WCMA Notes: Cheddar Boom Hits in a Volatile Year

Cheddapalooza is here. 

The upswell of cheddar and American styles production in the United States predicted in this column three years ago is in full swing.  But far from being a sole challenge to the dairy industry, this sharp increase in cheese production at new and renovated facilities joins a host of converging factors – oscillating tariffs, uneven milk production, new federal order base prices, and the potential for an economic downturn—that make 2025 a challenging year for dairy processors.  

Domestic Sales 

Let’s start with retail demand. Cheddar cheese at retail is in positive territory looking at the most recent sales data: February 2025 vs. February 2024. Cheddar volume sales are up 1.5 percent using  “gold-standard” retail scanner data.  Cheddar dollar sales are up 2.9 percent in that time frame. Monterey Jack is flat – down 0.1 percent in volume in the same February to February comparison. 

Export Sales 

Demand outside the U.S. is the wilder card. The latest dairy export data from U.S. Dairy Export Council (USDEC) captures February 2025 activity and cheese sales abroad remained positive, while nonfat dry milk/skim milk powders and whey protein exports declined sharply.  

Overseas cheese sales rose 7 percent in February, led by growth in Korea, Australia, Middle East nations and Caribbean nations.  China and Japan logged sharp declines in cheese sales. USDEC noted earlier in April: “The outlook for U.S. exports remains murky given the uncertain policy environment.” 

Currently, Canada has answered recent tariffs set by the Trump Administration with 25 percent counter tariffs on U.S. dairy products, however, dairy products moving to Canada under the quota levels set in the USMCA are not subject to the new tariffs. Mexico, likewise, has not yet announced any new tariffs on U.S. dairy products.  

China is the hottest front in tariff turmoil. As of this writing, the Trump Administration is considering a reduction in current tariffs on China from  the current 145 percent. Until any reductions take place, U.S. dairy products planned for sale to China face a stifling 135 percent tariff. While cheese is impacted, U.S. exports of whey proteins, whey and lactose are most deeply affected.  

Modeling data from the University of Wisconsin economist Charles Nicholson, released April 24, projects that current counter tariff impacts could reduce U.S. cheese sales abroad by 18 to 25 percent.  

Recent Production 

Cheddar and American styles production has been on a rollercoaster ride in the Covid era and beyond. Production in 2019 was slightly lower than the year before at 5.23 billion pounds nationally. Then in 2020 and 2021, American styles production surged 2.0 percent and 5.2 percent respectively, settling down to 1.0 percent growth in 2022. 

American styles grew 3.0 percent in 2023, but – looking at monthly data in 2024 – fell back 3.6 percent in 2024 to 5.63 billion pounds. A retreat in milk production last year (down 0.7 percent) is a significant factor in that decline. 

Cheddapalooza 

In 2022, this column predicted “Cheddapalooza will be in full swing” in 2025 with cheddar and American styes production exceeding 2021 production by more than 1 billion pounds. At least six major renovations and newly constructed American-styles facilities contribute to this boom.  

WCMA has discussed progress with each U.S. manufacturer that has brought significant production growth or new plant capacity online in the past five years. In total, these manufacturers confirm that cheddar and American styles production in 2025 will exceed 2021 production by more than 1 billion pounds, with nearly half of this growth commencing in 2025 alone. Several sites note that 2026 will see further production increases as plants reach full capacity.  

In addition, a new, large cheese production facility is on the drawing board for future green-field construction in the Upper Midwest. 

Clearly, production capacity is only one factor impacting the near future of cheese and milk pricing in the U.S. Wide swings in trade policy and tariffs, muted milk production, new federal order base prices, and the potential for economic recession all make 2025 a serious challenge for dairy businesses.