In this week’s episode of The Milk Check, we strap in for a wild ride. From tariff chaos to spring flush milk surpluses, the market is anything but predictable.

Join Ted Jacoby and the team of experts as we cover key topics, including:

Our team of experts break down the current dairy climate and offer insights on navigating these turbulent waters.

Listen now to The Milk Check episode 76: Tariff talk takes dairy on a wild ride.

The Jacoby Team:

Intro (with music): Welcome to The Milk Check, a podcast from T.C. Jacoby & Company, where we share market insights and analysis with dairy farmers in mind

Ted Jacoby III: Welcome everybody. It is April 11th, 2025. We’ve had a lot going on in the last couple of weeks. Trump initiated some tariffs, took some tariffs off, and raised some tariffs. I think we landed in various different spots when the dust started to settle, and I’m pretty sure that the dust hasn’t settled yet. So, this market discussion could be completely out of date by the time we get back on Monday.

I’ve asked a lot of my traders to join us for this discussion. My brother Gus is representing the Fluid Group and talking a little about milk and cream. We’ve got Diego with international sales and non-fat. We’ve got Brianne here to talk about cheese. We’ve got Joe here to talk about butter, and we’ve got Josh here to talk about whey, as well as Miguel to help Bri with cheese. And then we’ve got Mike Brown joining us.

And so we’re just going to go around the horn and talk about our various dairy products. Obviously, we can’t avoid the topic of tariffs today. Let’s start where the milk starts, and start with milk. Gus, what’s going on in milk right now?

Gus Jacoby: Well, we’re in the middle of the spring flush. So, in areas like the Mideast, Northeast, and even areas on the Eastern Atlantic, you have some pretty long milk. But an interesting dichotomy for the discussion is that there are areas of the country that aren’t so long. It’s mostly areas where a lot of milk-processing capacity has been added, like the I-29 corridor up in South Dakota or down the Southwest.

Those areas aren’t quite as tight, but nonetheless, where it is long, for example, in the Mideast, there have been a number of plant shutdowns for periods that have made it really long for certain stretches. You add in some higher components, and you’re in for some interesting times right here in the middle of April.

Ted Jacoby III: So we’re about a week away from Easter. Do we think things will get even longer over the Easter weekend before they maybe start to clean up a little bit?

Gus Jacoby: Some plants that were down are coming back online, but not all of them, so I think you will have a little bit of both. It’s hard to figure out exactly how long we’ll be over Easter. But I think it’s safe to say that you’ll likely have enough plant shutdowns during that holiday weekend, and it’ll still be ugly.

Ted Jacoby III: And what about cream? Cream has been the bane of many people’s existence this year, especially in the Midwest. Is it still ugly? Or is it starting to get better?

Gus Jacoby: It’s not as ugly as it was. How about that? Ice cream demand has kicked in; perhaps some other Class II products have shown some demand for cream again. That, in addition to some longer skim-solids, probably provides those cheese plants with some fortification that can hold some fat back from there.

Those two have firmed up the market a bit, so we’ve seen some higher multiples than we’ve seen maybe a month ago. Nonetheless, Ted, it’s still long. I don’t want to act like it’s gotten any significant tightness with what I just said. There’s more demand, and some cheese plants aren’t selling quite as much cream as they were before.

Ted Jacoby III: How do you expect this cream situation and these low-cream multiples? How is this going to play out as we get into the heat of the middle of the summer?

Gus Jacoby: That is a very good question. I’ve been trying to find some answers to that. I’ve engaged Joe a little bit to help me figure out this butter market a little bit. But there’s no doubt that the cream has been a butter maker’s dream, so to speak, and the fact that they can go out, endure these long markets, and call their price. At least, that was the case in the middle of Q1.

Not so much now, but it doesn’t mean that it isn’t still long, and those numbers aren’t very profitable for them. They are. Nonetheless, as we know, most of your butter inventory is produced during this term, and the rest of the year is somewhat unknown. And I’m going to hand that off to Joe.

Ted Jacoby III: Joe, is this butter market going to stay around where it is? If you were talking cream, we sure did feel like it should be going lower, even if it’s already down in the low twos. Well, where’s it going to go from here?

Joe Maixner: As to where it’s going to go from here, I’m not going to give you any specifics because I don’t have that on my crystal ball. But I would say that we’re probably range-bound for a little while here.

Alluding to what Gus was talking about on the cream, we’ve seen a lot of excess cream finding homes outside of churns recently. Churns are still getting plenty of creams, but they’re not getting all of the distressed spot creams as they had been earlier in the year.

The big question is, and I hate to go into it already, but it will be the exports. How much product actually gets exported with all of this tariff situation? My personal opinion is that exports for butter really aren’t going to be affected.

There are several different imports for re-export programs out there, as well as the fact that we’re just that much more competitive than the rest of the world, so a 10% tariff on most countries will not stop buyers from bringing in our products.

