U.S. cheese prices have been falling, driven by the uncertainty of the Trump tariff tit for tat, and yet they remain above year ago levels. Butter has also fallen, but is well below a year ago. Both cheese and butter prices are below global levels.

StoneX broker Dave Kurzawski admitted in the March 24 Dairy Radio Now broadcast that the tariff talk has contributed to the weaker prices, however the main reason is weak demand. He said the trend reflects what we saw in 2024, where cheese demand was only up 0.4 percent, adding that he’s not aware of us ever stringing two years back-to-back where cheese demand was flat or lower.

While he expects demand to pick up, right now, we’re about 70-75 cents per pound below the world market on Cheddar and probably a dollar below on butter and “These discounts may kick U.S. exports into overdrive especially on cheese.”

“For whatever reason in the industry, we tend to focus on cheese exports more than butter,” he said, plus butter made in the U.S. is not necessarily what the global market wants. That might change over time, he said, but “A dollar spread between U.S. and Europe butter, we can live with that, that’s kinda normal, but 75 cents on cheese between the U.S. and Europe or the U.S. and Oceania, that is pretty unusual and I do think that will spark a lot of exports for cheese.”

Another positive in the market is the fact that cheese producers have not been over producing the past year or so and because of that, inventory is not overwhelming. That may change with the new capacity coming online but “We’re tight on the fresh market,” he concluded, and with prices where they are, “There’s plenty of buyers that want that cheese. I think cheese is on sale.”

Cash Cheddar block fell to $1.5750 per pound Tuesday, lowest since April 15, 2024, but was trading Thursday morning at $1.62, after closing Friday at $1.6925. Traders are awaiting Friday afternoon’s February Milk Production report.

StoneX says, “Consumer spending was lower than expected in February at plus 0.2 percent, and revised lower in January (from minus .9 percent to minus 1.2 percent). Sales at restaurants and bars had the greatest month-over-month decline in 13 months, painting a picture of uncertainty and fear as consumers avoid discretionary spending amidst swift declines in the financial markets. But supply data around finished Cheddar remains underwhelming and we’ve yet to build inventories, at least based on data we can see. So, the cheese market toggles between weak demand and weak supply narratives, which has really been the case for the last year.”

Dairy Market News says, “Cheese markets have faced evident pressure in recent weeks. Concerns are emerging regarding global trading hurdles keeping more cheese within U.S. borders. A number of cheesemakers have begun to add stocks to warehouses. Domestic demand is in line with seasonal expectations, particularly as cheese has become more affordable. Mid-week spot milk prices ranged from $2.50-under to 25 cents-over Class III.”

Cash butter closed Thursday at $2.2950 per pound, after closing Friday at $2.3425.

Butter demand has begun to spring ahead of seasonal holiday needs for both Central retail and food service sectors, says DMN, but retail customers are more active than food service. Churning remains very active in the region and cream availability has shown no sign of near-term drawdowns. Plant managers say, if they ask for offers on 10 loads, suppliers offer them 15. Butter market tones are uncertain ahead of the spring holiday season. Stocks are plentiful and growing, while domestic demand is beginning to emerge from a seasonal lull, says DMN.

The Agriculture Department announced the April Federal order Class I base milk price at $19.57 per hundredweight, down $1.45 from March but 39 cents above April 2024, and the lowest Class I since May 2024. 

The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued March 17, mirrored milk price and production projections in the March 11 World Agricultural Supply and Demand Estimates report.

The Outlook stated: “As of January 2025, the U.S. dairy herd reached 9.365 million head, marking a year-over-year increase from January 2024, and the fourth consecutive month of year-over-year increase. This expansion reflects the lagged response to improved profitability in 2024, as the milk-to-feed ratio rose from 1.73 in January 2024 to 2.35 in January 2025. The higher ratio suggests better margins for producers, leading to lower culling rates and herd retention. Low replacement numbers indicate that future expansion may be moderate.

“Slaughter of dairy cows has declined substantially since the fourth week of 2025 to levels below 2024 and 2023. Given the relatively limited number of replacement dairy heifers available in the herd and steadily increasing number of cows in milk production, the lower slaughter rate suggests that dairy farmers are holding cows longer in production instead of culling.”

New cases of bird flu on-farm have been reported in Arizona, Nevada, California, and Idaho in the past 30 days, but the number of confirmed cases is low overall. StoneX reports, “Testing at the plant level is showing a positive test in Texas, so we should expect them to track it back to a farm and show up on the farm level list in the next couple weeks.”

“Dairy margins were mixed over the first half of March as nearby milk futures continued to sell off while deferred contracts moved higher and the feed markets were largely flat,” says the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

“The looming threat of a trade war due to tariff escalation is causing particular concern for the export market,” the MW warned. “Exports accounted for 16.4 percent of total U.S. milk production last year, with Mexico, Canada, and China representing more than 50 percent of all dairy exports by both volume and value.

Mexico is the leading export market for U.S. dairy products, taking 52.4 percent of our NDM exports and 37.7 percent of total cheese exports last year. Mexico is also the second largest market for U.S. butter and milkfat behind Canada, and China is our largest whey customer taking 42 percent of total shipments last year and over 50 percent in January 2025.

“During the 2018-19 trade war that started under Trump’s first term, dairy exports to Mexico declined 17.6 percent between 2018 and 2020. Mexico is expected to launch retaliatory tariffs against U.S. products including agriculture beginning next month if the 25 percent threatened tariffs take hold, and Canada has already begun reciprocal tariffs of 25 percent on $30 billion worth of U.S. products with dairy prominently.

“China has also imposed 10 percent-15 percent duties beginning March 10 on more than 700 agricultural products including 10 percent tariffs on some dairy products. The U.S. will have to clear significantly more dairy products through domestic channels if exports slow down, with consumers already showing signs of fatigue. Just released retail sales figures were particularly weak for sales at food service establishments, with February sales reflecting a real decline of 2.2 percent year-over-year,” the MW concluded.