The second Global Dairy Trade auction (GDT) of 2019 got another boost in its weighted average of products offered, jumping 4.2 percent, following the Jan. 2 gain of 2.8 percent, and the biggest increase since Feb. 6, 2018. It also represented the fourth consecutive session of gain.
    Sellers brought 61.5 million pounds of product to the market, down from 63.2 million on January 2 and the lowest amount since July 17, 2018. All products offered except rennet casein were in the black, led by skim milk powder, up 10.3 percent, after it climbed 7.9 percent in the last event and 3.4 percent in the event before that. Lactose followed, up 7.9 percent. Butter was next in line, up 4.6 percent, after a 3.9 percent climb last time. GDT Cheddar was up 4.2 percent, following a 3.2 percent increase, and anhydrous milkfat was up 3.2 percent following a 3.9 percent gain. Whole milk powder rounded up the gains with a 3.0 percent increase after it was up 1.2 percent in the last event.
    FC Stone equates the GDT 80 percent butterfat butter price to $1.8860 per pound U.S., up 8.2 cents from the last session. CME butter closed Friday at $2.24. GDT Cheddar cheese equated to $1.5893 per pound, up 6 cents from the last event and compares to Friday’s CME block Cheddar at $1.40. GDT skim milk powder averaged $1.0907 per pound, up from 99.82 cents last time and the first time it topped $1 per pound since June 20, 2017. Whole milk powder averaged $1.2597, up from $1.2269. CME Grade A nonfat dry milk closed Friday at $1.03 per pound.
    Week three of 2019 became week four of the partial government shutdown.
    So far, the dairy industry has been deprived of the November Dairy Products report, the January World Agricultural Supply and demand Estimates, monthly U.S. trade data from the Bureau of Census, weekly dairy slaughter data, the month’s Livestock, Dairy and Poultry Outlook, and grain stocks data. Next will be the December Milk Production and Cold Storage reports scheduled for Jan. 23 and 24, respectively.
    Agriculture Sonny Perdue ordered many Farm Service Agency (FSA) offices to reopen temporarily to perform “certain limited services for farmers and ranchers,” and “assist with existing farm loans and to ensure the agency provides 1099 tax documents to borrowers by the Internal Revenue Service’s deadline.”
    But FC Stone dairy broker Dave Kurzawski played down the loss of information from the missing USDA reports in the Jan. 21 Dairy Radio Now broadcast.
    “The markets do a pretty good job of determining whether buyers are panicking in the country or sellers are panicking in the country,” Kurzawski explained. He admitted that the USDA data is important and “gives us a good frame of reference for what’s going on out there,” but “The markets reflect what is actually happening in the country and if there’s too many people selling cheese, the market will go down, it doesn’t take a USDA report to figure that out.”
    “The data is also aged,” he said, “And while I’d rather be in a world that had the data than not, I don’t think that it’s as critical as we initially thought.” Of more importance to Kurzawski for example is the loss of “E-Verify,” the web-based system that allows enrolled employers to confirm the eligibility of employees to work in the U.S. That is very important, according to Kurzawski who agrees that for now, the shutdown has replaced the issue of the tariff wars but that issue hasn’t gone away and says we will address that again in the future.
    One of the functions that the Agriculture Department did still perform was to announce the February Federal order Class I base milk price at $15.30 per hundredweight, up 18 cents from January, $1.05 above February 2018, and the highest Class I price since November 2018. It equates to $1.32 per gallon, up from $1.23 a year ago, and put the two month average at $15.21, up from $14.85 a year ago but compares to $17.09 in 2017.
    CME prices didn’t respond much to the week’s GDT, in fact most weakened. The Cheddar blocks slipped to $1.3875 per pound Thursday but closed Friday at $1.40, down a penny on the week and 16 1/2-cents below a year ago. The barrels sunk to $1.1850 Thursday, lowest price since July 28, 2009, but rallied and finished at $1.20, still down 4 1/2-cents on the week, 14 1/2-cents below a year ago, and a whopping 20 cents below the blocks. 3 cars of block were sold on the week and 14 of barrel.
