Market Reports

Despite the challenges, the national dairy herd and milk production continue to grow. In addition to rising year over year output, the spring flush is also driving ample milk availability in most parts of the country. Bottling demand is stable to softer and freeing up plenty of milk for processing. Spot milk for manufacturing could be obtained for about $5 under Class III prices in the Central region this week – significantly lower than the $1.50 discount available at the same time last year.

Every week, U.S. dairy producers send about 10,000 fewer milk cows to beef packers than they used to. That’s slowly adding up to more cows in the barn. Even so, dairy cow head counts are not as high as previously thought. After its quarterly survey, USDA trimmed its estimates of January and February milk cow inventories.

For producers who have been considering retirement for years, slim margins and high cow values offer a lucrative exit ramp. The auction docket is growing, which could allow producers to buy replacements and boost cull rates. Eventually, that could shrink the dairy herd. But for now, slaughter volumes remain low and milk output is on the rise.

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.”