverageTariff-free accessGeopolitical alignmentNone

China’s Strategic Shifts:

  • WMP Imports: Projected to stabilize at 460,000 MT in 2024, down from 845,000 MT in 2022, as domestic production fills demand.
  • Cheese & Butter: Butter imports surged 32% YoY in 2022, but USDA forecasts 2024 declines due to economic headwinds.
  • Whey: U.S. remains China’s top supplier despite a 38,700t H1 2024 drop in global whey demand.

Economic Headwinds: Deflation and Oversupply

China’s -0.7% February 2025 CPI—the steepest deflation since 2020—has suppressed consumer spending. Key impacts:

  1. Domestic Dairy Demand Stagnation: UHT milk imports stabilized after a 4.7% January 2025 drop, reflecting China’s push for self-reliance.
  2. Global Glut: Rabobank forecasts 0.8% global milk supply growth in 2025, but China’s import recovery hinges on economic stimulus.
  3. U.S. Cheese Overproduction: New processing capacity (+200M lbs/year) risks price crashes without export demand.

Geopolitical Realities and U.S. Strategic Failures

“The U.S. priced itself out of China’s market,” says a U.S. Dairy Export Council source. “Mexico is now our lifeline, but we need radical changes.”

Critical Errors:

  • Trade Policy: No progress on China’s retaliatory tariffs (e.g., 10% on U.S. pork since March 2025).
  • Competitive Blind Spots: EU butterfat shortages boosted New Zealand’s SMP/WMP exports, while U.S. prices lagged.

Recommended Shifts:

  • Redirect SMP to Butter/Cheddar: Match EU/NZ’s product mix adjustments to align with China’s cheese demand.
  • Lobby for Tariff Parity: Demand urgency in U.S.-China trade talks to offset New Zealand’s tariff-free advantage.

Provocative Takeaways for Dairy Farmers

  1. “China’s SMP Door Is Closed—For Now.”
    1. With 15,000 MT/day domestic milk surplus and WMP self-sufficiency goals, China’s import recovery is a 2026+ prospect.
  2. “Deflation Isn’t the Only Threat—Oversupply Is.”
    1. U.S. cheese plants risk closures if exports stall; hedge with Dairy Revenue Protection (DRP).
  3. “Mexico Can’t Save Us Alone.”
    1. Diversify to Southeast Asia, where SMP demand grew 3.4% in early 2024.

The Bullvine’s Call to Action

  1. Price Transparency: Publish weekly SMP benchmarks to compete with EU/NZ.
  2. Innovate or Die: Develop high-protein SMP blends for China’s bakery sector.
  3. Demand Policy Reform: Pressure Washington to fast-track tariff relief in bilateral talks.

Final Warning:
“New Zealand and the EU are rewriting global dairy trade rules. Will U.S. farmers adapt—or become collateral damage?”

Learn more:

  1. How U.S. Dairy Can Outmaneuver China’s Self-Sufficiency Push
    Explores strategies for redirecting exports to emerging markets and adapting production to counter China’s domestic growth.
  2. New Zealand’s Dairy Dominance: Lessons for U.S. Exporters
    Analyzes how tariff-free access and pricing tactics secured New Zealand’s 68% share of China’s SMP market.
  3. China’s Deflation Crisis: What It Means for Global Dairy Prices
    Breaks down the ripple effects of China’s -0.7% CPI on dairy demand and global oversupply risks.

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Weekly Global Dairy Market Recap – March 24, 2025: Fonterra’s Profit Surge, EU Butter Prices Skyrocket, and Markets Defy Forecasts

Monday, March 24th, 2025

Fonterra profits soar, EU butter prices rocket, and US markets defy forecasts—what’s next for global dairy?

EXECUTIVE SUMMARY: Fonterra’s FY25 interim results reveal an 8% net profit surge to NZ $729M and a 16% operating profit jump, driven by premium products and efficiency gains. EU butter prices exploded 33.5% YoY to €7,548/MT, while SMP stagnated, reflecting a structural shift toward fat-rich products. US Class III futures rallied to $18.53/cwt, defying USDA’s bearish outlook, as block cheese prices rebounded. Production disparities widened: New Zealand’s milk solids grew 3.7% YTD, while the EU faced declines. Strategic plays include capitalizing on the $1,106 GDT butter-AMF spread, hedging futures, and adopting precision breeding.

KEY TAKEAWAYS

  1. Fonterra’s Profit Powerhouse: NZ $729M net profit and NZ $1.07B operating profit, fueled by digital overhauls and premium protein investments.
  2. EU Butter’s Golden Run: Prices soared 33.5% YoY (€7,548/MT), outpacing SMP (€2,443/MT) and driving cheese gains (Cheddar: +19.4%, Mozzarella: +16.7%).
  3. US Markets Defy USDA: Class III futures hit $18.53/cwt (vs. USDA’s $17.95/cwt) as cream multiples crash below 1.00, signaling summer demand spikes.
  4. Production Divide: Oceania thrives (NZ: +3.7% YTD) while Europe struggles (Netherlands: -2.1% YTD).
  5. Strategic Action: Target butterfat premiums, hedge Class III futures, and adopt sexed semen (+18% GB adoption) for herd optimization.
Fonterra profits 2025, EU butter prices, global dairy market trends, US dairy futures, dairy strategic investments

The global dairy industry is buzzing with high-stakes action. Fonterra’s profits are surging, EU butter prices are breaking records, and US markets are defying USDA forecasts. Whether you’re chasing butterfat premiums or hedging Class III futures, this report cuts through the noise to deliver the intel you need to stay ahead of the herd.

Fonterra Posts Record Profits: NZ $729M Net Profit

“We’re locking in value at every turn” — Miles Hurrell, Fonterra CEO

New Zealand’s dairy powerhouse Fonterra delivered stellar FY25 interim results:

  • Net profit surged 8% to NZ $729 million (Fonterra Interim Report)
  • Operating profit jumped 16% to NZ $1.07 billion
  • Farmgate milk price midpoint held steady at NZ $10.00/kgMS

Farmers benefit from a narrowed milk price forecast range (NZ $9.70-$10.30/kgMS) and a 3.6% season-to-date production surge, driven by improved pasture conditions.

Fonterra continues to invest heavily in strategic expansions:

  1. NZ $75M high-value protein plant at Studholme
  2. NZ $150M UHT cream line at Edendale
  3. NZ $130M digital overhaul, aiming for a 12% supply chain efficiency boost

Fonterra Financial Firepower

MetricFY25 Interim ResultYoY Change
Net ProfitNZ $729M+8%
Operating ProfitNZ $1.07B+16%
Milk Price MidpointNZ $10.00/kgMSHeld
CAPEX CommitmentsNZ $130MNew

“This isn’t just profit—it’s war chest building,” says a Wellington analyst tracking Fonterra’s NZ $500M digital overhaul.

