Will Tariffs Have an Impact on Dairy Demand?

Tariffs have been dominating the news, and concerns over their impact on dairy export demand have surfaced, particularly in relation to China. As tariffs on U.S. imports are implemented, changes in the global dairy market are anticipated. China’s role as the largest importer of whey and its derivatives, crucial for the calculation of Class III milk prices, might significantly affect market dynamics.

Interestingly, a current gap between world and U.S. pricing could alleviate these impacts for butterfat. In February, butterfat exports soared by 224.5% over the previous year, making it the largest monthly export since April 2014. This surge is attributed to U.S. prices being considerably lower than global levels.

The recent Global Dairy Trade auction highlighted an average butter price disparity, with global prices at $3.45 per pound compared to $2.3475 in the U.S. as of April 11th. Oceania’s figures also painted a competitive picture, suggesting potential shifts in demand logistics favoring certain regions.

Moreover, dairy farmers face potential cow culling due to declining milk prices despite holding cows for higher heifer and calf value. U.S. dairy cow numbers stood at 9.41 million heads in February, reflecting ongoing economic evaluations by producers.