This week’s Global Dairy Trade auction saw its weighted average of products offered move higher for the third consecutive session, up 0.5% following a 0.2% rise October 1 and the 2.0% jump on September 17.
    Rennet casein led the charge, up 3.6%. Skim milk powder was up 2.4%, after a 2.7% rise, and anhydrous milkfat was up 0.8%.
    GDT Cheddar again led the losses, down 2.2%, following a 3.4% dip. Butter inched 0.4% lower after slipping 0.2% last time. Whole milk powder was unchanged after slipping 0.2% last time.
    FC Stone equated the GDT 80 percent butterfat butter price to $1.8166 per pound U.S. CME butter closed Friday at $2.1150. GDT Cheddar cheese equated to $1.6492 per pound, down 3.7 cents and compares to Friday’s CME block Cheddar at $1.9675. GDT skim milk powder averaged $1.2441 per pound and compares to $1.2130 last time. Whole milk powder averaged $1.4212. CME Grade A nonfat dry milk closed Friday at $1.17 per pound.
    Trade remains a volatile issue with the seemingly never ending dispute with China. President Trump meets with President Xi Jinping in Chile next month but there appears to be an agreement on Phase 1 which has halted additional tariffs.
    FC Stone dairy broker Dave Kurzawski reported in the October 21 “Dairy Radio Now” broadcast that there is talk is of a purchase by China of $40-50 billion worth of US agricultural products and, to put that in perspective, he said that China’s 2017 purchases, before the trade dispute began, totaled about $17.7 billion. Last year they were just $7.7 billion, “so this is a sizable increase, however we do not know yet if the $40-$50 billion is spread over three or four years.”
    Potentially it’s a really good deal for U.S. agriculture, Kurzawski said, though the United States does not export a large amount of dairy products to China. That of course could increase and currently China has removed its tariffs on U.S. imports of dry whey which are needed to rebuild their hog population. Kurzawski says that while we currently have 30 cent dry whey at the CME, he believes we will see increased demand in 2020 “in spurts,” and with that, better prices.
    The trade agreement with Japan also holds hope for the U.S. dairy industry as does the United States-Mexico-Canada trade agreement, which would replace the NAFTA.
    Unfortunately, the agreement has hit a snag in the House. The United Auto Workers Union has voiced concern over the number of automotive related jobs it would create in the United States, according to the Northeast Dairy Farmers Cooperatives newsletter.
    The cheese price roller coaster headed down this week as traders anticipated the September Milk Production and Cold Storage reports issued October 21 and 22 respectively. The Cheddar blocks closed October 18 at $1.9675 per pound, down 13 1/4-cents on the week but 47 cents above a year ago when they fell 11 1/4-cents. The barrels finished at $2.00, down 2 1/4-cents on the week, 73 1/4-cents above a year ago, but 3 1/4-cents above the blocks, first inversion since May 10, 2019. Fifteen cars of block traded hands on the week at the CME and 17 of barrel.
    Dairy Market News reported that Midwestern cheese producers blame $2-plus cheese for sliding sales but cheese output is steady. Milk flowing to the Southeast has kept spot milk at a premium, typically around $1 over Class the past two weeks. Cheesemakers continue to use nonfat dry milk to standardize and fortify. Cheese inventories are balanced to tighter.
    The Western market has gone through ups and downs the past few weeks and customers are resistant to current price trends. Production schedules are active. The higher prices are affecting international requests however, under the recent United States-Japan trade deal that might take effect by January 1, the US will see the elimination of Japan’s tariffs on cheese, its largest dairy product export to Japan.
    The National Milk Producers Federation praised the Trump Administration for including a number of European dairy products, particularly cheeses from major EU exporters such as Italy, on a list of WTO-authorized retaliatory tariffs related to the successful U.S. case against European Airbus subsidies.