EU Butter Prices Explode: Up 31% Year-Over-Year

“SMP prices are stuck in neutral while butter drives the entire complex” — Jan De Vries, Amsterdam Dairy Trader

European butter prices continue their meteoric rise, hitting €7,548/MT (+33.5% YoY) (EC Market Reports). French butter leads the charge at €7,590/MT, while Dutch and German butter trail closely at €7,530-7,525/MT.

Cheese markets are also surging:

  • Cheddar Curd climbs to €4,858/MT (+19.4%)
  • Mozzarella rockets €618/MT higher than last year

EU Price Volcano

ProductCurrent PriceYoY ChangePrice Leader
Butter€7,548/MT+33.5%France (+€250)
SMP€2,443/MT+3.0%Germany (€2,460)
Young Gouda€4,465/MT+12.0%Netherlands
Mozzarella€4,310/MT+16.7%Italy

Production Wars: Oceania Gains vs EU Struggles

“Oceania’s efficiency is leaving Europe in the dust” — Rabobank Global Dairy Analyst

New Zealand continues to dominate with robust production growth:

  • February milk solids up 1.5% YoY (NZ Dairy Stats)
  • Season-to-date production rockets 3.7% higher

Meanwhile, Europe faces production headwinds: Dutch milk collections fell 2.6% YoY in February (adjusted for leap year), while SMP prices stalled at €2,443/MT as buyers balk at thin inventories (Rabobank 2025 Outlook).

In the US, herd dynamics are shifting as sexed semen adoption reshapes genetics and milk solids concentration reaches record highs.

Global Production Showdown

RegionFeb Milk Solids GrowthSeason Growth YTDHerd Strategy
New Zealand+1.5%+3.7%Pasture-first optimization
AustraliaFlat+0.8%Focus on fat % (4.37% avg)
EU (Netherlands)-0.2%-2.1%Slaughter rates up 4%
USA+1.1%+0.9%Sexed semen adoption +18%

US Markets Defy USDA Gloom: Class III Futures Rally

“The market smells a squeeze” — Chicago Futures Trader

While the USDA slashes its 2025 forecasts—cutting the all-milk price by to .60/cwt—traders remain bullish on Class III futures:

  • CME Class III futures hit $18.53/cwt, exceeding USDA’s Q2 projection ($17.95/cwt).
  • Block cheese prices rallied to $1.6950/lb, defying oversupply concerns.

Butter stocks are up 26%, but cream multiples have crashed below 1.00—a signal that summer demand spikes could be imminent.

Strategic Plays for Smart Operators

Butterfat Bonanza

Capitalize on the $1,106 spread between GDT butter and AMF, and focus on increasing milk fat percentages for higher returns.

Hedge the Gap

Lock in Class III futures above USDA forecasts and leverage programs like Fonterra’s Fixed Milk Price for stability.

Track the Tech

Adopt precision breeding techniques as sexed semen reshapes herd genetics across GB herds (+18%).

Fonterra’s Strategic Investments Signal Long-Term Gains

“Digital overhauls will squeeze 12% more efficiency from our supply chain” — Fonterra Board Statement

Fonterra is doubling down on innovation with major projects aimed at boosting profitability and sustainability:

Fonterra’s Strategic Investments

ProjectLocationInvestmentTimelineExpected Impact
High-Value Protein PlantStudholmeNZ $75M2026+15% protein yield
UHT Cream LineEdendaleNZ $150MQ3 202540M additional liters/year
Digital OverhaulNationwideNZ $130M2025-203012% supply chain efficiency gain
Decarbonization PushClandeboyeNZ $45M20279% emissions reduction

Is the EU Butter Bubble About to Burst?

“With butter stocks rising 26% and cream multiples crashing, the EU’s golden run may face headwinds. — Amsterdam Trader

The Bottom Line

This is no time for complacency! With Fonterra printing money, EU churns maxed out, and US markets defying expectations, dairy producers who act now will be first in line when the market turns.

Strap in—the second half of 2025 could make or break operations. Those who read these tea leaves today will be tomorrow’s leaders.

Learn more

  1. Fonterra’s Digital Overhaul: How NZ Farmers Can Capitalize on Tech Advancements
  2. The Butter Bubble: Why EU Price Peaks Could Signal a Market Shift
  3. US Dairy Policy Changes: What the 2025 Federal Order Revisions Mean for Farmers

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DOLLAR DIVE: How Currency Chaos Could Save US Dairy Exports (But Don’t Celebrate Yet)

Sunday, March 23rd, 2025

Dollar dive vs. tariff wars: Can currency chaos save US dairy exports? The Bullvine breaks down the high-stakes game.

EXECUTIVE SUMMARY: The US dairy industry faces a paradox: a weakening dollar boosts export competitiveness, but retaliatory tariffs threaten profitability. A 5.7% dollar drop since January 2025 has made American dairy cheaper globally, offsetting some tariff impacts. However, tariffs on key markets like Mexico (25%) and China (10-15%) risk eroding gains, with Cornell University projecting a $6 billion loss over four years. While cheese and milk powder exports surged in 2024, domestic demand remains critical, as 84% of US milk stays at home. Farmers must navigate volatility by diversifying markets, focusing on premium products, and hedging against currency swings. The dollar’s decline is no silver bullet – it’s a temporary reprieve demanding strategic action.

KEY TAKEAWAYS:

  1. Currency advantage vs. tariff pain: A weaker dollar offsets tariff hikes, but margins remain fragile.
  2. Premium products win: High-quality dairy (e.g., cheese, butterfat) outperforms in tariff-hit markets.
  3. Diversify or die: Shift focus to Southeast Asia, Africa, and Middle East to reduce reliance on Mexico/China.
  4. Domestic risks linger: A weak dollar could trigger recession, threatening 84% of US milk consumption.
  5. Hedge aggressively: Financial tools are essential to survive currency/tariff volatility.
US dairy exports, currency fluctuations, tariff impacts, global dairy trade, dairy market volatility

Uncle Sam’s wallet is getting lighter by the day, and for once, that might not be terrible news for America’s dairy farmers. The almighty dollar has taken a nosedive, shedding a whopping 5.7% of its value since January – the kind of freefall we haven’t seen since the 2008 financial crisis.

But here’s where it gets interesting: while politicians play chicken with tariffs, this currency slide is quietly reshaping the global dairy chessboard. Every cent the dollar drops makes American dairy more appetizing to foreign buyers. It’s like a sale at the global dairy store, and Uncle Sam’s cheese is suddenly the bargain of the century.

