Bleeding in the world dairy market slowed a bit in the July 17 Global Dairy Trade auction (GDT) which saw its weighted average slip 1.7 percent, following the 5.0 percent drop July 3. This was the fourth consecutive session of decline.
    Rennet casein led the declines, down 9.5 percent. Butter dropped 8.1 percent, following a 4 percent decline last time, and anhydrous milkfat was down 5.2 percent, following a 1.7 percent decline. Cheddar was off 3.3 percent after dropping 4.3 percent in the last event.
    Again, only two offerings were to the positive, the ones that led the declines last time. Whole milk powder was up 1.5 percent, following a steep 7.3 percent drop last time, and skim milk powder was up 0.8 percent, after falling 4.6 percent.
    FC Stone equates the GDT 80 percent butterfat butter to $2.1920 per pound U.S. CME butter closed Friday at $2.25. GDT Cheddar cheese equated to $1.6312 per pound U.S. and compares to Friday’s CME block Cheddar at $1.52. GDT skim milk powder averaged 88.85 cents per pound and whole milk powder averaged $1.3485. CME nonfat dry milk closed Friday at 78 1/2-cents per pound.
    The GDT Oversight Board announced that it approved two rule changes to “encourage a wider range of sellers to offer dairy ingredients on the auction platform, with the goal to expand the breadth of regional published prices.”
    Global trade turmoil remains in the spotlight and FC Stone’s Arlan Suderman wrote in his July 16 Morning Commentary that “Europe and Japan have signed a trade agreement to fight against the protectionist efforts of the United States, failing to mention protectionist efforts of their own in recent decades.” He talked of the “battle of public opinion and political persuasion, with most countries decrying protectionism while fully engaged in the same, and aggressively so.”
    FC Stone’s Dave Kurzawski, in the July 23 Dairy Radio Now broadcast, said the ultimate question is, “Are we in this to build walls and barriers to slow global trade or expand it?” He said our actions right now appear to want to minimize global trade, which would be troubling for U.S. agriculture.
    “One thing is clear,” he said, “The U.S. has no trade agreement with Japan and it looks like all the other major exporters now have at least some advantage, or will have an advantage, in the coming years.” Suderman adds that “Few countries are willing to fully eliminate tariffs and other protectionist mechanisms, although most want you to believe that is precisely the environment in which they operate.”
    Kurzawski sees the Administration’s actions as an exertion of power and leverage to “essentially better our place at the negotiation table and although things over the past eight weeks have been fairly grim as far as the trade wars are concerned, and it may still get worse before it gets better, but I do think there’s a light at the end of the tunnel.”
    Back on the home front; the Agriculture Department’s latest Livestock, Dairy, and Poultry Outlook, issued June 18, mirrored dairy projections in the July 12 World Agricultural Supply and Demand Estimates report. It also stated that “With lower expected milk prices, milk cows are expected to average 9.395 million head in 2019, a year-over-year contraction of 10,000 head. Yield per cow was forecast at 23,170 pounds in 2018 (15 pounds less than last month’s forecast) and 23,475 pounds in 2019 (20 pounds less than last month’s forecast).”
    “Feed price estimates for 2017/18 for corn and soybean meal were lowered from last month to $3.30-$3.50 per bushel and $350 per short ton, respectively. The alfalfa hay price in May was $189 per short ton, $6 higher than April and $32 higher than May of last year. The average corn price for 2018/19 was projected to be $3.30-$4.30 per bushel, 10 cents lower than last month’s forecast at the midpoint. The 2018/19 average soybean meal price was projected at $315-$355 per short ton, $15 lower than last month’s forecast at the midpoint.”
