The US dairy market experienced significant movement this week as cheese prices rallied sharply, gaining $0.12/lb over Wednesday and Thursday alone. This surge comes against a backdrop of major international trade developments, with the recent US-China trade agreement creating new dynamics across dairy commodity markets.

Cheese supply tightens despite capacity expansion

Despite industry expectations of abundant supply from recently added production capacity, the domestic cheese market has tightened considerably. CME futures are showing strong premiums for June and Q3 delivery over May prices, indicating heightened buyer concern about securing summer volumes.

The fundamentals remain impressively strong – US cheese production in March 2025 showed a remarkable 21.01% increase compared to March 2015, outpacing the population growth rate of 6.05%. This translates to an 11.28% increase in per capita cheese consumption over the past decade, demonstrating Americans’ growing appetite for cheese products.

US-China trade deal creates export opportunities

The newly announced 90-day tariff reduction agreement between the US and China represents a potentially significant shift for dairy exports. While immediate positive effects have been observed in the whey segment, industry opinion remains divided on whether the temporary window will drive meaningful demand patterns back to US suppliers.

The arrangement puts a pause on triple-digit tariffs that had severely impacted trade relations, making US dairy exports substantially more competitive even with the remaining 10% import tariff. This price advantage is particularly notable when compared to European alternatives.

NFDM outlook improves

Nonfat dry milk (NFDM) markets also gained momentum this week, benefiting both from improved export competitiveness and the recent dairy trade agreement between the United States and Indonesia. These developments have significantly brightened the previously gloomy outlook for NFDM exports and prices.

Looking ahead

As global markets respond to these developments, the key question remains whether buyers will pivot back to US origins or maintain diversified supply strategies given the temporary nature of the current trade agreement. The next few weeks should provide greater clarity on how the market balances immediate price advantages against longer-term strategic concerns.

For the complete analysis, including CME futures details, trade agreement implications, and international market movements, Vesper subscribers can access the full US Weekly Edition 57 report in their dashboard, or start your free trial to access the analysis here: https://app.vespertool.com/market-analysis/1941