Key Data:

Metric2024 ValueChange
Total US Dairy Exports$8.2B+2% YoY
Cheese Exports to Mexico+30% (Dec 2024)Record high
Butterfat Exports+28% (2024)Driven by Canada

Tariff Wars: The $6 Billion Migraine

Let’s not sugarcoat it – the tariff situation is a Grade A disaster for US dairy. President Trump’s recent temper tantrum slapped a 25% tax on most goods from Mexico and Canada, with China getting hit with a 10% surcharge. These aren’t just any markets – they’re the holy trinity of US dairy exports, gobbling up over half of what we ship overseas.

Cornell University’s Charles Nicholson puts it bluntly: “If you pick a trade fight with our major export destinations, the retaliation will cost dairy farmers $6 billion over four years.”

Farmer Reality Check
“The dollar drop saved my cheese exports to Japan, but tariffs erased those gains. We’re stuck in a never-ending cycle of policy whiplash.” – Sarah Miller, Wisconsin Cheese Exporter (USDA Farm Report, 2025)

But here’s the twist: even with these tariffs, certain American dairy products could stay in the game, especially in the premium market where quality trumps price sensitivity.

The Great Currency Offset: Can Math Save the Day?

Here’s where things get interesting – and where The Bullvine’s going to do some math that’ll make your head spin. We’ve got tariffs pushing prices up 10-25%, but a dollar drop giving us a 5-6% discount. Sounds like we’re still underwater, right?

Mike North, president of Ever.Ag, throws a wrench in the works: “Only small changes can have large impacts on price.”

Tariff vs. Currency: The Breakdown

FactorImpactOutcome
25% Tariff+25% Price IncreaseOffset by 5-6% Currency Discount
10% Tariff+10% Price IncreasePartially Offset by Currency
5.7% Dollar Decline-5.7% Price DropBoosts Competitiveness

Take cheese exports, for example. Despite the tariff tempest, they jumped 12% in August compared to last year. Japan, South Korea, and Mexico couldn’t get enough of our cheddar. Milk powder? Up a whopping 15%, with Southeast Asia and Africa suddenly treating American powder like it’s going out of style.

The Risks No One’s Talking About

While the dollar’s decline offers relief, economists warn of volatility. Dr. Ben Brown, University of Missouri, cautions: “Currency fluctuations are unpredictable – farmers shouldn’t rely solely on exchange rates. A sudden dollar rebound could erase export gains overnight.”

Key Vulnerabilities

  1. Dollar Rebound Risk: A Fed rate hike could reverse currency trends.
  2. Trade Policy Uncertainty: Retaliatory tariffs may escalate beyond current levels.
  3. Domestic Demand: A weaker dollar risks recession-driven demand drops at home.

The Mexico Paradox: When Weak Meets Weaker

Now, let’s talk Mexico – our dairy industry’s favorite customer and current political punching bag. Here’s where currency chaos gets really interesting. The peso’s taking a beating too, which means Mexican buyers have less purchasing power for our dollar-priced dairy.

Krysta Harden, CEO of the US Dairy Export Council, cuts through the noise: “Mexico imported .47 billion in US dairy in 2024 – a record high. But with tariffs looming, we need to focus on essentials, not luxury items.”

Farmer Perspective
“We’re shifting to bulk milk powder and butter, but tariffs are still eating into margins. The dollar drop helps, but it’s not enough.” – Juan Perez, California Dairy Exporter (USDEC Trade Report, 2025)

The China Syndrome: Trade War Redux

Just when you thought US-China trade relations couldn’t get more complicated, here we go again. Beijing’s slapping 10-15% tariffs on US agricultural products, including dairy, starting March 10, 2025. It’s like watching a bad movie sequel – same plot, higher stakes.

But here’s the twist: that weakening dollar might just be the secret weapon US dairy never knew it needed. Even with the tariff handicap, certain American dairy products could stay in the game, especially in the premium market where quality trumps price sensitivity.

The Home Front: America’s Dairy Dilemma

While we’re busy counting our export pennies, let’s not forget where most of our milk actually goes – right here at home. A staggering 84% of US milk production never leaves American soil. That means domestic market health isn’t just important – it’s everything.

Here’s the rub: that weak dollar that’s helping exports is also making imports more expensive, potentially pushing America towards a recession if consumers tighten their belts. Recent retail data shows Americans are already watching their wallets, with sales barely inching up 0.2% in February after a 1.2% nosedive in January.

But there’s a silver lining for domestic dairy producers. As foreign dairy products become pricier, local options start looking a lot more attractive. It’s like a “Buy American” campaign, courtesy of the currency markets.

The Bullvine’s Bottom Line: Adapt or Get Milked Dry

So, what’s a savvy dairy farmer to do in this economic maelstrom? The Bullvine’s got your back with some hard-hitting strategies:

First, look beyond the usual suspects. While Mexico and China play tariff tug-of-war, markets in Southeast Asia, Africa, and the Middle East are hungry for quality dairy. Time to redraw your export map.

Second, premium is the new normal. In a world where currency advantages can evaporate overnight, quality is your best defense. Invest in products that command loyalty beyond price.

Third, hedge like your farm depends on it – because it does. With volatility the only constant, smart financial instruments are no longer optional. They’re survival tools.

Fourth, keep your ear to the ground and your eyes on Washington. In this climate, today’s policy tweet could be tomorrow’s market earthquake. Stay informed, stay ahead.

Finally, diversify or die. If this currency-tariff rollercoaster has taught us anything, it’s that putting all your milk in one market is a recipe for disaster. Spread those risks like you spread your fertilizer – liberally and strategically.

Learn more:

  1. TRUMP’S 250% DAIRY TARIFF THREAT: What’s Really at Stake for Your Farm
    Breaks down the complexities of U.S.-Canada dairy tariffs, quota utilization, and the hidden realities behind political rhetoric threatening farm profitability.
  2. U.S. Dairy Exports Shatter Billion-Pound Barrier
    Explores record-breaking 2024 export volumes, Mexico’s dominance as a buyer, and how cheese exports now drive global market expansion.
  3. How the Dollar’s Fall Boosts U.S. Dairy Exports and Challenges Trade with Mexico
    Analyzes currency-driven export advantages, peso volatility, and strategies to leverage dollar depreciation while navigating Mexican market risks.

Join the Revolution!

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.

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Dairy Markets on A Knife’s Edge: Spring 2025’s Make-Or-Break Moment for Producers

Sunday, March 23rd, 2025

Dairy markets plunge as milk floods markets. Can producers adapt to heifer shortage and avian flu impacts?

EXECUTIVE SUMMARY: U.S. dairy markets face intense pressure as milk production surges (+1% YOY to 17.73M lbs in February) while prices plummet: butter (-4¢), cheese blocks (-9¢), and barrels (-14¢) hit multi-month lows. Despite historic heifer shortages, herds expanded to 9.405M head, driven by lower cull rates. Component production booms—cream output up 12.7M lbs YOY, milk protein +3.1%—but processors struggle with oversupply. Regional disparities sharpen due to avian influenza (California down 3.8%) and growth in Texas/Idaho. Futures indicate painful near-term margins (Class III .95/cwt), but export opportunities and feed cost savings (10.1% YOY) offer lifelines. Producers must prioritize cost control, component optimization, and strategic culling to survive the squeeze.

