The USDA issued its latest World Agricultural Supply and Demand Estimates (WASDE) report on Feb. 8. The report was not issued in January due to the government shutdown. The 2018 milk production estimate was lowered, based on available data through December. The 2019 forecast was reduced on lower expected first-half dairy cow numbers and continued slow growth in milk per cow.
    2018 production and marketings were projected at 217.6 and 216.6 billion pounds respectively, down 200 million from the December estimate. If realized, 2018 production would still be up 2.1 billion pounds or 0.97 percent from 2017.
    2019 production and marketings were estimated at 220.1 and 219.1 billion pounds respectively, down 500 million pounds on both. If realized, 2019 production would be up 2.5 billion pounds or 1.1 percent from 2018.
    The 2018 and 2019 fat basis import forecasts were reduced from December on recent trade data and lower expected cheese and butterfat imports. Fat basis exports were unchanged for 2018 but the forecast was raised for 2019 primarily on strong expected demand for butter and butterfat products.
    Projected 2018 skim-solids basis imports were raised on current trade data while the 2019 import forecast was unchanged. Skim-solids basis exports for 2018 were lowered, but the 2019 export forecast was raised from December on anticipated strong demand for nonfat dry milk (NDM).
    Dairy product prices for 2018 were adjusted to reflect available December price data. The 2019 cheese price forecast was lowered while butter, NDM, and whey price forecasts were raised from December.
    The projected 2019 Class III milk price average was unchanged from the December estimate. Look for a 2019 Class III average of about $15.05 per cwt., unchanged from the December estimate, and compares to $14.61 in 2018 and $16.17 in 2017.
    The Class IV price was projected to average $15.95, up $1.10 from the December estimate and compares to $14.23 in 2018 and $15.16 in 2017.
    This month’s 2018/19 U.S. corn outlook is for lower imports, production, food, seed, and industrial use (FSI), feed and residual use, and stocks. Corn production was estimated at 14.42 billion bushels, down 206 million on reduction in yield to 176.4 bushels per acre. Harvested area was down fractionally. Total corn use is down 165 million bushels to 14.865 billion. FSI use was lowered 40 million bushels, reflecting reductions to corn used for ethanol and other industrial use. With supply falling more than use, corn stocks were lowered 46 million bushels and the season-average corn price received by producers was unchanged at a midpoint of $3.60 per bushel.
    U.S. oilseed production was estimated at 134.0 million tons, down 1.5 million from the previous report. Soybean production was estimated at 4.54 million bushels, down 56 million. Harvested area was estimated at 88.1 million acres, down fractionally from the previous report. Yield was estimated at 51.6 bushels per acre, down a half-bushel.
    The soybean crush forecast was raised 10 million bushels to 2.09 million. Soybean meal production was unchanged as the higher crush is offset by a lower extraction rate. Lower supplies and increased crush are partly offset with a 25-million-bushel reduction in exports. Ending stocks were projected at 910 million bushels, down 45 million from the previous forecast. The 2018/19 U.S. season-average farm price forecast for soybeans was projected at $8.10 to $9.10 per bushel, unchanged at the midpoint. The soybean meal price was forecast at $295 to $335 per short ton, up $5.00 at the midpoint. The soybean oil price forecast of 28.5 to 31.5 cents per pound was unchanged at the midpoint.
    This month’s 2018/19 U.S. cotton forecasts include slightly lower production, mill use, and ending stocks. Production was reduced 200,000 bales due to small declines outside the Southeast. Ending stocks and mill use were reduced 100,000 bales each while exports were unchanged.
    Cash cheese prices continued to strengthen in the Valentine’s Day week as traders anticipated the February 19 Global Dairy Trade auction and the shortened President’s Day holiday Week. The week will include Milk Production reports for December and January and December Cold Storage data.
