An international coalition of 10 dairy industry organizations, including three U.S. dairy groups, is “asking their governments’ trade ministers to intercede in the increasingly acrimonious dispute over Canada’s harmful dairy policies that is having global repercussions,” according to a joint news release.

 

The groups co-signed a joint letter requesting that their respective trade ministries “pursue all avenues available to challenge these measures, including WTO dispute settlement and bilateral trade agreement relationships.”

The U.S. dairy sector, represented by the International Dairy Foods Assoc. (IDFA), the National Milk Producers Federation (NMPF) and the U.S. Dairy Export Council (USDEC), together with seven dairy groups from Argentina, Australia, the EuropeanUnion, Mexico and New Zealand, is insisting that “Canada remove the recently implemented policies that are facilitating the dumping of Canadian dairy products in the international market, while making already prohibitive Canadian restrictions on dairy imports even more onerous.”

“IDFA will use every opportunity to urge administration officials and legislators who are working to modernize the North American Free Trade Agreement  to tackle these unfair, illegitimate and protectionist policies,” said Michael Dykes, D.V.M., IDFA president and CEO.

NMPF president Jim Mulhern said that “Canada’s revised dairy policy amounts to a ‘beggar-thy-neighbor’ approach, damaging not just its neighbor to the south, but also causing harm to other major dairy exporting countries around the world. This policy must stop now, before any more damage is done to American farmers and those from other nations seeking to compete on a level global playing field.”

Tom Vilsack, president and CEO of the U.S. Dairy Export Council, charged that “Canada has been adopting policies that run counter to our longstanding agreements and upending what has until recently been a mutually beneficial trade relationship. Our trade agreements must be honored and not ignored, or worse, by our closest neighbor.”

Canada implemented a special milk Class 7 pricing policy in February that “artificially lowers milk ingredient prices for Canadian processors and is designed to incentivize the substitution of domestic Canadian dairy ingredients for imported ingredients, while also pushing Canadian proteins out onto world markets at below-market prices,” the news release states.

Antibiotic testing

As June Dairy Month appears in our rear view mirror, the dairy industry is taking another step to safeguard the milk it produces. USA regulators began testing milk for another type of antibiotic starting July 1.

The June 23 Dairy and Food Market Analyst reports that this 18-month pilot program will “look for residues of tetracyclines including oxytetracycline and tetracycline.

Currently, milk tanks are tested for beta-lactam drugs such as penicillin and amoxicillin. Just like the beta-lactam testing, any milk found with tetracycline residues (of 300 or more parts per billion) will be dumped.”

Class values

The June Dairy Month Federal order Class III benchmark milk price was announced by USDA at $16.44 per cwt., up 87 cents  from May and $3.22 above June 2016.It is the highest Class III since February 2017 and equates to about $1.41 per gallon, up from $1.34 in May and $1.14 a year ago.

The half-year Class III average stands at $16.12, up from $13.48 at this time a year ago and $15.99 in 2015. Late Friday morning Class III futures portend a July price at $15.74; August, $16.52; September, $16.65; with a peak at $16.92 in November.

The June Class IV milk price is $15.89, up $1.40 from May and $2.12 above a year ago. The mid-year average is $15.08, up from $13.18 a year ago and $13.70 in 2015.

The USDA-surveyed cheese price used in calculating the month’s Class values averaged $1.6293 per pound, up 9 cents from May. Butter averaged $2.4065, up 24.2 cents. Nonfat dry milk averaged 91.37 cents per pound, up 4.3 cents, and dry averaged 49.17 cents per pound, down 1.8 cents from May.

Off-peak season

As to what lies ahead, worldwide milk production is past its peak and won’t see another uptick until Oceania starts its season in a few months on a volume basis, according to FC Stone’s June 26 Early Morning Update (EMU).

“Looking at year-over-year figures, global milk production was in contraction during the second half of 2016, so it is expected that in the coming months, we will be seeing positive yearover-year increases,” the Update states.

“Heat is a concern, especially out West, which has caused over 18 wildfires already this summer. In the Midwest, however, temperatures have been rather optimal for milk production at the moment. The problem nationally is getting milk production into the right dairy commodity,” according to the EMU.

Cash prices

Cheese: Cash block Cheddar cheese fell to $1.51 per pound Wednesday, June 28, but closed Friday and June Dairy Month at $1.5250, down 1.5 cents 

on the week and the fifth consecutive week of loss, 10 cents below a year ago, and 21.25 cents lower than on June 1.