KEY TAKEAWAYS

  • Herd Expansion Defies Logic: 9.405M cows (+62k YOY) despite heifer shortage, driven by low cull rates.
  • Component Wars: Butterfat surges (+12.7M lbs cream) dominate, but protein growth (+3.1%) lags behind demand.
  • Regional Crisis: California production plummets (-3.8% YOY) from avian flu, while Texas/Idaho thrive.
  • Futures Forecast Pain: Class III futures at $17.95/cwt threaten margins; Q4 rebound potential hinges on exports.
  • Strategic Solutions: Lock in sub-$4.70 corn, target 3.5% butterfat herds, and consider culling low-performing cows.
dairy market trends 2025, USDA milk production, avian influenza dairy impact, dairy component pricing, Class III futures forecast

The whey market’s 5¢ rally to 50¢/lb this week fooled nobody who’s read a milk check lately. USDA’s Dairy Market News confirms what every producer knows – demand remains “lackluster” with inventories ballooning. This dead-cat bounce comes as:

  • Butter crashes 4¢ to $2.3025/lb
  • Cheese blocks nosedive 9¢ to $1.6025
  • Barrels implode 14¢ to $1.55 – an 11-month low[3]

“Buyers play hardball below 50¢,” says our Chicago floor contact. “With milk flows increasing, this whey rally has expiration date written all over it.”

MILK FLOODGATES OPEN AS HERD EXPANSION DEFIES LOGIC

USDA’s March shocker: 9.405 million head in February – highest since May 2023. How?

HERD GROWTH DESPITE HEIFER ARMAGEDDON

MetricFeb 2025Change YOY
Total Dairy Cows9.405M+62k
Heifers 500lb+3.914M-7% (1978 low)
Cull Rate (Jan-Feb)89k below historic avg

Producers are playing musical barns – 15k cows added in February alone. The result? 17.73M lbs February output (+1% YOY leap-adjusted) – biggest jump since 2023.

COMPONENT WARS: FAT’S WINNING, PROTEIN’S FUTURE UNCERTAIN

The real money’s in what’s IN your milk:

FEBRUARY COMPONENT SURGE

ComponentProduction IncreaseEquivalent Product
Butterfat+12.7M lbs cream15.5M lbs butter
Protein+3.1% YOY620k lbs cheese
Nonfat Solids+2.3% YOY9.2M lbs NFDM

“Processors are fat-hungry,” notes USDA economist Dr. Mark Svennson. “That $2.30 butter price? Still 18% above 5-year average. The fat premium’s alive.”

COAST-TO-COAST CRISIS: BIRD FLU DECIMATES WESTERN HERDS

Avian influenza isn’t just a poultry problem anymore:

STATE-LEVEL MILK PRODUCTION

RegionYOY ChangeKey Factor
California-3.8%62% herds infected
Texas+4.1%New mega-facilities
Pacific NW-2.9%Historic basis discounts
Upper Midwest+1.3%Component focus

“California’s looking at 5% production drop by June if culling continues,” warns Western United Dairies’ Janelle Hasser.

FUTURES FORECAST: PAIN BEFORE GAIN?

USDA’s revised projections paint a grim near-term picture:

2025 PRICE PROJECTIONS

MetricMarch EstimateChange vs FebProfit Threshold
All-Milk Price$21.60/cwt-$1.00$22.00+
Class III$17.95/cwt-$1.15$19.50
Class IV$18.80/cwt-$0.90$20.00
Feed Cost Savings10.1% YOYCorn $4.85/buSoymeal $395/ton

“Q4 could see $19.75 Class III,” says CME analyst Luke Torrison. “But getting from here to there will bankrupt marginal operators.”

THE BULLVINE BOTTOM LINE: ADAPT OR EXIT

  1. Cost Crunch Calculus: Lock in sub-$4.70 corn now – USDA sees 2025 feed savings offsetting 14% of milk price decline.
  2. Component Premium Play: 3.5% BF herds now capturing $0.47/cwt premium over 3.0% herds.
  3. Exit Strategy Window: Beef prices at $1.92/lb make culling profitable – 12% ROI on heifer-replacement deferral.

As one Wisconsin producer told us: “I’m feeding more haylage, culling 5% low-end cows, and praying Class IV finds its legs by June. If not? The auctioneer’s getting my Rolodex.”

LEARN MORE

  1. DAIRY MARKET WARNING: How The Egg Price Collapse Reveals Your Farm’s Hidden Vulnerabilities
    Analyzes parallels between the egg market collapse and dairy’s consumer price resistance risks, offering strategies to mitigate volatility.
  2. CME Dairy Market Analysis: Trade War Drama Sends Cheese Prices Plunging to 11-Month Lows
    Examines the impact of U.S. tariffs and international trade tensions on cheese and butter markets, with actionable producer recommendations.
  3. CME Dairy Market Report: March 17, 2025: Cheese and Butter Prices Fall Amid Seasonal Supply Increases
    Provides granular analysis of the latest CME price declines, bird flu disruptions, and plant-based competition shaping dairy’s Q2 outlook.

Join the Revolution!

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.

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CHINA SLAMS DOOR ON U.S. BEEF: Your Cull Cow Checks Could Take a Massive Hit

Tuesday, March 18th, 2025

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.
dairy cull cow prices, China beef exports, dairy farm profitability, beef plant registrations, U.S.-China trade impact

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.

Let’s call this what it is: Beijing is playing hardball after slapping retaliatory tariffs on approximately $21 billion worth of American farm goods earlier this month, including a 10% tariff on imports of American beef, pork, and dairy products.

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 impact could be catastrophic. The U.S. Meat Export Federation estimates that the financial repercussions of these expired licenses could total $4.13 billion for the beef sector alone. That’s not just an abstract number—it translates directly to what you’ll get for your culls at auction.

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.

Make no mistake, though—this strategic protection of domestic interests directly costs your dairy operation’s bottom line.

Beijing’s Beef with American Agriculture

This isn’t simply about paperwork. The U.S. Department of Agriculture reports that China has systematically ignored repeated requests to renew plant registrations.

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.”

What This Means for Your Bottom Line

Let’s cut through the diplomatic doublespeak and talk real money. In 2024, the United States ranked China’s third-largest meat supplier by volume, trailing only Brazil and Argentina. It accounted for 590,000 tonnes or 9% of China’s total imports.

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.

Losing access to this critical market would devastate beef producers and dairy operations.

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.

The Bottom Line

This registration standoff highlights a fundamental vulnerability in dairy economics—our increasing dependence on strong cull values to maintain operational profitability when milk margins tighten.

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.