    The Cheddar blocks climbed to $1.5925 per pound Wednesday, highest CME price since mid-October 2018, but closed Friday at $1.58, up 5 1/4-cents on the week and 4 cents above a year ago. The barrels finished at $1.4350, up 6 1/4-cents on the week, highest since September 13, 2018, but 4 1/2-cents below a year ago when they jumped 12 cents, and are at an unsustainable 14 1/2-cents below the blocks. Sales for the week included 6 cars of block and 20 of barrel.
    The West received its own version of Arctic weather this week, with cold and snow causing more than the usual challenges. Over 1800 dairy cows died in the Yakima Valley of eastern Washington, according to the Yakima Valley Dairy Farmers Association, where low temperatures and high winds took a huge toll.
    Meanwhile; the Feb. 12 Daily Dairy Report points out that “The increase in U.S. cheese prices has been augmented by the dollar, which continues to gain ground against the Euro, New Zealand dollar, and Mexican peso. The strong dollar makes U.S. cheese more expensive when the price is converted to importers’ currency. Tariffs put U.S. cheese at a further disadvantage in Mexico and China, according to the DDR.
    Those continuing tariffs drew sharp criticism by the Wisconsin-based American Dairy Coalition (ADC) which charged; “Mexico imports nearly a quarter of the U.S. dairy industry’s exports annually. It’s a critical $1.4 billion marketplace. And it’s one that President Trump continues to risk damaging permanently and unnecessarily. Locked in a trade war since May, Mexican leaders are setting aside American business connections that took decades to build as our neighbors to the south find new sources of cheese, butter and other products.
    This should have changed in November when Trump declared success with his newly rechristened U.S.-Canada-Mexico Trade Agreement replacing NAFTA. In retrospect, it was a disingenuous statement: The administration has not lifted steel and aluminum tariffs on Mexican and Canadian products, and in response those countries are refusing to sign the pact or lift retaliatory tariffs, impacting dairy products and other items, the ADC stated.
    Winter weather remains the topic of discussion among Midwest cheesemakers, according to Dairy Market News. Cheese production remains slower as plant managers work on inventories and weather-related production stoppages have slowed or stopped production in some cases. Contacts suggest cold weather and snow in the upper-Midwest were affecting both milk and cheese deliveries.
    Western cheese makers stated that new business deals are harder to come by and demand for American style blocks and barrels is slow. “Buyer interest seemingly ebbs and flows as the market price for cheese rises and falls. Cheese is moving steadily through regular contracts, but contacts say there does not seem to be anything right now that will give a boost to sales.”
    As to the strength in cheese prices, some contacts suggest that fourth quarter consumption was better than expected and the industry is seeing a bit of a refill from the winter holidays and Super Bowl. Others say marketers are getting prepared for upcoming export tenders while others believe more cheese is moving into aging programs. They agree that inventories are long and “demand does not seem to be at levels hoped for.”
    Some say the absence of market production and stock number reports due to the government shutdown made it difficult to get a picture of supply and demand. Manufacturers say cheese output is running mostly seven days per week, but winter storms slowed cheese output in some regions due to challenges transporting milk and the need to refill the pipeline following the storms.
    Interestingly; California cheese output is likely starting to slow, according to the Daily Dairy Report’s Sarina Sharp. Writing in the February 8 Milk Producers Council newsletter, Sharp says “Cheese processors in the nation’s largest dairy state are now paying more for milk using the Federal Milk Marketing Order (FMMO) formula than they would have under the previous rules.”
    “Dairy Market News reports, many manufacturers are running full schedules at their cheese facilities, but some contacts suggest a few processors are starting to ease back on cheese production and diverting milk intakes toward Class IV uses. That’s excellent news for California dairy producers in particular and for dairy product prices in general,” according to Sharp.
    “The shift in the product mix will mean a greater share of California dairy producers” milk checks is based on the much higher Class IV price. Incrementally lower cheese output will slowly lift cheese prices relative to where they would have been had California stuck with its previous milk pricing formulas. Of course, the reverse is true for milk powder pricing,” Sharp concludes.
