The U.S. dairy industry commended Robert Lighthizer, the newly confirmed U.S. Trade Representative, for taking swift action under the Bipartisan Congressional Trade Priorities and Accountability Act (TPA) to begin the process for modernizing the North American Free Trade Agreement (NAFTA).

 

Lighthizer outlined in a letter to Congress areas of the agreement that are either outdated or missing, several of which are important to the U.S. dairy industry. He reaffirmed commitment to pursuing the trade priorities outlined by TPA, including goals related to market access and curbing the abuse of geographical indications.

 

He also emphasized the importance of effectively implementing and aggressively enforcing the commitments made by Canada and Mexico.

The International Dairy Foods Assoc. (IDFA), NMPF, and the U.S. Dairy Export Council (USDEC) have repeatedly urged administration officials and legislators to focus on maintaining what has worked well, such as trade with Mexico, the top market for U.S. dairy exports.

The dairy groups continued to call for improving market access to Canada and tackling that country’s expanding list of protectionist policies and other barriers to U.S. dairy exports.

Dairy trade with Canada is in fact a focus of dairy interests in Europe, reports DMN. “European officials believe the Canadian Senate could be finished with their third reading of the EUCanada Comprehensive Economic and Trade Agreement (CETA) agreement text by the end of May, meaning that CETA could enter into provisional application in July 2017. The biggest gain for EU dairy is the additional access granted to cheese in the form of a duty free quota (18,500 MT from year 6 of the agreement). 16,800 MT of this quota will be set aside for high value consumer or ‘fine’ cheese and the remaining 1,700 MT will apply to industrial cheese, according to DMN.

 

Elsewhere in politics

Plant-based “milk”: National Milk reported that state milk regulators have requested that the U.S. Food and Drug Administration (FDA) work with them to enforce the proper use of milk and milk product labeling terms, especially those meant to distinguish between real dairy products and plant-based imitators.

“It’s time for FDA to work with state agencies in defending standards of identity for dairy products,” NMPF’s Beth Briczinski said.

California quota program: Meanwhile, the public comment period for the California Federal Milk Marketing Order (CA FMMO) Recommended Decision closed May 15. The California Department of Food and Agriculture (CDFA) says it has reviewed USDA’s Recommended Decision, and State Agriculture Secretary Karen Ross stated that “The recommended decision found that the quota program should remain entirely within the jurisdiction of CDFA, operate as a stand-alone program and that its proper recognition under the proposed CA FMMO would be through an authorized deduction from payments due to producers.

“In response to the USDA’s recommendation and input from California milk producers, CDFA is ready and willing to establish a standalone, producer-funded quota program.

However, to ensure a stand-alone quota program is not disrupted, it is necessary to remove any statutory ambiguity that may exist in California’s statutes.

Therefore, it is the CDFA’s intention to sponsor legislation to ensure the proper authority lies with the department, convene the Producer Review Board (Board), develop the necessary details for a stand-alone quota program, and hold a producer referendum on the Board’s recommendations.”

The letter said it is CDFA’s goal that “all of this should happen prior to the CA FMMO producer referendum,” and recommended that USDA use CDFA’s “in-house expertise” if a CA FMMO is approved by producers.

Consumer campaign: Lastly, dairy checkoff dollars are funding a new campaign titled “Undeniably Dairy.” The campaign is designed to “rekindle consumers’ love for our products,” according to the Innovation Center for U.S. Dairy’s website, “and help reshape the way people think about dairy and all that we do.”

GDT Auction

Market bulls received more fodder in the May16 Global Dairy Trade (GDT) auction. The weighted average for all products offered shot up for the fifth consecutive event, up 3.2 percent, following gains of 3.6 percent on May 2, 3.1 percent jump April 18, 1.6 percent April 4, and 1.7 percent on March 14.

Rennet casein was the only negative, down 3.7 percent, after it jumped 10.4 percent on May 2.

Butter was the unquestioned leader,  up an attention-grabbing 11.2 percent,following a 1.1 percent increase last time.

Anhydrous milkfat was up 8.2 percent, after a 4.7 percent advance. Buttermilk powder was up 7 percent, after leading the gains last time with a 21.8 percent charge. Lactose was up 2 percent, whole milk powder was up 1.3 percent, after a 5.2 percent boost, and skim milk powder was up 1 percent, after it inched 0.9 percent lower last time. The smallest gain was in GDT Cheddar, up 0.6 percent, after it advanced 4.6 percent last time.

FC Stone equated the average 80 percent butterfat GDT butter price to $2.4247 per pound U.S. CME butter closed Friday at $2.3750 per pound.

GDT Cheddar cheese equated to $1.6902 per pound U.S. and compares to Friday’s CME block Cheddar at $1.67. GDT skim milk powder was 90.64 cents per pound and whole milk powder averaged $1.5025 per pound U.S. CME Grade A nonfat dry milk price closed Friday at 91.50 cents per pound.

