U.S. dairy organizations have called on the Trump Administration to “fight back against protectionist Canadian trade policies that are slamming the door to American dairy exports in violation of existing trade commitments between the two nations.”

 

A joint news release from the National Milk Producers Federation (NMPF), the U.S. Dairy Export Council (USDEC) and the International Dairy Foods Assoc. (IDFA) called on the federal government, and on governors in northern states, to “take immediate action in response to Canada’s violation of its trade commitments to the United States.

 

“Because of the new ‘Class 7’ pricing policy, which is expressly designed to disadvantage U.S. exports to Canada and globally, multiple dairy companies in Wisconsin and New York have been forced to inform many of their supplying farmers that the Canadian market for their exports has dried up. For some farmers, this means that the company processing their milk and shipping it to Canada can no longer accept it starting in May.”

 

Jim Mulhern, president and CEO of NMPF, said “This is a direct consequence of Canada’s National Ingredients Strategy and new Class 7 milk pricing program. Canada’s protectionist dairy policies are having precisely the effect Canada intended: cutting off U.S. dairy exports of ultra-filtered milk to Canada despite long-standing contracts with American companies.”

 

Tom Vilsack, president and CEO of USDEC, added that “American companies have invested in new equipment and asked dairy farmers to supply the milk to meet demand in the Canadian dairy market. This export access has suddenly disappeared, not because the market is gone, but because the Canadian government has reneged on its commitments.

 

“Our federal and state governments cannot abide by Canada’s disregard for its trade commitment to the U.S. and its intentional decision to pursue policies that are choking off sales of American-made milk to the detriment of U.S. farmers,” Vilsack said. “It is deeply concerning that Canada has chosen to continue down a ‘beggar thy neighbor’ path of addressing its internal issues by forcing the U.S. dairy industry to bear the harmful consequences.”

 

He noted that while farm families in the Northeast and Midwest are suffering the immediate consequences of the loss of Canadian markets, “thousands more will suffer if Canada persists in using its programs to distort the global milk powder markets so critical to tens of thousands of American dairy farmers.”

 

 

Michael Dykes, D.V.M., president and IDFA CEO, charged that “these policies are prohibiting our nation’s dairy processors from accessing the Canadian market. IDFA is speaking out against Canada’s protectionist policies on Capitol Hill and asking the Trump Administration and state governors and legislators to insist that Canada honor its trade commitments and allow more market

access for U.S. dairy products.”

 

 

The March Federal order Class III benchmark milk price dropped to $15.81 per cwt., down $1.07 from February but $2.07 above March 2016. It is the lowest Class III price since October 2016 and equates to $1.36 per gallon, down from $1.45 in February and compares to $1.18 a year ago. The First Quarter Class III price average stands at $16.49, up from $13.75 at this time a

year ago and $15.73 in 2015.

 

Class III futures late Friday morning portended an April price of $15.10; May, $15.09; and June, $15.29; with a peak of $16.60 in September.

 

The March Class IV price is $14.32, down $1.27 from February, $1.58 above a year ago, and the lowest since November 2016.

 

The First Quarter Class IV average stands at $15.37, up from $13.18 a year ago and $13.62 in 2015. California’s comparable 4b cheese milk price is $13.76 per cwt., down $2.05 from February, 52 cents above a year ago, but $2.05 below the FO Class III, biggest deficit since January 2015, and the lowest 4b price since June 2016. The three-month 4b average, at $15.19, is up from $13.12 a year ago and $13.83 in 2015.

 

The March 4a butter-powder price is $13.96 per cwt., down $1.44 from February but $1.55 above a year ago and the lowest 4a price since November 2016. Its First Quarter average is $15.01, up from $12.98 a year ago and $13.32 in 2015.

 

 

The April 4 Global Dairy Trade (GDT) auction’s weighted average for products offered inched up 1.6 percent, following the 1.7 percent gain on March 21, and that after plunging 6.3 percent March 7 and 3.2 percent on Feb. 21. It also surpassed the U.S. $20 billion milestone in cumulative value of products sold. Buttermilk powder led the declines, down 12.2 percent. It was not offered in the last event. Cheddar cheese fell 4.4 percent, after a 1 percent slip last time, and butter was down 1.6 percent, following a 4.9 percent increase. Skim milk powder (SMP) rounded out the losses, down 0.8 percent, after leading the losses last time with a 10.1 percent plunge.

 

The gains were led by rennet casein, up 6.9 percent. Anhydrous milkfat was up 2.5 percent, following a 3.0 percent increase. Whole milk powder (WMP) was up 2.4 percent, after increasing 2.9 percent, and lactose was up 2.2 percent. FC Stone equated the average 80 percent butterfat GDT butter price to $2.1585 per pound U.S. CME butter closed Friday, April 7, at $2.0975 per pound. GDT Cheddar cheese equated to $1.4912 per pound U.S. and compares to Friday’s CME block Cheddar at $1.46. GDT SMP was at 86.78 cents per pound and WMP averaged $1.3265 per pound

U.S. CME Grade A nonfat dry milk closed Friday at 81 cents per pound.  

