American cheese surges as Mozzarella stalls-Q1 2025’s dairy shift demands new strategies. Export boom offsets pizza slump.

EXECUTIVE SUMMARY: The U.S. cheese market diverged sharply in Q1 2025: American-style cheese production rebounded 3.3%, fueled by new processing plants and record exports, while Mozzarella declined 0.9% amid pizza chain struggles. U.S. cheese exports hit 140,874 metric tons (+7% YoY), leveraging a 20-25% price advantage over global markets. As processors pivot milk toward storable American cheeses, dairy producers must adapt to shifting component values and global trade dynamics. The article urges farmers to align with export-driven strategies and reassess milk quality metrics to thrive in this transformed landscape.

KEY TAKEAWAYS:

• American cheese thrives: 3.3% production surge driven by new capacity and exports; Cheddar output up 2.8%.
• Mozzarella stumbles: First decline in 15 months (-0.9%) as pizza chains like Pizza Hut (-5% sales) struggle.
• Export lifeline: Record Q1 exports at 140,874 MT (+7%), with U.S. prices 20-25% below global competitors.
• Strategic shift: Processors prioritize storable American cheeses; farmers must optimize components (protein/fat) for export markets.
• Wake-up call: Over-reliance on domestic pizza demand risks profitability; diversify markets or face margin pressure.

American-style cheese production roars back with a 3.3% first-quarter increase while Mozzarella hits its first decline in 15 months. The days of riding both markets to stability are over; divergent signals indicate a fundamental shift in how dairy producers must position their operations. Those who fail to recognize these market signals risk being left behind in an increasingly global dairy landscape.

American Cheese Stages a Remarkable Comeback

Remember when everyone was fretting about American cheese production last year? Those concerns now seem like ancient history, about as relevant as previous generations’ proven sires. After stumbling through 2024 with production down more than 3% year-over-year, American-style cheese has staged a dramatic turnaround in the first quarter of 2025.

According to USDA’s National Agricultural Statistics Service data released May 6, cheesemakers churned out more than 1.4 billion pounds of American-style cheese in Q1, a robust 3.3% increase from the same period in 2024. The momentum built as the quarter progressed, with March production reaching 500 million pounds, a significant 4.6% jump from March 2024. Like a well-managed Holstein herd hitting peak performance post-calving, the cheese industry’s production curve is trending upward.

Cheddar cheese has truly earned its “comeback kid” moniker. After falling 11 months during 2024 and again in January 2025, Cheddar finally broke its losing streak with year-over-year growth in February and March. This resurgence brought Q1 Cheddar output to 984 million pounds; a solid 2.8% increase compared to Q1 2024.

What’s driving this impressive reversal? Much of it comes down to strategic capacity investments made years ago that are now bearing fruit, not unlike those genomic selection decisions you made three years ago, finally paying dividends in the milking string. Several new, large-scale cheese manufacturing plants in states like Texas, South Dakota, and Kansas have recently come online or ramped up production.

But here’s what should concern you: This capacity expansion was planned years ago, when market conditions were entirely different. While long-range capital planning is necessary in our industry, the dairy processing sector committed to producing significantly more cheese without guaranteeing that the domestic market could absorb it. How many other agricultural industries would build massive new production capacity without firm commitments from buyers? This raises serious questions about our industry’s approach to expansion planning.

Mozzarella Hits an Unexpected Speed Bump

While American cheese celebrates its resurgence, Mozzarella, the growth engine for U.S. cheese production in recent years, has hit turbulence. USDA data reveals that March 2025 saw Mozzarella output decline by 0.9% compared to March 2024, marking the first year-over-year decrease in 15 months. It’s a classic case of component stream diversion; processors are redirecting the solids-not-fat (SNF) in your milk toward products with stronger market pull.

This downturn is particularly striking given Mozzarella’s stellar performance throughout 2024, when manufacturers produced a record 4.6 billion pounds, bolstered by robust export demand. So, what’s changed?

In a word: pizza. Or more precisely, the lack of it being ordered by American consumers. The pizza restaurant category is experiencing a notable slump, with Pizza Today reporting that 61% of pizza chains saw year-over-year sales declines in early 2025. This contrasts sharply with other foodservice segments, such as coffee chains, where 88% of businesses recorded sales growth.

The numbers from major pizza players tell a sobering story:

• Domino’s Pizza: U.S. same-store sales declined 0.5% in Q1 2025
• Pizza Hut: Same-store sales plummeted 5%
• Papa John’s: North American comparable sales dropped 3%
• Little Caesars: While specific figures aren’t public (being privately held), industry trends suggest they’ve also experienced sales declines

The inconvenient truth is that we’ve built an entire industry sector on the assumption that Americans will always eat more pizza every year. It’s true that consumer demand inevitably shifts, and food industries must adapt accordingly. However, an over-reliance on a single, trend-sensitive downstream product like pizza for a major cheese category warrants a critical look at diversification strategies. How much longer can we afford to let consumer whims determine our profitability? And why aren’t we more aggressively pursuing alternative markets for Mozzarella beyond pizza?

