Let’s Chat Dairy is a weekly podcast hosted by HighGround Dairy’s top analysts. At the end of every week, they sit down to recap the week in dairy markets and summarize recent reports and relevant news. The podcast can be found here on our dashboard or wherever you listen to podcasts. Subscribe so that you never miss an episode!
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Transcript:
(0:15) Alyssa Badger:
Hello everyone, and welcome back to Let’s Chat Dairy, your favorite weekly market podcast powered by HighGround Dairy. Today’s Friday, March 7th, and you’re joined today by Alyssa Badger and Cara Murphy. It has been a whirlwind week. The implementation, then not, of US tariffs sent the markets into a tailspin. Then on top of that, we received the US Dairy Products Production data for January of 2025, the US Trade Data for January as well, a Global Dairy Trade event, and more. So let’s get into it right away here with the CME Spot Market Recap. Cara?
(0:53) Cara Murphy:
Alright, the cheese market plummeted this week. Block cheddar fell $0.1150 cents on Tuesday following Trump’s tariff announcement to $1.6050 per pound and held in the low $1.60s the rest of the week, closing today at $1.6225 per pound with a total of 41 trades. Barrels didn’t see quite the same fall but declined nonetheless to $1.63 per pound today with 11 trades on the week. The butter market also took a dive. On Tuesday, it closed at $2.25 per pound, the lowest price since December 2021. The market came back over the next few days, though, to close the week at $2.31 per pound with 37 trades. In powders, nonfat dry milk continues to fall, ending this week at $1.1550 with 15 trades, while dry whey finally moved below the $0.50 per pound mark, closing today at $0.49 per pound with 6 trades on the week.
(1:49) Alyssa:
Thanks for that, Cara. As we mentioned, there were a couple of US reports out this week. Do you mind if we start off with the Dairy Products Report? Then we can get into all the trade chaos where we’ll also discuss a lot of those big headlines of the week that involved tariffs.
(2:04) Cara:
Yeah, no problem. Well, the big talk of the town in January was butter output. Could it go higher? And the answer is yes. Butter production rose 0.5% in January 2025 versus the prior year. At first, this doesn’t seem large, but 2024 held the second-highest output for the month of January on record, and 2025 usurped that number. So there was indeed plenty of butter made. With the abundance of cream available across the nation, it makes sense that more butter would be produced. Excess fat is also moving into Class II products such as cottage cheese, ice cream, and yogurt. Cheese output posted another month of growth lifted by strong mozzarella output and more natural American cheese, which at 0.2% year-on-year growth posted its largest gain in over a year. Dry whey production is steadily on the rise. Stocks have risen as well, contributing to the recent downward price pressure. Lastly, nonfat dry milk skim milk powder output is poor, and yet stocks continue to climb. January’s inventories of 299 million pounds were the largest for the month since 2021. Not much is being made, and you’ll see in a second with trade, not much is being shipped out either.
(3:20) Alyssa:
Alright, thanks Cara. So let’s talk trade then. This week the US Import and Export Volumes were released for the month of January. Now these shipments would have been booked back in December or November, and if we think back to that time, this would have been post the US presidential election, and tariff threats would have started to populate, but timelines for implementation were still very much incorporeal. Nonetheless, what we have learned in recent months is that Trump’s announcements move markets, so it’s likely the impact of potential tariffs and potential retaliatory tariffs had on some level an effect here.
(3:56) Cara:
Absolutely, Alyssa. I think we will surely see more of that in the trade reports to come. One thing I think was fascinating this month was shipments of anhydrous milk fat marked a record high at 8 million pounds in January, and this was due to all-time high exports to Mexico and Canada. The US also saw an increase in butter exports, with more product moving to Saudi Arabia and Canada. In the cheese space, there were some interesting dynamics at play as well. Mexico remains the top destination for US cheese exports, but shipments to the nation only grew marginally. The big gain we saw in total cheese was actually driven by more product heading to Japan, South Korea, and Bahrain. On top of this, cheddar sailings posted their largest monthly volume on a 30-day adjusted basis since March 2014. More cheddar was shipped to Japan, Australia, Bahrain, and Panama of all places. In the whey complex, more dry whey made its way to China, the highest monthly volume since November 2023. WPC≥80% shipments were the largest January on record, and the second highest month of all time behind March 2024 on larger volumes to China, Japan, Canada, and South Korea. US imports of butter and cheese increased year-over-year in January 2025 as more companies pushed product into the US ahead of that moving tariff deadline.
(5:20)
So, let’s get into them. I’ll cover North America, and Alyssa, our resident expert on China, will take it from there. US tariffs on China and Mexico went into effect on March 4th. Immediately, US markets took a tumble, with the stock market Dow Jones and S&P 500 plunging downward. Commodity futures also fell across grains, cattle, hogs, and, of course, dairy. Then, on March 6th, Trump agreed to pause tariffs on Mexican and Canadian products included under the USMCA, a trade agreement penned during the first Trump administration. This pause would go until April 2nd, 2025. So where does that leave us today? Well, to start, dairy exports under the USMCA are duty-free to Mexico, and while they are included in the agreement for Canada, things are a little bit more complex with this nation as the US dairy trade with Canada has been contentious over the past years. For now, tariffs are yet again in a one-month pause, but things are a little different in March than they were in February. For Mexico, President Claudia Scheinbaum says that Mexico has plans in place for reciprocal tariffs, but we do not know what those are or what products would be included. Mexico also said they could look into trade agreements with other nations if the US went through with tariffs, which Mexico has already been doing as they penned a deal with the EU back in January, which does include dairy products. For Canada, on March 4th, they announced a batch of reciprocal tariffs, including dairy, and while the U.S. paused tariffs on Canadian goods until April 2nd, Canada has not. So Canadian tariffs on US goods remain in effect. Canada has released a Notice of Intent to impose additional tariffs in April. These additional tariffs do include more dairy HS codes. Most notably, they include lactose, infant formula, and caseinates, which were not included in the original tariff HS code list for March 4th. This is what we know so far for North America, and now we wait until April 2nd.
