Lee Mielke is a veteran dairy journalist and broadcaster, currently carried in a dozen Ag newspapers nationally. This column is prepared especially for the readers of DairyBusiness. Based in Lynden, Wash., he can be reached by email at [email protected] or by phone 360.201.4033.
U.S. milk output appears to be slowing but still topped a year ago for the 51st consecutive month, hitting a bullish 17.8 billion pounds in the top 23 states. That’s up just 1.5 percent from March 2017, according to preliminary data in the USDA’s latest Milk Production report issued last Friday afternoon.
The 50-state total, at 18.99 billion pounds, was up 1.3 percent. Revisions lowered the February estimate 12 million pounds to 15.9 billion pounds, up 1.8 percent.
First Quarter 50-State milk output hit 54.4 billion pounds, up 1.5 percent from a year ago, with the average number of milk cows at 9.41 million head, up 9,000 from the October to December period and 38,000 more than First Quarter 2017.
March cow numbers in the 50-states totaled 9.4 million head, virtually unchanged from February but 23,000 above a year ago. Output per cow averaged 2,019 pounds, up 22 pounds from a year ago.
California topped its year ago output for the third consecutive month, up a hefty 2.7 percent, despite a drop of 18,000 cows from a year ago. Output per cow was up 75 pounds. Weather kept Wisconsin output unchanged. Cow numbers were down 6,000 head but output per cow was up 10 pounds.
Weather likely impacted New York as well, down 1.2 percent on a 35 pound loss per cow, outweighing a gain of 3,000 cows. Idaho was up 4.0 percent, thanks to a 50 pound increase per cow and 9,000 more cows. Pennsylvania was off 0.3 percent on a 5 pound loss per cow. Cow numbers were unchanged. Minnesota was down 1.1 percent, on 5,000 fewer cows but output per cow was unchanged.
Michigan was up 0.8 percent on a 15 pound gain per cow and 1,000 more cows. New Mexico was up 1.9 percent on 7,000 more cows offsetting a 5 pound loss per cow. Texas keeps the tank full, up 4.8 percent, thanks to 11,000 more cows and 55 pounds more per cow. Vermont was down 1.7 percent on a 15 pound loss per cow and 1,000 fewer cows. Washington State was up 3.3 percent on a 50 pound gain per cow and 2,000 more cows milked than a year ago.
Dairy product inventories continued to grow in March but were close to expectations or a bit below. The Agriculture Department’s latest Cold Storage report pegs March butter stocks at 273.6 million pounds, up 7.8 million pounds or 2.9 percent from February, but revisions reduced the February total 11.2 million pounds. Stocks are just 1.1 million pounds or 0.4 percent above March 2017, but that is the fourth month in a row that stocks are above those a year ago.
American cheese hit 769.3 million pounds, up 6.5 million pounds or 0.9 percent from February, but 3.4 million or just under 1 percent below a year ago. That’s the first time they were below the prior year since April 2015.
The other cheese category grew to 529.2 million pounds, up 2.2 million pounds or 0.4 percent from February but 65.8 million or 14.2 percent above a year ago. The February total was revised up 3.6 million pounds.
The total cheese inventory stood at 1.33 billion pounds, up 10 million pounds or 0.75 percent from February and 65.4 million or 5.2 percent above a year ago.
Cash block Cheddar closed the last Friday of April at $1.62 per pound, up 1 3/4-cents on the week, 14 cents above a year ago, and 9 cents higher than it was on April 2. The barrels finished at $1.4875, down 1 1/4-cents on the week, 7 cents above a year ago, up 4 1/4-cents on the month, but 13 1/4-cents below the blocks. Six cars of block were sold on the week at the CME and 45 of barrel.
The cheese market tone remains uncertain, according to Dairy Market News. Cheese demand is generally unchanged and sales are reported as fair to slightly up week over week. With Midwestern weather warming and spring snowstorms recent history, cheesemakers are expecting sales to “move northerly as grilling season is getting its late launch.” But, spot milk prices remain discounted, ranging from $2 to $4 under Class III.
