Lots of eyes are on China which continues to increase its dominance in the world marketplace. A look at China’s June dairy imports was “impressive,” according to HighGround Dairy’s (HGD) Lucas Fuess.
    Speaking in the Aug. 3 “Dairy Radio Now” broadcast, Fuess reported that the gains were driven by fluid milk and cream, up 27% from 2019, and whey products, up 84.2%, and not the usual powder products.
    Cheese imports totaled 27.5 million pounds, up 13.9% from a year ago, while butter imports, at just 10.5 million pounds, were down 6.3%.
    Skim milk powder imports totaled 51.5 million pounds, down 6% from a year ago, and lagged year ago levels for the third consecutive month. But HGD points out that imports from the US were up 667%, totaling 7.2 million pounds, up from 939,160 pounds a year ago “as the US maintained competitive prices for much of the year, from February through today.”
    Whole milk powder also turned negative, totaling 80 million pounds, down 6.5% from a year ago, according to HGD, but against a strong prior year.
    Lactose imports totaled 26.9 million pounds, up 99.2% from a year ago, and whey products totaled 122.8 million pounds. Ingredients like whey and lactose “jumped off the table,” according to HGD, as they are an important part of China rebuilding its hog population devastated by African Swine fever.
    The July 28 Daily Dairy Report pointed out that the US remains China’s top whey supplier however the US share of China’s whey market remains much lower than it was before the US-China trade war began.
    “Looking ahead, as New Zealand milk production ramps up,” Fuess said “The US still has the upper hand in Southeast Asia, with the lowest priced nonfat dry milk on the globe” and he expects the flow into Southeast Asia to continue the next several months.
    He warned however that rising milk prices will spur stronger milk production in the US, Europe, and New Zealand into the fall but, hopefully, demand from China and other countries will continue as well. He says the US has a pretty good chance of remaining competitive globally.
    Fluctuations in the US dollar have also helped, he said, and “Hopefully Mexico can resolve its pandemic issues and we’ll see stronger volumes of US product headed to that country again.”
    One more bit of encouraging trade news; Japan’s cheese imports were a record high in June and up 6.8 million pounds or 14% from 2019. HGD points out that, while the US remains the fourth largest source country-region for cheese following the EU, Australia, and New Zealand, the US saw the largest year over year volume gain of any area. The US sent an additional 3.7 million pounds to Japan in June, with monthly shipments totaling 8.9 million pounds, up 72% from a year ago. Skim milk powder, whey, and butter imports were down.
    The bleeding increased in cheese at the CME. The Cheddar blocks closed the week and the month at $2.2525 per pound, down another 28.75 cents, after losing 12 cents the previous week and 25.5 cents the week before that. It’s the lowest CME price since May 29, but are still 43.25 cents above a year ago.
    The barrels finished at $2.2350, down 21.5 cents on the week and the lowest since June 2. They are 54.25 cents above a year ago and at a more typical 1.75 cents below the blocks after topping them a couple days. There were 15 cars of block traded on the week, 70 on the month, up from 48 in June. The barrels saw 9 carloads go to new homes on the week, 51 on the month, up from 33 in June.
    While May dairy product commercial disappearance was a big improvement from April, particularly for cheese, it was still down from a year ago. June data is yet to be seen. Uncle Sam’s food purchases and restaurant re-openings played a major role in the improvement but the rising cases of COVID in many states has either paused or reversed many of those restaurant re-openings and volatility remains a big part of dairy markets.
    StoneX warned in its July 29 “Early Morning Update;” “Although the details of the food box program may not have been what the market was pricing and is weighing in cheese, it should still add support to a landscape that seemed to be in an already tight cheese supply. We foresee volatility to continue well into August as the food box program plays out and coronavirus problems continue across the country.”
    Speaking of government aid, the USDA released a combined synopsis and solicitation for further volumes for food to be distributed under the Farmers to Families Food Box program.
    HighGround Dairy says there was limited volume, price, or timing information announced in the solicitation and details will be announced in future contracts. While USDA stated that “the placement of orders is not guaranteed”, the announcement stated that “the government intends to issue Basic Ordering Agreements to multiple vendors for food box deliveries.”
    It was the first time the USDA released information regarding the actual content requirements of the boxes, according to HGD. The boxes must contain, a minimum 5-6 pounds of at least two dairy items; natural cheese or cottage cheese, cream cheese, yogurt, butter, or sour cream. One gallon of milk must also be included. Combined with the other products, meat and dairy must have a combined weight of at least 10 pounds, according to HGD.
    USDA stated that, as of July 24, 35.5 million food boxes were invoiced in round one (May 15-June 30) and 11.2 million in round two (July 1-Aug. 31).
    Meanwhile, Dairy Market News reports that Midwest cheese production is “busy,” as milk supplies are plentiful, though a fire at a plant in the region had a ripple effect that added to production elsewhere. Some contacts expected block price drops at the CME to slow output but most say they’re remaining busy, with some even turning customers away. Block and barrel availability is reported as tight to nonexistent so cheese markets remain robust. Even as the blocks have dropped, block and barrel prices are in the same tight area and most contacts agree that a similar block-barrel price is “a benchmark of steadying market tones.”
    Western cheese market conditions the last week of July hadn’t changed much from the previous week. US prices may have seen declines but still weren’t very competitive in the international market, says DMN. Domestic retail cheese demand is stronger, whereas intakes from food service have declined a bit. Western cheese output remains active and inventories are sufficient, says DMN.
    Point of interest; the July Class III futures milk price was trading late Friday morning at $24.54 per hundredweight, which would be a $3.50 increase from June and 6 cents shy of the record high set in September 2014.
