Mielke Market Weekly 

 

The National Milk Producers Federation (NMPF), U.S. Dairy Export Council (USDEC) and International Dairy Foods Assoc. (IDFA) joined other food and agricultural organizations in support of additional changes in U.S. policy to facilitate U.S. dairy exports to Cuba and permit open travel for all Americans to that nation. The dairy organizations are members of the U.S. Agriculture Coalition for Cuba, a coalition of more than 30 trade associations and companies championing an end to the U.S. embargo against Cuba.

The dairy groups say one of the biggest impediments to trade is the lack of financing to allow for payment in a manner that it is commercially viable. They stressed the importance of policy changes that would remove costly and unnecessary burdens on U.S. agricultural exporters by allowing payment to pass from Cuba directly to U.S. banks in place of the current requirement that payments be routed through banks in other countries.

NMPF’s Jim Mulhern urged members of Congress to seek changes in policy that would remove travel restrictions and reform financing rules for U.S. food products destined for Cuba. 

“NMPF believes that unilateral U.S. government actions should not hinder U.S. dairy exporters from selling their products to any nation,” Mulhern said. “We look forward to expanding our ability to more easily provide the Cuban people and those Americans wishing to travel to Cuba with the nutritious and safe foods that we produce in such abundance here in the U.S.” 

USDEC’s Tom Suber said, “The U.S. has been forced to largely cede this neighboring market to our competitors. Cuba has been importing approximately $200 million worth of dairy products in recent years, but virtually none of that has come from our exporters due to the restrictions they face in trading with Cuba.” 

Silver lining?

 There was more hope for a turnaround in the international dairy market last week as the Global Dairy Trade (GDT) auction started 2015 on an up note. The Tuesday (Jan. 6) weighted average for all products jumped 3.6 percent, following a 2.4 percent gain in the Dec. 16 event. All of the products offered were up.

The uptick was led by butter, up 13.2 percent, following a 10.4 percent boost in the Dec. 16 event. Next was buttermilk powder, up 10.5 percent, following a 9.5 percent drop the last time. Anhydrous milkfat was up 6.8 percent, following a 10.8 percent gain last time. It was followed by rennet casein, up 4.2 percent, after a 4.5 percent gain last time. Cheddar cheese followed, up 3.2 percent, after it inched 0.6 percent lower last time. Skim milk powder was up 2.8 percent, after a 3.2 percent drop last time, and whole milk powder brought up the rear, up 1.6 percent, following a rise of 1.4 percent last time.

FC Stone reports the average GDT butter price equated to about $1.6141 per pound U.S., up from $1.4264 in the Dec. 16 event. Contrast that to CME butter, which closed Friday, Jan. 9, at $1.54 per pound. The GDT Cheddar cheese average was $1.4015 per pound U.S., up from $1.3615. The U.S. block Cheddar CME price closed Jan. 9 at $1.59 per pound. GDT skim milk powder, at $1.0821per pound U.S., was up from $1.0521, and the whole milk powder average at $1.0464 per pound U.S., was up from $1.0298 in the last event. The CME Grade A nonfat dry milk price closed Jan. 9 at 98.75 cents per pound.

The Daily Dairy Report points out that “There is growing concern about Oceania milk output falling at the end of the season as hot, dry weather conditions continue to spread. With the 2012-13 drought still lingering in the minds of buyers, weather concerns and low prices could be sparking purchases as insurance against what could lie ahead.”

The U.S. Dairy Export Council (USDEC) reported in its latest Global Dairy Market Outlook that U.S. exporters focused on the Western Hemisphere in November, helping to offset a continued slowdown in shipments to Asia. It reports that exports to Mexico were up 15 percent from last year, and shipments to South America topped $30 million for the first time, led by gains in sales to Peru, Brazil and Colombia. Sales to the Caribbean were the most in 18 months. 

Exports to Southeast Asia and China were the lowest since early 2013, and shipments to the Middle East/North Africa (MENA) region were down 66 percent. 

In all, exporters shipped 147,879 tons of milk powders, cheese, butterfat, whey and lactose in November, down 7 percent from a year ago but down just 1 percent from October (on a daily-average basis). 

Total exports were valued at $500.5 million in November, down 14 percent from last year and about the same as October (daily-average). That brought year-to-date U.S. sales to $6.63 billion, up 9 percent versus 2013. 

Production data

You’ll recall that November 2014 milk production totaled 15.5 billion pounds, according to preliminary data, up 3.5 percent from a year ago. USDA’s Dairy Products report, issued Tuesday, Jan. 6, shows where it went – and one place the extra milk didn’t go was the churn. November butter output, at 136 million pounds, was down 5.7 percent from October and 4.7 percent below November 2013. 

A good share of it hit the dryer. Nonfat dry milk production totaled 151 million pounds, up 11.5 percent from October and up 48.9 percent from a year ago. Milk also flowed to the cheese vat. Italian production hit 410 million pounds, down 3.7 percent from October but was up 5.1 percent from a year ago. American cheese output hit 372 million pounds, down 2.9 percent from October but 4.5 percent above a year ago. Total cheese output amounted to 949 million pounds, down 3.3 percent from October but 2.9 percent above that of a year ago.

HighGround Dairy’s Eric Meyer views the data as neutral for butter and bearish for the rest. He reports that butter production did show a 4.3 million pound downward revision for October, and November marked the fourth consecutive month running behind prior year levels. But with the chatter of cream availability in December, the lack of export sales and what appeared to be a normal drawdown in stocks from the Cold Storage report last month, “We do not believe there is anything to get worried about with significant upside risk on butter prices.”

That said, Global Dairy Trade results last week had butter priced in the low $1.60s per pound, so there may be support from dairy buyers who want to own product and build inventory at below average levels. It does not mean there has been a change in the bearish trend, according to Meyer.

Cheese production remained solid, and inventories were strong in November, signaling that current spot prices are fair. But there is nothing in this report’s data that would suggest a sharp move higher or lower from today’s levels. However, after the losses posted in December and during the first few days of 2015, it would not surprise us to see last minute Super Bowl orders or end-users building inventory to cause a slight bounce in CME spot prices, Meyer said.

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.