American Cheese vs. Mozzarella: The Strategic Advantage Gap Widens

Look beyond the simple production numbers, and you’ll see a strategic recalibration happening across the cheese industry that has profound implications for dairy producers. Consider these critical differences:

This comparison underscores why processors shift milk component streams toward American cheese production. With better storability, stronger export demand, and less dependence on struggling foodservice channels, American-style cheeses currently offer a more stable and potentially profitable outlet for milk.

But let’s be brutally honest: many dairy producers have no idea whether their milk ends up as Cheddar, Mozzarella, or another product entirely. While some disconnection is inherent in our commodity-based system, this knowledge gap represents a strategic liability in today’s rapidly evolving market. How can you strategically position your operation when you’re blind to your milk’s ultimate destination?

Exports: No Longer Just a “Safety Valve”

If not for the extraordinary performance of U.S. cheese exports, the divergent production trends between American cheese and Mozzarella might have created severe market imbalances. U.S. Dairy Export Council data shows Q1 2025 witnessed record-breaking cheese exports, with volumes reaching 140,874 metric tons, an impressive 7.0% increase compared to the same period in 2024.

The primary driver behind this export surge is U.S. cheese’s remarkable price advantage in global markets. U.S. cheese prices have been consistently lower than those of international competitors since October 2024, creating compelling opportunities for overseas buyers. If you’ve ever watched your neighbor’s heifer sale attract buyers from three states away because his prices were 15% below market, you understand the pulling power of competitive pricing.

This price gap is substantial. In March 2025, Global Dairy Trade (GDT) Cheddar prices averaged around $4,976 per metric ton (approximately $2.25 per pound), while CME spot Cheddar blocks were trading around $1.82 per pound in early May. This 20-25% price advantage has made American cheese irresistible to international buyers.

January 2025 was particularly impressive with cheese exports jumping 22% year-over-year to 46,680 metric tons, setting a January record. The geographic diversity of these exports is remarkable:

• Japan: Cheese exports up 59% in January
• South Korea: Shipments jumped 34%
• Southeast Asia: Exports increased by 67%
• Middle East/North Africa: This region showed a 93% increase in January, with Cheddar in high demand

But here’s the uncomfortable question most industry analysts won’t ask: Why are we celebrating having to sell our cheese at a 25% discount to the rest of the world? While price competitiveness is necessary for market entry and expansion, it’s reasonable to question whether this discount level reflects a structural imbalance in our production capacity versus domestic demand. Shouldn’t we be concerned that we can only move our growing production volumes by being the cheapest option on the global market?

What This Means for Your Dairy Operation

Suppose you’re still operating under the assumption that the traditional domestic cheese market will always be there to absorb your milk at favorable prices. In that case, it’s time for a serious reality check. The USDA and market data make it clear: the U.S. cheese industry is undergoing a structural transformation, not merely experiencing a temporary market fluctuation.

Here are the implications you need to confront:

Component values are changing: American-style cheeses typically use different fat-to-protein ratios than Mozzarella, potentially affecting how components are valued in your milk check. The ideal casein-to-fat ratio for American cheese is around 0.64-0.69, while Mozzarella manufacturing targets a higher protein standardization at 0.80-0.85. Are you monitoring these shifts in component premiums, or are you still feeding on maximum volume rather than optimized components?

Quality matters more than ever: With exports becoming crucial to market balance, quality standards are tightening. The Bullvine’s February export analysis highlighted how processors facing strong export demand offer incentives for milk with specific characteristics that enhance cheese yields and quality. When did you last ask your field representative about quality bonuses for lower somatic cell counts, reduced psychrotropic bacteria counts, or optimal component ratios? These factors directly impact cheese manufacturing efficiency and could translate to premium opportunities.

Regional impacts will vary dramatically: If your operation is in an area heavily invested in Mozzarella production for foodservice, you might face more pressure than those in regions with diverse cheese manufacturing. Understanding your local processing landscape has never been more critical. Knowing your soil types determines your fertilizer program, and your processor’s product mix should inform your production strategy.

Federal Order implications could be substantial: The shift toward American cheese production could influence Federal Milk Marketing Order pricing over time, as Class III utilization rates increase in some markets. Depending on your order and utilization mix, this may affect your blend price and producer price differential (PPD). Are you paying attention to these utilization shifts, or do you only notice when your milk check drops?

