Tariffs, bird flu remain hot topics

The U.S. Department of Agriculture again lowered its 2025 milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates report, citing lower expected cow inventories. Milk supply and use estimates for 2024 were adjusted to reflect December domestic and trade data.

2024 production and marketings were projected at 225.9 and 224.9 billion pounds respectively, up 100 million pounds on both from last month’s estimate. If realized, both would be down 500 million pounds or 0.2% from 2023.

2025 production and marketings were projected at 226.9 and 225.9 billion pounds respectively, down 300 million on both from a month ago. If realized, both would be up 1 billion pounds or 0.4% from 2024.

Milk and dairy product price forecasts reflected updated price formulas of the Federal Milk Marketing Order, as published in the Federal Register Jan. 17 by the Agricultural Marketing Service. Butter, nonfat dry milk and whey prices were lowered based on recent prices. The cheese price was raised on recent prices and tight inventories from 2024 that are expected to carry into 2025.

Cheese was projected to average $1.88 per pound in 2025, up 1.50 cents from last month’s estimate, and it compares to $1.8634 in 2024 and $1.7593 in 2023.

Butter was projected at $2.6450 per pound, down a nickel from a month ago, and it compares to a $2.8870 average in 2024 and $2.6170 in 2023.

Nonfat dry milk was projected with a $1.2950 average, down 4.50 cents from last month’s estimate, and it compares to $1.2420 in 2024 and $1.1856 in 2023.

Dry whey is expected to average 60.50 cents per pound in 2025, down 3.5 cents from last month’s estimate, and it compares to a 49.13 cent average in 2024 and 36.18 cents per pound in 2023.

Class III and Class IV milk price forecasts for 2025 were lowered. Look for the Class III to average $19.10 per hundredweight in 2025, down 60 cents from last month’s projection; this compares to $18.89 in 2024 and $17.02 in 2023. The Class IV price is expected to average $19.70, down $1.10 from last month’s estimate, which compares to $20.75 in 2024 and $19.12 in 2023.

This month’s corn outlook was unchanged. The projected season-average price was raised 10 cents to $4.35 per bushel. Global coarse grain production was forecasted at 1.492 billion tons, which is 1.8 million lower.

This month’s outlook is for reduced production and trade, as well as ending stocks. Foreign corn production was forecasted down, with declines in Argentina and Brazil.

Soybean supply and use projections were also unchanged. The season-average soybean price was projected at $10.10 per bushel, down 10 cents from last month. Soybean meal and oil prices were unchanged at $310 per short ton and 43 cents per pound, respectively. Global soybean supply and use forecasts included lower production, higher use and lower ending stocks.

Production was reduced for Argentina and Paraguay due to persistent heat and dryness in January. Brazilian soybean production was unchanged at 169.0 million tons. Beneficial weather in the Center-West is boosting soybean prospects, but drier weather in the South accelerated soybean development at the expense of yields, according to the WASDE.

U.S. dairy culling continues to lag. The USDA reported 57,500 dairy cows were sent to slaughter the week ending Feb. 1, 6,000 more than the previous week but 2,500 or 4.2% below a year ago. Year to date, 275,700 cows had retired from the dairy business, down 9,200 head or 3.3% from a year ago.

Cash dairy prices in Chicago were a bit skittish with the “T” word (tariffs) being bandied about again the week leading up to Valentine’s Day. However, the Cheddar blocks closed Friday at $1.92 per pound, up 6 cents on the week and 44 cents above a year ago. The barrels crept to $1.83 by Thursday but closed Friday at $1.8175, 3.75 cents higher, 21 cents above a year ago and a higher-than-normal 10.25 cents below the blocks. There were eight CME sales of each on the week.

StoneX stated in its Feb. 12 Early Morning Update, “It’s important to remember that the 10-year spot block price average in February is $1.7020. $1.90 block cheese today is appropriately reflective of a tighter-than-normal cheese market.”