Learn more:

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Cheese Makers Crushing It While Powder Pushers Panic: Global Dairy Trade Signals Market Divide

Tuesday, March 18th, 2025

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.
Global Dairy Trade index, cheese market prices, dairy profitability, milk powder exports, component optimization

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 CATEGORYPRICE CHANGECURRENT 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 PowderN/AN/AN/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:

  1. Shelf-life and storage benefits—Powder can be stored for extended periods without refrigeration, which is critical for distant export markets.
  2. Transportation economics – Removing water reduces shipping costs dramatically, allowing producers to reach far-flung markets cost-effectively.
  3. Processing flexibility – Powder can be reconstituted for various applications, from infant formula to bakery products, providing end-use versatility.
  4. 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:

  1. North American producers with significant cheese exposure may be better positioned than their powder-dependent counterparts.
  2. European processors with investments in specialty cheese production could leverage their market position for premium returns.
  3. 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:

  1. Shifting consumer preferences continue to favor cheese and premium butter over commodity ingredients.
  2. As the Southern Hemisphere approaches autumn, regional production shifts will impact global supply dynamics.
  3. 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.

Learn more

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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.

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Butter Prices Soar 27% While USDA Slashes Dairy Forecasts.

Monday, March 17th, 2025

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.
  • Critical Indicators: Watch WASDE revisions, futures volumes (>7,500t = volatility), and fat-protein price ratios.

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

ProductCurrent Price (€)Change vs Last Year (€)% Change
Butter7,407+1,594+27.4%
Cheddar Curd4,845+755+18.5%
Mild Cheddar4,808+726+17.8%
Mozzarella4,246+576+15.7%
Young Gouda4,400+419+10.5%
SMP2,453+40+1.7%
Whey885+185+26.4%
WMP4,372+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.

More concerning is the rationale: “lower expected milk output per cow more than offsetting slightly higher cow inventories.”

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

MetricFebruary ForecastMarch ForecastChange
2025 Milk Production (mil MT)102.92102.60-0.3%
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.

THE BULLVINE’S TAKE: The USDA’s forecast reductions speak volumes about American dairy’s structural issues. The contradiction between expanding cow numbers and reduced productivity expectations raises serious questions about USDA’s forecasting methodology.

Are you basing your expansion decisions on government forecasts that change dramatically monthly? That’s a dangerous game.

EUROPE’S MILK PRODUCTION CRISIS DEEPENS

European production figures reveal troubling trends that could reshape global dairy trade flows.

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

CountryVolume (mil tonnes)Y/Y ChangeMilkfat %Protein %MS Change
France2.02-1.7%4.25%3.34%-1.9%
Germany2.66-2.2%***
Denmark0.478+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:

  1. Forward Price Projections: Watch for revisions in the following WASDE report.
  2. EEX and SGX Futures Volume: When weekly volumes exceed 7,500 tonnes, volatility typically follows.
  3. Fat-to-Protein Price Ratio: Component optimization becomes crucial when butter maintains a 27%+ premium over year-ago levels while SMP struggles.
  4. Feed Cost Trajectory: Changes in feed costs could partially offset milk price declines.
  5. 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:

  1. Component Strategy: Given the current 27% year-over-year premium, are you maximizing butterfat production?
  2. Risk Protection: What percentage of your 2025 production is protected against the USDA’s newly lowered price forecasts?
  3. Feed Efficiency: Can you capture margin opportunities if feed costs decline?
  4. Cash Flow Planning: Have you stress-tested your finances against the new $21.60 all-milk price scenario?
  5. 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:

  1. Maximize component yields through precision nutrition and genetics
  2. Implement aggressive risk management strategies to protect against volatility
  3. Scrutinize all input costs with renewed vigor as margins potentially compress
  4. 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.”

Learn more:

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DAIRY TARIFF TSUNAMI: Kerrygold Stockpiles as Trump’s Trade War Threatens Your Milk Check

Monday, March 17th, 2025

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
dairy tariffs, Kerrygold butter, Trump trade war, global dairy markets, milk check impact

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:

CommodityPrice ($/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:

  1. The window for preemptive stockpiling (like Ornua’s strategy) has largely closed
  2. Future dairy production decisions need to account for potential market disruptions
  3. 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)

ClassPrice ($/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:

ComponentPrice ($/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

  1. What percentage of your production currently goes to export markets?
  2. Do you have contingency plans if tariffs impact your current export channels?
  3. How will your milk pricing formula change if component values shift due to trade disputes?
  4. Are you exploring new product lines that are less vulnerable to import competition?
  5. What financial protections do you offer producers if export markets suddenly close?

Learn More:

  1. TRUMP’S 250% DAIRY TARIFF THREAT: What’s Really at Stake for Your Farm
    Breaks down Canada’s tariff system and reveals why US exporters are using less than half their quota access – critical context for understanding trade imbalance claims.
  2. 25% Tariffs Ignite $1.2 Billion Dairy Trade Crisis Between U.S. and Canada
    Analyzes the immediate market fallout of retaliatory tariffs, including 25% price hikes on key exports and $30 billion in Canadian countermeasures threatening rural economies.
  3. Trump’s Tariffs: Can History Repeat Without Repeating Mistakes?
    Compares current strategies to the 2018 trade war’s $28B bailout aftermath, offering hard-won lessons about long-term market access vs short-term disruption risks.

Join the Revolution!

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.

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USDA Slashes 2025 Milk Price Forecast By $1: What Dairy Farmers Need to Know

Sunday, March 16th, 2025

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

YearAnnual Production (Billion Pounds)Notes
2023226.3Actual production (USDA-NASS Annual Milk Production Report)
2024225.9Current estimate (unchanged from February WASDE)
2025226.2March 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

CategoryFebruary 2025 ForecastMarch 2025 ForecastChange
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.

“These aren’t minor adjustments—they represent substantial reductions directly affecting producer revenues.”

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

MonthRelease DateTime
AprilApril 1012:00 PM ET
MayMay 1212:00 PM ET
JuneJune 1212:00 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.”

Learn more:

Join the Revolution!

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.

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Dairy Markets Under Pressure: Trade Tensions Reshape Export Landscape

Sunday, March 16th, 2025

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
Dairy trade tensions, milk powder prices, cheese market analysis, international dairy tariffs, dairy export challenges

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.

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DAIRY’S DIVIDE: February Milk Prices Expose America’s $5-Per-Hundredweight Dairy Lottery

Saturday, March 15th, 2025

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.
FMMO milk pricing, regional milk price gap, June 1 dairy changes, dairy component values, milk class price formula

Florida dairy farmers are banking $5.11 more per hundredweight than their Upper Midwest counterparts for identical milk—highway robbery or fair market?

February’s milk check exposes a system that’s making some farmers rich while others barely survive.