Ted Jacoby III: Okay. And Gus, before we move on, what about liquid skim-solids? Skim condensed, skim UF milk, borrow, whatnot? Is that market getting better yet?

Gus Jacoby: It’s loosened up a little bit, Ted, but I don’t want to act as if it’s crazy, right? I mean, you can get skim-solids right now. Some areas of the country have taken on the milk and sold skim-solids and cream. They take the milk at a discount and sell it. You’re just in the typical flush mode.

But when we talk about that, you can’t help but talk about the fact that with skim solids now being readily available and probably some good deals out there in the marketplace to be had, that means that fortification solids are available for those cheese plants. Again, the higher butterfat component means you can keep that butterfat in the cheese plant.

I’m not saying that that’s happening in any lengthy term. I think it’s happening on a spot basis. I don’t know what will unfold as we enter the summer and out of the flush.

Ted Jacoby III: I’m going to ask this Gus, both for you and for Diego. I’m unsure if you guys will have the same or different answers. But you think one of the reasons we’ve had skim solids available is because of the non-fat price? That market has been difficult to trade in because the demand is so poor.

Gus Jacoby: I think there’s certainly a lot of powder being made and whatnot. No doubt in this tariff climate, there’s probably some concerns about what will unfold in the future.

But I also think we have really long milk right now, as we always do in the spring flush. And there’s certainly still plenty of powder being dried. So, Diego, do you want to take that from there?

Diego Carvallo: Yeah, I do think it’s part of the reason. The thing is, you have powder where it’s not that needed; let’s put it that way. You have a little bit more powder now that the avian influenza has improved in California. And that product needs exports, while the product that cheese makers need for purification needs to be in the Midwest. But yeah, the answer is yes, and in part, that’s the reason. Yeah.

Ted Jacoby III: All right. Since we’ve exhausted all of our liquid dairy options, we’re going to start talking about all those products we can store. And just about every single one of them is being affected in one way or another by this tariff market.

So, Diego, I’ll stick with you. In this non-fat market, prices have been going down. I saw a statistic, it looks like our inventories of non-fat and skim milk powder are 57% higher than they were at this time last year. Is this a direct effect of the tariff war that’s going on, or is there more to it?

Diego Carvallo: No, increasing inventories is not the result of the tariffs. It is the result of the U.S. being at a higher price than the rest of the world for close to, I would say, six months.

So let’s say at the beginning of the year, end of last year, Europe was at a steep discount to U.S. in non-fat. And Europe was taking most of the little demand that there was around. So, as a consequence, the U.S. was dependent only on Mexico. Mexico hasn’t been buying as many had expected, and inventories grew.

Now that we have the tariffs, depending on the price, it could continue to accelerate. I think the U.S. will need to go into a discount versus the rest of the world so that inventories stop growing.

Ted Jacoby III: Okay. How hard is that going to be, with everything going on in the tariff world right now?

Diego Carvallo: Well, we’re already seeing a lot of pressure on the non-fat futures, so it could happen in the near term. I think the market is still in, I don’t know if calling it panic mode or just a waiting standby mode, maybe seeing what happens.

But if let’s say a month goes by and we still have the same tariffs through China, U.S. product needs to find and gain market share in other markets. And the only way to do that is by aggressively competing.

Ted Jacoby III: Outside of price, has there been any other kind of conversations that you’ve been having that were kind of eye-opening as you’ve been talking with our international customers over the last couple of weeks?

Diego Carvallo: Well, one thing that was interesting is that after Trump reduced the tariffs to just that 10%, I saw a lot of international customers re-engaging and requesting votes once again. We only have 90 days for the product to be imported to those countries, so it’s still a risk, but we’re seeing more interest.

Ted Jacoby III: Does it feel like a “Let’s hurry up and get this product into our borders before we do end up with a tariff war again”?

Diego Carvallo: Yes, but at the same time, I think most of the buyers are going to go to New Zealand. Why would you risk paying an extra tariff? Why would you risk having to rush and then your provider maybe delays the shipment, et cetera. Why would you have an exposure to tariffs if you could buy just at $100 higher, product from New Zealand or from Europe? Yeah, I think that spread between the U.S. and Europe needs to widen.

Ted Jacoby III: So, in other words, what you’re saying is that this not-fat price probably needs to drop lower.

Diego Carvallo: At the same time, I do not see much downside potential. What I think could happen is a combination of Europe moving a little bit higher, New Zealand moving a little bit higher, and the U.S. maybe staying under pressure or moving a little bit lower.

Ted Jacoby III: Okay. Bri, while Diego’s been dealing with tariffs on the powder side, what have you been hearing on the cheese side?