(7:17) Alyssa:
Thanks, Cara. Yeah, so on March 4th, President Trump also imposed another 10% levy on Chinese goods, taking the total tariff up to now 20%. And remember, from Trump’s first term, there was a 25% tariff added to a handful of Chinese goods, so there are some products that face a 45% tariff when entering the US. Most notably, that’s automobiles, solar panels, and electric vehicles. China, this time, responded immediately by announcing a 10-15% tariff on US agricultural products. We took a look at the HS codes, and China has placed a 10% tariff on US fluid milk and cream, milk powders, yogurt, butter, anhydrous milk fat, cheese, casein, and caseinates, as well as whey protein isolate, which is particularly important as Chinese buying has been the primary support of US WPI exports throughout 2024. Noticeably, though, HS codes for dry whey, lactose, and infant formula were not listed. Though China’s whey tariff exemption did expire at the end of February from the first round of China’s retaliatory efforts, so whey technically now faces a 27% tariff into China according to the US Dairy Export Council, but they have not added this additional 10% tariff to US dry whey at this time. Time will tell if that exemption comes back into play or not, though since US whey is primarily used for feed and very little expansion is anticipated in China’s hog industry, they may be able to limit imports anyway. China’s foreign minister, Wang Yi, has accused the US of two-faced behavior, condemning the imposition of tariffs on Chinese goods and warning against the law of the jungle that could emerge from Donald Trump’s America First policy. Customs data published today, Friday, showed that the value of China’s exports in January and February grew 2.3% from prior year, which was well below expectations, underlying the pressure that China’s exporters will be under this year if China is to hit that GDP growth target of 5%. Back to tariffs though, it looks like now, April 2nd will be the big day to watch for. The Trump administration announced plans to instill reciprocal tariffs on other nations including Brazil, India, and the European Union on that date, so get ready for another wild week to come.
(9:48) Cara:
Alyssa, before we get into the Global Dairy Trade event this week, could you briefly cover the disparity between the US butter price and the rest of the world? US cheese and nonfat dry milk is also currently at a discount to New Zealand and Europe, but butter has really stood out to me.
(10:03) Alyssa:
Yeah, that’s a good thing to bring up here. There is quite a gap. As many of you know, international butter typically has 82% butterfat, while US butter has only 80% butter fat. So the US is a net importer of butter, and the domestic market consumes about 97% of the butter that’s made within the US. However, at the moment, US butter is incredibly cheap, with a large enough discount to the rest of the world that could be enticing to international buyers. Currently, New Zealand’s C2 unsalted butter price is at $7,500MT, or $3.42 per pound on the Global Dairy Trade platform. European butter on the Global Dairy Trade platform is priced below product offered on the European Energy Exchange, so if we take the low number to be conservative, European butter is priced at $7,745MT, or around $3.51 per pound. Meanwhile, US butter, when adjusted for 82% butterfat, is at about $5,170 MT, or $2.34 per pound. That’s roughly a $1.12 discount to the rest of the world. Now, back in August of 2024, when European butter prices took off, this disparity did appear between the US and the EU. However, at the time, New Zealand product was competitive against the US. But not this time around. US product is priced at such a discount to both regions, it’ll be interesting to see if purchasing behaviors change.
(11:37) Cara:
Wow, that is a large gap. What else happened during this week’s Global Dairy Trade Auction?
(11:43) Alyssa:
Well, it was truly a mixed bag, but commodities did not decline as sharply as SGX traders had priced in, and this time it wasn’t North Asia, or as we assume to be China, that provided support to keep markets underpinned. And in reality, both Asia and Latin America scaled back total volumes compared to two weeks ago, while Europe surged to a record high in market share. Gains from Africa and the Middle East were also present versus the prior event and year, though at a smaller scale compared to the growth we saw out of Europe. Perhaps the bigger story and concern is North Asia’s weak demand for both whole and skim milk powder, which sank to historically low levels. In fact, lactose was the only commodity to see an uptick in demand from North Asia compared to the last event. And year over year, the numbers remain just as concerning, though there was a small increase in cheddar and lactose volumes versus a year ago.
Well, that wraps up another busy week in global dairy markets. As always, things are evolving very quickly, and we want to remind our customers that we’re here to help you cut through all the noise and get clarity when it comes to your bottom line and answering your market questions, so please do not hesitate to reach out to us at any time when you have questions. And, of course, be sure to head to the dashboard to view all of our comprehensive global dairy analysis. Before we close out, I just want to take a moment to wish everyone a happy International Women’s Day ahead of tomorrow. It is a day to celebrate the incredible strength, resilience, and achievements of women around the world. Let’s keep lifting each other up and creating space for the next generation of leaders. Thanks for tuning in. Until next time, cheers.
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