    Meanwhile; dairy margins were lower the first half of July, as trade tensions continue to batter milk and feed prices, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    “Deteriorating milk prices across the board eclipsed favorable movement lower in corn and meal,” the MW stated. “July brought Chinese tariffs of 25 percent on a multitude of U.S. dairy imports, as well as a further phasing in of Mexican tariffs on U.S. cheese imports. Unfortunately, there are not any reported talks on either front. President Trump however did announce a proposal to add a 10 percent tariff on $200 billion worth of Chinese imports. The proposal will have hearings in late August and a two-month review after that, perhaps giving time for a resolution to be hammered out prior to further escalations. China did not answer the new proposal with specifics, but did promise future action,” the MW states.
    The Agriculture Department’s latest Livestock Slaughter report shows that dairy cow culling dropped in June May but remained slightly above a year ago. An estimated 237,500 head were slaughtered under federal inspection, down 7,600 head from April but 800 above a year ago. A total 1.57 million head were culled in the first six months of the year, up 73,300 head or 4.9 percent from 2017.
    The August Federal order Class I base milk price was announced by the USDA at $14.15 per hundredweight, down $1.21 from July and $2.57 below August 2017. It is the lowest August Class I price since 2009’s $10.04 and equates to $1.22 per gallon, down from $1.44 a year ago. The eight month average is at $14.54, down from $16.37 a year ago and compares to $14.10 in 2017.
    Speaking of fluid milk; while the April uptick in sales ended 10 months of consecutive declines, it was short-lived. After inching up 0.4 percent, the latest tracking put fluid sales at 3.93 billion pounds, down 3.2 percent from May 2017.
    Conventional product sales totaled 3.7 billion pounds, down 3.2 percent from a year ago. Organic products, at 219 million pounds, were down 3.2 percent and represented about 5.6 percent of total sales for the month.
    Whole milk sales totaled 1.2 billion pounds, up 0.4 percent from a year ago, up 2.4 percent year to date, and made up 31.3 percent of total fluid sales in the month and 31.1 percent for the year so far. Skim milk sales, at 325 million, were down 7.8 percent from May 2017 and down 9.2 percent year to date.
    Total packaged fluid milk sales in four month period climbed to 19.8 billion pounds, down 1.7 percent from the same period a year ago.
    Conventional products year to date totaled 18.7 billion pounds, down 1.8 percent; organic products, at 1.1 million pounds, were up 0.1 percent. Organic represented about 5.5 percent of total fluid milk sales January through May.
    The figures represent consumption of fluid milk products in Federal milk order marketing areas and California, which account for approximately 92 percent of total fluid milk sales in the U.S.
    A rose by any other name is still a rose but not milk and the dairy industry has been working hard to halt the use of that name by plant-based beverages. Enter the Trump Administration into the fray.
    U.S. Food and Drug Administration (FDA) Commissioner Scott Gottlieb told a July 17 audience at a Politico Pro Summit in Washington that the FDA will begin enforcing regulations that define milk as an animal product, not a plant-based food.
    One of the leaders of the fight, the National Milk Producers Federation’s (NMPF), praised the decision, stating in a press release that “requests for action by the agency are being heard.”
    The American Dairy Coalition (ADC) also praised the decision, stating; “In over 200 countries across the world, plant-based juices are not allowed to call their product “milk” on labels unless they are, in fact, derived from a mammal.”
    ADC CEO Laurie Fischer stated; “As we see dairy farmers across the U.S. suffering with low milk and other commodity prices, tariff uncertainty and lack of reliable labor force, this news provides a positive movement in the dairy industry.
    After acknowledging that “an almond doesn’t lactate,” Dr. Gottlieb said the agency will soon will seek public input as a prelude to enforcing existing regulations on dairy labeling standards.
    NMPF CEO Jim Mulhern charged; “After years of inaction in response to our complaints about these labeling violations, Dr. Gottlieb’s announcement is very encouraging. The marketing of non-dairy imitators must comply with federal standards of identity, and consumers should not be misled that these products have the same nutrition as real milk, yogurt, cheese and other dairy products.”