    Cash butter saw its Friday price at $2.25 per pound, down 4 1/2-cents on the week but still 15 cents above a year ago. 24 cars exchanged hands on the week.
    Central contacts suggest that butter sales have been stunted recently, while others maintain sales are seasonally slower, but meeting expectations. Cream is readily available for churning and butter producers are taking advantage of it and “booking loads well ahead of time, indicating what they suggest may be a sign of near to mid-term oversupplies.”
    Western processors are proactively running churns to clear ample supplies of cream. Cream is plentiful throughout the West and some distressed loads are moving out of the region at discounted prices. Bulk butter is being intensively stored for use later in the year. Retail and club store butter sales are generally good, according to DMN, and while producers would prefer to make more sales now, they are content with current inventory levels and are managing their supplies efficiently while others are churning at a higher rate than last year.
    Grade A nonfat dry milk saw the weeks closing at 98 3/4-cents per pound, down three-quarter cents but 28 1/4-cents above a year ago. 30 cars exchanged hands on the week, 23 on Thursday alone, highest single day total since April 25, 2018.
    The dry whey closed Friday at 35 1/4-cents per pound, down 1 1/4-cents, with 42 cars finding new homes on the week, a single-day record 15 on Wednesday.
    Plummeted dry whey shipments to China have pulled whey prices lower. FC Stone reports that African swine fever has reduced soy meal demand in China and some estimates say meal feeding is off 20 percent. African swine fever has also been detected in Japan.
    FC Stone warns; “This issue will get worse before it gets better. How much damage will be done to China’s 700 million plus hog herd and how long will it take it to recover is still unknown. Some analysts think it could take 6-7 years for China’s hog herd to fully recover.”
    The Dairy and Food Market Analyst (DFMA) says dry whey shipments to China   have fallen 20 million pounds or 40 percent. Total exports of whey products have decreased 18 percent and exports of milk powder were down 13 percent.
    Analyzing the November Dairy Products report, the DFMA stated; “Total milk powder output was the biggest surprise falling 22 million pounds, down 12 percent. Skim milk powder production plummeted 27 percent, and nonfat dry milk production decreased 7.7 percent. Despite the declines, milk powder inventories grew by 35 million pounds.”
    The European Commission sold another 1.3 million pounds of skim milk powder from its Intervention program the week of Feb. 4, leaving 6.6 million pounds. The DFMA says “The remaining stocks are believed to be low quality. The milk powder sold for a minimum price of 83 cents per pound, up a penny from the previous sale.” Tenders will occur just once a month beginning in March.
    Cooperatives Working Together (CWT) members accepted 17 offers of export assistance from CWT the week of February 11 to help sell 2.7 million pounds of Cheddar and Monterey Jack cheese, 220,462 pounds of butter, and 440,925 pounds of whole milk powder to customers in Asia, the Middle East, and South America from February through July.
    The sales raised CWT’s 2019 exports to 15.547 million pounds of American-type cheeses, 928,146 pounds of butter (82 percent milkfat) and 6.931 million pounds of whole milk powder to 18 countries.
    In politics, President Trump signed a Senate and House-passed compromise bill Friday to fund the government and allocate just under $1.4 billion for a border “wall” of sorts. He also declared a national emergency in order to provide additional funding for the wall he seeks to build on the border with Mexico.
    The Administration also released its proposal to update the Waters of the U.S. Rule (WOTUS) water quality regulation on Valentine’s Day. There will be a 60-day public comment period on how the Environment Protection Agency and the Army Corp of Engineers will regulate waterways under the Clean Water Act.
    Bob Gray, editor of the Northeast Dairy Farmers Cooperative’s newsletter, reported that the update would “replace the rule that was promulgated in 2015 which proved to be confusing and vague in its provisions for compliance by the agriculture community.” EPA will also hold a public hearing on the new rule, says Gray.