Market Reports

Spring has sprung and the resurgence of allergies isn’t the only sign of the season. Milk volumes are also expanding in most regions as the spring flush moves across the country. Seasonal increases are compounding milk volumes that are growing year over year both in liquid terms and in component values.

An intensifying trade war is likely to further complicate the outlook for U.S. dairy exports, which had already come under pressure. During February, U.S. exporters sent 463 million pounds of product abroad, 4.3% less than in the same month last year after adjusting for the leap day. The bulk of the decline came from milk powder with shipments of nonfat dry milk (NDM) and skim milk powder falling to the lowest volume seen for the month since 2016.

Dairy producers are doing all they can to keep their barns and milk tanks full, and it shows. In the week ending March 15, they sent just 52,431 milk cows to beef packers, the lowest mid-March tally since 2008. In the first 11 weeks of 2025, the industry culled roughly 109,000 fewer cows than the historic average, helping to raise head counts despite the heifer shortage. More cows mean more milk, especially during the flush.

Better demand could also lift the dairy markets out of the bargain basement. Even after accounting for new tariffs, U.S. dairy products are competitively priced, especially when compared to dairy products priced in euros rather than dollars. The invisible hand will slowly bring U.S. dairy products to new buyers and boost prices, but it could be a slow, painful process.

Trade threats – and new tariffs on U.S. dairy exports to Canada and China – have spooked the markets and slowed sales. Importers don’t want to speak for milk powder that might face a tariff down the road. And domestic users are also going hand-to-mouth, anticipating further declines in this export-dependent market. Whey prices just keep dropping.

The situation may have changed by the time you read this, but for now, here’s the status of the relationship: The U.S. will not impose tariffs on goods covered under the U.S.-Mexico-Canada Agreement (USMCA). However, while most agricultural and auto-industry goods will be protected from tariffs through their USMCA status, many businesses had opted out of the complicated and expensive process of certifying that their products are USMCA-compliant.

The dairy markets suffered a deluge of data and news that invigorated the bears. The trade war heated up, while USDA highlighted abundance in its monthly Cold Storage report and at its annual Outlook Forum. On Thursday, President Trump cleared up some confusion about the timing of a proposed 25% tariff on all U.S. imports from Canada and Mexico. He vowed on Truth Social that “the proposed TARIFFS scheduled to go into effect on MARCH FOURTH will indeed, go into effect, as scheduled.”

After slipping in the final months of 2024, output appears to have grown in January, rising to 19.1 billion pounds. The 0.1% increase reported in USDA’s Milk Production report was modest, but nevertheless suggests that producers may now be responding to strong margins and overcoming animal health challenges in order to expand.

A potential trade war is worrisome for the cheese sector, which has come to depend increasingly on the export market to absorb production. According to USDA’s Supply and Utilization data, total domestic cheese disappearance fell by 17.3 million pounds in 2024, dragged down by weaker consumption of American style cheeses. Over the same period, however, exports grew by 170.2 million pounds, more than compensating for slow domestic demand and preventing stock accumulation.

It was a truly wild week on LaSalle Street. The dairy markets swung violently back and forth amid the on-again, off-again trade war. On Monday alone, the March Class III contract lurched more than a dollar from low to high. At its worst, it was 39ȼ in the red, compounding a 70ȼ loss last Friday.