The April 16 Global Dairy Trade auction (GDT) registered its 10th consecutive session of gain, inching 0.5% higher on the weighted average of products offered. That compares to the April 2 rise of 0.8%, 1.9% on March 19, and 3.3% on March 5. Sellers brought 16.2 million pounds of product to the market, down from 17.9 million on April 2.
The gains were led by anhydrous milkfat, up 4.2%, following a 3.7% rise April 2. Butter was right behind, up 3.5%, after it climbed 5.8% last time. Cheddar was up 1.4%, following a 3.2% boost, and skim milk powder was up 0.2%, after rising 1.8% in the last event.
The losses were led by lactose, down 3.4%, rennet casein, down 2.4%, and whole milk powder was off 0.7%, after a 1.3% descent last time.
FC Stone equates the GDT 80 percent butterfat butter price to $2.4533 per pound U.S., up 7.5 cents from the last session. CME butter closed Thursday at $2.2825. GDT Cheddar cheese equated to $1.9593 per pound, up 3.2 cents from the last event and compares to Thursday’s CME block Cheddar at $1.6675. GDT skim milk powder averaged $1.1169 per pound, and compares to $1.1194 last time. Whole milk powder averaged $1.4829, down from $1.4910 last time. CME Grade A nonfat dry milk closed Thursday at $1.00 per pound.
Speaking of trade, the April 17 Daily Dairy Report (DDR) says “U.S. dairy product exports in February were mixed, with cheese and butterfat exports higher and nonfat dry milk/skim milk powder (NDM/SMP) and whey lower. U.S. dairy exports to Canada and China have suffered since trade disputes began last summer, but exports of NDM and cheese to Mexico continue to grow. Despite retaliatory tariffs targeting cheese, U.S. exporters shipped 71.7 million pounds of cheese, up from 62.1 million pounds a year ago and the highest total for any February in the past decade,” according to the DDR.
Cash dairy prices meanwhile were mixed in the Good Friday holiday shortened week as traders absorbed Tuesday’s GDT and anticipated the April 22 release of the March Milk Production report. The 40-pound Cheddar blocks closed Thursday at $1.6675 per pound, up 2 1/4-cents on the week and 6 1/2-cents above a year ago. The 500-pound barrels finished at $1.5150, down a disappointing 10 1/4-cents on the week but 1 1/2-cents above a year ago. 14 cars of block traded hands on the week at the CME and 10 of barrel.
Cheese contacts continue to report bullish demand in the Midwest, according to Dairy Market News. Curd, mozzarella and specialty cheesemakers say there has been a seasonal push from buyers. Cheese inventories are generally in good balance though long inventories remain a concern nationally. Midwest contacts report that more and more dairy farms calling it quits and question what that means for upcoming milk availability.
Western cheese output remains active with plenty of milk going to the vats. Some processors are attempting to control massive growth in supplies through planned output reduction. With demand not as good as they want and more milk available, cheese production control seems one of the best ways to manage inventories from building too much. Cheese sales are reported as a bit mixed and the tenor of the western cheese market is “somewhat unsettled.”
Cash butter saw a Thursday finish at $2.2825 per pound, up 2 1/2-cents on the week but 3 1/4-cents below a year ago, with 9 cars sold on the week.
Butter makers are still receiving sufficient cream supplies at similar prices to the previous week. They do not expect this to last much longer as cream has tightened recently and is expected to continue this path. Retail sales are down somewhat, as late holiday orders ebbed. Still, butter makers say demand is up on average, year over year.
Western butter makers suggest pre-holiday orders that had been going strong have “evaporated” while bulk butter demand is “generally steady.” Contacts relay that production levels are stable. They are getting offers of extra cream, but so far, it has not been the flood of cream that is sometimes expected at this point in the year but butter stocks are building somewhat, according to DMN.
