A lot of eyes are on dairy product demand right now as the spring flush begins. Exports are strong due to low U.S. prices, particularly on cheese and butter, but they are suspect due to the Trump tariff tit for tat and falling U.S. dollar.

We got a look back on February in USDA’s latest Dairy Supply and Utilization report which showed overall cheese use at 1.1 billion pounds, down 0.8 percent from February 2024. HighGround Dairy blamed “tepid domestic consumption for both American and Other-Cheese as a volatile economic environment weighs on consumer purchasing.” The good news is “Discounted U.S. product compared to the rest of the world continues to stimulate healthy export demand.”

Butter utilization, at 169.4 million pounds, was up 10.1 percent and “Neared the monthly high set in 2021, missing it by just 500,000 pounds. Exports and domestic disappearance were both robust,” says HighGround, “and international shipments hit their highest mark since March 2022. These were likely buoyed by the steep discount that U.S. product carries to international prices.”

Unfortunately, nonfat dry milk and skim milk powder continued to falter, coming in at 151.5 million pounds, down 13.8 percent from a year ago, and down from the year before for the 17th time in the past 19 months. HGD says “It was the lowest volume for the month since 2011 highlighting just how poor demand is presently.”

Dry whey utilization fell to 57.2 million pounds, down 11.3 percent, smallest monthly volume since November 2022, primarily due to poor domestic demand. Exports were up 3.0 percent; however HGD warns, “Growth seems unlikely to continue given the tariff war with China, the top destination for U.S. whey.” With China’s tariff at 125 percent, a U.S. price of 47 cents per pound would put whey at over a dollar to China.

Speaking in the April 21 Dairy Radio Now broadcast, HighGround Dairy’s Curtis Bosma pointed out that we export a significant amount of the nonfat dry milk and whey that we produce here so there is a lot of concern about what lies ahead. Domestic demand is greatest for cheese and butter, he said, and cheese has faced some headwinds, while butter demand has been relatively steady.

“The thing that’s really going to move the price one way or the other,” says Bosma, “Is going to be export demand and right now that’s quite questionable given everything that’s going on.”

He adds that the new cheese plants that have come on line were also built to tap into the whey supply chain as demand for high protein whey derivatives has seemingly been insatiable.

Problem is, a good segment of that demand is international and, if we’re unable to export that product because of tariffs or other trade concerns, then that presents a challenge, according to Bosma.

Timing is essential, he said, because as these plants come on line, initially they’re not manufacturing the higher value whey products but are starting with the base line commodity grade dry whey. However, those prices have slumped the last few months. The product mix may change over time, he concluded, but “That may be a lot slower than we want it to be.”

Fluid milk sales may be returning to their old ways. The USDA’s February data reports packaged sales at 3.4 billion pounds, down 2.2 percent from February 2024, and follows a 0.5 percent slippage in January and a 2.6 percent increase in December 2024.

Conventional product sales totaled 3.1 billion pounds, down 2.5 percent from a year ago. Organic sales, at 241 million pounds, were up 2.8 percent from a year ago, and represented 7.1 percent of total milk sales in the month.

Whole milk sales totaled 1.2 billion pounds, down 1.3 percent from a year ago, but up 0.1 percent year to date. Whole milk represented 35.5 percent of total milk sales for the month. Skim milk sales totaled 143 million pounds, down 6.7 percent from a year ago.

Packaged fluid sales in the two-month period totaled 7.2 billion pounds, down 1.3 percent from 2024. Conventional product sales totaled 6.7 billion pounds, down 1.7 percent from a year ago. Organic products, at 517 million pounds, were up 4.8 percent, and represented 7.2 percent of total milk sales in the two months. The figures represent consumption in Federal market orders, which account for about 92 percent of total fluid sales in the U.S.

Down on the farm, dairy margins weakened slightly over the first half of April as increasing feed costs more than offset a small improvement in milk futures, according to the latest Margin Watch (MW) from Chicago-based Commodity and Ingredient Hedging LLC.

“Market participants continue to monitor the evolving trade war that the Trump administration is pursuing, with the reciprocal tariff scheduled that was revealed on “Liberation Day” much more aggressive than most were anticipating. While a 90-day reprieve was issued shortly after the announcement following stress in the U.S. Treasury market with yields spiking in response to a sharp selloff, punitive tariffs on China remain in place and the country now faces an effective 145 percent duty on goods shipped to the U.S. An exemption was made for some consumer electronic products including cell phones and computers that only face a 20 percent tariff, although China raised duties on U.S. exports to 125 percent which effectively shuts down trade between the two countries.

“China is the largest buyer of U.S. dry whey, with shipments of 150 million pounds last year and representing a market share of around 40 percent of U.S. exports between 2022 and 2024. February U.S. dairy exports declined by 4.3 percent in volume to 463 million pounds but increased in value by 12.1 percent to $723.5 million. Nonfat dry milk exports fell 25.7 percent from last year to 106.9 million pounds, the weakest February volume since 2016. By contrast, February cheese exports of 99 million pounds were the strongest volume ever recorded for the month and up 7.3 percent from 2024. Butter exports rose 134.2 percent while exports of anhydrous milk fat were 10 times larger than in February last year,” the MW concluded.

CME Cheddar block cheese closed the Good Friday holiday-shortened week at $1.8350 per pound, up 9 cents on the week, highest since Feb. 27, 2025, and is 15.50 cents above a year ago. It has gained 23.25 cents the past four weeks.

The Cheddar barrels climbed to $1.90 per pound Tuesday, highest CME price since Oct. 30, 2024, but closed Thursday at $1.84, up 3.50 cents on the week, 18 cents above a year ago, and a half-cent atop the blocks. The barrels have gained 29 cents in four weeks. Sales this week totaled 14 cars of block and 14 of barrel.

Midwest cheesemakers told Dairy Market News that demand tones have improved the past two weeks. Retail customers are more aggressive in buying. Retail Cheddar and Italian style cheesemakers relay similar notes. Barrel makers say demand has steadied somewhat, but they are also actively purchasing milk and increasing production. Milk has grown in availability and spot milk prices mid-week were as low as $6-under Class III. Lower prices were expected later in the week and over the spring holiday weekend.