Introduction
From tariffs and export markets to domestic demand and innovative production strategies, navigating this landscape requires astute attention to market signals and strategic planning.
The global dairy market is a fascinating tapestry of interconnections and influences. From the impact of tariffs to the strategic importance of export markets, the intricacies of this sector demand strategic attention and planning. In a recent episode of “AgriTalk,” Chip Flory sat down with industry expert Matt Tranel from Ever.Ag to discuss the intricate dynamics of the global dairy market. The conversation delved into the factors influencing Class III futures, the importance of export markets like Mexico, and the domestic demand for dairy products.
The Impact of Tariffs and Global Competition
Tranel says tariff talk initially rattled the cheese markets, driving prices downward. Despite these initial setbacks, the U.S. remained a competitive value buy in the global cheese market.
“Regardless of having tariffs or not, we were a very good value buy from a cheese export standpoint,” he says.
This competitiveness fueled export orders, particularly in the second and third quarters, which impacted available cheese stocks and drove up prices in futures, Tranel says.
The global market dynamics are influenced by regional competitiveness, with New Zealand and Europe playing significant roles.
“New Zealand ... is in large part supplying the Chinese market,” Tranel says, highlighting the geographical advantage and tariff implications that shape trade flows. Meanwhile, European challenges, such as blue tongue disease and foot and mouth disease, create variables that can influence supply and demand dynamics.
Mexico’s Crucial Role in U.S. Dairy Exports
Mexico is the No. 1 importer of U.S. dairy products. In fact, according to the U.S. Dairy Export Council (USDEC), in 2022, Mexico was the first $2-billion U.S. dairy export market, with sales increasing 37% to $2.5 billion and volume up 9% to 556,497 MT. In 2024, U.S. dairy exports reached $8.2 billion, marking the industry’s second-highest level ever. Critical to this success is Mexico, who imported record values at $2.47 billion.
Tranel says with Mexico purchasing a significant portion of U.S. cheese exports, maintaining favorable trade relations is imperative. In fact, Mexico bought 33 million pounds out of the total U.S. cheese exports. This underscores Mexico’s strategic importance and the necessity of keeping this market engaged and satisfied.
Domestic Market Dynamics
Domestic dairy demand was another focal point, with Tranel pointing out varied trends across different products. While frozen pizza sales remain robust, reflecting economic pressures and consumer behavior, the overall cheese demand has been stable. Interestingly, the push toward real butter continues, though the increased butter production has led to price declines.
“Frozen pizza sales continue to be up pretty substantially through the end of 2024 into 2025,” Tranel says, noting that frozen pizza is an economical meal for a family. “A lot of times that can be a little bit of a barometer as far as where the economy has been or is, from a cheese standpoint, overall, it’s been okay. It’s actually performed maybe a little bit better in 2025 than maybe what some expectations would have been, just due to all of the new capacity that is and has come online.”
Big-Ticket Prices of Beef-on-Dairy
Innovative strategies such as the use of beef-on-dairy have evolved dairy business models by integrating beef production into dairy operations. Tranel points out that the $1,000 day-old beef-on-dairy calves and the price of cull cows is helping cash flow situations on dairies.
“The economics certainly suggest that we should be pushing that as hard as we can, and ultimately, that’s keeping a few more replacement animals out of the system and maybe some of the supply down the road,” he says.
Risk Management in a Volatile Market
Managing risk is critical in the current volatile market. Tranel advises employing protective financial strategies, such as using CME puts and leveraging other dairy-specific risk management tools. The objective is to maintain a floor on potential losses while staying open to top-side market opportunities.
“You got to protect the bottom, because you know you have to be the lowest price, but you got to stay open to the top side, because you’re going to see some volatility,” he emphasizes.
The global dairy market is characterized by its complexity and interdependence. From tariffs and export markets to domestic demand and innovative production strategies, navigating this landscape requires astute attention to market signals and strategic planning. As the sector evolves, staying informed and adaptable will be key to thriving in this dynamic market environment. 