The National Milk Producers Federation (NMPF) gave a thumbs up to President Donald Trump’s Wisconsin speech last Tuesday in which he blasted “the harmful pricing policy Canada implemented in an effort to stifle competition with the U.S.”

 

The Federation stated that it has “repeatedly stressed that trade must be fair and that all countries be held accountable when they break the rules. Canada’s repeated disregard for its dairy trade commitments to the United States has left American dairy farmers enduring the severe and unfair consequences.”

 

Canada’s ambassador, David MacNaughton, charged that President Trump is wrong, stating in a letter that the facts don’t bear out his claims, and he blamed U.S. overproduction for the problems.

 

NMPF countered: “It’s absurd for the Canadian government to assert there is no relationship between its new Class 7 policy and the lost U.S. milk sales there. When customers in Canada, who have been purchasing milk products from American suppliers for years, suddenly decide to switch to domestic suppliers after Canada implements a major change in milk pricing, it is abundantly clear that the lost business incurred by U.S. farmers is directly tied to Canada’s milk pricing system.

 

“The problems this pricing policy is creating for dairy farmers in Wisconsin, New York and Minnesota are real, and they have nothing to do with ‘overproduction.’ ” “U.S. companies had, until recently, supplied Canadian customers during periods of relatively tight supplies and when production increased. The only change has been Canada’s deliberate pricing policy decision, starting last year in Ontario and spreading more recently to other provinces, to create a national ingredients strategy to undercut competition from the United States.

 

“Canada didn’t like U.S. farmers supplying their processors’ demand for milk proteins, so they changed the rules of the game. First they moved to block our exports and, even more problematic, their new pricing strategy is positioning them to further undercut global powder markets by dumping their surplus on the world market.”

 

NMPF warned, “This situation is not just a bilateral trade problem for the U.S. Canada’s policy change to manipulate internal prices to export more dairy ingredients globally is of great concern to other nations beyond just the U.S. and is why countries including Australia and New Zealand have also raised objections.”

 

 

Lastly; the Progressive Agriculture Organization (Pro-Ag) says it will petition USDA for a national milk hearing to consider changing the method of determining the value of milk at the farm level. Pro-Ag manager, Arden Tewksbury, said they will ask USDA to consider the national average cost of producing milk, as determined by the Economic Research Service, as a starting price for all milk.

 

“The continued price decline at the farm level has convinced Pro-Ag that the average dairy farmer can no longer exist with the unrealistic prices they are receiving,” a Pro-Ag news release stated. “Some people are urging the ill-fated Margin Insurance Program can be improved enough to solve the dairy farmers’ financial problems.

 

Pro-Ag takes a strong exception to the Margin Insurance Program as being the savior of dairy farmers.”

 

 

The USDA’s preliminary data pegs March milk output in the top 23 producing states at 17.5 billion pounds, up 1.8 percent from March 2016. The 50-state total hit 18.7 billion pounds, up 1.7 percent.

 

March cow numbers in the 23 states totaled 8.71 million head, up 15,000 from February and 72,000 more than a year ago.

 

Output per cow averaged 2,012 pounds, up 18 pounds from a year ago.

 

Milk output for the quarter stood at 53.5 billion pounds, up 1 percent from the same period a year ago. Milk cows averaged 9.37 million head, up 57,000.

 

California’s March milk output was below a year ago for the third month in a row, down 2.9 percent, on a 45-pound-per-cow loss  and 12,000 fewer cows. Wisconsin was up 1.5 percent, thanks to output per cow being up 30 pounds but cow numbers unchanged from a year ago.

 

Texas again showed the biggest year over year gain, up a tank busting 16.4 percent, thanks to 47,000 more cows and 110 pounds more per cow. New Mexico was up 9 percent on an 80-pound-per-cow gain and 16,000 more cows.

 

Michigan was up 3.5 percent, on 9,000 additional cows and 30 pounds more per cow. Idaho was down 1 percent, on a 45-pound-per-cow loss, but cow numbers were up 7,000. New York was up 3.6 percent, on a 65-pound-per-cow gain and 2,000 more cows. Pennsylvania was up 3 percent, thanks to a 70-pound-per-cow gain outweighing a loss of 5,000 cows. Minnesota was up 1.9 percent on a 40-pound-per-cow gain. Cow numbers were down 1,000 head.

 

Washington State was down 3.3 percent, on 3,000 fewer cows, and a drop of 45 pounds per cow.

 

FC Stone’s Dave Kurzawski says “While milk production came in shy of expectations, the longer term indicators on this report tend to lean bearish as we added 15,000 cows from February, which exceeded our expectation by 10,000.”

 

 

The bulls got fed again Tuesday, April 18, at the Global Dairy Trade (GDT) auction where the weighted average for all products offered jumped 3.1 percent, following a 1.6 percent rise on April 4 and a 1.7 percent gain on March 21.

 

Skim milk powder led the gains, up 7.1 percent, following a 0.8 percent slippage last time. Cheddar cheese was up 6 percent, after falling 4.4 percent. Whole milk powder was up 3.5 percent, after rising 2.4 percent. Butter was up 2.9 percent, following a 1.6 percent loss in the last event.

