Just as history was made in the meeting between North Korea’s Kim Jong Un and President Trump, who would have thought that dairy pricing would get the attention it received after the meeting of the G-7 nations in Quebec. The President is critical of Canada’s age-old quota supply-management program.
World trade and politics appear to be “trumped” in turmoil but the fallout may not be as great as some predict. FC Stone dairy broker Dave Kurzawski said in the June 18 Dairy Radio Now broadcast that he doesn’t think the Mexican buyer has much of an alternative, as “the U.S. is probably the most attractively priced, given current levels and proximity.”
He referenced the 2009 trucking dispute with Mexico when tariffs were imposed on U.S. cheese and said exports fell about 26 percent for the 14 month period. If the same scenario would develop today, “We’d be talking about 4.7 million pounds of cheese and since we price fresh cheddar in the U.S. and Mexican imports tend to be other than fresh cheddar, in rough numbers, we’re talking for every 1 million pounds of lost cheddar exports to Mexico, it could knock about a penny per pound off the price of cheese. So 4.7 million pounds, we’re talking about 4 cents on the CME spot market. I don’t think that’s a game changer.”
He also reported that April American cheese demand was up 0.1 percent from March but 5.8 percent above a year ago, according to USDA’s latest data. Butter demand was off 14.3 percent from March and 0.1 percent below a year ago, though year to date it’s up 3.6 percent. Nonfat dry milk was up 9.8 percent from March, up 25.1 percent from a year ago, and up 20.4 percent year to date.
The Agriculture Department again lowered its 2018 milk production forecast in the latest World Agricultural Supply and Demand Estimates report (WASDE), on slightly lower cow numbers and slower expected growth in milk per cow. No change was made to the 2019 cow herd but the milk production forecast for 2019 was also lowered from last month on continued slow growth in milk per cow.
“Fat basis exports for 2018 were raised from the previous month as second-quarter exports are strong and continued strength in sales of a number of fat-containing products will largely mitigate the impacts of Mexico’s tariffs on U.S. cheese,” the WASDE stated. “For 2019, the fat basis export forecast was lowered. Skim-solids basis export forecasts for 2018 and 2019 were raised from the previous month on robust demand for non-fat dry milk and lactose thus far in 2018, and this strength is expected to carry into 2019.”
“The 2018 cheese price was unchanged at the midpoint of the range, but raised for 2019. The 2018 butter price forecast was raised, but reduced slightly for 2019. Nonfat dry milk (NDM) and whey price forecasts were raised for both 2018 and 2019 on strong demand and a reduced production forecast.”
The 2018 Class III milk price forecast was raised on the stronger whey price. The Class IV price forecast reflects higher butter and NDM.
The WASDE says the U.S. corn outlook for 2018/19 is for reduced beginning stocks, lower feed and residual use, greater corn used for ethanol production, and lower ending stocks. Beginning stocks are down largely reflecting a 75-million-bushel increase in projected exports for 2017/18 to 2.30 billion bushels, which if realized would be the highest since 2007/08.
April exports were record high, besting the prior monthly shipment record set in November 1989. Export inspection data for May implies continued robust global demand for U.S. corn, while old crop outstanding sales at this point in the marketing year are record high. Projected 2018/19 corn used for ethanol was raised 50 million bushels.
This month’s U.S. soybean supply and use projections for 2018/19 include lower beginning stocks, slightly higher crush, and lower ending stocks. Lower beginning stocks reflect higher crush for 2017/18. Soybean crush for 2017/18 was raised 25 million bushels to 2.015 billion, reflecting an increase in projected soybean meal domestic disappearance and exports. Higher soybean meal domestic disappearance reflects stronger than-expected use for the marketing year through April. Soybean meal exports were raised based in part on commitments through May, says USDA.
Soybean ending stocks for 2017/18 are projected at 505 million bushels, down 25 million from last month. Ending stocks for 2018/19 are projected at 385 million bushels, down 30 million from last month. Price forecasts for 2018/19 are unchanged this month. The 2018/19 season-average price for soybeans is forecast at $8.75 to $11.25 per bushel; soybean meal and oil prices are projected at $330 to $370 per short ton and 29.5 to 33.5 cents per pound, respectively.
The most significant revision to this month’s U.S. cotton supply and demand estimates is a 500,000-bale increase in 2017/18 exports, to 16.0 million bales, due to above- average late-season shipments. U.S. ending stocks are now forecast at 4.2 million bales in 2017/18, and 4.7 million bales in 2018/19, for a stocks-to-use ratio of 25 percent. The projected range of the marketing-year-average farm price is raised 5 cents at each end to 60-80 cents per pound.
Meanwhile; the latest Crop Progress report shows that 94 percent of the nation’s corn has emerged, as of the week ending June 10, up 1 percent from that week a year ago and 2 percent ahead of the five year average. It also shows 77 percent of the corn is rated in good to excellent condition, up from 67 percent a year ago.
The report shows 93 percent of the soybeans have been planted, up from 91 percent a year ago and compares to 85 percent in the five year average. There is 83 percent of the crop emerged, up 9 percent from a year ago and 14 percent ahead of the five year average. Condition wise, 74 percent is rated good to excellent.
Cotton planting is at 90 percent, unchanged from a year ago but 2 percent ahead of the five year average.
Midwestern process cheesemakers report that demand is up one week and down the next, according to Dairy Market News. The grilling season has done little to quell irregular buying but cheese curd sales are positive. Milk discounts remain for cheesemakers open to the spot market. Offers increased the week of June 11 and spot milk prices ranged $1.50 to $3.50 under Class. Cheese production varies from plant to plant. Midwestern cheesemakers are aware of the trade and tariff concerns “but are not anxious, about the health of the overall cheese market,” says DMN.
Western cheese output remains steady but some plants are planning to slow output in the coming weeks. Cheese inventories are in balance with current needs but a few sellers are starting to feel the impact of the new tariff regulation on sales. Others say that most Mexican buyers have already purchased or contracted the amount of cheese they need for the remainder of this year; therefore exports to Mexico are unlikely to change much in the short term. “Nevertheless, uncertainty about other trade issues lingers,” says DMN, but “Cheddar inquiries from the Middle East are rising.”
Cash butter closed Friday at $2.3525 per pound, down 3 3/4-cents, and 20 3/4-cents below a year ago, with 13 carloads finding new homes on the week.
Western butter inventories are a little higher than typical for this time of year, according to some contacts. Production has been driven by ample amounts of affordable cream, according to DMN, but a few would like to slow their butter output and begin to sell off some cream.
Cash Grade A nonfat dry milk closed Friday at 78 3/4-cents per pound, down 1 3/4-cents on the week and 12 1/4-cents below a year ago, on 9 sales reported.
The spot dry whey hit a record high 41 3/4-cents per pound Monday but saw a Friday close at 41 cents, a quarter-cent lower on the week and ended six consecutive weeks of gain. There were 4 cars sold on the week at the CME.
Farm milk production varies throughout the nation, according to the USDA’s weekly update. Mountain states are at the top of the spring flush which is typical for this time of the year in that region. Northeast milk output is also trending higher. Milk intakes are steady or decreasing in the Southeast, Midwest, and Southwest, mainly due to higher temperatures.
Milk components (butterfat/protein) continue decreasing nationwide. Meanwhile, bottled (fluid) milk sales are down as many educational institutions are closed. Cream volumes are mixed throughout the country but are expected to decrease in the next few weeks. Cream demands from ice cream/ frozen dessert are ramping up ahead of the summer season needs.
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.