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)
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
| Market | Volume (Million lbs) | Change vs. 2024 |
| South Korea | 25.6 | +40% |
| Japan | 19.2 | +10% |
| Australia | 13.0 | +37% |
| Canada | 8.4 | +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:
- Real-time tariff impact modeling
- Blockchain traceability for premium markets
- Predictive analytics for H5N1 risk zones
- Dynamic pricing engines for cheese varieties
- 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:
- Trade Agility: With 18% of U.S. milk production exported, rapid response to tariff changes is critical.
- Value-Add Focus: Cheese/butter growth proves premiumization beats commodity reliance.
- 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:
- Global Dairy Market Trends 2025: European Decline, US Expansion Reshaping Industry Landscape
Explore how regional shifts in dairy production are reshaping the global market landscape in 2025 and uncover strategic opportunities for producers. - USDA’s 2025 Dairy Outlook: Market Shifts and Strategic Opportunities for Producers
Discover the USDA’s latest projections for milk production, pricing, and export dynamics, along with actionable strategies for dairy farmers to thrive in 2025. - EU Dairy Forecast 2025: Milk Production Declines as Cheese Demand Rises
Dive into the challenges facing EU dairy farmers, including declining milk production and rising cheese demand, and learn how innovation can drive resilience.
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