Interestingly, the DDR reports that Japan has increased its tariff rate quotas for butter but reduced them for nonfat dry milk for the country’s current fiscal year (April 1, 2018 – March 30, 2020). “Japan’s Ministry of Agriculture, Forestry, and Fisheries announced that Japan intends to import 20,000 metric tons of butter, up 7,000 from last year, due to lingering supply impacts from a September 2018 earthquake in southern Hokkaido and growing domestic demand for milkfat from the food processing industry,” the DDR says.
Grade A nonfat dry milk closed Thursday at $1.00 per pound, highest CME price since February 6, 2019, up 1 1/4-cents on the week, and 19 1/2-cents above a year ago, with only 3 cars finding new homes on the week.
The spot dry whey closed the week at 34 cents per pound, down 1 3/4-cents but 2 1/2-cents above a year ago, on 17 trades recorded for the week at the CME.
The DDR’s Sarina Sharp wrote in the April 12 Milk Producers Council (MPC) newsletter that “Concern is growing among NDM buyers that milk powder prices could reach into the $1.15 range, if not higher later this year.” She says “The market sentiment now is that the longer prices remain in the high 90 cent range this spring, the higher prices could move up later this year.”
She adds that “This year will be the first year in five years that market prices have not been weighed down by an overhang of EU Intervention skim milk powder stocks. If the higher nonfat dry milk price levels materialize, they could result in some of the highest-Class IV milk prices in a long time for western dairy producers, which would be much needed good news.”
May Class I milk prices will rise, driven by strength in cheese. The Agriculture Department announced the May Federal order Class I base price at $16.42 per hundredweight (cwt.), up 66 cents from April, $1.98 above May 2018, and the highest Class I price since December 2017. This is the price that each Federal order adds its Class I differential to, to determine its Class I price.
The five month Class I average is at $15.72, up from $14.32 at this time a year ago, but compares to $16.47 in 2017.
This is the first Federal order Class I price not using the “higher of” value of milk that goes to cheese or butter-powder, in determining the Class I value, a practice for nearly 20 years, but one that put processors at a disadvantage.
The MPC’s Geoff VandenHeuvel explains in his April 12 newsletter the reasons for the problem and how processors and producers agreed to solve the issue. Long complicated story short, the advanced Class III and Class IV pricing factors will now be averaged together and 74 cents will be added to that in the formula.
U.S. dairy margins were relatively flat over the first half of April with limited movement in the milk and feed markets, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.
The MW stated that “The milk market has shown a firmer tone of late with some features that may be positive for prices longer-term. First, poor margins throughout 2018 and early 2019 have accelerated the pace of dairy herd contraction, with the number of licensed dairy herds dropping to 37,468 last year from 40,199 in 2017 according to USDA. The 6.8% year-over-year contraction is the worst percentage decline since the data series began in 2003, with that pace likely increasing in early 2019 based on year-to-date dairy cow slaughter which is up 8.4% in the Midwest region and 5.6% in Eastern states.”
“Meanwhile, although U.S. milk production on the whole has been increasingly slightly with more efficiency in the dairy herd, global milk production is on the decline. For the season which began in July, 2018, Australia has experienced a 6.4% drop in milk collections. A persistent drought has decimated pastures and raised feed costs substantially. Production has also declined in Argentina due to poor economic conditions while it has been flat in New Zealand.”
“Along with the U.S., milk production could increase up to 2.5% in the EU without offsetting the combined milk production deficit from the other major dairy exporters which has prevailed since November. This dynamic has been slowing whittling away at the global dairy product surplus. Meanwhile, USDA noted a 200 million bushel increase to corn ending stocks in the April World Agricultural supply and Demand Estimates report, following the surprisingly large March 1 stocks figure last month. Sentiment in the market would probably be even more bearish if not for the recent severe weather in the Upper Midwest that will likely delay corn planting,” the MW concluded.
