Powder and cheese lifted the July 16 Global Dairy Trade auction, ending four consecutive declines. The weighted average of products offered jumped 2.7 percent, following a 0.4 percent loss on July 2, 3.8 percent on June 18, 3.4 percent on June 4, and 1.2 percent on May 21. Sellers brought 55.1 million pounds of product to the market, up from 54.5 million in the last event and the highest since Feb. 19.
All products traded were in the black, led by skim milk powder, up 3.8 percent, following a 3.2 percent rise last time. Whole milk powder was up 3.6 percent, after holding steady last time. This was the first positive move for whole milk powder in eight auctions. GDT Cheddar was up 3.3 percent, following three consecutive events of loss, down 1.5 percent on July 2. Butter and anhydrous milkfat were both up 1.7 percent, following losses of 4.8 and 1.9 percent respectively.
FC Stone equated the GDT 80 percent butterfat butter price to $1.9199 per pound U.S., up 3 cents from the July 2 event. CME butter closed Friday at $2. GDT Cheddar cheese equated to $1.7548 per pound, up 5.1 cents from the last event and compares to Friday’s CME’s block Cheddar at $1. GDT skim milk powder averaged $1.1365 per pound, and compares to $1.1020 last time. Whole milk powder averaged $1.3944, up from $1.3465 last time. CME Grade A nonfat dry milk closed Friday at $1 per pound.
FC Stone adds “While mounting concerns over fresh milk supply could be a factor, today it seems more of a U.S. issue. We can mount questions around supply of milk in Europe this summer or New Zealand this fall, but that doesn’t seem to be a diving factor at the moment. Instead, we surmise that the demand side of the equation, perhaps stemming from Asian protein replacement demand as continued Swine Flu issues mount, is a larger issue today.”
U.S. dairy exports set a record in 2018, with volume reaching 15.8 percent of U.S. milk solids production, well above the five-year average of 14.7 percent. But the U.S. Dairy Export Council estimates that they might have reached 17 percent, had the retaliatory tariffs not been in place. USDEC’s goal is 20 percent.
“Fortunately, the U.S. and Mexico have lifted their retaliatory tariffs, paving the way for Congress to ratify the U.S.-Mexico-Canada Agreement, a high priority for the U.S. dairy industry and all of U.S. agriculture,” says USDEC. “While talks between China and the United States are continuing, we are less than optimistic that we will see Chinese tariffs lift soon. Tariffs as high as 45 percent on U.S. dairy products and ingredients are having a negative effect.
Since the tariffs were enacted last July, the volume of combined U.S. dairy exports to China has dropped 43 percent compared to the same period of time before tariffs went into effect,” according to the USDEC.
The U.S. market however is chugging along irrespective of the tariffs and FC Stone’s Dave Kurzawski said in the July 22 Dairy Radio Now broadcast that, “The bigger story is the domestic bull market that is emerging for all dairy products.” He adds that “the roots are in languishing U.S. milk production,” which he blamed on the previous years of poor dairy prices and farms exiting the business.
“The U.S. market is trading on its own accord,” Kurzawski explained, and while he admits we want to look at exports and we know exports are important to the U.S. dairy industry long term, “the short term scenario is, it doesn’t matter what the butterfat price in Europe is doing, the U.S. butterfat price is going to do its own thing,” as will U.S. cheese and “the U.S, market is focused on the other 85% of the business, the domestic market.”
He admits some regions of the country are doing fine in milk output but rising temperatures could change that, plus “there’s lots of buyers for milk in the Midwest, they’re competing for that milk, and that’s going to continue for the next at least six months,” he concluded.
The Agriculture Department’s monthly Livestock, Dairy, and Poultry Outlook, issued July 17, mirrored milk price and production projections in the July 11 World Agricultural Supply and Demand Estimates report. The Outlook also stated “Based on May data, the forecast for the size of the milking herd for 2019 has been raised 5,000 head to 9.34 million. Based on recent milk yields, higher expected milk cow numbers, and higher feed price forecasts, the milk per cow forecast for the year has been lowered 10 pounds to 23,365. The overall milk production forecast for 2019 is 218.2 billion pounds, unchanged from last month’s forecast.”
“The forecast for the size of the milking herd in 2020 was unchanged at 9.355 million head. However, recent yield data and relatively high expected feed prices have motivated a slight decrease in forecasted yield per cow to 23,710 pounds.”
In politics, the National Milk Producers Federation marked the one-year anniversary this week of then-FDA Commissioner Scott Gottlieb’s famous observation that ‘almonds don’t lactate’ by reminding the agency “it still has not resolved the issue and that citizens who heeded its call for comments with thoughtful responses deserve answers.”
“An almond doesn’t lactate, I must confess,” Gottlieb said last July 17, admitting that FDA has been lax in enforcing its own rules on the use of dairy terms on products containing no dairy ingredients. “Have we been enforcing our standard of identity? The answer is, probably not,” he said, while pledging agency action in “something close to a year.”
“FDA’s longstanding inaction on enforcing its own standards of identity is perpetuating the marketing of products using milk and dairy terms when those products don’t match the nutritional content of the dairy products they are imitating,” said Jim Mulhern, president and CEO of NMPF.
“Dairy farmers have never called for bans on fake-food competitors, nor have they called for market censorship. They do want the FDA to enforce its own rules defining what a product is and what it isn’t, in keeping with similar standards enforced in other countries around the globe. The clock is still ticking. We are not going away,” Mulhern concluded.