    Dairy Market News reports that Central cheese production has scaled back since the holidays as regional producers manage post-holiday inventories. Spot milk prices ranged $2 under to 50 cents over Class. But the gap between block and barrel prices drew more attention. DMN says barrel producers who can shift production to other varieties and/or sell milk back on the spot market are doing so. Block producers are reportedly concerned and “suggest that even though there is a chance barrel prices could ascend to meet block prices, the inverse possibility of block prices declining to converge with barrel prices creates hesitant buyers and a generally inferior market dynamic.”
    Western cheese makers continue to run their vats at or near capacity, as there’s plenty of milk. Mozzarella demand is solid due to the football playoffs and pizza season, according to DMN, “However, the winter holiday season that generates peak consumption is a memory and processed cheese demand continues to struggle.”
    The retail cheese market is seasonally slower, and some contacts suggest sales are lagging while others say demand is as would be expected, but production is outpacing demand. Stocks are weighing heavily on cheese prices and end users report getting many offers for consideration. The spread between block and barrel prices has western manufacturers “adapting to this through a number of means, using risk management strategies or offsetting the milk intake costs with greater value generation in the whey protein complex,” says DMN.
    FC Stone’s Early Morning Update Friday candidly stated; “At the moment there seems to be no light at the end of the tunnel for the cheese market. It sounds as though milk flows are strong enough to keep Class IV plants full at the moment and still leave plenty of excess available for milk to make its way into cheese plants. That’s tough to determine for certain, but that seems to be the chatter out there today. The bearishness that’s so prevalent in the Cheese and Class III markets is what makes it difficult to be bullish on dairy products at the moment. With barrels at fresh lows and Class III at a big discount milk should be moving away from the plants but that doesn’t seem to be happening in a meaningful enough way for now.”
    Cash butter closed Friday at $2.24 per pound, down 1 3/4-cents on the week but 12 cents above a year ago, with 8 carload sales reported on the week.
    Cream situations are similar to the previous week for butter producers, says DMN. Cream prices have been reported at or near the same range, therefore butter churning remains active. Plant managers are preparing for the spring push and multiple contacts have said this is the peak of butter production for the year. Butter demand remains healthy, as well as the market tone. Contacts suggest that “with bullish powder markets, dryers will be more active, and this could weigh on butter markets but they also point out the resiliency of recent butter markets, and their tendency to ignore otherwise bearish indicators.”
    Western churns are full of cream as processors take advantage of cheap prices to seasonally build butter inventories for use later in the year. Stocks are heavy and will likely get heavier in the coming months but processors are comfortable with their holdings. Export demand is currently stable, but sellers hope it will respond positively to competitive domestic prices.
    Grade A nonfat dry milk hit $1.0450 per pound Tuesday, highest CME price since Jan. 6, 2017, but slipped back Wednesday and Thursday and closed the week unchanged at $1.03, 32 1/4-cents above a year ago, with 15 cars finding new homes on the week.
    Spot dry whey climbed to 52 1/2-cents per pound Wednesday, highest level since mid-October 2018, but finished Friday at 50 1/2-cents per pound, up a penny on the week, with 8 cars trading hands on the week at the CME.
    Cooperatives Working Together (CWT) members accepted 28 offers of export assistance this week from CWT to help capture contracts for 4.45 million pounds of Cheddar, Monterey Jack and Gouda cheeses; 454,15 pounds of butter and 1.12 million pounds of whole milk powder. The product will be delivered through June and is the equivalent of 59.53 million pounds of milk on a milkfat basis.
    Checking dairy politics; Western United Dairymen’s (WUD) federal affairs lobbyist, Charlie Garrison, writes in the Jan. 17 member newsletter that California’s two Senators and several members of the state’s House delegation have joined together to introduce the “Agricultural Worker Program Act of 2019.”
