Milk Market Update: Nervousness in the Milk Market? Newsletter from 11 April 2025
Mozzarella and the prices for protein concentrates (casein) remain stable. In contrast, skimmed milk powder and cheese are experiencing a slight decline, while spot milk and milk fat are seeing significant downturns.
Market Development: Retrospect and Outlook
Our figures refer to the week of Liberation Day. At that time, no one believed that the tariffs would come into effect, and yet prices decreased across the board. The rapid collapse of spot milk prices is particularly concerning. Since Wednesday, 9 April 2025, we have learned that the tariffs will not come into effect after all.
There are numerous studies showing that the most important factor for a country’s success is legal certainty; in this sense, this back-and-forth is certainly not conducive.
Merger of Arla Foods and DMK Group
On 8 April, Arla Foods and the German DMK Group announced their plans for a merger, which aims to create the largest dairy cooperative in Europe. This strategic move is intended to strengthen competitiveness and reshape the dairy industry in Northern Europe. The merger still requires regulatory approval and would encompass over 12,000 farmers as well as a pro forma annual turnover of €19 billion.
The merged company will be headquartered in Denmark and operate under the name Arla. The existing management teams will largely remain in place. A detailed merger proposal will be presented soon, and the final agreement could be ratified by the end of 2025.
Given that DMK lost a significant volume of milk a year ago, this merger is not really a surprise.
Impact of US Tariffs
In our last newsletter, we promised to analyse the impact of the US tariffs. The issue is complex, and any analysis becomes outdated within a few days. Most variables are unknown. We do not know how other countries and the US consumer will respond. Surely, most countries will engage in negotiations now. In bilateral negotiations, the larger and more important country usually has the advantage, while smaller countries can be sidelined as collateral damage.
It is also still unclear how domestic politics will evolve. Trump wants to massively reduce taxes for households and businesses, but when and by how much is still unknown.
Here is an overview of what the tariffs could mean for exporters of milk products: The largest EU exporters to America are Italy (cheese), France (cheese), and Ireland (butter). Most exports consist of expensive specialities, whose prices are already significantly higher than those of substitute products in the USA. The tariffs will dampen consumption, but since the enthusiasts for these products tend to belong to the upper class, who are likely to benefit from tax reliefs, we expect no major drops.
Counter-tariffs could lead to problems in the US as this country is a net exporter of dairy products. The major importers of US milk are Central America, particularly Mexico, followed by Southeast Asia with Malaysia, Vietnam, and Thailand, then Northeast Asia with Japan and China, with Mexico alone importing 10-15 times more than China or any other previously mentioned country. On the other hand, if China were to purchase one-third of its milk from Europe instead of the US in the future, Europe's balance could already be restored. It is also now clear that China will not be sourcing products from the US in the near future; thus, competition will focus on New Zealand and Australia. Since these two countries have already dealt with large milk deliveries, there is a good chance that there will be no oversupply in Europe this spring.
Two factors pose challenges for the Eurozone and Switzerland:
- The weak USD
- The low prices for cheese, butter, and skimmed milk powder in the USA.
The following graphic illustrates the decline in prices and the significant price differences for butter, mozzarella, and soon also for skimmed milk powder.
The direct impact of the tariffs on Switzerland has already been analysed last week. We estimated that around 0.5% of the total Swiss milk quantity would need to seek a new market. With a 10% tariff, this will halve.
All of this should not distract from the fact that certain products and manufacturers that are primarily focused on the USA may find themselves in difficulties.
Market Situation in Switzerland
In Switzerland, the tariffs primarily burden the producers of Switzerland Swiss and La Gruyère AOP.
Fortunately, 80% of this cheese is distributed by Emmi and Migros Industrie, and both are financially well-equipped to cushion the direct effects. Unless Migros Industries decides to cease investing in exports; even then, a reduction in La Gruyère sales by 1000 tonnes would not be a catastrophe.
It will also be challenging for the Swiss chocolate industry, which typically uses Swiss milk powder. Last year, subsidies were increased for these producers to ensure Mondelez processed Swiss milk powder again. Now, Mondelez's production, an American company, is also subject to tariffs.
The most important factor will be what Switzerland can negotiate. Here, we foresee a significant dilemma arising. If the USA, as has been repeatedly emphasised, insists on the reduction of agricultural tariffs, the question arises whether we should sacrifice our industry or agriculture. Various Swiss politicians from left to right are already calling for us to abandon agricultural tariffs.
Nervousness in the Milk Market?
Compared to the stock markets, the milk markets remain quite stable, but how long this will last is difficult to predict. The fundamental data and the above analysis indicate that there is no reason for panic – except perhaps in Switzerland.
Switzerland was already facing sales difficulties before the tariffs, and some players were experiencing significant financial problems. This is likely to worsen soon.
Outlook for Q2 and Q3 2025
- Q2 2025: We are currently not making any forecasts!
- Q3 2025: We are currently not making any forecasts!
Where the disruptive trade policy of the USA leads in the short term is impossible for us to predict. In the longer term, this means that the world will have to reorient itself. This also applies to us; whether we will be present at the Fancy Food Shows will remain to be seen.
We will be present at the following trade fairs:
- Tutto Food, Milan, 5–8 May 2025, Hall 1 Stand U07
- PLMA, Amsterdam, 20 & 21 May 2025,
- International Cheese Awards 2025
- Summer Fancy Food, New York, 29 June – 1 July 2024, with our partner World's Best Cheese
- Le Mondial du Fromage et Produits Laitiers, Tours (France), 14–16 September 2025, We will have a stand.
- Anuga, Köln 4 – 8. October 2025, with our Partner Dicke Food
- World Cheese Award, 13 – 15. November 2025, Bern, we will have a stand
- Winter Fancy Food, San Diego, 11 – 13 January 2026 with our partner World's Best Cheese.
- Marca, Bologna, 14 – 15 January 2026, I will visit the show
- Salon du Fromage, Paris, 7th – 9th June 2026, with our Stand
Stay informed! Enjoy the exquisite Swiss flower meadow cheese made from raw milk – not only a delight but also healthy and soothing!
Kind regards, Affineur Walo
