The Agriculture Department’s February Cold Storage report shows dairy product inventories are plentiful but not overly burdensome. Feb. 28 butter stocks totaled 242.5 million pounds, up 31.3 million pounds, or 14.8 percent, from January but 23.3 million, or 8.8 percent, below February 2018.
American type cheese, which includes Cheddar, slipped to 785.6 million pounds, down 18 million pounds, or 2.2 percent, from January, the largest January-to-February decline in 25 years, according to the Daily Dairy Report’s Sarina Sharp, but 22.8 million pounds, or 3 percent, above a year ago.
The “other” cheese category hit 553.4 million pounds, up 16.8 million pounds, or 3.1 percent, from January and 26.3 million, or 5 percent, above a year ago. That put the total cheese inventory at 1.37 billion pounds, up 570,000 pounds, virtually unchanged from January but 52.4 million pounds, or 4 percent, above a year ago and the 52nd consecutive month stocks topped a year ago.
Revisions added 11.3 million pounds in the “other” cheese category for January and put total cheese at 1.37 billion pounds, up 9.6 million pounds from the preliminary report.
FCStone’s Dave Kurzawski warns that “although American cheese holdings saw a nice drawdown in February, it’s the increase in Italian style (mostly mozzarella) holdings that have us concerned. Our estimated domestic mozzarella sales were very strong during the second half of 2018 and that was helping to keep milk out of Cheddar/American production. But it looks like those sales had slowed in January and it now looks like February was slow, as well. If mozzarella sales remain weak, it could push more milk back toward Cheddar production in coming months, which would be bearish for prices.”
The DDR’s Sarina Sharp wrote in the March 22 Milk Producers Council newsletter that “firm demand, slowing global milk output and tightening stocks suggest that the worst of the dairy downturn is finally in the rear-view mirror. Near-term milk prices are far from exciting, but they are much better than where they were. Given the depth of the pain the industry has suffered over the past four years, the upcoming rally is likely to have considerable staying power. Dairy producers simply lack the appetite and the equity to significantly expand as milk prices recover,” Sharp concludes.
Kurzawski echoed some of that positive sentiment in the April 1 Dairy Radio Now broadcast, and it was no “April Fool’s joke.”
He reported that January exports of U.S. Cheddar cheese were up 57.3 percent from January 2018, though mozzarella exports were a little weaker than a year ago, but blamed existing tariffs as part of the reason as “certain cheeses going to Mexico are dinged a little higher.”
“The overall takeaway,” says Kurzawski, “is that demand in January was quite robust for cheese and probably worked its way in part to the U.S. spot cheese market rally that we have seen over the past couple weeks.”
Butter exports were also strong, up 13.7 percent, but nonfat dry milk was off almost 2 percent. He quickly added that he expects those exports to increase once we get past the second quarter.
The other factor is that imports were down: “We took in less in the U.S. and we’re exporting a little bit more,” he said, “The net effect is increased milk prices.”
As to where the top is in cheese prices, Kurzawski hesitated but warned that we could see some price weakness going into April because “there is some cheese out there and some milk, but cull rates are really strong and the milk is probably not going to be as robust in the second quarter as we have seen in previous years.” He pointed to the tremendous financial strain on dairy farmers, concluding, “There’s milk right now, but that’s a limited view.” He believes the second half of 2019 “could show some sustained higher prices for cheese and possibly for butter and powder, as well.”
Strong milk production is filling cheese vats, says DMN, but “the new federal milk market order in California is reshuffling how milk flows into manufacturing facilities. Some plants are holding back on production, while others are shifting production away from American-style cheeses. In some cases, cheesemakers are switching some production to other natural cheeses or specialty cheeses. In other cases, the manufacturer is diverting milk into other dairy product processing altogether. The net effect is less cheese being made in the state and more butter and milk powder.”
The U.S. largest dairy cooperative, Kansas-based Dairy Farmers of America, announced that it will begin trading on the Global Dairy Trade. GDT Director of Global Dairy Trade Eric Hansen stated: “We are delighted to have a seller of DFA’s magnitude join GDT Marketplace. The platform has over 400 registered buyers and has completed over 8,500 listings across a broad range of dairy ingredient products. It’s great to see this highly credible seller creating further opportunities for buyers to browse and purchase quality products.”
Dale Mills Jr., vice president of sales at DFA, said, “We’re excited to be partnering with GDT Marketplace as an innovative way for our top-quality ingredients to reach new markets and increase brand awareness for our U.S. farmer-owners.”
DFA traded products include anhydrous milkfat, cheese, milk protein concentrate, nonfat dry milk, skim milk powder, sweet whey powder and whole milk powder.
While the future of President Trump’s U.S.-Mexico-Canada free trade agreement remains uncertain in a divided U.S. House of Representatives, the Toronto-based North American affairs manager of the Consumer Choice Center, David Clement, called on the Canadian government to give it a thumbs down.
A CCC news release stated: “The federal government’s 2019 budget has allocated $3.9 billion in support for Canada’s supply managed industries (dairy, poultry and eggs). Specifically, the bailout is supposed to help supply-managed farmers deal with increased competition as a result of Canada’s trade deals.”
Clement called the multibillion dollar bailout “a slap in the face for consumers, and for taxpayers. Supply management is a heavily regressive policy that inflates prices to the point where it costs Canadian families up to $500 more per year for groceries. We know that these artificial prices push nearly 189,000 Canadians under the poverty line, and we know that the best peer-reviewed research out there states that eliminating supply management would be a net benefit for Canadian consumers and Canadian farmers. It is unfortunate that Budget 2019 makes maintaining supply management significantly worse by devoting taxpayer funds for an industry that is already heavily protected from competition. The bailout is nothing more than corporate welfare, ripping Canadians off as consumers and as taxpayers,” Clement said.