Market Reports

A potential trade war is worrisome for the cheese sector, which has come to depend increasingly on the export market to absorb production. According to USDA’s Supply and Utilization data, total domestic cheese disappearance fell by 17.3 million pounds in 2024, dragged down by weaker consumption of American style cheeses. Over the same period, however, exports grew by 170.2 million pounds, more than compensating for slow domestic demand and preventing stock accumulation.

It was a truly wild week on LaSalle Street. The dairy markets swung violently back and forth amid the on-again, off-again trade war. On Monday alone, the March Class III contract lurched more than a dollar from low to high. At its worst, it was 39ȼ in the red, compounding a 70ȼ loss last Friday.

This week may have been light on USDA reports, but there was no shortage of news for the dairy markets to digest. Developing stories on supply, demand, tariffs, and more sowed the markets with volatility as prices scrambled to find direction.

With cull rates at a 16-year low, the industry was able to stabilize the dairy herd, but growth was fleeting. There were 9.351 million milk cows in the final month of 2024, just 3,000 more than in December 2023 and 9,000 fewer than there were in November.

In the rearview mirror, booming exports and a steep drop in U.S. cheese stocks argue for higher prices. On the horizon, a potential trade war, a strong dollar, and shiny new cheese plants have set the stage for a setback.

The dairy markets are adjusting to the post-Christmas routine. Traders are back at their desks, and milk bottlers are running full throttle. In addition to the typical post-holiday school milk and grocery case restocks, bottlers are rushing to resupply in the wake of a snowstorm that sent southerners scrambling for milk and eggs.

Most parts of the country report that milk production is improving, facilitated by mostly mild winter conditions. However, with more frigid temperatures forecast for the coming days and weeks, inclement weather could have a negative impact on the sector. Production in California continues to struggle under the weight of animal health issues though slower processing schedules during the holiday season have eased tensions in the state.

In November, as roughly one in four California dairies struggled with avian influenza, the state’s milk production plummeted 9.2% from a year ago, the largest-ever decline in a century of USDA records.

Class III futures bounced back bigtime this week, led by another strong performance in the whey market. CME spot whey powder rallied 8.25ȼ, notching a 12% increase in just five sessions. Whey protein concentrate prices continue to climb, evidence of nearly insatiable domestic demand for protein.

The dairy markets had a lot of data to digest along with their turkey. While Americans topped their mashed potatoes and slathered their rolls with butter, dairy analysts chewed on data showing October butter output and inventories well above year-ago levels.