Dairy markets on edge as tariffs loom! Butter slides 1¢ on Canadian retaliation fears, while cheese barrels inch up 0.25¢. Class III futures stabilize at $18.91/cwt, but USDA cuts 2025 milk price forecast. Get the scoop on global impacts, feed costs, and actionable strategies for farmers in today’s CME report.

Summary

In today’s CME dairy market report, butter prices dipped 1.00¢ to $2.3350/lb as Canada’s impending 25% retaliatory tariff sparked preemptive selling, particularly impacting Midwest processors. Cheese markets showed mixed results, with blocks falling 1.00¢ to $1.8700/lb on thin trading, while barrels edged up 0.25¢ to $1.7950/lb, supported by steady foodservice demand. Class III futures stabilized at $18.91/cwt, up 0.18¢, despite ongoing trade policy uncertainties. The USDA revised its 2025 all-milk price forecast down to $22.60/cwt, reflecting tighter margins due to persistent feed cost pressures and export challenges. Global factors, including New Zealand’s 3.1% seasonal milk output growth and the EU’s push for sustainable dairy practices, continue to shape market dynamics. Farmers are advised to consider hedging feed costs, plan for potential tariff impacts, and explore niche markets like direct-to-consumer sales to navigate the evolving landscape.

Key Takeaways

• Butter prices fell 1.00¢ to $2.3350/lb due to Canada’s upcoming 25% tariff.
• Cheese blocks dropped 1.00¢ to $1.8700/lb, while barrels rose 0.25¢ to $1.7950/lb.
• Class III futures stabilized at $18.91/cwt (+0.18¢).
• USDA lowered 2025 all-milk price forecast to $22.60/cwt.
• New Zealand’s milk production up 3.1%, increasing global competition.
• Feed costs remain high, pressuring the milk-feed ratio (2.10 vs. breakeven 2.25).
• EU sustainability trends are influencing U.S. export competitiveness.
• Farmers advised to hedge feed costs and consider diversifying into niche markets.
• Mexico’s pending tariff decision (due March 5) could significantly impact cheese prices.
• Direct-to-consumer raw milk sales offering premiums of +$4.50/cwt in the Midwest.

Butter prices fell 1.00¢/lb as Canada’s retaliatory tariffs loom, while cheese barrels gained 0.25¢ on limited bids. Class III futures stabilized at $18.91/cwt despite heightened trade policy risks. USDA revised its 2025 all-milk price forecast down to $22.60/cwt, reflecting tighter margins.

Key Price Changes & Market Trends

Commentary:

• Butter slid 1.00¢ as Canada’s 25% tariff announcement (effective March 1) triggered preemptive inventory liquidation, particularly impacting Midwest processors.
• Cheese blocks saw minimal trading (1 sale) amid uncertainty over Mexico’s tariff review, while barrels edged up 0.25¢ on steady foodservice demand.
• NDM rose 0.75¢ on renewed Southeast Asian buying interest, though USDA’s 2025 skim-solids export forecast remains cautious (-3% YOY).

Volume and Trading Activity

• Butter: 26 trades executed (range: $2.3275–$2.34/lb), dominated by pre-tariff sell orders.
• Cheese: Blocks saw 1 trade, while barrels attracted 2 bids at $1.7950/lb amid thin liquidity.
• NDM: 6 trades ($1.1975–$1.2075/lb) with aggressive bidding (22 bids vs. 2 offers).
• Dry Whey: No trades, with 4 offers lingering at $0.5350/lb.

Global Context

• Canada’s Tariffs: 25% duty threatens $450M in annual Wisconsin butter exports, forcing processors to redirect supplies domestically.
• New Zealand Production: RaboResearch reports 3.1% seasonal milk output growth, increasing competition in Asian markets and pressuring U.S. butter prices.
• EU Sustainability Push: Rising consumer demand for carbon-neutral dairy is pressuring U.S. exporters to adopt greener practices or risk losing EU market share.

Forecasts and Analysis

• USDA 2025 Milk Price: Revised to $22.60/cwt (-0.45¢ from January), reflecting tighter margins from feed costs and export headwinds.
• Feed Costs: Corn settled at $4.7900/bu (-0.3% weekly), while soybean meal dipped to $302.00/ton (-0.3%), maintaining pressure on the milk-feed ratio (2.10 vs. breakeven 2.25).
• Class III Futures: March contract edged up to $18.91/cwt (+0.18¢), aligning with USDA’s Q2 projection of $18.50/cwt.

Visual Trend:
Class III milk futures remain 3.6% below February’s peak of $19.50/cwt, with USDA forecasting sideways movement through Q2 amid tariff uncertainty.

Market Sentiment

• Trader Quote: “Butter’s tariff-driven drop overshadows cheese’s resilience – the real test comes when Mexico’s tariff decision drops March 5.” – CME Floor Trader.
• General Outlook: 62% of traders remain bearish on near-term butter markets, while cautiously optimistic about NDM export demand recovering in Q2.

Closing Summary & Recommendations

Today’s market highlighted tariff-driven volatility (butter) versus cautious stability (cheese, NDM). Feed costs and trade policies now outweigh production trends as margin drivers.

Actionable Steps:

1. Hedge Feed: Lock in 50% of Q2 corn needs at $4.70/bu (December futures) to offset soybean meal’s 8% YoY surge.
2. Tariff Contingency Planning: Diversify 15-20% of milk to NDM production if Mexico imposes cheese tariffs.
3. Explore Niche Markets: Direct-to-consumer raw milk sales now offer premiums of +$4.50/cwt in Midwest markets.

Learn more

• Milk’s Surprising Renaissance: How Dairy Farmers Are Navigating New Opportunities and Challenges
• Global Dairy Market in 2025: Production Shifts, Demand Fluctuations and Trade Dynamics
• Fewer Farms, Flat Output: U.S. Dairy’s Efficiency Paradox

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