Brianne Breed: The bulk of the conversations I’ve been having are more on the domestic front line, more U.S.-based demand. Gus mentioned earlier that the flush is underway. There’s a lot of milk out there, and so we’re seeing more cheese being made right now. But because we had that drop a few weeks ago, I think we were able to get some exports put on the books.

And so we’re seeing a little bit of a squeeze right now between Easter holiday demand and filling up those production plants with cheese that was committed. It sounds actually bullish on that side, because the milk is needed to fill orders. But we’re hearing a lot of pushback from domestic consumption.

Food service, retail seems pretty slow overall. Yes, there’s a little bit of a pop here before Easter. But I think all those orders are going to be in by today, I would expect. And so next week we’ll have a better idea as to what actual demand is here domestically.

Ted Jacoby III: Okay. And Miguel, how about you internationally? How’s the cheese outlook with your customers?

Miguel Aragón: We are having a few comments from them because our prices are definitely getting better. There’s more opportunities, so we have people jumping in.

But at the same time, they’re being cautious because as Diego said, there’s only 90 days, they don’t know what tomorrow’s going to bring. Plus on top of that, the currency exchange is up and down, up and down, up and down. So there is interest. They see good offers from us, but they’re cautious.

Ted Jacoby III: And it sounds like the volatility of what’s going on with tariffs, the volatility of the peso-dollar exchange rate, the volatility of our dairy markets, all of it just makes it really difficult for our customers to make buying decisions right now.

Miguel Aragón: That is correct. And even when they make a decision, they’ll come back two, three days later before the whole contract is signed, asking, “Is there a change in price? Can you do a little bit better?” Just because they are now aware that the situation is very volatile, and they just want to make sure they get the best deal they can.

Ted Jacoby III: So they’re trying to push for everything they can get right now.

Miguel Aragón: Yes. And at the same time, they always remind me the U.S. is aggressive when there is no domestic market. But then later on, if everything gets better domestically, they’re not interested in a long-term relationship. They always throw that in my face.

Ted Jacoby III: Yeah, that’s a tough one. I know exactly what you mean.

Miguel Aragón: Yeah.

Ted Jacoby III: Everybody, we will be right back after these messages.

Center commercial (with music): If you’re a dairy producer or a cooperative looking for a better market for your milk, or you’re a food manufacturer hoping to strengthen your dairy procurement or risk management strategy, please reach out to T.C. Jacoby and Company.

We’ve been building worldwide relationships with all sides of the dairy supply chain for over 75 years. Tap into our expertise for unlimited free consultative support, and we’ll develop a sales or procurement strategy that hits all of your targets. Please visit us online at www.jacoby.com to get started.

Thanks for listening to The Milk Check. Back to the show.

Ted Jacoby III: Josh, turning to the whey complex, you’ve probably been affected by the tariffs more than anybody, both on the permeate side and the protein side. What’s your sense? What’s going on?

Josh White: Overall, I think a lot of paralysis right now. Lots of conversations this week with people trying to digest what are the solutions, what’s tomorrow going to bring, late-night phone calls talking about the U.S. response, early-morning phone calls talking about the retaliation out of China. And that’s been pretty much a consistent pattern throughout the week.

All in all, I think if we start with the carbohydrate side of it or the lower-value products, China’s obviously very important, particularly for permeate. I think there’s a willingness and a recognition by both countries that we have to find a way to do business together. But at 125% tariffs on both sides of the coin, that’s a de facto embargo. Just doesn’t make sense to do business, and at the permeate returns effectively, if you have a choice not to dry, you wouldn’t dry.

All of that being said, it’s all happened within this week. And I think that patience hopefully will reward certain people to see if we’re able to come to some type of resolution, temporary pause, or something that’ll allow that trade because that’s going to impact both industries.

The U.S. really needs and has contracts on for the second quarter to ship a lot of volume to China. And the Chinese pig industry in particular needs that product. Now, can they go out and find some alternatives? Sure, but it’s going to hurt their cost of production. Those alternatives aren’t as heavy in lactose or as cheap on a pre-unit lactose content, which is really what they’re interested in.

And as a result, they are going to have to go to other markets and unnatural markets to buy product. And I don’t think they’ll be able to cover 100% of their needs.

So yeah, both of these markets need each other. To what degree the markets can, they’ll figure out a solution. But right now, paralysis, everyone’s going to wait and see what happens. Where it becomes more interesting, I think, is on the upper end of the whey complex with the WPI and WPC80.

China is our leading export partner, followed by Canada and Japan. I think that they might switch positions here and there. This Chinese issue, it’s well-reported that there’s product that’s already on the water. And if my understanding’s right, if it arrives before May 13th, it’s exempt from the additional tariffs into China.

But there’s also a lot of production in motion for products that were destined for China. And that’s leaving U.S. manufacturers, processors, copackers, et cetera, all looking for alternatives. So that sounds bearish. Anytime you switch trade lanes, that does feel a little bit bearish.

