A Feast For The Bulls

The T.C. Jacoby Weekly Market Report Week Ending May 9, 2025

The bulls feasted this week on news of booming U.S. dairy exports and signs that American dairy remains attractive to foreign buyers. Tuesday’s Global Dairy Trade (GDT) auction served as an appetizer. Buyers bid up nearly all products. Compared to the late-April auction, whole milk powder prices climbed 6.2% while Cheddar jumped 12%. Both products notched three-year highs. Not to be outdone, butter rallied 3.8% to its highest-ever price at the GDT. And lactose values leapt 16.8%, as buyers snapped up European lactose to avoid American tariffs. These gains highlighted the growing chasm between U.S. and international dairy values, hinting that U.S. exports will continue to win sales thanks to their steep discounts.

The bulls feasted this week on news of booming U.S. dairy exports and signs that American dairy remains attractive to foreign buyers. Tuesday’s Global Dairy Trade (GDT) auction served as an appetizer. Buyers bid up nearly all products. Compared to the late-April auction, whole milk powder prices climbed 6.2% while Cheddar jumped 12%. Both products notched three-year highs. Not to be outdone, butter rallied 3.8% to its highest-ever price at the GDT. And lactose values leapt 16.8%, as buyers snapped up European lactose to avoid American tariffs. These gains highlighted the growing chasm between U.S. and international dairy values, hinting that U.S. exports will continue to win sales thanks to their steep discounts.

The main course arrived just in time for lunch on Tuesday, as trade data confirmed that U.S. dairy products are leaving our shores at a brisk pace. The value and volume of U.S. dairy exports reached twoyear highs in March. U.S. cheese exports fell just short of their record-shattering pace set in March 2024, and shipments to Japan set an all-time high. The United States sent 53 million pounds of butter and milkfat abroad in the first three months of the year, the strongest first-quarter sales since 2014. U.S. whey product exports easily topped 2024 volumes, but in some categories, they fell short of 2023’s pace. And, after a slow start in January and February, U.S. milk powder exports recovered, slightly exceeding March 2024 shipments.

 

The future looks bright for U.S. cheese, butter, and milk powder exports, as a weak dollar and relatively low American dairy values continue to attract foreign buyers. The trade situation is more precarious for whey and lactose, which depend on robust sales to China. Under the new tariff regime, Chinese buyers are likely to look elsewhere, and suppliers in Oceania and Europe are delighted to fill the vacuum. European lactose and highprotein whey products now command their highest-ever premium to U.S. prices. Thanks to new sales and rising product values, many dairy processors in Australia, New Zealand, and Europe are starting to lift farmgate milk prices.

The dairy market bulls gorged themselves early in the week, but after they polished off the GDT and trade data, the meal began to look a little picked over. On Tuesday afternoon, USDA published its monthly Dairy Products report, which showed that modest growth in milk output and strong components provided more than enough raw material for dairy processors. U.S. manufacturers made 1.4% more cheese – including 5.4% more Cheddar – and 8.6% more butter than they did in March 2024. Booming exports have helped to restrain – but not prevent – growth in U.S. cheese and butter stocks. But output may overwhelm demand if exports falter. Domestic consumption appears lackluster. Several pizza and burger chains reported disappointing sales in the first quarter and expressed concerns about slowing traffic in April and May.

Manufacturers continued to focus on output of whey protein isolates, leaving less whey for dryers. Whey powder production fell 11.7% below March 2024 volumes. Nonetheless, stocks inched upward. Similarly, greater cheese output pulled milk solids away from dryers, and combined production of nonfat dry milk (NDM) and skim milk powder dropped 9.6% behind year-ago volumes, logging the lowest March milk powder output since 2013. Milk powder stocks grew modestly from February to March, and manufacturers’ stocks of NDM were 12.8% greater on March 31 than they were the year before. But the milk powder stockpile is not nearly as large as USDA first believed it to be. In its annual survey of milk powder inventories, the government found February stocks at 250 million pounds, sharply lower than its initial assessment of 329 million pounds. USDA officials told Daily Dairy Report analysts that milk powder inventories were also overstated in other months, but government rules prevent them from publishing those revisions until the next annual survey in April 2026. The upshot is that milk powder supplies have been tighter – and domestic demand better – than previously reported.

Despite a Thursday and Friday selloff, the dairy markets finished the week much higher than where they began it. CME spot Cheddar blocks jumped 5.75ȼ to $1.8175 per pound and Cheddar barrels rallied 1.5ȼ to $1.77. Spot NDM climbed 1.25ȼ and reached $1.2075. Spot whey powder added 2.25ȼ and closed at 54.25ȼ. Meanwhile, butter held steady at $2.33. Most Class III and IV milk contracts added between 30 and 40ȼ and settled in the $18s and $19s. In uncertain times, these prices offer an excellent opportunity for dairy producers to protect milk income using the Dairy Revenue Protection program or similar hedging tools.

Beef revenues are also on the rise. Live and feeder cattle futures both hit new all-time highs, lifting the value of dairy cull cows, beef calves, and all other on-farm livestock. Meanwhile, feed costs dropped. Spring is off to an excellent start, with a good mix of sunshine and rain. However, to maintain ideal conditions, farmers in the Northern Plains and western Corn Belt would like to see a few more showers. Good weather in the U.S. and South America dragged corn futures to five-month lows on Thursday, but prices bounced back Friday. July corn finished at $4.4975 per bushel, down nearly 20ȼ this week. July soybeans settled at $10.52, 6ȼ lower than last Friday. July soybean meal dropped $2.90 to $294 per ton.

Original Report At: https://www.jacoby.com/market-report/a-feast-for-the-bulls/