The National Milk Producers Federation called on the Agriculture Department this week to “better reflect the dairy-farm incomes lost to tariff retaliation when it calculates its next round of trade mitigation payments.”

In a letter sent to Agriculture Secretary Sonny Perdue, NMPF Chairman and Missouri dairy farmer Randy Mooney cited four studies illustrating that milk producers have experienced more than $1 billion in lost income since May, when the retaliatory tariffs were first placed on dairy goods in response to U.S. levies on foreign products. In contrast, the first round of USDA trade mitigation payments, announced in August, allocated only $127 million to dairy farmers.

“We are ever-grateful for your advocacy on agricultural trade, which is crucial to the economic health of our industry,” wrote Mooney, “However, our members are greatly concerned about the level of aid that was provided in the initial effort.”

The letter details four analyses, including two independent studies using sophisticated economic modeling, that each show losses to dairy producers far above USDA’s initial payment level.

Perdue has said a second trade mitigation payment to producers may be made this year, after additional calculations of farmer losses. NMPF’s Mooney wrote Perdue; “We are eager to work with you on a plan that better reflects the struggles dairy producers across the country have faced due to the tariffs.”

Meanwhile; the U.S. Trade Representative this week announced progress in talks with the Philippines under the bilateral Trade and Investment Framework Agreement (TIFA). A joint NMPF/U.S. Dairy Export Council press release stated; “U.S. dairy producers and processors appreciate the Administration’s work to preserve and deepen market access ties with a country that purchased $243 million in U.S. dairy products last year.”

“In a joint statement released about the recent achievements in resolving trade issues under the TIFA, both governments agreed that they should work together to benefit agriculture. This is viewed as a promising development given Southeast Asia’s growing market for dairy products.”

Cooperatives Working Together (CWT) extended 12 offers of export assistance to members to help sell 1.407 million pounds of Cheddar and Monterey Jack cheese and 264,555 pounds of whole milk powder. The product is contracted for delivery in Asia, the Middle East, North Africa and Oceania through April 2019.

Strong gains in milk per cow kept U.S. milk output above that of a year ago for the 58th consecutive month. Preliminary September data in the top 23 producing states shows output at 16.4 billion pounds, up 1.5 percent from September 2017. The 50-state total, at a slightly bullish 17.38 billion pounds, was up 1.3 percent.

September cow numbers in the 50 states totaled 9.37 million head, down 12,000 from August and 32,000 less than a year ago. Output per cow averaged 1,855 pounds, up 30 pounds from a year ago.

September butter stocks were down from August but well above 2017 and the seventh consecutive month they topped year ago levels, according to the USDA’s latest Cold Storage report.

American type cheese, which includes Cheddar, climbed to 792.4 million pounds, up 6 million pounds, or 0.8 percent from August, and 11.9 million or 1.6 percent above a year ago.

Other cheese crept to 543.1 million pounds, up 2 million pounds from August or 0.4 percent from August, and 40.9 million or 8.1 percent above a year ago.

That put the total cheese inventory at 1.37 billion pounds, up 7.8 million pounds or 0.6 percent from August and a bearish 58.3 million pounds or 4.5 percent above a year ago and the 47th consecutive month stocks topped a year ago.

HGD called the report “unabashedly bearish, showing much less product than normal moving out of storage in September, a month that usually sees end users begin to pull product to meet Fourth Quarter holiday demand. Strong stocks will weigh on the market and limit any price upside in both butter and cheese, an especially concerning development in cheese prices which have seen considerable weakness in recent weeks.”

With plenty of milk being produced, along with plenty of cheese, plenty in inventory, and cheese prices falling, buyers will likely hold off some of their purchases, not being concerned over shortages and big price rises ahead.

HighGround Dairy’s Lucas Fuess pointed out in the Oct. 29 Dairy Radio Now broadcast that, even though dairy commercial disappearance and exports are strong, that hasn’t been enough to help the barrel cheese price. Most exports are blocks, he said, and that has contributed to the big price spread between them.

Dairy Market News warns that some Midwestern cheesemakers are beginning to build inventories as buyers hesitate to take on extra cheese while markets falter. Cheese producers have generally had a healthy demand season and new customers are showing interest. Retail demand and prices have also shown relative stability. But, record price splits between process cheese and blocks, followed by continuing price slides “have taken their toll.” Cheese production remains steady to slower with spot milk prices at 50 cents to $1.50 over Class.

Spot butter fell to $2.1950 per pound Tuesday, lowest price since September 5, 2018, but closed Friday at $2.2325, down 2 3/4-cents on the week and 7 cents below a year ago. 28 cars found new homes on the week.

FC Stone blames continued weakness in the world fat market “finally spilling over in the US.” But, DMN reports that cream remains tight in the Midwest, thus some churns are running solely to meet contract needs. “There are mixed reports on salted versus unsalted bulk butter demand. Some contacts relay that unsalted butter demand is trending up this fall, while others report salted demand remains stronger than that of the unsalted variety. Supply demand imbalances, regarding unsalted butter, may become a concern with the limited cream supplies.”

Grade A nonfat dry milk inched a half-cent lower on the week, to 86 3/4-cents per pound, 11 3/4-cents above a year ago. 7 trades were reported on the week.

Cash dry whey saw the biggest drops ever in its seven month existence, losing a nickel on Monday and again on Tuesday, falling to 47 1/2-cents per pound, lowest price since August 23. It closed Friday at 47 cents per pound, down 10 1/2-cents on the week, with 24 loads exchanging hands on the week.

FC Stone points out that, up until this week it took 3 months for the whey to accumulate over 20 trades.

Dairy margins weakened the first half of October on a combination of higher feed and lower milk prices, according to the latest Margin Watch (MW) from Chicago-based Commodity & Ingredient Hedging LLC.

“Margins remain positive and generally above average over the past ten years, although not as attractive as they have been recently,” the MW states. “Milk prices have been slipping since early September despite some encouraging domestic and global indications. August dairy product exports were robust, mostly topping year-ago levels with strong demand from Mexico for nonfat dry milk (NDM) helping to chip away at large stockpiles. In addition, a blistering drought this summer in the EU has lowered milk production on the continent with concerns over tightening supply working to boost demand. The European Commission sold 2,499 MT of SMP from its intervention storage program in the latest tender which is now occurring twice a month, and the price while steady with the previous two tenders was higher than tenders in the first 7 months of the year. The Commission now holds 485 million pounds of SMP in storage compared to over 800 million at this time last year.”

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.