Western cheese makers report there is plenty of milk flowing through cheese vats. General interest from international buyers, looking for favorable price spreads, has aided movement of U.S. cheese into international markets.
FC Stone notes that USDA revised 2016 and 2017 dairy product production, raising 2017 Cheddar production by 156 million pounds. “That means Cheddar/American cheese domestic sales were very strong last year with American up 5.9 percent, which is the strongest growth in 17 years (since 1999).”
“It was looking like American sales were very strong in Jan/Feb this year, but with these upward revisions to last year’s production and sales, American disappearance in January was down 0.4 percent from last year while February was only up 1.9 percent,” FC Stone says. I’ll have more highlights next week.
Cash butter climbed to $2.38 per pound Thursday but saw a Friday close at $2.36, 4 1/2-cents higher than the previous week and 25 1/2-cents above a year ago, with a whopping 87 carloads exchanging hands on the week.
“World markets are cause for conversation amongst butter producers and analysts in the Central U.S.,” says DMN. “One reason is a top butter exporting country, New Zealand, has experienced milk output declines due to dry weather. Another talking point is that milkfat shortages continue worldwide. There is some uncertainty as to how, or if, U.S. producers will attempt to fill that breach.”
Cold storage figures are another sign of strength, according to contacts. “Undoubtedly, market bulls are aware of the news as CME prices have topped $2.30 since the middle of last week,” says DMN.
Spot Grade A nonfat dry milk continued the previous week’s rally, skyrocketing to the highest price since September 2017; 84 1/4-cents per pound, 3 3/4-cents higher on the week, just 2 1/2-cents below a year ago, but 15 1/4-cents higher on the month, with 67 carloads sold on the week.
DMN says “The change in the prices of nonfat dry milk is astonishing to many industry players,” as supplies are “overflowing and production is very active.” “Others explain the upsurge in prices by the fact that higher international prices are boosting U.S. export demand.”
Spot dry whey closed Friday at 31 cents per pound, down a half-cent, with nothing traded on the week at the CME.
Product keeps moving offshore through Cooperatives Working Together (CWT) which accepted 12 requests for export assistance this week from member cooperatives to sell 881,849 pounds of Cheddar and Monterey Jack cheese, and 2.547 million pounds of butter to customers in Asia, Europe, and the Middle East.
So, lights are appearing at the end of dairy’s dark tunnel. The April 17 GDT auction was up 2.7 percent and February dairy exports and domestic commercial disappearance was encouraging. FC Stone dairy broker, Dave Kurzawski, stated in the April 23 Dairy Radio Now broadcast that “It’s all about demand. That’s what’s going on,” but he cautioned against focusing on supply because “we’re starting to get some really good data on the demand side of the equation.”
April data was also looking good, he said, though he admitted there still are some “dark clouds,” with respect to the talk of trade wars and ending NAFTA. He mentioned the mid-year election in Mexico where a populist candidate is leading in the polls, and said “that could be a problem for NAFTA.”
“If you look at the back half of 2017, if you strip out Chinese demand from overall world dairy demand, demand was down 2.7 percent,” he said. “Chinese demand really pushed that into positive territory.
They have been a big buyer but, with the strong (global) economic growth we’ve seen, we can’t expect to see demand be as poor as it was in the second half of last year. I think that’s going to keep our prices buoyant and probably mean some better money coming back to the producers,” he concluded.
Down on the farm; the USDA’s latest Crop Progress report shows that 5 percent of the corn crop is in the ground in the top 18 producing states, as of the week of April 22. That compares to 15 percent a year ago and 14 percent in the five year average. The report also shows 2 percent of the soybeans have been planted in the top 18 states, down from 5 percent a year ago and even with the five year average. And 9 percent of the cotton is planted, down from 11 percent a year ago and 1 percent behind the five year average.