Safety nets have been a part of dairy’s financial landscape for many years but the net has changed since the old Price Support program and keeps changing. Hoard’s Dairyman managing editor Corey Geiger talked about the current Dairy Margin Coverage in the April 22 Dairy Radio Now broadcast and quoted House Agriculture Committee Chairman, Rep. Colin Peterson (D-MN).
“When it comes to the new Dairy Margin Coverage (DMC) program, I want to make sure dairy farmers and their lenders know what the point of the program is. It isn’t to get a bunch of money out of the federal government every year; it’s to make sure that dairy farmers have an adequate safety net when they need it.”
Geiger quickly added “This is a time when they need it,” and he reported that House and Senate members have called on Agriculture Secretary Sonny Purdue to get the program rolled out right now.”
The Farm Bill was signed into law in December but one of the hold ups is at the Farm Service Agency (FSA) offices because the Farm Bill included a refund of premium payments under the old Margin Protection program. “Believe it or not,” Geiger said. “They were done on paper and not electronically so it all needs to be entered into the electronic format before proceeding.”
Farmers who sign up for the program will see a January Tier 1 premium, which is for the first 5 million pounds of milk, of $1.51 per cwt., according to Geiger, and that January DMC payment will basically pay for the premiums for the entire year of 2019. He adds that February’s projected payment is $1.28 and says farmers will be able to sign up at their local FSA office by June 17.
He also reported that the Office of the Chief Economist is working with the University of Wisconsin’s Dr. Mark Stevenson to develop a “decision tool” to assist dairy farmers and says it should be ready by May 1.
Geiger says Rep. Peterson stated that “One of my biggest priorities as chairman is to grow demand for U.S. dairy products so that dairy farmers can get all their income directly from the marketplace, but until that is the case, the DMC will be there so dairy farmers have a chance to keep going when times are tough.”    The Agriculture Department’s latest Crop Progress report shows 3% of the nation’s corn crop was in the ground, as of the week ending April 14, up 1% from the previous week, dead even with a year ago, but 2% behind the five year average. The report also shows 7% of the cotton crop has been planted, up 1% from the previous week, 1% behind a year ago and mirrors the five year average.
The Cooperatives Working Together (CWT) program made its first export sale of one of the new products recently added to its eligibility mix. A member captured 10 contracts to sell 1.254 million pounds of cream cheese with CWT assistance.  
Other members accepted 6 offers of export assistance from CWT to help capture sales of 335,103 pounds of Cheddar and Gouda cheese and 209,439 pounds of whole milk powder. These products will go to customers in Asia, the Middle East, and South America and will be delivered through September 2019.
The latest sales put CWT’s 2019 exports at 26.0 million pounds of American-type cheeses, 3.47 million pounds of butter (82% milkfat), 1.25 million pounds of cream cheese, and 22.6 million pounds of whole milk powder to 22 countries.
In politics, the National Milk Producers Federation (NMPF) has endorsed the Environmental Protection Agency’s proposed changes to the Waters of the U.S. rule, a proposal, NMPF says, “is meant to provide clarity and certainty about the waterways subject to regulation under the federal Clean Water Act.”
The International Dairy Foods Association (IDFA) hailed a new report by the U.S. International Trade Commission (ITC) that assesses the likely impact of the U.S.-Mexico-Canada Agreement (USMCA) on the U.S. economy and industry sectors.
“The ITC report estimates that USMCA would raise U.S. GDP by $68.2 billion, pumping an additional $2.2 billion or 1.1 percent into the U.S. economy through increases in agricultural and food exports,” according to the IDFA, and “The ITC expects exports of U.S. dairy products to increase by more than $277 million overall, rising $227.0 million to Canada and $50.6 million to Mexico, respectively.”
Lastly; I read with interest a very telling statistic in the April 14 Parade magazine, an insert in my local Sunday paper. It talked of technology’s impact in the workplace every 100 years and showed the number of Americans who worked in agriculture in 2012 at just 1.5%, contrasted to the year 1850’s 58%. It is no wonder most consumers know little about what goes on, down on the farm.