MRV BLOG: MRV Market Commentary February 27, 2025

Check-in here to see the MRV commentary on what we have seen and are seeing in the dairy market.  These insights have been developed from MRV’s proprietary data, industry experience, and industry reports referenced below. Here’s our latest:

Domestic

Over the past week, butter prices declined to $2.45 per pound, dropping by 4.6 cents. Five hundred-pound barrel cheese also decreased slightly to $1.86 per pound, down by 0.6 cents. In contrast, 40-pound block cheese saw a modest increase, rising 1.5 cents to $1.92 per pound. Nonfat dry milk experienced a decline, falling 1.2 cents. Dry whey prices also softened, dropping by 0.7 cents. Overall, most dairy commodities trended downward for the week, with the exception of block cheese, which showed a slight price increase.

The slight decrease in butter prices reflects a market correction following previous price surges. Despite strong export demand, particularly from markets like New Zealand, the global oversupply has exerted downward pressure on prices. The marginal decline in 500-pound barrel cheese is partially influenced by increased milk production in regions such as Texas and Idaho, leading to higher cheese output. However, challenges like the Highly Pathogenic Avian Influenza (HPAI) outbreaks in key dairy-producing areas, notably California, have disrupted supply chains and tempered price fluctuations. The modest price increase for 40-pound block cheese is driven by robust demand, both domestically and internationally. Anticipated negotiations to expand U.S. access to Canada’s dairy market under the USMCA may also be bolstering market optimism and influencing price dynamics.

The recent trends in dairy commodity prices can be attributed to a combination of supply dynamics, disease outbreaks, and international trade considerations.

Avian Flu

The outbreak of the Avian Influenza in dairy cattle, particularly in California has been an unprecedented event which has led to significant challenges in the dairy industry, including the culling of affected herds, quarantine measures, and disruptions in milk production and supply chains. As of February 18, 2025, the California Department of Food and Agriculture (CDFA) reported H5N1 detections in 745 dairy farms, with 281 fully recovered and released from quarantine. These outbreaks have had a direct impact on the fluctuations in dairy commodity prices, albeit it has not been the only contributing factor, as producers navigate the impacts of the disease on operations and market dynamics.

Exports

In 2024, U.S. dairy exports to Latin America grew significantly, with Mexico leading in cheese demand, making the region a key driver of U.S. dairy exports. This strong demand is expected to continue into 2025, supporting U.S. dairy producers and maintaining a crucial export market. However, China’s economic struggles, including a real estate crisis and high unemployment, have weakened consumer spending, making a strong rebound in dairy imports unlikely. This presents a challenge for U.S. exporters who have traditionally relied on China as a major buyer. Meanwhile, global milk production is set to increase slightly, but factors such as weather, production costs, and policy shifts could impact supply levels. Supply chain disruptions and logistical hurdles may further influence trade efficiency, potentially affecting U.S. competitiveness. Additionally, trade agreements like the USMCA will play a crucial role in shaping market access, potentially opening or restricting opportunities for U.S. dairy exports. Overall, while Latin America presents strong growth potential, economic uncertainty in China and trade policy shifts will shape the U.S. dairy export outlook in 2025.

Milk production

In January 2025, U.S. milk production totaled 18.3 billion pounds, a 0.2% increase from January 2024. This slight rise is attributed to a 0.5% increase in milk per cow, averaging 2,054 pounds, and a 0.3% increase in the number of cows, totaling 8.92 million head. However, the dairy herd size has been declining, with the number of milk cows on farms in the 24 major states decreasing by 61,000 head compared to February 2023. This trend suggests a potential tightening of milk supply in the future.

Summary

Over the past week, dairy commodity prices experienced mixed trends. Butter and 500-pound barrel cheese dropped while 40-pound block cheese saw a modest increase. Nonfat dry milk and dry whey prices also declined slightly. The downturn in prices is attributed to a global oversupply, higher milk production in certain regions, and disruptions caused by the Avian Influenza (HPAI) outbreaks in California. The U.S. dairy export market is seeing strong demand from Latin America, particularly Mexico, but challenges in China’s economy and logistical issues may affect future growth. U.S. milk production slightly increased by 0.2% in January 2025, although the dairy herd size continues to decline, potentially impacting future milk supply.

This information cited by MRV Marketing, LLC is for informational and reference purposes only. It is not intended to be a conclusive statement of future market conditions. It is not legal advice or legal documents. The data used in these documents contains references to information created and maintained by other organizations or agencies. Please note that MRV Marketing, LLC does not control and cannot guarantee the accuracy of these outside materials.

Statistical data referenced here is gleaned from reports by MRV Proprietary Data, CME Group, Dairy Herd Management, USDEC and USDA.