According to Bob Gray, editor of the Northeast Dairy Farmers Cooperatives newsletter, it seems everyone is trying to convince President Trump not to terminate the North American Free Trade Agreement (NAFTA).

Gray reported, “Senators Joni Ernst of Iowa and Deb Fischer of Nebraska emphasized that any changes to NAFTA should not hurt livestock or crop producers. Agriculture strongly depends on free trade agreements.

“U.S. food manufacturers exported $25 billion in food products to Canada and Mexico in 2015. Without NAFTA, those exports could have faced up to $3.8 billion in extra tariffs, including tariffs averaging 28.3 percent on meat products and 22 percent on dairy products.”

U.S. farmers and ranchers exported $15 billion in farm products to Canada and Mexico in 2015.

“Without NAFTA, those products would have had $657 million in extra tariffs, including those averaging 6.6 percent on oilseeds and grains,” Gray wrote.

GDT auction inching up

Bleeding in the Global Dairy Trade (GDT) auction was stopped Dec. 5, reversing four previous events of decline. Tuesday’s trading saw the weighted average for all products inch up 0.4 percent, following a 3.4 percent plunge Nov. 21 and 3.5 percent on Nov. 7. And, the amount of product offered fell to 65.1 million pounds, after averaging 76.2 million the past eight sessions.

Leading the charge was skim milk powder, up 4.7 percent, following a drop of 6.5 percent Nov. 21. Buttermilk powder was up 4.3 percent and rennet casein was up 3.4 percent, after leading the declines last time, plunging 12.6 percent

There still was a lot of red ink, with butter showing an 11.1 percent meltdown, after it dropped 5.9 percent last time. GDT Cheddar was down 3.9 percent, following a 4.2 percent loss, and anhydrous milkfat was off 0.6 percent.

FC Stone equated the GDT 80 percent butterfat butter price to $2.0246 per pound U.S. CME butter closed Friday at $2.22. GDT Cheddar cheese equated to $1.6764 per pound U.S. and compares to Friday’s CME block Cheddar at $1.4750. GDT skim milk powder averaged 80.49 cents per pound U.S. and whole milk powder averaged $1.2836. CME Grade A nonfat dry milk price closed on Dec. 8 at 68.25 cents per pound.

HighGround Dairy reported, “Butter was the biggest surprise at this week’s event, melting down to lows not seen since January. Convergence has occurred in the global butter market with NZ-sourced product now the cheapest in the world.”

Cooperatives Working Together (CWT) accepted 20 requests for export assistance the week of December 4 from members to sell 3.35 million pounds of cheese, and 55,116 pounds of butter to customers in the Asia. The product has been contracted for delivery through February 2018 and raised CWT’s 2016 sales to 67.32 million pounds of American-type cheeses, and 4.8 million pounds of butter (82 percent milkfat) to 21 countries on five continents.

California’s November 4b cheese milk price was announced at $15.52 per cwt., down 65 cents from October, $1.93 below a year ago, and $1.36 below the comparable Federal order Class III price. That gap has varied from a low of 16 cents in July to a high of $2.05 in March. The 11 month 4b average stands at $15.35, up from $14.06 a year ago and $14.62 in 2015.

The 4a butter-powder price is $13.62, down 89 cents from October, 7 cents below a year ago, and the lowest 4a price since February 2017. Its 11-month average is at $15.09, up from $13.29 a year ago and $14.06 in 2015.

Preliminary USDA data reported October’s 50-State milk production at 17.8 billion pounds, up 1.4 percent from October 2016. USDA’s latest Dairy Products report shows where that milk went.

October cheese output higher

October cheese output totaled 1.07 billion pounds, up 5.2 percent from September and 1.7 percent above October 2016. Year to date (YTD) output stands at 10.3 billion pounds, up 2.5 percent from a year ago.

California produced less than 212 million pounds of that cheese, up 9.3 percent from September but 0.7 percent below a year ago. Wisconsin, at 287.5 million pounds, was up 5.9 percent from September and 2.8 percent above a year ago.

Idaho output, at 85.0 million pounds, was up 5.5 percent from September and 1.3 percent above a year ago. Minnesota was up 6 percent from September and 10.6 percent above a year ago. New York was down 2 percent from September and 0.1 percent below a year ago.

Italian cheese totaled 455.22 million pounds, up 5 percent from September and 1.8 percent above a year ago, with YTD output at 4.5 billion pounds, up 1.5 percent. Mozzarella, at 348 million pounds, was up 0.9 percent, with YTD at 3.4 billion pounds, up 0.9 percent.

Total American type cheese output hit 417.6 million pounds, up 6 percent from September and 4 percent above a year ago. YTD totaled 4.1 billion pounds, up 3.4 percent.

Cheddar output, the cheese traded at the CME, totaled 294.3 million pounds, up 4.4 percent from September and 4.1 percent above a year ago, with YTD at 2.96 billion pounds, up 4.5 percent.

Butter churns produced 143.5 million pounds of butter, up 6.8 percent from September and 2.6 percent above a year ago. YTD butter totaled 1.5 billion pounds, up 3.7 percent.

California’s October butter output totaled 43.8million pounds, up 21.3 percent from September and 3.6 percent above a year ago. New York was up 18.8 percent from September and unchanged from a year ago. Pennsylvania was up 7.6 percent from September but 9.1 percent below a year ago.

Yogurt output amounted to 351.9 million pounds, down 2.6 percent from a year ago, with YTD at 3.7 billion pounds, down 1.8 percent.

Dry whey totaled 80.7 million pounds, down 3.8 percent, with year-to-date hitting 869.3 million pounds, up 8.2 percent. Stocks were down 13.2 percent from September but up 53.8 percent from a year ago.