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 RegionFebruary 2025 Uniform PriceChange 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 ClassFebruary 2025 PriceChange from JanuaryChange 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 1WinnersLosers
Return to “higher-of” formulaHigh Class I utilization areasWould have reduced Feb Class I price by $0.44/cwt
Updated make allowancesProcessors gain increased marginsAll 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.

ComponentFebruary 2025 ValueChange from JanuaryTrend
Butterfat$2.82/lb-$0.13Lowest since July 2023
Protein$2.53/lb+$0.204-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 ImpactMonthly 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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BEGA’S DAIRY DOMINATION: Australian Giant’s Profit Explosion Reveals Industry Secrets Other Processors Don’t Want You to Know

Friday, March 14th, 2025

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.
SEO keywords: Bega Cheese, dairy profits, bulk segment turnaround, Australian dairy industry, financial performance

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 Metric1H FY2025 ($M)1H FY2024 ($M)Change (%)
Net Revenue1,782.11,728.0+3%
Normalised EBITDA110.376.5+44%
Depreciation & Amortisation46.042.9+7%
Normalised EBIT64.333.6+91%
Net Finance Costs16.716.5+1%
Normalised Profit After Tax35.913.3+170%
Basic EPS (cents)11.84.4+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.

SegmentExternal Revenue ($M)Growth vs 1H FY2024Normalised EBITDA ($M)Increase/(Decrease) vs 1H FY2024 ($M)
Branded1,522.2+1%104.2+7.4
Bulk259.9+18%24.4+30.0
Unallocated overheads––(16.5)(0.4)
Inter-segment elimination––(1.8)(3.2)
Group total1,782.1+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 Measure1H FY20251H FY2024Change
Net Revenue Growth3.1%3.2%-0.1 ppts
Gross margin (% of Revenue)21.8%20.2%+1.6 ppts
Net Debt ($M)207.2250.9-17%
Leverage Ratio (times)1.31.9-0.6
Return on Funds Employed (%)7.9%4.7%+3.2 ppts
Dividends per share (cents)6.04.0+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?

Learn more:

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Dairy’s 81-Day Reckoning: 3 States That Win, 5 Facing Financial Bloodbath

Wednesday, March 12th, 2025

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 ElementPre-2025 Formula2025 FormulaImpact
Class I MoverAverage + $0.74Higher of III/IV+$0.44/cwt baseline
Cheese PricingBlocks & BarrelsBlocks OnlyReduced volatility
ESL ProductsNo adjustment24-mo rolling averageProcessor stability
Location DifferentialsLast updated 2008Modernized zone adjustmentsRegional 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.

RegionPool Value ImpactKey FactorAction Required
NortheastPositiveHigh Class I utilizationMaximize component yield
Upper MidwestNegativeMake allowance penaltiesRenegotiate premiums
CaliforniaPotential $94M reductionClass III/IV dependenceCost containment
Central/MideastPositiveProximity to fluid marketsExpand 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.

Product2008 Make Allowance2025 Final RuleChange
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.

ComponentPrevious Standard2025 StandardImplementation Date
True Protein3.1%3.3%Dec 1, 2025
Other Solids5.9%6.0%Dec 1, 2025
Nonfat Solids9.0%9.3%Dec 1, 2025
ButterfatNo changeNo changeN/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

MilestoneDateSignificance
Final Rule PublishedJan 17, 2025Official regulation text
Producer ReferendumDec 31, 20242/3 approval threshold met
Implementation StartJune 1, 2025Majority of changes take effect
Component UpdatesDec 1, 2025Milk 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 Profit Forecast Jumps 25%: New Zealand Dairy Farmers Win Big with Record $10 Milk Price Intact.

Tuesday, March 11th, 2025

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.

KEY TAKEAWAYS:

  • Fonterra’s 25% earnings jump (55-75c/share) + NZ$10 milk price = unprecedented dual win
  • 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 earnings upgrade, NZ dairy profits, Farmgate milk price 2025, dairy industry trends, Fonterra dividend policy

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.”

In plain English? They sell more products at better margins while paying farmers record milk prices. That shouldn’t work on paper, but here we are!

MetricPrevious ForecastCurrent ForecastChange
Earnings per share40-60 NZ cents55-75 NZ centsUp to +25%
Farmgate Milk PriceNZ$10 per kgMS (midpoint)NZ$10 per kgMS (midpoint)No change
Milk CollectionsPrevious season1.51 billion kgMSIncreased
Interim Results ReleaseMarch 20, 2025March 20, 2025No change

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:

Cooperative2025 Profit OutlookMilk Price TrendStrategic Focus
Fonterra (NZ)Up to 25% increaseMaintained at NZ$10/kgMSConsumer division divestment
Arla Foods (EU)Flat to decliningReduced €/kg paymentsCost-cutting initiatives
Dairy Farmers of AmericaMixed regional resultsClass III price pressureDomestic market focus
FrieslandCampinaRestructuring costs impactReduced €/kg paymentsSustainability 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?

DOUBLE PAYDAY: PREMIUM MILK PRICE + FATTER DIVIDEND CHECKS

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 SizePotential Dividend at 60cNew Potential Dividend at 75cPotential Increase
50,000 sharesNZ$30,000NZ$37,500Up to NZ$7,500
100,000 sharesNZ$60,000NZ$75,000Up to NZ$15,000
200,000 sharesNZ$120,000NZ$150,000Up 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.

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American Cheese Dominance: U.S. Dairy Exports Shatter Billion-Pound Barrier

Tuesday, March 11th, 2025

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
U.S. dairy exports, cheese export record, American cheese, global dairy market, milk components

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.”

CHEESE BOOM OFFSETS POWDER SLUMP: MIXED EXPORT PICTURE

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 CategoryVolume (Metric Tons)Year-over-Year Change
Cheese508,808+17%
NFDM/SMPYear 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.”

MarketExport 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.”

MetricValue
Total U.S. Dairy Export Value (2024)$8.2 Billion
Year-over-Year Value Increase$202-223 Million
Percentage of U.S. Milk Production Exported18%
Jobs Supported by U.S. Dairy Industry3.2 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.

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CHINA’S DAIRY TRADE POWERPLAY: German Exports Flow While US Faces 10% Tariff Wall

Monday, March 10th, 2025

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.
China dairy trade, German dairy exports, US dairy tariffs, whey protein market, global dairy industry

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:

Table 1: German Dairy Export Profile (2023)

Key IndicatorFigure
Total Milk Exports$1.67 billion
Exports to China$225 million
Percentage of Non-EU Exports to China24.9%
Top Export DestinationsNetherlands ($449M), China ($225M), Italy ($220M)

That’s right – nearly a quarter of Germany’s non-EU dairy exports head straight to China. That’s a massive chunk of business that just came roaring back.

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.

These specialized whey products represent some of the dairy’s highest-value exports, from infant formula to muscle-building protein shakes. And guess who’s been dominating that market? Yep, American producers.