    While Italy’s President Sergio Mattarella lobbied Trump this week not to impose the tariffs, NMPF declared; “We must reject European efforts to deceive the United States about the reality of Trans-Atlantic dairy trade. To that end, we asked the President to put the needs of U.S. dairy farmers above those of Italian and European farmers by maintaining the retaliatory tariff list against Europe.”
    “The United States is running a $1.5 billion dairy trade deficit with Europe because of unfair EU trade practices that largely block our access to their market while they enjoy broad access to ours. EU policies such as Italian-initiated bans on American-made parmesan, asiago and gorgonzola mean that they can ship us $1 billion in cheese each year while US cheese exports to the EU clock in at $6 million.”
    “In light of this disparity and the EU’s refusal to meet its WTO commitments regarding illegal Airbus subsidies, American dairy farmers saw the proposed retaliatory tariff list’s strong focus on EU dairy and cheeses as at least temporarily creating a slightly more level playing field for ‘Made in America’ products that face even higher barriers to entry in the EU market.”
    Cash butter closed Friday at $2.1150 per pound, up 2 cents on the week but 14 1/2-cents below a year ago. 49 cars exchanged hands on the week.
    Central butter output is steady and butter demand is generally steady regionally, says DMN, with some upticks due to the upcoming holidays. Cream is as available as it has been in recent weeks, both regionally and in the West but cream suppliers are getting more calls from Class II and III producers. Some even warn that there could be a seasonal shortage in the next few weeks.
    Western butter contacts believe many end users have fourth quarter needs covered and buyers seem to be holding back on the normal holiday purchase fervor. There is plenty of cream available and butter Inventories, while getting drawn down seasonally, are thought to be heavy, says DMN.
    Grade A nonfat dry milk climbed to $1.17 per pound, highest since February 18, 2015, up a half-cent on the week and 29 3/4-cents above a year ago on 17 sales.
    Dry whey saw a Friday close at 28 1/2-cents per pound, down 1 3/4-cents on the week, lowest CME price since April 4, 2018, and a whopping 29 cents below a year ago. There were 62 trades reported on the week, down from 71 the previous week and 80 the week before that.
    Lots of eyes remain on crops still in US fields, especially after the USDA’s surprise increase in projected corn yield per acre last week. The Daily Dairy Report’s Sarina Sharp wrote in the October 11 Milk Producer Council newsletter: “Most dairy producers report that corn silage yields have been better than feared but lower than last year” and she warned that ‘Feed quality could be a major issue in the year to come. Dairy producers with low-quality forage may struggle to increase milk yields despite powerful economic incentives to do so. Higher milk prices will surely encourage higher milk output. However, between feed quality issues, depleted bank accounts, lower heifer inventories, and a smaller dairy herd, the U.S. dairy producers’ ability to add a lot of milk may be limited.”
    Much of the western central Corn Belt had temperatures low enough and long enough to cause significant damage to the crop over the weekend of October 6. FC Stone warned that the corn and soybean crops were damaged but we won’t know how much “until we get more of it out of the field.” “The frost event was more pronounced and dove deeper south than originally expected.”
    Next week’s Crop Progress report may indicate the weather damage but this week’s report showed 22% of US corn crop has been harvested, as of the week ending October 13, down from 38% a year ago and 14% behind the five year average. 55% was rated good to excellent, down from 68% a year ago.
    26% of the soybeans have been harvested, down from 37% a year ago and 23% behind the five year average. 54% are good to excellent, 12% behind a year ago.
    32% of the cotton has been harvested, up 1% a year ago and 5% ahead of the five year average. 38% is rated good to excellent, up from 35% a year ago.
    Checking dairy’s bottom line, “Class III milk futures have climbed mostly higher since the beginning of the month and attractive margins remain in play as feed costs have held relatively steady,” according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
    The MW stated; “Margins in the fourth quarter are approaching the 95th percentile of historical profitability within the last decade, driven largely by high Class III futures. Margins in the first and second quarter of 2020 are above the 85th percentiles, providing opportunities to protect potentially attractive pricing.”