Dry milk production goes up

Nonfat dry milk production totaled 149.2 million pounds, up 11.7 percent from September and 6.5 percent above a year ago, with YTD at 1.5 billion pounds, up 3.7 percent.

Skim milk powder production totaled 23.8 million pounds, down 20 percent from September and 42.5 percent below a year ago. YTD output was at 440.4 million pounds, down 3.6 percent.

The report also showed October nonfat dry milk stocks at 328 million pounds, up 7.1 million pounds or 2.2 percent from September and a whopping 104.2 million pounds or 46.5 percent above those a year ago.

CME block Cheddar fell to $1.47 per pound on December 6, lowest price since April 11, 2017, but closed that Friday at $1.4750, down 8 3/4-cents on the week and the sixth consecutive week of decline, 23 1/2-cents below a year ago when it lost a dime, and at a record 19 1/2-cents below the barrels. The barrels closed the week at $1.67, up 13 1/2-cents and 9 1/4-cents above a year ago, with 34 cars of block finding new homes on the week at the CME and 56 of barrel.

Milk remains available for cheese production in the Midwest, according to Dairy Market News, with spot milk prices, flat to $4 under Class for the second consecutive week. Holiday milk offers are beginning to come in but some cheese producers are prepared to hold off until prices decline. Cheese production is steady and not expected to slow until the holidays. Cheese sales are steady to slower but the atypical inversion of block and barrel prices remains a concern.

Western cheesemakers report a lot of milk is available and cheese production is active, “However, cheesemakers also express, with a certain amount of candor, their hesitancy to take on more milk,” according to DMN. “While lower prices are generating some new interest in international markets, cheesemakers are watching the cheese and Class III milk futures closely for any sign that could encapsulate the belief that cheese prices may weaken further.”

DMN said “There is an underlying concern that lower cheese prices and lagging milk prices could make it difficult for manufacturers to recoup costs of the milk.” It adds that cheese demand is solid now but “there is some question what demand will look like after end of the year festivities.”

FC Stone dairy broker Dave Kurzawski said the block-barrel price spread concern in a Dec. 11 Dairy Radio Now interview. He added, “if you’re a block manufacturer, you’re paying a Class III milk price but you’re selling a block cheese price.”

The Class III price is made up of both block and barrel prices, he said, and if you have a barrel price that’s 10 cents over the block price, for example, then your cost of milk is more expensive. He says the natural spread should be blocks 3 to 5 cents above the barrels. He adds that five of the past ten years has seen a barrel over block spread develop in December.

Cash butter prices declining

Cash butter fell to $2.19 per pound on Dec. 4, climbed back to $2.2375 on Dec. 7, but closed Friday at $2.22, up a half-cent on the week and 15.5 cents above a year ago when it dropped 12 cents. Sixty cars were sold on the week.

Some Central butter plant managers eased production the week of Dec. 4. Retail and food service orders, in some cases, were slower the previous two weeks. Others report steady to solid interest in both salted and unsalted product.

Butter inventories are reportedly balanced but cream has become readily available and contacts suggest this trend will continue throughout the month.

Western churning is less active in some areas despite long cream supplies. A number of processors have plenty of butter to meet their end of the year holidays obligations and manufacturers are doing their best to keep their inventories in check by finding other avenues to use their cream. Butter orders for the remainder of the year are generally steady to weakening, said DMN.

CME Grade A nonfat dry milk closed the week at a record low 68.25 cents per pound, down 3.75 cents on the week and 29 cents below a year ago.

The October Consumer Price Index for all food was 251.4, up 1.3 percent from 2016. The dairy products index, at 217.2, was down 0.5 percent from a year ago, with fresh whole milk down 4.7 percent; cheese down 0.8 percent; and butter down 3.8 percent.

Dairy margins were mixed over the second half of the month, as spot Fourth Quarter slipped while deferred margins into 2018 all improved, according to Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

The MW said, “Milk prices have recovered somewhat in deferred periods following recent news that China will lower their current tariff on U.S. cheese imports from 12 to 8 percent, while some other dairy products, such as hydrolyzed protein formula and pre-packaged infant foods, will likewise drop effectively immediately. Chinese demand has been quite firm and the move should help the U.S. reduce the current high stockpile of cheese.

“Feed prices held relatively steady over the past two weeks, although soybean meal prices have begun moving higher on indications of strong soybean demand at current price levels.”

Milk production costs increase

The USDA’s latest National Milk Cost of Production report shows October’s total milk production costs were up from September and a year ago.

Total feed costs averaged $10.82 per cwt., up 31 cents from August, 16 cents above the September figure, and 18 cents above October 2016. Purchased feed costs, at $5.86 per cwt., were up a dime from August, 3 cents above September, but 6 cents below October 2016.

Total costs, including feed, bedding, marketing, fuel, repairs, hired labor, taxes, etc., at $23.03 per cwt., were up 63 cents from August, 21 cents above September, and 41 cents above a year ago.

Feed costs made up 46.98 percent of total costs in October, down from 46.7 percent the month before and 47 percent a year ago.

Dairy Management Inc.’s November Dairy Market Report stated, “U.S. Cheddar cheese prices hit a 10-month high in October, while butter prices softened but remained well above $2 a pound. Nonfat dry milk and dry whey prices are showing extended weakness due to deteriorating prices in world markets, which are overhung by excessive stocks of skim milk powder in the European Union (EU). Against this backdrop of prices, there are some recent signs that overall supply has been gradually heading back toward balance with demand in U.S. domestic dairy markets. These include: (1) year-over-year growth in milk production well below 2 percent, (2) slower growth in cheese production, (3) further reduction in cheese stocks and (4) continued growth in cheese exports.”

Lastly, a reminder, dairy farmers wishing to participate in the 2018 Dairy Margin Protection Program must enroll by Friday, Dec. 15.