Happy New Year. But, will it be one?

FCStone dairy broker Dave Kurzawski said, “Yes,” in the recent Dairy Radio Now broadcast. While Class III futures show nothing approaching $16 per cwt. for the foreseeable future, Kurzawski remains optimistic.

He admitted that 2017 global dairy demand may have been overestimated, but he believes 2018 will be better, stating, “General economics, both at home and abroad, are strong and improving.” He cited the recently passed tax bill, which he believes will benefit consumers, and U.S. economic annual growth was up 3.5 percent in 2017, first time since 2006 it’s been above 3 percent.

The global GDP is also expected to top 3 percent in 2018, he said. “So, I think improving economics across the board are going to help dairy product demand … When you have a booming economic situation, which says nothing of the accelerating pace of technology and historically low unemployment, when you have a booming economy, generally speaking, you’re going to have booming on-farm prices as well.”

When asked if domestic demand or exports will turn things around, Kurzawski said he thinks we will see a “stable to better export situation in 2018” as the “black cloud” of NAFTA is lifted. Speculation over dismantling NAFTA was the 2017 story, he said.

“The 2018 story is that this has already been priced into our markets. If nothing changes on NAFTA, I think we are going to see a warm embrace on the export market for dairy products, in particular.”

One thing is sure in the global market, and that is the influence by China. The world’s largest dairy importer made 2017 one of the biggest volume years on record, according to the Dec. 28 Daily Dairy Report (DDR): “China imported 72 million pounds of whole milk powder (WMP) in November, 2 percent more than the prior year and 60 percent higher than October on a daily average basis.

“Seasonally, China’s milk powder imports begin to increase in late fall due to the zero-tariff powder allotment that opens in November and in preparation for the Chinese New Year. China also took in 40 million pounds of skim milk powder (SMP) in November, up 53 percent versus last year and the highest November volume since 2013.

“Year to date, China imported 36 percent more SMP than the comparable period in 2016.” Incidentally, the United States was the second-largest SMP trading partner in November, according to the DDR, accounting for nearly 15 percent of the total share and 187 percent more than the prior year.

In other global news, the Consortium for Common Food Names (CCFN) praised the Japanese government's decision to “assure the continued general use for many generic food terms as part of its trade agreement with the European Union (EU), especially highly contested terms such as ‘parmesan’ and ‘romano,’ even as CCFN seeks further assurances on several common terms still at risk.”

A CCFN press release stated: “Japan has assured continued common use for the generic cheese names brie, camembert, cheddar, edam, emmental, gouda, grana, mozzarella, parmesan, pecorino, provolone and romano; for the meats bologna, bratwurst and mortadella; and for varietal terms such as ‘kalamata’ for olives and ‘valencia’ for oranges.”

"Japan took the right steps in preserving the vast majority of terms that were of concern to CCFN members worldwide, and in doing so helped maintain the choices and fair competition that will benefit Japanese consumers," said CCFN Executive Director Jaime Castaneda.

"Now we are urging continued consistency and fairness as they establish the finer points of the agreement, so that names that are clearly generic in the marketplace will remain accessible to everyone."

Dairy stocks updates

The last week of 2017 was light on fodder for the dairy markets. The Agriculture Department’s last Cold Storage report of 2017, issued Dec. 22, provided some crumbs, however. It pegged Nov. 30 butter stocks at a slightly bullish 158.8 million pounds, down 59.1 million, or 27 percent, from October and 2.4 million pounds, or 1 percent, below November 2016.

American-type cheese, at 733.2 million pounds, was down 7.2 million, or 1 percent, from October but 20 million, or 3 percent, above a year ago. The other cheese category totaled 500.3 million pounds, down 1 percent from October but 13 percent higher than a year ago.

The total cheese inventory was down 9.3 million pounds, or 1 percent, from October, but 76 million, or 6 percent, above 2016. October butter stocks were revised 1.9 million pounds lower, American cheese was revised up 1.1 million and the other cheese stocks were lowered 958,000 pounds.

FCStone says the large jump in the “other cheese” category “may indicate that we are producing quite a bit more mozzarella, and that may have had something to do with the wide barrel/block inversion.” HGD called the report “mostly neutral.”

The U.S. average All-Milk price was $18.10 per cwt., up 20 cents from October and 30 cents above November 2016. Michigan again scored the lowest, at $16.60, followed by Arizona at $16.70 and California at $16.95, which was up 17 cents from October but 12 cents below a year ago.

Wisconsin’s $19 is up 50 cents from October, 30 cents above a year ago, and $2.05 above California. Florida typically shows the highest, which averaged $21.50 for November, followed by Oregon at $20.90 and Virginia at $19.70 per cwt.

November corn averaged $3.15 per bushel, down 11 cents from October and 9 cents below November 2016. Soybeans averaged $9.22 per bushel, up 4 cents from October but 25 cents below a year ago. Alfalfa hay averaged $148 per ton, down $4 from October but $18 above a year ago.

Looking at the cow side of the ledger; the report shows the November cull price for beef and dairy combined averaged $63.40 per cwt., down $2 from October, after dropping $4.50 the previous month, but it is $1.50 above November 2016 and $8.20 below the 2011 base average of $71.60.

Western cheese inventories are reportedly heavy. Cheese demand has been stable but not enough to stay ahead of the abundant milk supplies and vigorous cheese production. A few contacts suggest that cheese sales have not met expectations for the year.

Demand for blocks and barrels slowed greatly between the winter holidays, and market observers say higher-than-normal stocks of cheese and other dairy products going into the new year “should provide a hortative yelp for slowing the supply of milk moving into cheese vats. Cheese manufacturers know an early launch into the cheese pizza and grilling seasons may be critical to set a positive tone for cheese in 2018,” DMN concludes.

Central butter makers report that holiday cream supplies are plenteous and will remain so until early January. Retail sales reports vary from butter makers across the region. Some butter producers report that retail demand has been meeting expectations, while others suggest 2017 holiday retail figures were below previous years.

The market tone is softening a bit and contacts are anxious that once 2018 budgeting and futures contracting is complete, the markets will see further declines. Western butter makers report that they are being flooded with cream, butter production is active and a few manufacturers are adding extra shifts or running additional churns to keep up. But, retailers are starting to reorder and fill vacated stock shelves, according to DMN.

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.