There’s another side of the story that needs to be told, and that’s the price out of Europe. Before these incremental tariffs were announced, the European market was already looking to the U.S. as a potential market to source from. You look at some of the index prices, which aren’t super-accurate for things like WPI, but on a U.S. dollar equivalent, the WPI price in Europe right now is approaching $11 a pound. The price here in the U.S. prior to these issues was closer to $10 a pound.

That leaves some room, even with some tariffs, for those two regions to trade together. And additionally, the Chinese market buys a lot of whey products from the U.S.. And if we shut that off, they’re going to look to other markets to backfill those needs. Probably at a higher price in most instances, which I think is just going to reshuffle the deck a little bit, create some price volatility, but isn’t uniformly bearish over the course of the next few months? Probably leans bearish, but I don’t know that I would immediately assume that, “Okay, because we remove China from shipments of UF WPC80 and WPI, that immediately means there’s less demand in the world for those products.”

It’s a complicated game. I think that aside from just the international trade, that’s a very complex market at the moment. I mean, this is the largest premium I think we’ve seen on record for isolate over whey, certainly the largest premium that I can remember for WPC80 and isolate over non-fat prices.

The U.S. market clearly has found new demand for whey proteins and higher proteins overall, but whey protein’s been the biggest beneficiary of that. But at the same time, all the consumer sentiment has been leaning a little bit more bearish.

As Bri evidenced on the cheese side and how slow some of the consumer demand’s been on that end, is the consumption or utilization for WPI, does it have an inverse relationship with the rest of the market? I don’t know that I would subscribe to that yet.
But there’s some doubt that the GLP-1-driven demand creation and healthy snacking movements might continue to consume more whey protein, and at a more valuable price level than ever before.

But we have to be concerned about the economy as a whole. And these new disruptions, like the announcements of the tariffs, may be the catalyst that finally shifts the market into a more bearish climate, and God forbid, but the potential recession that I think we’re all concerned about.

Ted Jacoby III: Well, I think we touched on every product. Mike, was there anything that came to mind from your end?

Mike Brown: My only thought is I had a call with a good friend in the supermarket business. And he says, “When it comes to the cheese counter, it is definitely true.” Store brands are doing well, national brands are not. And that may be why some of our packaging, co-packaging, cut-and-wrap friends are having more struggles than others, and that food service seems to be quite tough. So there does seem to be concern longer term.

Consumers are certainly continuing to buy down to store brands to save a little money. That’s true across our grocery store, and dairy is no exception.

If you’re wearing a store label, you’re probably selling fine. If you’re not, you’re struggling. And particularly, a couple of the very popular national brands seem to be struggling a little more, hearing some comments from cut-and-wraps that their orders are way down.

Other thing is some producer concern on where margins are going. Something I’m going to be tracking as you know, trying to get a little better picture for that. The biggest concern is making sure the milk has a home with spring flush. But otherwise, they’re not afraid yet. They’re concerned, but producers see an opportunity to grow long-term if we get through this little mess we’re in right now.

Ted Jacoby III: It kind of goes back to the podcast we just recorded a couple of weeks ago. If we get a downturn in prices because of this tariff war, we may squeeze some dairy producers right out of the business, given their options to sell their cows right now.

Mike Brown: Yeah, cows are valuable. Beef is valuable. They have a lot of older cows that won’t be profitable if the margins get too tight.

Ted Jacoby III: Yes.

Mike Brown: Some of those late-term, light-lactation cows may go.

Ted Jacoby III: Feels like we just climbed to the top of the roller coaster and we’re hanging off the edge before we start flying down. We’ll have to see how the next 90 days go and where we end up.

Thanks for joining us today, everybody. It’s just an old-fashioned market discussion. We’re going to try to have these about once a month just to get market information out for everybody, especially in times like these when it seems like every day goes by tariffs change.

It’s affecting our exports. It’s affecting our imports. Frankly, it’s even affecting our markets. Just as Mike said, the consumer right now, faced with this uncertainty as a result of tariffs, is altering their buying patterns domestically.

That wraps up into a whole market that has a lot of uncertainty. That uncertainty is probably creating some bearish sentiment out there. But at the same time, we’ve got a dairy producer who, if he’s under any kind of profit pressure, we’ve got some very real concerns about whether or not they’re going to keep those cows in the herd.

Good luck out there. Hold on tight, and hopefully, we’ll all get through this. Thanks for joining us today.

Josh White: Have a good weekend, guys.

Joe Maixner: Yep. Thank you.

Miguel Aragón: Bye. Have a good one.

Outro (with music): We welcome your participation in The Milk Check. If you have comments to share or questions you want answered, send an email to [email protected].

Our theme music is composed and performed by Phil Keaggy. The Milk Check is a production of T.C. Jacoby & Company.