    NMPF wrote to Gottlieb last year to complain that the agency has not been enforcing labeling standards, pointing out that FDA’s lack of action “has led to rampant consumer fraud related to the inferior nutrient content of these non-dairy products compared to their true dairy counterparts.” Mulhern adds that “in addition to fake “milks,” there also are a proliferation of products calling themselves “yogurt,” “cheese,” “ice cream” and “butter.”
    Mid-July cash dairy prices were mixed as traders absorbed the week’s GDT and anticipated Friday afternoon’s June Milk Production report and Monday’s June Cold Storage data, which I will detail next week.
    The Cheddar blocks closed the third Friday of the month at $1.52 per pound, down 4 cents on the week and 18 3/4-cents below a year ago. The barrels finished 15 1/4-cents lower at $1.27, 14 cents below a year ago and 25 cents below the blocks. A fluctuating price gap is apparently becoming the new norm in this market. 7 cars of block sold on the week at the CME and 41 of barrel.
    FC Stone’s Dave Kurzawski wrote in his July 18 Early Morning Update that “There is still fear being baked into the market with the trade war uncertainty. If mozzarella exports continue to slow down we can expect more barrels being offered on the market which explains why we have such a large spread of plus 15 cents between blocks and barrels. Also, freight continues to be a huge issue for moving dairy commodities around the country in the past year. Moving barrels from Idaho eastward to where the demand is has been much more costly and can be another explanation why we have such a large spread.”
    Dairy Market News says that some barrel producers are reporting slow sales this summer, leading to inventory management concerns. That said, a number of other varietal cheesemakers are seeing steady to increasing sales as the summer progresses. Spot milk prices were mostly up on the week but there were some loads as low as $4 under Class III. The active spot milk trading range is between 50 cents under to $1.00 over Class. Cheese production varies by plant, but a growing number of Midwestern cheesemakers are allotting days off as milk becomes less available.
    Western cheese makers report domestic demand has been lackluster and disappointing. And while export cheese demand has been stable, issues with our largest trading partners have battered U.S. cheese sales and other countries are entering into trade agreements with competitors while stockpiles grow here. Milk intakes are tightening, says DMN, but manufacturers have plenty to feed an already active cheese production system. Contacts hope that domestic food service cheese demand can reenergize as processors prepare for a new school year and for the pizza season to come.
    Spot butter closed Friday at $2.25 per pound, up 2 1/2-cents on the week but 33 1/2-cents below a year ago, with 8 carloads trading spaces on the week.
    Cream in butter churns became a Central region rarity the week of July 16, according to DMN, and as cream prices continue their upward climb, butter churners are taking a step back from the market. Some are returning cream to the spot market in lieu of churning. GDT index results were bearish on the butter side, but domestic markets continue to stand their ground, says DMN.
    Western butter stocks are heavy, and some butter makers are more than happy to sell excess cream rather than churn. Butter inventories have grown seasonally to the point of meeting most near-term needs. Contacts say that heat and summer vacations are cutting into retail sales, but food service demand is strong. Some processors report sales to international markets have become more difficult as the gap between domestic and international butter prices has shrunk.
    Grade A nonfat dry milk ended the week at 78 1/2-cents per pound, up 3 cents but 8 3/4-cents below a year ago, with 13 cars exchanging hands on the week.
    Dry whey closed Friday at 42 cents per pound, up a quarter-cent on the week.
    The June Consumer Price Index for all food is 253.2, up 1.4 percent from 2017. The dairy products index is 216.1, up 0.4 percent. Fresh whole milk was down 2.1 percent; cheese, up 2.0 percent; and butter, was up 2.8 percent.
    Lastly in politics, in a procedural move on July 18, the House approved a motion to appoint conferees to meet with Senate counterparts to hammer out a final Farm Bill. The Senate is expected to do likewise next week. There are some differences to reconcile between the two versions, including the dairy title’s safety net, so the Compromise Committee will have its work cut out for it.