Cash prices

Most mid-May dairy prices at the Chicago Mercantile Exchange also climbed higher as traders absorbed the GDT, awaited Friday afternoon’s April Milk Production report and Monday’s April Cold Storage report.

Cheese: Buoyed in part by the GDT, CME butter shot up to $2.43 per pound Tuesday, May 16, highest price since Dec. 9, 2015, only to ease back Wednesday, regain some ground Thursday, and then slip Friday, May 19. It finished at $2.3750, up 11.25 cents on the week after jumping 15.5 cents the previous week, and is 30.5 cents above a year ago. A hefty 26 cars exchanged hands on the week.

The 40-pound Cheddar blocks hit $1.67 per pound Tuesday, then slipped back, recovered, and closed the third Friday of May at $1.67, up 3.5 cents on the week, 35.5 cents above a year ago, and the highest price since Feb. 6, 2017. The barrels finished at $1.47, down 6 cents on the week, 11.5 cents above a year ago, but a way-too-high 20 cents below the blocks. Ten cars of block traded hands on the week at the CME and 39 of barrel. FC Stone says they continue to hear of better demand and, in particular, food service demand for cheese. “This,combined with short term tightness of 30 day or fresher block cheese, is why we have a big block-barrel spread.”

Like a broken record, DMN reports there is no shortage of milk for cheese makers in the Midwest. Some continue to take spot milk, at prices $3.00 to $6.00 under Class. Cheese output continues to keep in line with milk supplies. Block supplies vary, barrels are long, and producers are pushing to clear some aged product.

Process cheese producers report slight increases in sales, whereas traditional and pizza cheese demand has increased noticeably. There is concern regarding the price gap, as block price gains have outpaced the barrels,” DMN warned, and “Some suggest a stable market depends on a narrow block to barrel variance.”

Western cheese production remains at or near full capacity. Some cheese plants are running into production issues. Others have scheduled downtime to complete needed repairs or maintenance but, either way, cheese makers are facing challenges in processing the plentiful milk.

Cheese supplies are long, especially for barrels. 

Inventories for blocks are a little better balanced but contacts report some offers at heavily discounted prices. The grilling season has begun and domestic retail demand is steady. However, some market participants feel the recent price increases could choke off available export opportunities.

Butter: Butter production is active in the Central region, reports Dairy Market News (DMN). Some manufacturers plan to build late summer/fall inventories, and readily available cream continues to flow to churns. Some Central butter makers report receiving discounted cream from the Southwest. Retail butter demand varies. Some are seeing betterthan-expected sales, while others report a seasonal slowdown. “Global tightness on milk fat has some buyers purchasing butter ahead of an increasing export demand,” says DMN.

Western butter output is generally steady. However, larger pulls of cream from ice cream manufacturers are allowing butter makers to ease back.

Contacts report there is plenty of cream available. DMN says, “U.S. market butter prices have been prodded higher by tight supplies and subsequent higher prices abroad. However, U.S. butter inventories remain long. The recent price increases have prompted a rush of domestic buying activity. Other end users are taking regular shipments and are willing to take a wait and see approach to prices.”

Milk: Cash Grade A nonfat dry milk ended the week at 91.5 cents per pound, 5.25 cents higher than the previous week, 10 cents above a year ago, and the highest spot price since Feb. 10, 2017.

Thirty four cars were sold on the week. FC Stone’s Dave Kurzawski wrote in his May 15 Early Morning Update that “adverse weather conditions in Europe so far this flush is adding a bullish tone to the market. A month ago, it seemed like there would be another big round of intervention buying in Europe, which still cannot be discounted. Last week the EU bought almost 2,000mt with Dutch and British product in the mix.”

He also pointed out that the U.S. dollar is trading at its lowest point since the November election, which increases U.S. competitiveness in NFDM. He said “There were reports of a lot of export business for NFDM into Mexico last week, as well as production concerns coming out of the Southwest with a plant potentially being down. This should strengthen the NFDM market for the time being, but with the recent rally in butter and schools letting out for summer in a couple weeks, this market looks to soften come June,” he warned.

Crop progress

The latest Crop Progress report shows 71 percent of the U.S. corn crop is planted as of the week of May 14, up from 47 percent the previous week, down from 73 percent a year ago, but 1 percent ahead of the five-year average. Thirty one percent of the corn is emerged, up from 15 percent the previous week, 10 percent behind a year ago, and 5 percent behind the five-year average.

Thirty two percent of soybeans are in the ground, up from 14 percent the previous week, 2 percent behind of a year ago and dead even with the fiveyear average. Thirty three percent of the cotton is planted, up from 21 percent the week before, 5 percent behind a year ago and 4 percent behind the five-year average.

The May 16 Livestock, Dairy, and Poultry Outlook reported that feed prices for 2016/17 are still expected to be relatively low, with price forecasts for corn and soybean meal of $3.25-$3.55 per bushel and $320 per short ton, respectively.

Feed prices for 2017/18 are expected to remain relatively low, with price forecasts for corn and soybean meal at $3.00-$3.80 per bushel and $295-$335 per short ton, respectively.