The benchmark Federal order milk price is heading back down. The USDA announced the February Class III price at $20.18 per cwt., down 16 cents from January, but is still $4.10 above February 2024. The Class IV price is $19.90, down 83 cents from January but 5 cents above a year ago.

Wednesday’s Class III futures settlements had the March contract at $18.25; April, $17.34; and May at $17.74, peaking again in October at $18.36.

The Trump tariff “Tit-for-Tat” war between the U.S., China, Mexico and Canada will impact scores of U.S. products, including dairy. China and Canada responded immediately with retaliatory tariffs and Mexico was expected to announce similar action. But it was announced Thursday morning that Trump would pause tariffs for one month on products covered by the U.S., Mexico, and Canada free trade agreement.

The March 5 Daily Dairy Report warned, “This is wrenching news for the U.S. dairy industry, which relies heavily on exports to keep domestic markets balanced. Last year, exports accounted for 16.4 percent of total U.S. milk production, and the dairy industry’s three largest export markets, Mexico, Canada and China, accounted for more than half of all dairy exports by volume and value. Mexico, the largest market for U.S. dairy overall, is also the leading buyer of U.S. nonfat dry milk (NDM) and cheese, accounting for 52.4 percent and 37.7 percent of NDM and cheese exports, respectively, in 2024. The country is also the second largest market for butter and milkfat behind Canada,” according to the DDR.

Speaking in the March 10 Dairy Radio Now broadcast, StoneX broker Dave Kurzawski said the tariffs were one of the main topics at this week’s annual Outlook conference in Nashville, but “There is no definitive answer,” as to how they will be implemented and for how long, or will some be rolled back, as they were on the automotive side of things. The uncertainty leads the markets to volatility, he said, but right now people are taking a “shoot first and ask questions later attitude,” with more of a bearish tilt as they believe this will negatively impact our trade and our prices but we just don’t know yet.

Dairy exports to China are primarily dry whey, permeate and lactose which initially were not being hit with retaliatory tariffs. Cheese and powder are included, but U.S. exports of those products to China are very low, according to Kurzawski. He also said fat and cream availability was another big topic. He added that whey protein had a banner year in 2024 and remains on strong footing but there’s a lot of cream out there and that was one of the bearish aspects of the conference.

Leaders from the National Milk Producers Federation and Dairy Export Council stated “The president believes tariffs are necessary to address the opioid crisis in the U.S. We urge Mexico and Canada to take U.S. concerns seriously,” said NMPF’s Gregg Doud. “Mexico and Canada are valuable trading partners that American agriculture depends on, and trade with those countries is critical to the well-being of dairy farmers. Let’s focus on getting the concerns ironed out quickly so we can focus on bolstering these critical trade relationships. Then, let’s put those tariff tools to work, driving change with the trading partner that’s brushed off U.S. concerns for far too long, the European Union.”

You’ll recall that January milk production inched up 0.1 percent from a year ago, but fat and protein rose even more and component adjusted production was up 2.2 percent. The January Dairy Products report shows where the milk ended up.

January cheese vats produced 1.210 billion pounds, up 0.7 percent from December, and 0.8 percent above January 2024.

Italian cheese totaled 521.7 million pounds, down 0.3 percent from December, but 2.2 percent above a year ago. American output hit 473.9 million pounds, up 0.5 percent from December, and 0.2 percent above a year ago. Mozzarella totaled 412.7 million pounds, up 3.6 percent from a year ago.

Cheddar output crept to 326.1 million pounds, up 8.5 million pounds or 2.7 percent from December, but was down 4.5 million or 1.4 percent, from a year ago.

Butter production hit 218.3 million pounds, up 18.6 million or 9.3 percent from December, and was up 1.1 million pounds or 0.5 percent from a year ago.

Yogurt production totaled 418.5 million pounds, up 5.3 percent from a year ago. Hard ice cream output jumped to 59.6 million pounds, up 20.1 percent from 2024.

Dry whey output jumped to 76.2 million pounds, up 7.2 million pounds or 10.5 percent from December, but was shy by 1.5 million or 1.9 percent from a year ago. Whey stocks came in at 60.8 million pounds, up 600,000 pounds or 1.1 percent from December, but 6.7 million pounds or 9.9 percent below those a year ago.

Whey protein concentrate production was up 10.3 percent from a year ago and whey protein isolate output was up 19.9 percent.

Nonfat dry milk output jumped to 153.5 million pounds, up 22.8 million or 17.5 percent from December, and was up 15.2 million pounds or 11.0 percent from a year ago. Stocks grew to 299.3 million pounds, up a whopping 43.2 million, or 16.9 percent from December, and were up an eye catching 87 million pounds or 41.0 percent from 2024.

Skim milk powder output dropped to 35.5 million pounds, down 15.3 million or 30.1 percent from December, but was down 21.4 million or 37.6 percent from a year ago.

Dairy margins remained flat over the last half of February as a continued drop in milk prices coupled with a sharp selloff in the corn market were largely offsetting, says the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC. The MW detailed the January Milk Production and Cold Storage reports, which I have previously reported, and warned that the retaliatory tariffs from China, Mexico, and Canada will “keep pressure on Class III Milk.”

Meanwhile, an increase in the All Milk Price nudged the January milk feed price higher for the first time since September 2024. The USDA’s latest Ag Prices report shows the ratio at 2.82, up from 2.73 in December, and compares to 1.98 in Jan. 2023. The ratio was above the five-year average for the tenth month in a row, as the average ratio for December is 2.10,” according to dairy economist Bill Brooks, of Stoneheart Consulting in Dearborn, Mo.

The All Milk Price ended three months of decline and averaged $24.10 per cwt., with a 4.46 percent butterfat test, up 80 cents from December, which also had a 4.46 test, and compares to $20.10 in Jan. 2024, with a 4.35 percent test.

The national corn price averaged $4.29 per bushel, up 6 cents from December, but 45 cents per bushel below a year ago. Soybeans averaged $10 per bushel, up 21 cents from December, but $2.80 below a year ago. Alfalfa hay averaged $161 per ton, down $3 from December, and $41 below a year ago.

Looking at the cow side of the ledger, the January average cull price for beef and dairy combined was at $126 per cwt., up $5 from December and $23 above January 2023