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 percent to 30 percent, while China will lower tariffs on U.S. imports from 125 percent to 10 percent. 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 percent levy that the U.S. is now imposing on Chinese goods includes an existing 20 percent 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 percent “baseline’’ tariff Trump slapped on imports from most of the world’s countries. The 30 percent 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,” says HGD.

Meanwhile, the April Consumer Price Index was better than expected, according to StoneX. “Inflation increased 0.2 percent versus 0.3 percent 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,” says StoneX.

The USDA raised its 2025 milk production forecast from last month in its latest World Agricultural Supply and Demand Estimates (WASDE) 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 percent 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 percent 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 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 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 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.

The CME Cheddar blocks fell to $1.78 per pound Monday, then rallied Wednesday, and closed Thursday morning at $1.8975, highest CME price since Feb. 21. They closed Friday at $1.76. The barrels were trading Thursday at $1.82, highest since April 17, after closing Friday at $1.77.

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 that milk was more difficult to obtain in some portions of the regions. 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 production is generally steady. Demand from domestic and international buyers is somewhat stronger as domestic cheese prices continue to retain some competitiveness against international prices.

Cash butter was at $2.3325 per pound Thursday. It saw its Friday finish at $2.33. A year ago this week it closed at $3.07 per pound.

Cream is plentiful throughout the Midwest, though contacts in the southern part of the region 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 contributing to increased export interest, according to DMN.

Milk output is also 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 was trading Thursday at $1.2275 per pound, highest since Feb. 21, following a $1.2075 Friday close.

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 percent from a year ago and down for the second month in a row. She blamed weaker domestic demand, which was off 0.8 percent and smallest for the month since 2021. Exports were down 1.5 percent, 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 dinning out will be talking 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 percent throughout first quarter,” she said, compared to a year ago.