Meanwhile, Midwest cheesemakers reported mixed demand, according to Dairy Market News. Italian-style cheesemakers, particularly hard Italian styles, said sales are strong. Cheddar makers say demand varies plant to plant, with some being oversold. Milk availability also varies. Plant downtime continues to impact milk prices. Some cheesemakers had a lot of offers this week, while others said milk was short and they were looking for more but having no luck.

Demand for Class III milk from western cheese manufacturers is generally at or above expectations, DMN said. Class I milk demand is seasonally strong, and bottlers were pulling heavily on milk volumes as well as cheese manufacturers. Cheese output was steady to stronger. Inventories are reportedly tight on certain varieties, while others are generally far from short. Demand is mostly steady from retail and steady or lighter from food service, according to DMN.

Results of this year’s Super Bowl were a win-win for the dairy industry as well as for the Eagles. The Daily Dairy Report pointed out that National Pizza Day fell on the same day, which is the biggest pizza-eating day of the year. The DDR stated, “The Washington Post notes that Americans eat 3 billion pizzas annually, the equivalent of 46 slices per person. Assuming a 14-inch pizza is topped with 9 ounces of cheese, consumers eat nearly 1.7 billion pounds of cheese on pizzas each year, or about 35% of U.S. Mozzarella production.”

The DDR added that the playoffs and Super Bowl may have been part of the reason USDA’s December Dairy Products report showed record high Mozzarella production. Americans love cheese, and that’s great news for U.S. dairy farmers.

Butter jumped to $2.43 per pound Wednesday but closed Friday at $2.3775, down a quarter-cent on the week, lowest since June 26, 2023, and 37.25 cents below a year ago. There were 51 sales on the week, 31 on Wednesday alone.

Midwest butter makers relay that demand has yet to move out of its seasonal hiatus despite a slight pickup from January in retail. Outside of some planned and unplanned plant downtime this week, churning was unquestionably in one of its busiest runs of the year, DMN said. Cream is markedly abundant in the region and moving in from the West at “undeniably affordable rates.”

Cream is plentiful in the West, and multiples were again below the prior week. In some cases, offers for distressed loads were at much lower multiples. Churns are busy while butter demand is moderate to steady, according to DMN.

While powder prices were higher in last week’s Global Dairy Trade, Chicago Mercantile Exchange Grade A nonfat dry milk saw its Friday close at $1.28 per pound, down a nickel on the week, the lowest CME price since Aug. 22, 2024, but still 11 cents above a year ago on 15 sales.

The Daily Dairy Report points out that Mexico did not include nonfat dry milk in its list of potential targets for retaliatory tariffs; however, “Trade tensions have chilled cross-border commerce. Dairy Market News describes Mexican demand for U.S. milk powder as ‘subdued,’ and exporters expressed concerns about committing today to buy milk powder that could face tariffs if the trade spat heats up.” It also reported that domestic buyers have taken a step back “to avoid catching the proverbial falling knife.”

Dry whey closed Friday at 55.50 cents per pound, down 3.25 cents on the week, the lowest since Aug. 28, 2024, but 3.50 cents above a year ago, with 4 CME sales.

Fluid milk sales headed back up in December after falling 1.5% in November, and 2024 sales topped the 2023 level, ending decades of decline. Consumers do not appear to be overly concerned about bird flu and may be turning away from plant-based beverages and returning to natural cow’s milk, particularly organic.

Confirmation continues to mount on the health benefits of milk. The Jan. 27 Daily Dairy Report detailed a recent study showing that drinking an 8-ounce glass of milk daily could cut the risk of colorectal cancer by nearly a fifth.

USDA’s December data shows packaged sales climbed to 3.75 billion pounds, up 2.6% from December 2023. Conventional product sales totaled 3.5 billion for the month, up 2.0% from a year ago. Organic products hit 270 million pounds, up an impressive 10.1% from a year ago, and represented 7.2% of total milk sales in the month, up from 6.8% in November.

December whole milk sales totaled just under 1.4 billion pounds, up 2.9% from a year ago and up 2.0% year to date. Whole milk represented 36.1% of total milk sales for the month and 35.5% for the year.

Skim milk sales came in at 153 million pounds, down 8.0% from a year ago and down 10.2% year to date.