    The bill would create a “blue card” program for improperly documented farmworkers who have a significant history of employment on farms in the U.S. and would allow eligible workers to work in agriculture for up to five additional years and then adjust to lawful permanent residence, or “green card,” status. It would also offer protection for spouses and children already physically present with the worker. In addition to Senators Dianne Feinstein and Kamala Harris, more than half of the Democrats in the California House delegation are listed as original cosponsors of the bill. WUD says it will evaluate this and all other immigration reform legislation.
    And, as Congress prepares to review a new trade agreement replacing NAFTA, the U.S. Dairy Export Council (USDEC) charged in a posting on its website that the U.S. dairy industry “remains wary that a Canadian protectionist pricing policy could return under another name.”
    In an interview with Farm Journal Editor Rhonda Brooks, U.S. Dairy Export Council President and CEO Tom Vilsack stated; “We need some reassurance that the terms and conditions of the U.S-Mexico-Canada trade agreement are actually implemented. Canada has to be more transparent with its activities relative to the dairy market. We’ve seen for far too long Canadians agreeing to do one thing, and then utilizing a loophole or utilizing some tactic to basically sort of disregard what they’ve previously agreed to. We need to have a better understanding of exactly what the Canadians were doing in terms of the Class 7 elimination,” Vilsack charged. He said it’s great that it’s going to be eliminated but not if it’s been replaced with something else by another name.
    He said “The same is true with market access; do we really have that market access? Are we going to play some of the same games that have been played before?” He asked.
    Switching to the feed side of trade; FC Stone reports “There have been rumors of large Chinese soybean purchases; these will be difficult to confirm without export reports due to the partial government shutdown. Chinese soy imports are down from all sources, not just the US; although the US is bearing the brunt of these reduced purchases.
    There are reports that soy meal demand is down 20-30 percent due to African Swine fever. There will most likely be large pork imports into China, but that day is being pushed back.”
    “There does not seem to be any evidence of Chinese corn or wheat purchases,” Stone concludes. “Traders are looking for confirmation of Chinese demand and are growing tired of waiting. Even if robust Chinese demand materializes, is it too late to save this year’s soy balance sheet?”
    Uncertainties in agriculture has spawned questions regarding the current land market and Omaha-based Farmers National Company (FNC) asks in  a press release this week; “Will the negative farm financial situation finally overcome other factors to drive land prices the final leg lower? Will outside influences put more stress on land values or actually support prices? Will regional pockets of stress spill over into the overall land market?”
    “Farm and ranch land is the key financial bedrock for American agriculture as land makes up 82 percent of total assets for the industry,” says FNC, and “With today’s uncertainties in agriculture, everyone involved with owning, buying or selling ag land is holding their breath to see what will happen next with the market and prices.”
    “At Farmers National Company, we are seeing an uptick in our land sales as more families and inheritors want to sell now,” said Randy Dickhut, senior vice president of real estate operations. “Within our 28-state service area, we are also seeing more landowners coming to us to market and sell their land as evidenced by our volume of land for sale increasing 21 percent. These landowners are just deciding now is the time to sell and capture today’s price.”
    “Overall, agricultural land values have held up surprisingly well over the past few years despite lower commodity prices and much lower farm incomes compared to five years ago. There are a number of reasons for this, including the low supply of land for sale, cash rental rates remaining stronger than expected and interest rates that have been historically low.”
    “But there are some important questions looming about the land market that are causing many to figuratively hold their breath in anticipation of what comes next,” says FNC. “Even though the rate of bankruptcies and forced land sales is low, there is the expectation that numbers will increase somewhat in the year ahead as farmers’ cash flows are stressed. There is also an increase of quiet sales to neighbors or investors where the land is never exposed to the market to see what the true price is. The ultimate question here is how many more properties for sale can the market handle before the volume overwhelms the number of buyers and puts downward pressure on land prices,” Dickhut said.