Table 2: US Dairy Export Profile (2024)

Key IndicatorFigure
Total U.S. Dairy Exports$8.2 billion
Exports to Mexico$2.47 billion
Exports to Canada$1.14 billion
Exports to China$500-800 million
Percentage of U.S. Milk Production Exported18%

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.

TRADE CHESS MATCH: Dairy Becomes Geopolitical Pawn

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 DateSignificance
March 4, 2025China announces 10% tariff on U.S. dairy products
March 6, 2025China lifts restrictions on German dairy imports
March 10, 2025Tariffs effective for new U.S. dairy shipments
April 12, 2025Grace 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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Global Dairy Market Analysis: Butter Strength, SMP Weakness Signal Strategic Opportunities | March 10, 2025

Monday, March 10th, 2025

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.
Global dairy market, butter prices, milk production forecast, component optimization, dairy export trends

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)

Metric20172022Change
Farms selling milk40,33624,470-39%
Milk cow inventory9.5 million9.3 million-2.4%
Farms with 2,500+ cows714834+16.8%
Share of milk sales from farms with 1,000+ cows57%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:

  1. Focus on component optimization rather than simply maximizing volume
  2. Maintain financial flexibility to adapt to market shifts
  3. 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.

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New Zealand Milk Price Soars to $11.76: The Shocking Truth Behind 2025’s Dairy Market Extremes

Thursday, March 6th, 2025

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.
New Zealand dairy prices, global milk production, Fonterra forecast, dairy market trends, farmgate milk price

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 CategoryFY 2025 ProjectionChange 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 GrowthMarket Context
Second half of 2024+0.5% year-over-yearReversing previous 0.5% decline
Forecast for 2025+0.8% year-over-yearFirst growth across all regions since 2020
Q1 2025 vs. Q2-Q4 20250.5% 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?

7 Secrets Behind Fonterra’s Conservative Forecasting Strategy

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 SourceCurrent ForecastMarket CalculationGapStrategic Approach
Fonterra$10.00 per kgMS$11.76 per kgMS$1.76Conservative, risk-averse
Rabobank$10.00 per kgMSNot specifiedUnknownRecently revised upward by 30 cents
Season-to-date$10.39 per kgMSBased on actual returnsN/ATrending 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.

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Dairy Markets Panic While Smart Farmers Cash In: Why 94% of Exports Remain Unaffected by Tariff Drama.

Thursday, March 6th, 2025

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.
  • NFDM stocks up 41% year-over-year, signaling broader inventory challenges beyond tariff concerns.

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.

StateMilk 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)
MonthApr-25Jun-25Aug-25Oct-25Dec-25
US Margin10.839.5810.3311.2111.40
Class III17.5917.4618.0918.3618.17
Corn ($/bu)4.444.554.504.434.47
SBM ($/ton)290297303306310

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 Forecast 2025: Major Market Shifts Ahead as FMMO Changes And Processing Boom Create Rare Growth Window

Thursday, March 6th, 2025

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 industry, Federal Milk Marketing Order changes, milk processing expansion, dairy profitability strategies, biosecurity in dairy farming

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 ChangeImplementation DateImpact on Northeast Producers
Return to “higher-of” Class I pricing formulaJune 1, 2025Potentially positive due to higher Class I utilization in Northeast
Updated manufacturing allowances for Class III and IVJune 1, 2025Class III price approximately 16¢ lower, Class IV approximately 47¢ lower based on historical analysis
Removal of 500-pound barrel cheddar from pricing calculationsJune 1, 2025Potential 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, 2025Delayed implementation creates transitional period requiring careful planning

MILK PROCESSING CAPACITY EXPLOSION: MDVA’S GAME-CHANGING PENNSYLVANIA MOVE

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 FacilityLocationInvestmentCapacity ChangesCompletion Timeline
MDVA (former HP Hood facility)Northeast Philadelphia, PAPart of $10 million incentive packageExpanding from 12 million to 25 million gallons annuallyBy 2026
Various facilitiesNew York and surrounding areasNot specifiedNew plants opening and modernization of existing facilitiesOngoing 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.

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GLOBAL DAIRY MARKETS ROCKED: US-China-Canada Tariff War Sends Shockwaves Worldwide

Wednesday, March 5th, 2025

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.
global dairy trade, tariff war, US dairy exports, agricultural trade dispute, international dairy markets

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.”

CountryAnnual Export Value (2024)Key Product Dependence% of Total U.S. Exports
Mexico$2.47 billionLeading destination for US skim and non-fat powderTop market for U.S. dairy overall
Canada$1.14 billionRecord imports from US in 2024Second largest dairy trade partner
China$500-800 million (recent years)Major market despite 2024 declineStrategic growth market
Combined TotalOver $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 timing couldn’t be worse for international dairy markets. In 2024, the US dairy industry celebrated its second-highest export year, with foreign trade reaching .2 billion—a 3 million increase over 2023. However, those gains now face significant erosion as tariffs make US dairy products less competitive in key markets.

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.

ScenarioGlobal Market ImpactUS Farm-Level ConsequenceInternational Effect
Short-term tariffsTemporary price volatilityCash flow challengesOpportunity for competing exporters
Medium-term tariffsReshuffling of global trade flowsSignificant margin pressurePrice pressure in alternative markets
Long-term tariffsPermanent shifts in market accessAccelerated farm consolidationRestructured 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:

  1. Assess market exposure. Understand precisely how dependent your business is on markets affected by these tariffs, either directly or through secondary effects.
  2. Identify emerging opportunities. As traditional trade flows face disruption, new openings may emerge for suppliers positioned to fill gaps.
  3. Monitor price signals carefully. Global commodity prices will likely reflect shifting trade patterns, potentially creating risks and opportunities.
  4. 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.
  5. 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.

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GLOBAL DAIRY ALERT: Fonterra’s Price Bombshell Reshapes Milk Markets – What Smart Farmers Are Doing Right Now

Wednesday, March 5th, 2025

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 milk price forecast, global dairy market trends, Chinese dairy demand, milk production constraints, dairy farm strategy

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.

TimeframeForecast Range (NZD per kgMS)MidpointChange
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:

Category2024 Import Decline
Skim Milk Powder36.8%
Whole Milk Powder12.6%
Liquid Milk and Cream15.6%
Infant Formula14.8%

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.

Region2025 Production ProjectionKey Factors
European Union-0.2%Environmental restrictions, disease outbreaks
United StatesGrowth (from 2024)Expanded processing capacity, herd increases
New Zealand+1.2%Improved feed and management practices
AustraliaFlat (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:

  1. How specifically does your pricing formula respond to Fonterra’s forecast changes and GDT auction results?
  2. What market signals would trigger an upward revision in your farmgate price forecasts for the remainder of 2025?
  3. 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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GDT Alert: Dairy Index Down 0.5% as Lactose Surges Record 14%, Creating Strategic Opportunities for Producers

Tuesday, March 4th, 2025

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
  • CME cheddar blocks collapsed 9.50 cents to $1.7750/lb, signaling domestic market weakness
  • 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
Dairy market trends, GDT auction results, lactose price surge, cheese market volatility, feed cost reduction

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.

