Market Reports

It become obvious this spring and summer that the dairy industry was climbing out of the bearish period that marked late 2017 and early 2018, even in the face of tariffs and trade uncertainty. But as we dig a bit deeper, we've noticed a different trend, one which bodes far worse over the long term than tariffs.

When Mexico announced its retaliation to U.S. tariffs on steel and aluminum imports in early June, those affected by new tariffs predictably flipped out. It included the dairy industry, as cheese was among products newly subject to levies. But is the industry’s frantic reaction warranted?

Recent moves and counter moves in international trade have everyone nervous about how new tariffs announced by the Chinese and American governments will affect their ability to do profitable business in a global economy. Dairy is no exception. But an examination of what key players are actually doing will show that threatening rhetoric may not reflect reality.

Last month, we reported on increased interest in American cheeses from buyers abroad. It led us to believe there is potential for some good to come out of several months in a row of bad news for dairy markets. This month, we’re taking stock of the situation as the peak of the spring flush nears.

Domestic supply remains somewhat long, prices remain depressed, demand remains weak and American dairy farmers are seeing month after month of lackluster milk checks. But one market segment —U.S. cheese exports— is showing signs of strength.

Dairy markets in the U.S. are still stagnant. And, as we’ve reported for many months now, part of the problem is there’s just too much milk flooding the market. But there’s a demand problem, too, and demand problems are much harder to solve. That’s especially true when the economy is strong, like it is now.