 

Rennet casein led the declines, down 3.8 percent, and anhydrous milkfat slipped 0.5 percent, after it was up 2.5 percent last time. FC Stone equated the average 80 percent butterfat GDT butter price to $2.1648 per pound U.S. CME butter closed Friday, April 21, at $2.09 per pound. GDT Cheddar cheese equated to $1.5705 per pound U.S. and compares to Friday’s CME block Cheddar at $1.5450. GDT skim milk powder was 92.70 cents per pound and whole milk powder averaged $1.3599 per pound U.S. CME Grade A nonfat dry milk price closed Friday at 85.5 cents per pound.

 

 

USDA’s April 17 Livestock, Dairy, and Poultry Outlook echoed dairy projections in the April 11 World Agricultural Supply and Demand Estimates report.

 

The Outlook also examined the three most recent month’s commercial disappearance data, reporting that December through February saw year-over-year domestic commercial disappearance (adjusted for leap year) decline 8.7 percent for butter, 9.6 percent for nonfat dry milk (NDM), and 15.8 percent for dry whey, but YoY was about the same for cheese. Higher wholesale dairy product prices were cited as the likely factor contributing to the relatively low commercial use.

 

“Changing price relationships have likely contributed to the increase in cheese exports and the decrease in cheese imports, as U.S. wholesale domestic prices have declined relative to foreign export prices,” the Outlook reported. “U.S. domestic prices for butter and NDM have also become more competitive with foreign export prices in recent months.”

 

Based on recent milk production data, the milk cow estimate was raised to 9.385 million head, 5,000 higher than last month’s forecast, and the milk per cow estimate is now expected to be 35 pounds lower for the year, at 23,150 pounds per cow. With these changes, the milk production forecast for 2017 is now 217.3 billion pounds, 200 million pounds lower than last month.

 

Feed prices are still expected to be relatively low, according to the Outlook. The 2016- 17 corn price is $3.25-$3.55 per bushel, unchanged from last month’s forecast at the midpoint.

 

The soybean meal price forecast is $310-$330 per short ton, $10 less than last month’s forecast at the high end of the price range. The alfalfa hay price in February was $129 per short ton, $1 higher than January but $8 lower than February of last year.

 

 

CME dairy prices rallied late in the post Easter Week after most had lost ground

earlier.

 

Cheese: Spurred on perhaps by Thursday’s Milk Production report, the block Cheddar closed Friday, April 21, at $1.5450 per pound, up 7 cents on the day and the week, and 12.25 cents above a year ago. The barrels, after dipping to $1.3825 Thursday, gained 4.5 cents Friday to close at $1.4275, unchanged on the week and a quarter-cent above a year ago. Five cars of block were sold on the week at the CME and 38 of barrel, 22 on Friday alone.

 

Milk continues to be readily available for Midwest cheese makers, according to Dairy Market News (DMN). A number of recently cut-off milk producers will now be sending their milk into Midwest cheese vats because of actions by Canada (as discussed at the head of this column). Spot milk going into Class III production continues to range $1.50 to $5.00 under Class. Cheese production, in order to keep up with milk supplies, is active. Demand is generally steady to improving but inventories are long. Cheese output in the West is also active, with abundant milk supplies. Stocks for barrels are still “sloppy, but blocks supplies are mixed,” says DMN, but “several fast food chains are making a move to use more natural cheese on their menus.” Market participants are watching to see how that will impact demand.

 

HighGround Dairy warned in its latest Milk and Feed Market Update that “Supply side fundamentals have become increasingly bearish. Production has continued to surge in the U.S. as herds in the Southwest and Midwest have grown at an aggressive pace, which has led to an abundance of milk.”

 

Butter: Spot butter fell to $2.0625 per pound Tuesday (April 18) but closed Friday at $2.09, up a quarter-cent on the week and cents above a year ago, with 21 cars selling on the week.

 

DMN says butter production continues at active levels with cream available. Stronger-than-expected sales were reported from some manufacturers who expected a slowdown after spring holiday ordering, but orders remain heavy.

 

Western butter output is also steady. Butter makers are busy trying to find homes for the abundant supplies of milkfat. Cream is moving around the region and finding a place in churns, but often at discounted prices. Inventories are heavy. Some contacts anticipate softening butter prices in the near future; however, others see support coming from firm international butter prices and greater use of cream in ice cream and other Class II dairy products.

 

Milk: Cash Grade A nonfat dry milk closed Friday at 85.5 cents per pound, up a penny on the week and 10.5 cents above a year ago, with five cars selling.

 

Thankfully, powder is moving south to Mexico where drought has taken a toll on milk output, but political tensions keep those exports under suspicion.

 

Getting back to fluid milk, organic is a rising star in the dairy industry, according to a post on the April 13 Agri Marketing website. Citing a CoBank news release, the post states: “Despite the current excess supply environment, rising demand points to a bright future for the U.S. organic milk industry, leading a record number of dairies to transition to organic milk production.

 

“Organic milk generates the highest sales of any certified organic commodity, and steady demand growth will lift organic fluid milk market share and further stimulate product innovation,” the report states. “The substantial gap between organic and conventional milk prices, combined with more price stability, is driving the transition,” says Ben Laine, CoBank senior dairy economist. “We are seeing increasing herd sizes for many existing organic dairies looking to take advantage of size efficiencies and price premiums.”

 

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.