The tariff tit-for-tat took on another new look this week. Talks last weekend between the U.S. and China in Switzerland produced a temporary de-escalation.
Beginning May 14, they have agreed to a 90-day pause, reports HighGround Dairy. “The U.S. will reduce tariffs on Chinese goods from a peak of 145% to 30%, while China will lower tariffs on U.S. imports from 125% to 10%. China has also halted and scrapped other non-tariff countermeasures, such as the export of critical minerals to the U.S., put in place in response to the initial escalation.”
“The 30% levy that the U.S. is now imposing on Chinese goods includes an existing 20% tariff intended to pressure China into doing more to prevent the synthetic opioid fentanyl from entering the U.S. It also includes the same 10% ‘baseline’ tariff Trump slapped on imports from most of the world’s countries. The 30% tax comes on top of other levies on China, including some left over from Trump’s first term and kept by former President Joe Biden (such as solar panels and electric vehicles). On the Chinese side, retaliatory tariffs imposed in March on specific U.S. dairy exports remain in effect. These measures highlight that deeper trade frictions persist,” HGD said. Walmart announced it will raise its prices when tariff-affected merchandise arrives at its stores.
Meanwhile, the April Consumer Price Index was better than expected, according to StoneX. “Inflation increased 0.2% versus 0.3% expected month over month and appears to not be influenced by tariffs yet. However, if we look at the major categories of the CPI, we see that services did not cool, and energy is helping to keep commodities even on average. If rates are cut and the economy expands (instead of the expected recession), we would expect energy prices to come back, leaving commodities to inflate higher,” StoneX said.
The U.S. Department of Agriculture raised its 2025 milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates report, citing expectations of an increased cow herd and a faster growth rate in output per cow. The report also gave us our first preview of 2026 and looks for an expanding milk cow herd and slightly higher milk per cow.
2025 production and marketings were projected at 227.3 and 226.3 billion pounds respectively, up 400 million on both from a month ago. If realized, both would be up 1.4 billion pounds or 0.6% from 2024.
2026 production and marketings were projected at 227.9 and 226.9 billion pounds, respectively. If realized, both would be up 600 million pounds or 0.3% from 2025.
Butter, cheese, nonfat dry milk and whey price forecasts for 2025 were raised from last month, based on recent prices and increased export demand for the second half of the year. The Class III and Class IV price forecasts were also raised.
The Class III average was projected at $18.70 per hundredweight, up $1.10 from last month’s estimate, and it compares to $18.89 in 2024 and $17.02 in 2023. The 2026 average was projected at $17.50.
The 2025 Class IV is expected to average $18.45, up 25 cents from last month’s estimate, and it compares to $20.75 in 2024 and $19.12 in 2023. The 2026 average was estimated at $18.10.
Commercial exports for 2026 were forecast to be lower than in 2025 on a fat basis but higher on a skim-solids basis due to additional exports of whey products. Commercial imports were forecast to increase on a fat basis due primarily to increases in imports of butter. Imports on a skim-solids basis were forecast to increase slightly. Domestic use in 2026 is expected to increase on both a fat basis and skim-solids basis, according to the WASDE.
Dairy product prices in 2026 were forecast to be lower for butter, nonfat dry milk, cheese and whey compared with 2025, primarily due to increased milk supplies. As a result, Class III and Class IV milk prices were also forecast lower.
This month’s corn outlook included record supplies and total use and higher ending stocks. The corn crop was projected at a whopping 15.8 billion bushels, up 6% from a year ago on increases to both area and yield. Planted area of 95.3 million acres, if realized, would be the highest in over a decade, says USDA. The yield projection of 181.0 bushels per acre is based on a weather-adjusted trend assuming normal planting progress and summer growing season weather. With smaller beginning stocks partially offsetting the increase in production, total corn supplies were forecast at 17.3 billion bushels. Total U.S. corn use was forecast to rise over 1% from a year ago on higher domestic use and exports. Food, seed and industrial use was forecast at 6.9 billion bushels. Corn used for ethanol was unchanged from a year ago at 5.5 billion bushels.
