Global trade took the spotlight the first full week of August as President Donald Trump announced the addition of 10 percent tariffs on another $300 billion in Chinese imports to the U.S., effective Sept. 1. China responded by letting its yuan value tumble and state-owned companies ceased purchases and imports of U.S. agricultural products.

Meanwhile, butter’s woes continue and were a part of the downturn in Tuesday’s Global Dairy Trade auction. The weighted average of products offered fell 2.6 percent, following a short lived 2.7 percent “recovery” on July 16. That followed four previous declines. Sellers brought 77.1 million pounds of product to the market, up from 55.1 million in the last event and the highest since Dec. 18, 2018.

Just as all products offered in the last event were in the black, all were down this week, led by lactose, down 11.5 percent and buttermilk powder, down 5.6 percent. Neither traded in the last event. Butter was down 5.5 percent, following a 1.7 percent gain last time and anhydrous milkfat was down 5.1 percent, after it also gained 1.7 percent last time. GDT Cheddar was down 2 percent, following a 3.3 percent rise, whole milk powder was off 1.7 percent, following a 3.6 percent rise, and skim milk powder was off 1.6 percent, following a 3.8 percent climb. Rennet casein was off 1.3 percent after falling 3.4 percent last time.

The U.S. Dairy Export Council reports that “Lost sales to China due to retaliatory tariffs and African swine fever, plus strong competition elsewhere from European and New Zealand suppliers, resulted in lower U.S. export volume in the first half of 2019. Shipments of milk powders, cheese, butterfat, whey products and lactose were 1.0 million tons, down 14 percent from last year’s record pace. Exports of these major products to China were down 54 percent, while sales to other markets were up 5 percent.”

“Overall value of U.S. dairy exports reached $2.95 billion in the first half, up for the third straight year. Suppliers saw notable gains in sales value to Mexico, Southeast Asia, South Korea, Canada and South America, offsetting a large decline in sales to China.”

HighGround Dairy warned that “While exports have been weak, so has the availability of incremental milk for processing, which led to counter-seasonal stock drawdowns in cheese into summer. Domestic demand for butter and cheese will rise into the coming months and will help offset the slower movement of export volumes across the dairy sector, creating a tighter atmosphere for fat and protein in fourth quarter. However, the long-term outlook is bearish as domestic commodity prices for cheese/butter are not competitive, and both Oceania and EU slowly take on the lost US market share into China, which is soon becoming an irreversible trend as the trade war worsens.”

The Consorzio Tutela Mozzarella di Bufala Campana, the U.S. Dairy Export Council and the Consortium for Common Food Names signed an historic agreement Aug. 5 that is expected to “pave the way for a new dialogue on the protection of products of origin in the United States and in global markets, including those bearing geographical indications, while respecting the rights of companies to produce and market products bearing generic names.”

A press release posted on the USDEC website stated “The new agreement provides greater support for robust protection in the United States and around the world for the Mozzarella di Bufala Campana Protected Designation of Origin, while unequivocally establishing the free use of the generic term ‘mozzarella’ to indicate a type of cheese.”

“The agreement recognizes the distinctive character of the name Mozzarella di Bufala Campana PDO and its territory of production. It also recognizes the rights of all to freely use the term ‘mozzarella’ to describe a cheese produced according to the definition provided by the Codex Alimentarius or the U.S. Food and Drug Administration Standards of Identity.”

U.S. dairy margins improved over the second half of July as feed costs eased while milk prices were mostly flat, according to the latest Margin Watch from Chicago-based Commodity & Ingredient Hedging LLC.

The MW states “While milk prices have traded steady, the market maintains a firm fundamental undertone.”

“USDA reported June milk production at 18.2 billion pounds, 0.3 percent less than a year ago, with a further 10,000 head decline in the milking herd from May to 9.323 million which is also 91,000 fewer cows than last year. The semi-annual cattle inventory report also shed more light on the contraction in the U.S. dairy cow herd. As of July 1, there were 9.3 million dairy cows compared to 9.4 million last year, and milk cow replacements fell 2.4 percent to 4.1 million head versus 4.2 million a year ago. This is the first time the heifer replacement inventory has dropped since 2012 and only the fourth time over the past two decades.”

“USDA’s FAS also released their Dairy World Markets and Trade report, which decreased its 2019 milk production estimate in selected countries. While FAS still expects combined production from the major dairy exporters to be up 0.5 percent from last year that is down from its December forecast for growth of 1.5 percent year over year. At the same time, FAS also raised its forecast for world consumption of fluid milk, cheese and butter. Meanwhile, improving weather forecasts for the Corn Belt have taken some risk premium out of the feed markets recently with fund liquidation pressuring corn and meal,” the MW concludes.

Dairy Market News reports that spot milk offers are few and far between for Midwestern cheesemakers. Some contacts relay milk loads are headed east. Loads ranged from Class to $1.50 over Class III. Cheesemakers are limiting production but order reports are seasonally stable. Some specialty cheesemakers suggest summer demand has been stronger than average. Curd and barrel producers say demand has been noticeably stronger both this and last summer. Market tones are “fair.”

There’s still plenty of milk in the west for making cheese. Sales are generally active but not very strong, according to DMN. Some manufacturers are heavily promoting, hoping it will help increase sales. Recent trade agreements between the EU and other global cheese markets are a cause of concern for U.S. producers as international market shares might be affected. Inventories have remained under control and the market undertone is steady compared to the previous week.