Packaged fluid sales for all of 2024 totaled 43.0 billion pounds, up 0.8% from 2023. Conventional product sales amounted to 39.9 billion pounds, up 0.4% from a year ago. Organic products, at 3.0 billion pounds, were up 7.2% and represented 7.1% of total milk sales in the year. The figures represent consumption in federal market orders, which account for about 92% of total fluid sales in the United States.

Dairy Market News reported that “Bottlers, nationwide, continue to take on steady amounts of milk. Demand from Class I has remained strong well into February while demand from other Classes is somewhat mixed.” Milk is “cool” again.

However, cheese utilization fell in December, down 1.7% from December 2023, primarily due to poor domestic usage, down 3.3%. Exports were up 21.2%. Domestic demand accounts for about 92% of total use, according to HighGround Dairy, and totaled 1.1 billion pounds. Exports amounted to 96.7 million pounds.

After hitting an all-time high in November, December butter consumption plunged to 199 million pounds, down 7.0% from a year ago, the largest month-over-month fall since April 2021, HGD said, but it was still historically very strong through the second half of 2024, driving annual volume up 5.5% from 2023. At 6.3 million pounds, Butter exports were up 43.2% and up 6.7% year to date.

Nonfat dry milk and skim milk powder utilization fell to 161 million pounds, down 22.6%, the lowest monthly volume since November 2018, HGD said; they also reported, “Poor international shipments and dismal domestic demand left 2024 to post the smallest annual disappearance (2.1 million pounds) since 2012.”

Dry whey use rebounded in December from November, up 9.6%, but fell short of a year ago by 7.4%.

“The significant loss in domestic consumption observed throughout the second half of 2024 offset marginal gains in exports resulting in both categories declining annually from 2023,” HGD said.

In politics, Robert Kennedy was confirmed as secretary of health and human services this week, and Brooke Rollins was confirmed as agriculture secretary. The House Committee on Education and the Workforce passed the Whole Milk for Healthy Kids Act this week, 24 to 10, which would allow for whole (3.25%) and reduced-fat (2%) milk to once again be served in school cafeterias.

Michael Dykes, president and CEO of the International Dairy Foods Association, praised the move, stating, “(The passage) Demonstrates the widespread support the bill enjoys in Congress and among parents, nutritionists and school meals professionals alike. After more than a decade of waiting, it’s time to lift the ban on whole and 2% milk and give children more nutritious choices in school cafeterias.” He also urged passage of the bill by the full House and Senate.

Tuesday’s GDT Pulse saw 4.3 million pounds of product sold, same as the Jan. 28 Pulse and 96.9% of what was offered. The price on skim milk powder was slightly lower. Whole milk powder was up from the last Pulse.

Tariffs were back in the news this week after President Trump postponed them on Canada and Mexico last week. China was hit with 10% tariffs last week, though items $800 and less were paused, according to HighGround Dairy. China in turn imposed a 15% tariff on U.S. coal and liquefied natural gas and 10% on crude oil, agricultural machinery and large-engine vehicles. Trump also announced new tariffs this week of 25% on all imports of steel and aluminum as well as reciprocal tariffs on any country trading with the U.S.

Tariffs and bird flu were two main topics at this week’s World Ag Expo in Tulare, California, according to HGD’s Curtis Bosma in the Feb. 17 “Dairy Radio Now” broadcast. He said the expo is the world’s biggest farm equipment show and covers just about every aspect of agriculture; Tulare has a population of 60,000 people, and the expo draws about 100,000 per day, according to Bosma.

Dairy farmers there had a lot of optimism coming out of 2024 with higher milk prices and lower feed costs, which resulted in a better margin opportunity, Bosma said. Bird flu has certainly taken a toll on the state especially, but dairy revenue protection payouts and USDA assistance have farmers in “a pretty good spot.”

The tariffs came up a lot in conversations, according to Bosma.

“We’re going to see a much different tone when it comes to foreign relations and how this administration navigates these things,” he said. “With that comes some enhanced volatility in the commodity markets, so it’s a good time to be talking to folks like us because these are the times when things get a little crazy, but we have some opportunities to mitigate some of that risk.”