The soybean outlook showed slightly lower supplies, higher crush, reduced exports and lower ending stocks from a year ago. The soybean crop was projected lower, at 4.34 billion bushels, with trend yield and lower area. With higher beginning stocks but lower imports and production, soybean supplies are down less than 1% from 2024-2025. The U.S. crush was projected at 2.49 billion bushels, up 70 million from the 2024-2025 forecast, with higher soybean meal disappearance and exports. Domestic disappearance was forecast to increase 2%. Soybean meal exports were forecast at 18.0 million short tons, a 20% global trade share, compared to the prior 5-year average of 19%.
U.S. soybean exports were forecast at 1.815 billion bushels, down 35 million from 2024-2025. Ending stocks were projected at 295 million bushels, down 55 million from the revised 2024-2025 forecast. The U.S. season-average soybean price was forecast at $10.25 per bushel, compared with $9.95 per bushel in 2024-2025. The soybean meal price was forecast at $310 per short ton, up $10, the WASDE said.
The U.S. corn crop was 62% planted as of the week ending May 11, up from 40% the week before, 15% ahead of a year ago and 6% ahead of the 5-year average. Twenty-eight percent was emerged, up from 11% the previous week, 7% ahead of a year ago and 7% ahead of the average. Soybeans were 48% planted, up from 30%, 14% ahead of a year ago and 11% ahead of the 5-year average.
The Chicago Mercantile Exchange Cheddar blocks closed Friday at $1.93 per pound, 11.25 cents higher on the week, the highest since Jan. 30 but 1.25 cents below a year ago. The barrels finished at $1.88, up 11 cents on the week, highest since April 15 and 24.50 cents below a year ago. There were 24 sales of block on the week and seven barrel.
Retail cheese sales remain strong in the Central region, according to Dairy Market News, but contacts report food service sales continue to soften. Export demand is strengthening. Milk output is at or near its seasonal peak; however, some cheesemakers noted it was more difficult to obtain in some parts of the region. Class III milk was available as low as $7 under class. Cheese production is active and inventories are somewhat tight, according to DMN.
Milk production is seasonally ticking down for some parts of the West, but cheese manufacturers indicate supplies are meeting needs. Cheese output is generally steady. Demand from domestic and international buyers is somewhat stronger as domestic prices continue to retain competitiveness against international levels.
Cash butter saw its Friday close at $2.3425 per pound, up 1.25 cents on the week but 72.75 cents below a year ago when it gained 8 cents on the week and closed at $3.07 per pound. There were 16 CME sales this week.
Cream is plentiful throughout the Midwest, though contacts in the southern part say increasing temperatures are having a negative impact on milk components. Ice cream makers are purchasing a greater volume of cream, but butter makers say cream remains sufficient to run busy schedules. Some are at capacity and unable to purchase additional cream even at favorable pricing. Butter makers continue to freeze butter for the fall and winter months. Domestic butter prices remain competitive internationally and are contributing to increased export interest, according to DMN.
Milk output is ticking down seasonally for some parts of the West, but cream remains widely available. Bottom-end cream multiples moved up to flat market at mid-week for the first time this year in the West.
Churns are heavily active for the most part, and manufacturers continue to seasonally build inventories. Domestic demand is steady to strong. Export demand is strong, says DMN.
Grade A nonfat dry milk climbed to $1.2275 per pound Thursday, the highest since Feb. 21, but it closed Friday at 1.2250, 1.75 cents higher on the week and 6 cents above a year ago. There were 35 sales on the week, the highest total this year.
Dry whey finished Friday at 55 cents per pound, 0.75 cents higher on the week and 13.50 cents above a year ago, with eight CME sales for the week.
The latest Dairy Supply and Utilization report gave us a good look at demand. HighGround Dairy’s Alyssa Badger reported in the May 19 Dairy Radio Now broadcast that March cheese utilization was down 0.9% from a year ago and down for the second month in a row. She blamed weaker domestic demand, which was off 0.8% and smallest for the month since 2021. Exports were down 1.5%, but that’s compared to a record month in March 2024. Totaling 108.7 million pounds, it was the third highest March on record, according to Badger.