Key Dairy Product Performance: Specialized Categories Outshine Commodities

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 ClassButterfat ($/kg)Proteins ($/kg)Other solids ($/kg)
3(d)11.35659.70350.8921

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:

ProductGDT Price ($/lb)CME Price ($/lb)Price PremiumPremium (%)
Butter$3.43$2.35$1.0846%
Cheddar$2.22$1.78$0.4425%
SMP/NDM$1.24$1.20$0.043%

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:

ProductFinalChange ¢/lb.TradesBidsOffers
Butter2.3450NC012
Cheddar Block1.7750-9.50403
Cheddar Barrel1.7800-2.50201
NDM Grade A1.2000NC022
Dry Whey0.5100-1.50014

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 ClassButterfat ($/kg)Proteins ($/kg)Other solids ($/kg)
5(a)9.34597.38131.7080
5(b)9.34593.80753.8075
5(c)10.75042.90702.9070

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.

Market Outlook: Block-Barrel Inversion Signals Structural Shift

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.

Bottom Line: Product Divergence Creates Selective Opportunity

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.

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China Slaps 10% Tariff on US Dairy: Exporters Face New Market Challenges as Trade War Heats Up.

Tuesday, March 4th, 2025

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.
China tariffs, US dairy exports, trade war, agricultural retaliation, dairy industry impact

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.

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Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape

Tuesday, March 4th, 2025

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.
dairy industry trends, milk production 2025, dairy market analysis, European dairy decline, US dairy expansion, Oceania dairy strategy, global dairy market, cheese production, dairy exports, dairy sustainability

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:

  • Sustainable Dairy Farming Practices for 2025 and Beyond
  • Dairy Pricing Forecasts: What to Expect in the Coming Year
  • Strategic Feed Management in Times of Market Volatility
  • Technology Innovations Reshaping Modern Dairy Operations

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Weekly Global Dairy Market Recap 03/03/25: Record Butterfat Meets Trade War Threat

Monday, March 3rd, 2025

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.
  • Butter cold storage surged 26% monthly, reaching 9.2% above January 2024.
  • 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.
dairy market analysis, butterfat levels, dairy exports, tariff impact, milk production statistics

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.

ExchangeProductVolume TradedPrice Change (Mar-Oct strip)Current Price Level
EEXButter3,145 tonnes+4.9%€7,305
EEXSMP5,410 tonnes-2.8%€2,603
EEXWhey475 tonnesUnchanged€920
SGXWMP9,277 tonnes-0.9%$3,804
SGXSMP1,396 tonnes-2.0%$2,821
SGXAMF82 tonnes-0.1%$6,623
SGXButter179 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.

ProductCurrent PriceWeekly ChangeY/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)€904Unchanged+€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.

RegionButterfat %Protein %Y/Y Change in Milk VolumeY/Y Change in Milksolids
United States4.46%3.41%+0.1%+2.2%
United Kingdom4.39%3.41%+4.3%+4.5%
Australia4.24%3.38%-2.7%-1.8%
Netherlands4.66%N/A-1.7%-1.0% (fat only)
PolandN/AN/A+2.3%N/A
ItalyN/AN/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.

Feed Market Developments: Contradicting Conventional Signals

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.

Strategic Reset: Navigating Converging Disruptions

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.

Outlook: Biological Revolution Meets Geopolitical Disruption

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.

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Weekly Dairy Market Report: Tariffs Cast Shadow Over U.S. Dairy Industry Outlook

Saturday, March 1st, 2025

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.
dairy tariffs, milk prices, cheese exports, feed costs, dairy margins

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 ExportsValue (USD Millions)
Mexico576,00024.8%$1,840
Southeast Asia395,00017.0%$1,320
China311,00013.4%$970
Canada246,00010.6%$810
Middle East/North Africa172,0007.4%$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 CategoryCanadian Over-Quota TariffU.S. Over-Quota TariffCanadian Within-Quota TariffU.S. Within-Quota Tariff
Fluid Milk241%77%0%0.4¢/liter
Cheese (Cheddar)245%35%0.7%12% ad valorem
Butter298%69%1%12.4¢/kg
Yogurt237%20%0.5%2.8¢/kg
Ice Cream243%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 ChangeYear-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

ProductJan 2025 Inventory (Million lbs)Dec 2024 InventoryMonthly ChangeYear-Over-Year Change
Total Cheese1,3701,412-3.0%-5.7%
American Cheese742771-3.8%-7.4%
Butter270.28215+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 ForecastPrevious ForecastChange
Total Milk Production (billion lbs)227.2228.0-0.8
Milk Per Cow (lbs)24,20024,285-85
Dairy Cow Inventory (million head)9.3909.3900
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)

MonthClass IClass IIClass IIIClass 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 PriceWeekly ChangeAnnual 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)

Crop2025 Projected Acreage (millions)2024 Actual AcreageChange (millions)Change (%)
Corn94.090.6+3.4+3.8%
Soybeans84.087.1-3.1-3.6%
Wheat48.547.2+1.3+2.8%
Hay52.352.8-0.5-0.9%

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 CategoryPrice Index (Jan 2024=100)Monthly ChangeAnnual Change
Fluid Milk105.8+0.3%+3.2%
Cheese108.2+0.2%+4.7%
Butter110.5-0.5%+5.8%
Ice Cream106.3+0.1%+3.5%
Yogurt104.2-0.2%+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)

IndicatorCurrent Value5-Year AverageThreshold for Profitability
Milk-Feed Ratio2.102.452.25
Income Over Feed Cost$7.92/cwt$9.35/cwt$8.50/cwt
Operating Margin4.3%6.8%5.0%
Debt-to-Asset Ratio0.380.32<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.

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Brazil’s Milk Prices Surge: A Boon for Dairy Farmers, but Challenges Loom

Friday, February 28th, 2025

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 dairy prices, UHT milk demand, dairy farmer profitability, milk market challenges, dairy product inflation

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”.

Challenges on the Horizon

While the current high prices are certainly cause for celebration among dairy farmers, there’s a hint of caution in the air. Industry experts are already warning about potential challenges ahead.

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.

Learn more

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Golden Milk: New Zealand Dairy Prices Soar to Historic Highs Amid Production Boom

Thursday, February 27th, 2025

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.
New Zealand dairy prices, record milk prices, dairy production surge, Fonterra milk forecast, global dairy market trends

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.

Consumer Impact: Rising Retail Prices Spark Controversy

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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