The Trump tariff Tit-for-Tat has morphed and dairy became front and center. President Donald Trump stated, “Canada has been ripping us off for years on lumber and on dairy products,” and he cited Canada’s 250 percent tariff on U.S. dairy exports, warning that the U.S. would match those tariffs. Canada’s supply management program has long been a bone of contention for the U.S. but it remains a “sacred cow” among Canadian dairy farmers.

Meanwhile, China lifted its ban on milk and dairy products from Germany, which could hurt U.S. dairy exports to that country, especially on whey protein concentrate. Reuters reported, “China announced tariffs on over $2.6 billion worth of Canadian agricultural and food products on Saturday, retaliating against levies Ottawa introduced in October.”

Becky Rasdall Vargas, senior vice president of trade and workforce policy at the International Dairy Foods Association (IDFA), stated, “It is accurate that Canada imposes a tariff of approximately 250 percent on U.S. exports of certain dairy products into Canada, and even more with Canada’s 25 percent retaliatory tariffs in place. However, that tariff would only apply if we were able to reach and exceed the quota on U.S. dairy exports agreed to under the U.S.-Mexico-Canada Agreement (USMCA). Frustratingly, the U.S. has never gotten close to exceeding our USMCA quotas because Canada has erected various protectionist measures that fly in the face of their trade obligations made under USMCA.”

“U.S. dairy is grateful for the Trump Administration’s efforts to hold Canada accountable on these protectionist measures. At the same time, a prolonged tariff war with our top trading partners will continue to create uncertainty and additional costs for American dairy farmers, processors, and our rural communities. We urge Canada and the United States to negotiate a resolution to these issues, both Canada’s trade barriers to U.S. dairy exports and the tariffs, as expeditiously as possible,” the IDFA stated.

The overall U.S. economy is showing signs of strength despite the tariff fervor. Unemployment on March 7 showed job growth in most major sectors and CPI data was weaker than expected, although still well above the 2 percent federal mandate.

Checking demand, the USDA’s latest Dairy Supply and Utilization report showed that domestic cheese demand slipped about 1 percent in January from a year ago. Exports, however, helped pick up some of the slack, so overall disappearance was up 0.7 percent, according to HighGround Dairy’s Curtis Bosma in the March 17 Dairy Radio Now broadcast.

He added that the U.S. is not typically a major cheese exporter but there was enough exported in January to offset lower domestic demand.

Butter production has been running high, thanks to an abundant cream supply, according to Bosma. Butter demand domestically was down 3.3 percent from a year ago, however exports were up so overall usage was down 2 percent. Again, Bosma stated that we are not typically a major butter exporter but actually a net importer, however cheap U.S. prices on cheese and butter have made us competitive.

That said, Bosma pointed out there are different spec issues in terms of what kinds of butter and cheese is made in the U.S., versus what global buyers are looking for, so price is not the only factor. He also cited the tariff issues dominating the news right now as a factor. Mexico is a very important market for U.S. cheese, he said, and represents 35-40 percent of U.S. cheese exports.

Nonfat dry milk was the “dog” of this report, he said. Powder demand has been struggling the past year or so as production is significantly outpacing demand. Both domestic and global demand was hurting, making overall utilization down just over 20 percent from a year ago. This is causing stocks to swell, he concluded, and they were up 42 percent from a year ago at the end of January.

And, while fluid milk sales saw a nice 2.6 percent rise in December from a year ago, January sales tipped back a bit. The USDA’s January data shows packaged sales at just under 3.9 billion pounds, down 0.5 percent from January 2024. Conventional product sales amounted to 3.6 billion for the month, down 1.0 percent from a year ago. Organic sales, at 276 million pounds, were up 6.5 percent from a year ago, and represented 7.2 percent of total milk sales in the month.

Whole milk sales totaled 1.4 billion pounds, up 1.4 percent from a year ago. Whole milk represented 35.8 percent of total milk sales for the month. Skim milk totaled 161 million pounds, down 5.3 percent from a year ago.

The figures represent consumption in Federal market orders which account for about 92 percent of total fluid sales in the U.S.

The Agriculture Department again lowered its milk production forecast in its latest World Agricultural Supply and Demand Estimates (WASDE) report, citing lower expected output per cow more than offsetting slightly higher cow inventories.

2025 production and marketings were projected at 226.2 and 225.2 billion pounds respectively, down 700 million on both. If realized, both would still be up 300 million pounds or 0.1 percent from 2024.

Imports were unchanged on a fat basis and reduced on a skim-solids basis. Exports were lowered on a fat basis, primarily due to lower cheese exports. On a skim-solids basis, exports were lowered due to lower expected shipments of cheese, dry skim milk products, and lactose.

Cheese, butter, nonfat dry milk (NDM), and whey price forecasts were all lowered, based on recent prices. The Class III milk price was lowered on the lower price expectations for cheese and whey. It was projected at $17.95 per hundredweight, down from last month’s estimate of $19.10, and compares to the 2024 average of $18.89 and $17.02 in 2023.

The Class IV price was also reduced due to lower butter and NDM prices. It is projected to average $18.80, down from $19.70 a month ago, and compares to $20.75 in 2024 and $19.12 in 2023.

This month’s corn outlook was unchanged from last month, but the report stated, “U.S. tariffs on Canada and Mexico have been suspended until April 2 for all products covered under USMCA which include most agricultural products in the WASDE. Reciprocal tariffs are also scheduled to begin on April 2. However, until these are in effect, WASDE does not incorporate them into commodity forecasts.”

The season-average corn price was also unchanged at $4.35 per bushel. Global production was forecast 3.2 million tons higher to 1.496 billion. This month’s foreign coarse grain outlook is for larger production, reduced trade, and smaller ending stocks relative to last month. Foreign corn production is higher as increases for India, Russia and Ukraine are partly offset by declines for South Africa and Mexico.

Soybean supply and use projections were unchanged this month but include higher exports and lower soybean oil used for biofuel. The season-average soybean price was projected at $9.95 per bushel, down 15 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 include nearly unchanged production, higher crush, and lower ending stocks. Higher production for Ukraine, Mexico and Australia is offset by lower production for South Africa.