“While Wisconsin producers embark upon the lengthy process of assessing damages and rebuilding,” the ADC stated, “Wisconsin Governor Scott Walker and his administration are collecting data to determine what state and federal response options are available to assist Wisconsin’s livestock farmers.”
In the week’s dairy politics; the National Milk Producers Federation (NMPF), the U.S. Dairy Export Council (USDEC), and the Consortium for Common Food Names charged in a joint press release that “Mexico appears poised to enact new restrictions on the use of common cheese names such as ‘parmesan,’ ‘munster’ and ‘feta’ for products sold in Mexico, a development that runs counter to existing trade agreements with the United States, according to preliminary reports on the European Union (EU)-Mexico free trade agreement.”
“Full details of the agreement have not yet been released, but early information indicates Mexico will force cheese marketers from Mexico and the United States to phase out the use of some generic names, yielding to the EU’s desire to monopolize those cheese markets.”
Editor and analyst of the Dairy and Food Market Analyst newsletter, Jerry Dryer, called the situation serious in the April 30 Dairy Radio Now broadcast, and said “It’s an attempt by the Europeans to block us from making and marketing Parmesan and other cheeses that have their roots in Europe.” He said we’ve successfully negated the threat in some other trade negotiations but this issue may have to go to the World Trade Organization to get resolved.
But, the bigger issue in this EU-Mexico trade agreement, according to Dryer, is the fact that the Europeans have gained the right to ship 50,000 metric tons of nonfat dry milk into Mexico in direct competition with the U.S. That’s equal to about 20 percent of the NFDM we annually export to Mexico, he said, “So we could see a 20 percent whack in our ability to ship powder to Mexico.” Currently, U.S. powder exports to Mexico represent about a third of U.S. NFDM production.
When asked how the EU can compete with the U.S. due to our proximity, Dryer answered, “The Europeans will sell nonfat dry milk powder at whatever price it takes to get it off their books,” adding that they have almost a billion pounds of surplus in storage right now.
Dryer emphasized the importance of “solidifying our relationships with our Mexican customers in a major way and hope that the White House doesn’t offend them yet again over some other crazy issue.”
Speaking of the importance of names, U.S. Food and Drug Administration Commissioner Scott Gottlieb told a Senate panel on Tuesday that federal standards define milk as a product sourced from animals. He said his agency would be “taking a very close and fresh look” at imitation, plant-derived foods labeled with dairy-specific terms.
In response to questions from Senator Tammy Baldwin (D-WI) during a Senate Appropriations Committee hearing, Dr. Gottlieb also admitted that the agency has “exercised enforcement discretion” in not holding food marketers to that standard, as a variety of plant-based foods using dairy-specific terms have proliferated in the marketplace in the past two decades.
NMPF President and CEO Jim Mulhern said that the FDA “must stop turning a blind eye toward violations of food labeling laws. It needs to use more enforcement, and less discretion, as dozens of brands flagrantly violate government requirements.”
A NMPF press release stated that the Federation has “repeatedly urged federal regulators to enforce U.S. food labeling laws that exclude the ability of plant-derived foods from using the term, as do other nations that also have regulations clearly defining milk.
Lastly, NMPF, USDEC, and the International Dairy Foods Association this week commended a bipartisan effort of 68 members of Congress who “encouraged the U.S. Trade Representative to eliminate Canada’s tariffs on U.S. dairy exports and its protectionist pricing policies during the North American Free Trade Agreement (NAFTA) negotiations.”
“The bipartisan coalition of members of Congress, representing states on both coasts and in the Midwest, sent a letter to Ambassador Robert Lighthizer, urging him to demand an end to Canada’s trade-distorting Class 7 pricing program, as well as its dairy tariffs, which have created an unfair playing field and essentially eliminated U.S. exports of certain dairy products,” the press release stated.