Cash dairy markets mixed amid trade turmoil
Cash dairy markets weakened last week, perhaps over trade and political concerns, but they rallied as the first week of June Dairy Month progressed.
Block Cheddar dipped to $1.5750 per pound last Tuesday but closed Friday at $1.6350, up 3 3/4-cents on the week and a half-cent above a year ago. The barrels finished at $1.5650, up 4 1/2-cents on the week and 15 cents above a year ago.
Monday’s trading left the blocks and barrels unchanged but Tuesday inched the blocks a half-cent higher to $1.64, while the barrels rolled 2 1/2-cents lower to $1.54, a dime below the blocks.
Spot milk remains discounted for Class III producers, according to Dairy Market News, ranging from $1.50 to $4 under Class. Cheese production is steady to increasing, but lighter demand may reverse that. Demand remains slow to steady, depending on variety and destination. Some Midwest cheesemakers point to Mexican tariffs as a potential cause for concern, while suggesting effects may not be felt until later in the year.”
Western cheesemakers report “customers are making regular draws, but not asking for more right now. The unofficial start to summer passed and grilling season is upon the nation.
However, terms are ending for the school year and food service demand is shifting. Contacts hope export demand continues to grow, but some have lingering concerns about trade discussions, potential tariffs, currency rates, shipping and other trade issues.”
Cash butter saw a Friday close at $2.39 per pound, up 1 1/4-cents on the week but 8 1/2-cents below a year ago.
The butter was unchanged Monday but gave back 2 cents Tuesday, slipping to $2.37.
Cream remains fairly tight for some upper Midwest butter makers though bulk butter is very available, particularly from the West.
Western output is following seasonal norms as cream continues to be readily available. Inventories are growing. Domestic demand is strong and orders from the international market were steady compared to the previous week.
Grade A nonfat dry milk closed Friday at 80 1/2-cents per pound, down 2 cents on the week and 10 1/4-cents below a year ago.
Monday’s powder was down 1 1/4-cents and lost a half-cent Tuesday, dipping to 78 3/4-cents per pound, lowest CME price since April 18, 2018.
The spot’s new dry whey market hit 41 1/4-cents per pound Friday, up 2 3/4-cents on the week and the sixth consecutive week of gain, with 5 cars finding new homes last week.
It inched a half-cent higher Monday and stayed at a record high 41 3/4-cents per pound on Tuesday.
History was made in the historic meeting between North Korea’s Kim Jong Un and President Trump, but who would have thought that dairy pricing would get the attention it received after the meeting of the G-7 nations in Quebec last week?
World trade is in reactionary mode following President Trump’s announced retaliatory tariffs. You’ll recall in March he increased tariffs on U.S. imports of steel and aluminum but gave temporary waivers to several countries including the EU, Canada and Mexico. He threatened to end the waivers if a new NAFTA wasn’t renegotiated by June 1. That didn’t happen, hence he acted accordingly and Canada’s quota supply management program is a big part of the controversy, though most of the attention is on Mexico, our biggest dairy customer.
Mexico retaliated by raising tariffs on a number of U.S. products, including a 20 percent tariff on U.S. pork imports, apples and potatoes and 20 to 25 percent tariffs on various cheeses and bourbon, effective July 5, 2018.
The controversy, ironically, comes at a time that U.S. dairy exports are doing very well. HighGround Dairy’s Lucas Fuess, in the June 11 “Dairy Radio Now” broadcast, reported that “all products posted higher exports versus prior year levels and 2018 is shaping out to be a record year for U.S. dairy exports.”
Nonfat dry milk posted another record high, he said, third month in a row powder exports set a new record. Nonfat dry milk exports were up 17.7 percent from March, which itself was a record export month. Nonfat dry milk exports to Mexico were up 28 percent versus 2017 and accounted for a 41 percent market share.
“If we can maintain these exports, coupled with strong domestic demand, it will be good overall for the market but any drop in export volumes coupled with higher milk supplies that continue in the U.S. will pressure prices in a negative way,” he warned.
California’s July Class I milk price was announced at $16.86 per hundredweight for the north and $17.13 for the south. Both are down 33 cents from June, $1.59 below July 2017, and reverse three months of gain.
The seven-month average stands at $16.12 for the north, down from $17.77 a year ago and compares to $15.37 in 2016. The southern average, at $16.39, is down from $18.04 a year ago and compares to $15.64 in 2016.
Only three more Class I announcements will come under California’s longstanding state order as dairy producers have voted to join the Federal Milk Market Order system.
The Agriculture Department therefore announced June 7 that the nation’s largest milk producer will become part of the Federal Milk Marketing Order. The new order will be officially be implemented on Oct. 17, when USDA releases the November Class I base milk price.
The Agriculture Department again lowered its 2018 milk production forecast in Tuesday’s World Agricultural Supply and Demand Estimates report on slightly lower cow numbers and slower expected growth in milk per cow. No change was made to the annual cow herd for 2019, but the milk production forecast for 2019 was also lowered from last month on continued slow growth in milk per cow.
2018 production and marketings were projected at 218.0 billion and 217.1 billion pounds respectively, down 700 million pounds from last month’s estimate on production and down 600 million pounds on marketings. If realized, 2018 production would be up 2.5 billion pounds or 1.2 percent from 2017.
2019 production and marketings were estimated at 221.1 billion and 220.1 billion pounds respectively, down 400 million pounds on both. If realized, 2019 production would be up 3.1 billion pounds or 1.4 percent from 2018.