Trade wars bite: U.S. dairy exports face new tariffs while spring milk floods processors. Are falling powder prices the canary in the coal mine?
Executive Summary
The dairy industry faces significant market disruption as new tariffs targeting U.S. exports to Canada and China create domestic and international buyer uncertainty. Nonfat dry milk prices have retreated to 10-month lows at $1.155 per pound, while whey markets continue their bearish slide, dropping to 45ȼ per pound—the lowest since early June. In contrast, cheese and butter markets show signs of stabilization, with CME spot Cheddar blocks jumping 7ȼ to .6925 this week. Since February, the 5% decline in the dollar index has created potential export opportunities despite trade tensions, as U.S. dairy products become more price-competitive globally. The market outlook remains uncertain as seasonal production increases coincide with trade disruptions, suggesting continued volatility across dairy commodity sectors.
Key Takeaways
- Powder markets under severe pressure: NDM and whey prices have fallen to multi-month lows as buyers adopt conservative purchasing strategies amid trade uncertainty
- Market divergence creates strategic opportunities: While powder struggles, cheese and butter markets show resilience, suggesting targeted production and marketing approaches may be necessary.
- Currency effects partially offset trade barriers: The weaker dollar creates pricing advantages for U.S. dairy exports, potentially opening windows for international sales despite tariffs.
- Spring flush amplifies market challenges: Seasonal production increases are creating supply pressure at the worst possible time, with processing facilities facing longer queues at dryers.
- Market flexibility critical for producers: The uneven performance across product categories highlights the importance of adaptable production decisions and marketing strategies in the current volatile environment
The dairy markets are navigating turbulent waters as trade disputes cast long shadows over pricing and demand. New tariffs targeting U.S. dairy exports to Canada and China have significantly disrupted market dynamics, creating a cautious atmosphere among buyers domestically and internationally. This week’s market movements reveal a complex landscape where certain commodities are finding their footing while others continue to slide.
POWDER MARKETS FACE HEADWINDS AMID TRADE TENSIONS
The nonfat dry milk (NDM) market is experiencing notable pressure as buyers adopt increasingly conservative purchasing strategies. Importers are demonstrating marked hesitation to commit to volumes that might face tariffs down the road, while domestic users are similarly limiting purchases to immediate needs, anticipating further price declines in this export-dependent sector.
The CME spot NDM market briefly showed signs of life this week before retreating to $1.155 per pound, matching the 10-month low established last Friday. This represents a significant decline from October 2024, when USDA reported NDM prices averaging $1.3685 per pound. The current scenario starkly contrasts the previous fall’s market conditions, when condensed skim was readily available, but recently produced volumes ranged from balanced to tight.
Spring Flush Adds to Market Pressure
The arrival of spring has brought the familiar seasonal increase in milk production, further complicating the powder market outlook. With milk flows climbing, processing facilities are experiencing longer queues at dryers. This supply growth comes at a particularly challenging time, as export channels face obstacles from trade disputes and domestic buyers remain cautious.
WHEY MARKETS CONTINUE DOWNWARD TRAJECTORY
The whey market continues its bearish trend, with prices falling further this week. CME spot whey powder dropped another 4ȼ to reach 45ȼ, marking the lowest price point since early June. This represents a dramatic decline from October 2024’s reported prices, when dry whey was trading at around 60ȼ per pound.
USDA market analysts offer a candid assessment, noting “growing concerns among market actors as to what international trading activity will look like over the next few months.” Domestic end users have lost interest in dry whey volumes priced above 50ȼ per pound, indicating a significant shift in price expectations.
The agency characterizes the market as bearish “with few indications of the alternative in the near term.” While demand for high-protein whey concentrates and isolates remains robust, the industry continues to generate ample whey for powder production.
CHEESE AND BUTTER MARKETS FIND STABILITY
While powder markets continue their decline, other dairy commodities have shown resilience. After weeks of bearish pressure, the invisible hand of the market has stepped in to restore some balance:
- CME spot Cheddar blocks jumped 7ȼ this week to $1.6925
- Barrels rallied 6ȼ to reach $1.69
- Butter added 3.25ȼ to climb to $2.3425
These figures reflect significant shifts from October 2024, when cheese blocks and barrels traded at $1.90 and $1.87, respectively, and butter commanded nearly $2.70 per pound.
Market Fundamentals Remain Mixed
Despite the modest recovery in cheese and butter prices, several factors that drove February’s market collapse remain in play:
- Cream supplies continue to be abundant and affordable
- Churns are operating at high capacity
- U.S. cheese production continues to expand
- Domestic demand for cheese and butter lacks vigor
However, the recent price corrections have created opportunities for international buyers. U.S. cheese and butter present attractive value propositions to foreign purchasers compared to alternatives from other major dairy exporting regions.
CURRENCY EFFECTS CREATE EXPORT OPPORTUNITIES
A 5% decline in the dollar index since early February has enhanced the purchasing power of foreign currencies when buying U.S. dairy products. This currency effect, combined with stable to higher dairy prices in Oceania and Europe, has widened the gap between U.S. and international values.
This pricing disparity creates potential opportunities for buyers willing to navigate the uncertain U.S. trade policy landscape. International purchasers can effectively acquire U.S. dairy products at bargain prices compared to global alternatives, potentially offsetting some of the negative impact of recent trade tensions.
OUTLOOK REMAINS UNCERTAIN AS MARKETS ADJUST
The dairy industry is at a crossroads, with markets adjusting to new trading realities while seasonal production trends follow their typical patterns. The combination of trade tensions, seasonal milk production increases, and uneven demand across product categories suggests that continued volatility may lie ahead.
The divergent performance across product categories for dairy producers underscores the importance of maintaining flexibility in production decisions and marketing strategies. While powder markets face significant headwinds, stabilizing cheese and butter prices guarantees that market mechanisms continue functioning.
The coming weeks will be critical in determining whether the modest recovery in cheese and butter markets can be sustained and whether powder markets will find support or continue their decline under pressure from seasonal and trade-related factors.
Learn more
- Trump’s Trade Agenda: What Dairy Producers Need to Know About Round Two
- Beyond Survival: Smart Strategies for Dairy Farms During Market Downturns
- European Dairy Price Forecast: Why Global Markets Matter to Your Bottom Line
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