    Cash butter roller-coastered, plunging 15.5 cents on Wednesday to $1.5550 per pound but ended Friday at $1.6075, still down 12.25 cents on the week, 71.25 cents below a year ago, and the lowest CME price since May 28. 31 cars traded hands on the week, 81 for the month, down from 98 in June.
    Butter makers have given mixed reports on cream availability in recent weeks but more were in agreement this week that cream was available, says DMN. Some were securing loads out of the West and locally. Butter demand has ebbed in recent weeks. Contacts say retail demand has steadied somewhat since last month and food service demand has inched its way back up since the early days of the COVID-19 outbreak, but remains short of previous years. Market tones remain somewhat soft but contacts believe the market is “close to its basement.”    
    The western butter market is “a bit unsettled,” says DMN, due to uncertainties about how COVID might affect it. There was a surge in demand for print butter so churns were actively running as much as possible.
    Cream requests for ice cream production were strong, says DMN, but processors were still finding enough for butter. Food service butter demand has declined because of the new restrictions put in place to control the growing COVID cases.
    An interesting historical note on butter. The National Milk Producers Federation says August 2 is the anniversary of what was officially named the “Oleomargarine Act” signed by President Grover Cleveland in 1886.
    After heated Congressional debate, the legislation created what to this day remains the only standard of identity for a food product set by Congress rather than regulators, says NMPF, and “was a precursor to the food-safety system that protects US consumers to this day.”
    Margarine was an imposter, according to NMPF, and “Dairy fought its labeling chicanery, with outcomes that have benefited consumers ever since.”
    But NMPF warns the battle has returned. “Today’s self-styled innovators still try to gain an unfair marketing edge by misleading labeling implying they’re something they’re not. Think plant-based “butters” that are really nothing more than margarines at best. Think artificially concocted liquid mixtures labeled as “milks” that are nutritionally more like a high-school chemistry project than a natural, wholesome food,” says NMPF. Read the complete story; “Dairy Defined: How the Fight Against Bogus Butter Changed the World,” at www.nmpf.org.
    Grade A nonfat dry milk closed Friday at 97.75 cents per pound, down 1.25 cents   on the week and 4.25 cents below a year ago, with 7 sales reported on the week, 65 for the month, down from 105 in June.
    Dry whey saw its Friday finish at 34.25 cents per pound, up a quarter-cent and a quarter-cent above a year ago. 5 cars were sold on the week, 16 for the month, down from 126 in June.
    Turning back to world trade; global dairy markets will be under pressure in the second half of 2020, according to a webinar presented to US Dairy Export Council (USDEC) members in mid-July by analysts Alan Levitt and William Loux.
    “If you have even a slight reduction in consumer demand in the United States and Europe, and rising milk production in both regions, you’re going to have a lot more milk that has to find a home somewhere, either in export markets or in inventory,” Levitt said. “And then, if importer demand lags a bit, you’re going to be looking at more excess supply by the time we get to the fourth quarter. The upshot is downward pressure on global pricing,” he said.
    Loux and Levitt identified seven key themes that will define characteristics of the second half of 2020. At the top of their list was China. Second was Latin America is in crisis; third, customers carrying higher inventories; and fourthly, supply could overwhelm the market this fall, according to Levitt and Loux.
    They stated that US cheese prices have “disconnected from world levels, and the new normal; volatility makes it extra challenging.” Lastly, they state “The economic impact of COVID-19 is still playing out.”
    On a brighter note, they pointed out that overall dairy trade has been stronger than expected in the first few months after the pandemic lockdowns. But a key question Levitt and Loux address is whether that trade strength reflected importers stocking up at favorable prices, mitigating second half needs, does it represent a bubble about to burst, or does it reflect actual consumer dairy consumption. Complete details are posted at www.usdec.org.
    One of the world’s biggest dairy traders is New Zealand and StoneX reported in its July 30 Early Morning Update of “The NZ North Island deluge,” a one-in-500-year event that dumped more than 14 inches of rain over three days last week.
    Northland dairy farmers say it will take three weeks to disperse, according to StoneX, and Fonterra regional manager Mike Borrie said milk on up to 15 Northland dairy farmers could not be picked up during the torrential rains. Around 25% of the province’s 900 dairy farms are winter-milking part or all of their herd. This is on the heels of June milk production for the country starting the season stronger than last year,” StoneX stated.
    Cooperatives Working Together (CWT) members accepted 10 offers of export assistance from CWT this week to capture sales of 862,008 pounds of Cheddar and Monterey Jack cheese, and 3.3 million pounds of whole milk powder.
    The product is going to customers in Asia and South America from August through January 2021 and nudged CWT’s 2020 exports to 22.108 million pounds of American-type cheeses, 6.246 million pounds of butter (82% milkfat), 1.96 million pounds of anhydrous milkfat, 3.784 million pounds of cream cheese, and 29.471 million pounds of whole milk powder. The product is going to 28 countries
    USDA’s latest Crop Progress report shows 82% of the nation’s corn crop was silking, as of the week ending July 26, up from 51% a year ago and 7% ahead of the five year average. 22% is in the dough stage, up from 11% a year ago. Condition wise, 72% is rated good to excellent, up from 58% a year ago.
    The report has 76% of the soybeans blooming, up from 52% a year ago and 4% ahead of the five year average. 43% are setting pods. That compares to 17% a year ago and 36% for the five year average. 72% are rated good to excellent, up from 54% a year ago.
    The cotton crop showed a 49% good to excellent rating, down from 61% a year ago.