Why Progressive Producers Are Already Adapting

Forward-thinking dairy farmers aren’t waiting for the market to dictate their fate; they’re actively repositioning their operations to capitalize on these emerging trends. Here’s what they’re doing that perhaps you should be considering:

For those supplying plants producing American-style cheese:

• Focusing on milk components that maximize cheese yield, particularly protein and fat levels
• Adjusting feeding programs to optimize casein-to-fat ratios that match their processor’s needs
• Implementing SCC reduction strategies to improve cheese quality and yield
• Exploring quality premiums related to export-oriented production
• Considering longer-term milk marketing contracts when processors are seeing sustained export demand

For those supplying Mozzarella-focused plants:

• Opening discussions with processors about their market outlook and potential shifts in product mix
• Reviewing milk quality metrics that specifically impact stretch properties for Mozzarella
• Evaluating alternative processing options that might offer more diversified production
• Looking for opportunities to differentiate milk based on components or quality metrics
• Considering risk management tools to protect against potential price volatility

But perhaps the most important question is this: Do you even know which category you fall into? Too many producers remain dangerously disconnected from understanding their milk’s ultimate destination. In today’s rapidly evolving market, that’s like driving blindfolded.

The Growing Global Reality You Can’t Ignore

Even if you’ve never contemplated exporting dairy products directly, international markets increasingly determine your milk’s value. USDA and USDEC data reveal these eye-opening facts:

• The U.S. became the world’s largest cheese exporter in 2024, shipping over 508,000 metric tons internationally
• Cheese exports now account for approximately 8% of U.S. cheese production and are growing rapidly
• For every 46,000 metric tons of cheese exported, approximately 1 billion pounds of milk equivalent stays in the value chain rather than depressing domestic prices

This export dependence creates both opportunities and risks. On the positive side, as the USDA’s 2025 Dairy Outlook indicates, it provides a crucial outlet for growing U.S. milk production. It helps prevent domestic oversupply, acting much like a relief valve on a milk pipeline. However, it also makes the U.S. dairy industry more vulnerable to global economic fluctuations, trade disputes, and currency movements.

Yet how many dairy producers regularly monitor international dairy markets? How many understand the impact of currency exchange rates on their milk check? How many can name the top three export destinations for U.S. cheese? The uncomfortable truth is that most producers focus purely on domestic conditions while their profitability increasingly hinges on global factors.

The Bottom Line: Time To Decide Where You Stand

The USDA’s Q1 2025 cheese production data reveals an industry at a crossroads. The era of relying purely on domestic consumption to absorb our growing milk production is over. The question is no longer whether exports matter-they clearly do-but rather how to position your operation to thrive in this new reality.

Here’s what you need to take away from these market developments:

1. The export market is no longer optional for balancing U.S. cheese production. The substantial new online processing capacity could lead to severe price pressure without strong exports. Yet how many dairy organizations and producers still treat international markets as an afterthought rather than a strategic priority?
2. Consumer trends can shift dramatically and have ripple effects throughout the supply chain. Pizza Today’s 2025 Trend Report demonstrates how quickly the ground can move beneath your feet. Are you monitoring these shifts or assuming today’s market conditions will persist indefinitely?
3. Your component strategy matters more than ever. With processors increasingly shifting between cheese types based on market signals, the value of your milk’s components will fluctuate accordingly. Are you still focused on maximizing pounds of milk rather than pounds of components?
4. New processing capacity has fundamentally altered market dynamics for years to come. USDA data confirms that the investments made in cheese plants influence milk flows and pricing structures well beyond 2025. Have you considered how these structural changes will impact your region specifically?
5. Dairy is irrevocably global, even for producers who never export directly. International price relationships, trade policies, and consumer trends all ultimately filter down to your milk check. How much time do you spend understanding these global forces compared to local conditions?

It’s time to choose: will you be a passive participant in this market transformation, or will you actively position your operation to capitalize on these emerging trends? The dairy producers who thrive in this new era will understand how to produce milk efficiently, where that milk is going, and how global markets value it.

Ask yourself: Are you still running your dairy operation like your father or grandfather did, assuming the market will always absorb your production? Or are you adapting your strategies to reflect the reality of today’s increasingly complex and globalized dairy landscape?

The time for complacency is over. The divergence between American cheese and Mozzarella production is the latest signal that the game’s rules are changing. Those who recognize these shifts and adapt accordingly will find opportunities where others see only challenges. Your next move should be to determine exactly where your milk is going, understand how it’s being valued, and align your production strategies accordingly.

Learn more:

• Cheese Yield Explosion: How Dairy Farmers Can Reclaim Billions in Lost Component Value – This article delves into the increasing component levels in U.S. milk and how that translates to higher cheese yields, questioning whether farmers are being fairly compensated for this added value, which is highly relevant to the main article’s discussion on shifting cheese production and milk component strategies.
• American Cheese Dominance: U.S. Dairy Exports Shatter Billion-Pound Barrier in 2025 – Given the main article’s emphasis on the critical role of exports for American-style cheese, this piece provides further context on the scale of U.S. cheese export success and the impact of processing expansion.
• Italian Cheeses Propel U.S. to Record 14.25B Pound Output – This article offers a contrasting perspective by detailing the record cheese production in 2024 driven by Italian styles like Mozzarella, setting the stage for the Q1 2025 shifts discussed in the main article where Mozzarella faced a slowdown.

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