 

 

FC Stone reports that U.S, exports in February were slightly weaker than expected, up 11.5 percent on a milk equivalent basis (and unadjusted for leap year). “The big drop in WMP and improvement in SMP is at least partly due to powder shipments to Mexico finally getting classified correctly,” FC Stone said.

 

“It’s interesting that the combined shipments of WMP plus SMP to Mexico actually jumped from about 19,500 metric tons (MT) in January to 26,000 MT in February, which was up 32.5 percent from last February and possibly lending support to the market. On a milk equivalent basis, US shipments to Mexico were up 6.2 percent from last year, unadjusted for leap year, and while cream shipments to Canada were subdued, they’re still happening,” the report stated.

 

February cheese exports totaled 58 million pounds, up 12 percent from 2016, after adjusting for leap year, and 29 percent more than January on a daily average basis, according to the Daily Dairy Report (DDR). Fresh cheese exports rose to 19.1 million pounds, up 22 percent, and Cheddar exports were up nearly 14 percent from a year ago, according to the DDR.

 

 

Cheese: Cash block cheese closed the first Friday of April at $1.46 per pound, down 6 cents, reversing three weeks of gains, but 4 cents above a year ago. The barrels finished at $1.4350, down 3.5 cents on the week and 1.75 cents above a year ago. Three cars of block traded hands on the week and a whopping 40 of barrel.

 

Dairy Market News (DMN) reports that milk is readily available for cheese producers in the Midwest and spot milk prices headed into cheese vats were running $1.50 to $5.00 under Class. Some specialty cheese makers report fully active production as specialty and traditional style cheese orders are starting to pick up. Pizza cheese producers are also reporting an increase in buyer interest. Some contacts suggest that customers are buying before cheese prices increase further but cheese inventories generally are long. The market undertone is “uncertain, with signs of near term stability,” according to DMN.

 

Cheese production in the West is also strong as milk continues to be readily available. Some cheese makers are taking on more milk for cheese production. Inventories are increasing while domestic demand is a little lackluster. “Exports have been a little slow to develop, but are expected to rise in the coming weeks if U.S. and international prices stay close,” DMN says.

 

Butter: CME butter closed April 7 at $2.0975 per pound, down a penny on the week and 2.25 cents below a year ago when it climbed 16 cents. Ten cars exchanged hands this week at the CME. Some Central region butter producers report production is lighter than in previous weeks, while others continue at the same levels. Cream is available, but reported multiples are “indicative

of tightening availability,” says DMN.

 

Butter makers also report receiving fewer offers from cream suppliers. Cream suppliers report upticks in Class II and Class III orders are starting to pull cream away from butter churns. Butter demand is steady. However, some contacts expect butter orders to wane after the first week of April, as they view this as the last spring holiday push. Other contacts expect positive media coverage to keep retail butter sales steady. Butter inventories are steadily growing but the butter market tone is “stable,” according to DMN. Demand for Western butter is still good as the spring holidays approach, but buyers are trying hard to not overextend and take on more butter than their immediate needs. Most holiday shipments have been made. Some manufacturers say inventories are still building, but not at the pace that processors projected a few months

ago.

 

Milk: Grade A CME nonfat dry milk, after holding all week at 80 cents per pound, inched up a penny Friday, April 7, to close at 81 cents, up a penny on the week and 12 cents above a year ago. Nine carloads found new homes on the

week at the CME.

 

 

Checking the farm’s bottom line, dairy  margins recovered slightly over the back half of March following a recovery in milk prices, while feed costs held mostly steady, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC The MW stated that “Margins remain relatively strong from a historical perspective, existing between the 70th and 80th percentile of the previous decade through First Quarter 2018.

 

“Milk prices received a boost following recent higher trade in cheese prices after a prolonged slump dating back to November. USDA’s latest Cold Storage report was actually rather bearish for cheese and particularly for butter, showing strong month-over-month and year-over year builds in both product inventories.”

 

USDA’s Quarterly Grain Stocks and Prospective Plantings reports were “somewhat friendly for corn, with the latter in particular,” MW reported. “Corn planting intentions were estimated at 89.996 million acres, which was down more than 4 million from last year and 1 million less than the average trade estimate.” The reports also showed an increase in soybean acreage to 89.4 million acres and that soybean and corn stocks are up. Eyes will be on weather for direction.

 

Meanwhile, the USDA’s latest National Milk Cost of Production report shows February’s total milk production costs were down from the previous month and from a year ago.

 

Total feed costs averaged $10.10 per cwt., down 24 cents from December 2016, down 7 cents from January 2017, and 65 cents below February 2016. Purchased feed costs, at $5.68 per cwt., were down 14 cents from December, down 7 cents from January, and 28 cents below February 2016. 

 

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $21.63 per cwt., were down 54 cents from December, down 28 cents from January, and 53 cents below a year ago.

 

Feed costs made up 46.7 percent of total costs in February, down from 46.4 percent the month before and down from 48.5 percent a year ago.

 

The views and opinions expressed in this column are those of the author and not necessarily those of Farm World.

 

Readers with questions or comments for  Lee Mielke may write to him in care of this publication.