The Cheddar barrels dropped to $1.35 Thursday but closed Friday at $1.3525, down 1.75 cents on the week, 31.75 cents below a year ago, 18 cents lower on the month, and a still too-high 17.25 cents below the blocks. Twenty three cars of block traded hands the last week of June at the CME and 36 of barrel.

Extra loads of milk may not be as prevalent as they were the last few weeks, but some Midwest cheese makers report distressed milk is still 

available at $1 to $3 below Class, according to Dairy Market News (DMN).

Manufacturers also report running full schedules, but intakes have eased back a load or two. There is an expectation of more available loads over the Fourth of July holiday and cheese makers will have to weigh the pros and cons of taking additional milk, says DMN.

Demand is mixed. Some contacts say curds and readily consumed product orders are strong; others say demand from food manufacturers and food service businesses is steady and cheesecontinues to move well. Other contacts think cheese orders are “lackluster.”

Inventories are heavy for both blocks and barrels, and “some contacts suggest the all-time high for total natural cheese stocks may represent efforts by cheese makers to find homes for heavy milk intakes through various cheese aging programs for hard Italian cheeses, aged Cheddar, and other hard cheeses.” Storage capacity concern is pressuring cheese prices.

Western cheese inventories also continue to be long and loads with a 

little more age are proving harder to move, says DMN. Domestic demand is fair. Food service requests are perhaps slightly lower, but retail demand is steady. Cheese seems to be moving well through regular contracts, but end users are not asking for a lot of extra loads.

Contacts hope the price differences between U.S. and international markets can spur additional sales, but large volumes have yet to materialize. Production is active and is pushed on by plentiful milk supplies.

Butter: Butter ended the week at $2.6425 per pound, up 5.25 cents, 29.25 cents above a year ago, and up 23.25 cents on the month. Ten cars traded hands last week.

Butter at $3 a pound may be on the horizon. The EU price was reportedly averaging about $3.14, according to FC Stone. DMN says the status quo for butter production, in general, remains mostly active with moderate clearance, as the balance of output moves into storage. Salted butter supplies are adequate, but unsalted volumes are considered tight in some channels.

Manufacturers expect increased butter production as some cream plants close for the July 4 holiday. However, the market is preparing for lower trendingmilk production and butterfat declines to deter available cream. Hence, in the next few weeks, producers expect that cream will be readily absorbed into Class II ice cream, prompting reductions in churning rates, which is typical for this time of year. Some buyers note this as a cause of the premium butter price.

DMN says Western butter makers report cream is available for butter, but seasonal demand is making cream supplies tighter. Some butter processors are choosing to slow their churns and sell cream to ice cream and other Class II manufacturers because of the strong milkfat prices. Butter inventory is seasonally high, and manufacturers are managing stocks closely to assure they have product to meet expected high Third and Fourth Quarter demand. End users are very much aware of year-end butter needs and some suggest that end users are even seeking quotes for available butter into 2018, reports DMN.

Fat in the EU remains tight, according to FC Stone’s EMU, which suspects that Oceania milk is being put into cheese.

“The US has the fat,” the EMU says, “but you can’t buy it. The US has the upper hand in this poker game, and physical traders know it. It has been a game of chicken between price and demand, with demand faltering as of late, especially in the EU,” the EMU states.

The EMU warns that “There is a certain price level where consumption will slow down. In the US, we are somewhat acclimated to $2.00 plus butter. Internationally, that is not the case as there has already been outrage because of increases in croissant prices.  At what price level does consumption subside significantly? It’s hard to say, but it probably starts with a 3,” the EMU concludes.

 

As to cheese, the EMU says “The US looks like a nice bargain on cheese today. With shipping costs down, maybe half of what they were five years ago, we’re scratching our heads on why the export bid is not more pronounced.”

Milk: Cash Grade A nonfat dry milk closed Friday, June 30, at 84.5 cents per pound, down a quarter-cent on the week but a penny above a year ago, with 10 cars sold on the week at the CME.

FC Stone points out that Mexico has been “noticeably absent from the market as of late, leaving a void in US exports. Seasonally Mexico is coming into a low demand period, as schools are being let out and excess milk is making its way to the driers. However, with the US competitive cost of production advantage, Mexican buyers might see value in owning fresh product in the low 80 cent level, which should act as a major level of support for front month futures.”