Dairy markets have taken a hit, with prices dropping across the board.

Global economic uncertainty, tariff concerns, and weak demand have sent prices for cheese, butter, nonfat dry milk, and whey tumbling. Our team tackles this and more, including:

• Pricing market predictions by dairy product category


• Tariffs and demand changes for U.S. products


• Global strategies to diversify supply chains and potential long-term impacts


• A potential shift on feed strategies and butterfat production

Don’t miss Ted Jacoby III and his expert panel’s market discussion on what’s going on and what may be coming next.

Listen now to The Milk Check.

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Intro (with music)

Welcome to The Milk Check, a podcast from T.C. Jacoby & Co., where we share market insights and analysis with dairy farmers in mind.

Ted Jacoby III:

Welcome everybody to this month’s version of The Milk Check. We’re going to have an old-fashioned market discussion this month. Joining me today is Diego Carvallo, Director of Dry Ingredient Trading, especially on the international side, Greg Scheer, our Milk Marketing Manager, Jacob Menge, Vice President of Risk Management and Trade Strategy, Jared Miklasz, Sales Manager for the UFC Group, UF Milk and Cream, Joe Maixner, Director of Sales for Dairy Ingredients, and our Head Butter Trader, Josh White, our Vice President of Dairy Ingredients, and Miguel Aragon, Director of International Cheese Sales for Latin America. We’re recording March 7th.

Before we get started, let me say this: stick around, and don’t go when we start to say goodbye. We’re going to have a Marvel version of this podcast. After we said goodbye, we ended up having another 15 minutes of conversation. That may have been the best part of the whole conversation. Thanks everybody.

Pretty much every single one of our markets has been down 20 to 30 cents in the last month, whether it’s cheese, butter, non-fat, or whey. They all seem to be down 20 to 30 cents. Jake, is this a function of all of the tariff rhetoric coming out of the Trump administration, or is there something else going on?

Jacob Menge:

It’s tough to separate the components of what are really driving these markets. I think tariff talk is absolutely part of it. In our last podcast we mentioned that uncertainty just weighs on markets, and there’s more uncertainty today than I would say. There was the last podcast we did. The can has gotten kicked on the Mexico tariffs. I’m not sure how many times you can do that.

This time when it happened, we saw it in equity markets, they didn’t really pop like they did last time. The can got kicked on tariffs and equities were like, “Oh, okay, good.” And when it happened yesterday, equities really just continued. They’re crying lower. I’m only bringing that up because this is obviously a macroeconomic-driven dairy and equities market.

Tariffs are part of the problem, but demand is just poor, according to everything we’ve seen. I think we’ll hear from all of our product traders. That is certainly a factor, but it’s tough to blame anything.

Ted Jacoby III:

All right, well, let’s start with butterfat today. I’m going to ask Jared and Joe together. The butter market is down 20 to 30 cents, and the cream market has been ugly since Christmas. What’s going on on the demand side? Will this market stay this way all year, or is it a classic seasonal phenomenon?

Because if there’s one market that’s probably the most insulated by the tariff talk, it would be the butter market, but butter, if anything, it almost feels like the heaviest of all of our markets right now.

Jacob Menge:

There are certainly quirks in each market. Dairy is not the only one seeing that, though, so if I had to lean one way or the other, yeah, there are macroeconomic influences in that demand piece.

Jared Miklasz:

Butterfat numbers are still hanging out somewhere in the 4.5% range compared to they’re about a year over year 2.5% jump in demand remains to be extremely long, and we’re seeing yogurt productions up, low fat cottage cheese as well. There’s just been a lot of fat added to the complex. As far as end in sight or pick up in demand, we’re sitting here on March 7th, six weeks before Easter, hoping to see a little uptick in demand as we get into the spring holidays.

But what also gives me a little bit of a pause for concern, and seeing that hard ice cream sales surged up almost 21% year over year in January, those ice cream manufacturers are taking advantage of these cheap cream, which we know certainly continued into February. So I anticipate that they’re building up their stocks and there may not be as strong of a pool from ice cream as we get into the first part of summer year.

This means we could be looking at a long pre-market into late summer. Maybe this lower demand will result in higher [inaudible 00:04:02 ] rates in Q2 and potentially impact the future of milk production, but we don’t see a real end in sight here.

Ted Jacoby III:

Joe, what about butter? Is the butter market long too?

Joe Maixner:

Yeah, butter’s long. It’s been reeling from the effects of this long cream market. Demand has been okay, but it has not been great. We’ve seen increased stock builds on the cold storage reports. We came in with 270 million on the January report, which is a pretty hefty number for that early in the year already.

The production report that just came out showed that we were only up about half a percent year over year. Last year’s January production report was the second-highest on record for the month of January, so we bested that. We’re seeing strong builds on the butter side.

We are the cheapest hat in the world. We’re trying to export what we can, but between the uncertainties with the tariff talk and the fact that our butter is only good in certain regions of the world, it’s tough to get things done.

Ted Jacoby III:

And I assume the reason it’s only good in certain regions of the world is ’cause we’re 80% fat versus the 82% fat coming out of Europe.

Joe Maixner:

Yeah, that and the fact that our butter color-wise doesn’t represent the same and the flavor profile is a little bit different because we’re not a primarily pasture fed dairy herd. So if it’s going into further processing, a lot of countries can use it. But if it’s table service or going into retail, a lot of people don’t want it because it doesn’t look or taste like the European or Oceania product.

Ted Jacoby III:

Those differences, what difference in price, how much lower does US butter prices need to be than European butter prices, for people to start considering buying butter from us instead as a result of those differences?

Joe Maixner:

I think we’re close. We’re about there. We’ve seen some business get done, but we’re coming up on some other global competitors as well that are marketing really cheap product coming out of China and India. We’ve seen product in the low fives being offered for that product 5,000 a metric ton.

Ted Jacoby III:

$5000 in metric ton. What’s that in dollars per pound?

Joe Maixner:

On an 82, that’s a 220. So we’re not there yet.

Ted Jacoby III:

Got it. So even though we’re a dollar lower than, let’s say, European prices, we don’t really compete against European butter, we compete against places like India and China and as a result, that’s where we need to be in order to really clear a lot of butter internationally?

Joe Maixner:

For those markets that are looking for a cheap fat option, yes.

Ted Jacoby III:

Got it.

Joe Maixner:

You have to keep in mind too, though, our two largest trade partners on butter export-wise are Canada and Mexico. And with all of the current political strife going on right now, there’s a lot of uncertainty there as well.

Ted Jacoby III:

Got it. Makes sense. Okay.

Josh White:

We continue to make more fat in our milk, and maybe this is the point at which we all of a sudden have saturated our market and that’s a real conversation, but I think one of the things Joe alluded to is even if we don’t have readily available trade between Europe and the US, for instance, just simply that the conversation’s happening and that we’re getting to use Joe’s words closer, that’s a signal.

There’s no reason that the US and Europe should trade product back and forth. And some of those conversations with the European companies are, how can we use this cheap US butter fat price? Now, does that mean the US comes up or Europe comes down or both? I’m not going to predict that. It means the world market’s out of balance and we’ve got to start to figure out how to balance that.

Ted Jacoby III:

Well, let’s switch gears and let’s talk a little bit about non-fat. Diego, non-fat price’s come down 20 cents in the last couple of weeks. What’s going on?

Diego Carvallo:

A lot of things have influenced the price of non-fat, and the main ones are poor exports. I would say that’s the main driver. And poor exports is the result of several factors. So the first one is that we ha