    The MW added that “Recently announced additional tariffs on multiple EU dairy products, primarily cheeses, are expected to result in reduced imports” and said the USDA’s World Agricultural Supply and Demand Estimates report was “bearish for corn and friendly for soybeans. Corn production estimates were above pre-report estimates as the average national yield was increased to 168.4 bushels per acre while the demand picture continued to suffer amid lower ethanol production and export demand. Ending stocks were lowered slightly to 1.929 billion bushels but were larger than pre-report expectations.”
    “Soybean production was lowered in the report due to a lower national average yield (46.9 bushels per acre) and lowered harvested acres. Soybean ending stocks were lowered slightly as export shipments continue to outpace the USDA forecast and the crush was raised by 5 million bushels,” the MW concluded.
    Looking at dairy demand; HighGround Dairy (HGD) reports that “While August total cheese disappearance dropped below prior year levels for the first time since January, the prior year comparable value was strong as August 2018 marked the third strongest month of last year for total cheese disappearance.”
    “Disappearance has not shown strong month to month volatility this year with most months within 5 million pounds of the 1.1- billion-pound mark,” says HGD. “Disappearance was pulled lower by lower domestic and export demand in the month. August marked the strongest month of the year to date for domestic disappearance but the weakest month of the year to date for total cheese exports. American-style cheese disappearance was down slightly but marked the strongest disappearance in a single month so far this year.”
    Butter disappearance jumped and marked the strongest demand month of 2019 to date, according to HGD, topping a year ago for the first time since May and nonfat dry milk disappearance dropped after good performances in June and July but domestic demand remained above 2018 for the third consecutive month.
    Total dry whey disappearance was down following July’s move higher says HGD.
    US fluid milk sales also fell in August, following a small increase in July. The latest USDA data shows 3.87 billion pounds of packaged fluid sales in August, down 1.9% from August 2018.
    Conventional product sales totaled 3.7 billion pounds, down 1.7% from a year ago. Organic products, at 208 million pounds, were down 6.6% and represented 5.4% of total sales for the month.
    Whole milk sales totaled 1.3 billion pounds, up 0.8% from a year ago and made up 33.4% of total fluid sales in the month. Sales for the eight month period totaled 10 billion pounds, up 1.1% from a year ago. Skim milk sales, at 274 million pounds, were down 9.7% and made up 7.1% of total milk sales for the month.
    Packaged fluid milk sales, January through August totaled 30.4 billion pounds, down 1.8% from a year ago.
    Conventional products year-to-date totaled 28.8 billion pounds, down 1.7%. Organic products, at 1.7 billion pounds, were down 3.8% and represented about 5.4% of total fluid milk sales for the period.
    Lastly, the National Milk Producers Federation has joined calls for the Environmental Protection Agency to “finish the required scientific review of an influential groundwater study in Washington State.”
    NMPF called on EPA Administrator Andrew Wheeler to have the EPA conduct a full review of what they’re calling a “flawed” study and joined several other groups seeking EPA action on the Yakima nitrate study, including the American Dairy Coalition, Congressman Dan Newhouse, the Washington State Dairy Federation, Save Family Farming, and others.
    “Aside from the apparent flaws in the study, perhaps the most startling issue is the fact that this study has influenced decisions made by EPA without the required full review,” wrote Clay Detlefsen, NMPF’s Senior Vice President and Staff Counsel, in the letter to Administrator Wheeler.
    “While cursory reviews were conducted, whole sections were left out,” he said, and Detlefsen listed four key areas where the study was flawed and based on errors and inadequate data. His letter says the study “appears to unfairly accuse the Washington State dairy farmers for contributing the majority of high nitrate levels in lower Yakima valley groundwater” At least 15 top scientists have rejected the study, saying the data that was gathered doesn’t support its conclusions.