Disappointing domestic demand is an ongoing concern, she said, as store sales slump and pizza sales struggle. “Consumers are really weary about where their dollar is going right now, and unfortunately, dining out will be taking a bigger hit because of that, and that’s where a lot of cheese consumption happens.”
On a brighter note, “Butter demand was ‘red hot’ and followed the seasonal increase from February to March. It was the third consecutive month of year-on-year gains, up 6.8% throughout the first quarter compared to a year ago, Badger said.
Domestic disappearance topped 200 million pounds for the first time ever, and that’s important because domestic use makes up 94% of total sales. Butter exports saw the highest monthly volume on a 30-day adjusted basis since April 2014, she said, as U.S. butter is priced over $1 per pound lower than global levels.
Nonfat and skim milk powder utilization totaled 191.7 million pounds, up 0.9%, finally exceeding prior-year levels for the first time since February 2024. Domestic use narrowly missed March 2024 levels, according to Badger, and was the smallest for the month on record. Typically, consumption rises from February to March, but unfortunately, it declined this year, and that may have been the result of higher domestic demand in February as buyers locked in product early and backed off in March. Exports were up to Mexico and the Philippines, according to Badger.
Dry whey utilization was down 2.7% and down for the 10th month in a row; however, that was the smallest decline in the period. Demand has dropped in the U.S., with March numbers the lowest value for the month since 2014, HGD said.
Dairy margins continued to improve over the first half of May on a combination of higher milk prices and lower feed costs, according to the latest Margin Watch from Chicago-based Commodity and Ingredient Hedging LLC. “Nearby Class 3 milk futures posted a dramatic rally to new life-of-contract highs, completely reversing the steep selloff through Q1 while deferred contracts posted more modest gains,” the MW said.
“The corn market continues to decline on favorable planting weather across the Midwest, despite the USDA May WASDE report, which revealed lower projected corn ending stocks than expected. The strong recovery in margins has led to increased milk and dairy product production. American-style cheese production of more than 1.4 billion pounds in Q1 was up 3.3% from 2024, with cheddar production of 984 million pounds pacing the gain with a 2.8% increase from 2024. U.S. dairy producers have also increased butterfat by 82 million pounds in Q1, up 3.4% from 2024, with most of the increase going to butter production, which, at nearly 650 million pounds, is up 5% from Q1 last year,” the MW said.
“Big discounts of U.S. cheese and butter in the global market compared to the EU and Oceania, due to the weaker dollar, have helped boost exports. According to the latest data from USDA’s Global Agricultural Trade System, March cheese exports were down just 1.5% from the record set last year, while shipments to Japan were an all-time high. After adjusting for leap year, Q1 cheese exports were at a record high, up 8.3% from last year. Q1 butter and milkfat exports were also the strongest since 2014. The export market will be increasingly important to clear inventory as production expands, particularly for cheese,” the MW concluded.
Agriculture Secretary Brooke Rollins announced the suspension of live cattle, horse and bison imports through U.S. ports of entry along the southern border this week due to “the continued and rapid northward spread of New World Screwworm in Mexico, effective immediately. NWS has been recently detected in remote farms with minimal cattle movement as far north as Oaxaca and Veracruz, about 700 miles away from the U.S. border.”
“The U.S. and Mexico continue efforts to interdict and eradicate NWS in Mexico and work in good faith,” a USDA press release said. “However, despite these efforts and the economic impact on both countries due to this action, there has been unacceptable northward advancement of NWS and additional action must be taken to slow the northern progression of this deadly parasitic fly.”
The May 13 Daily Dairy Report said, “New World screwworm flies lay eggs on mammals, especially in wounds, eyes, noses and udders. When the eggs hatch, the larvae burrow or ‘screw’ deep into the host’s flesh. For nearly a century, the U.S. and Mexico have worked together to reduce the spread of the devastating pest by seeding Central America with sterile flies to ensure that female screwworms lay nonviable eggs. USDA estimates that the return of screwworm could cost the beef industry billions of dollars every year.”
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