The Farmer's Exchange Online Home
Friday, July 3, 2020
Michiana's Popular Farm Paper Since 1926
Click here to start your trial subscription!

Russia Lifts Ban on New Zealand Dairy Products, Boosting the GDT

by Lee Mielke

Published: Friday, August 28, 2015

The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."

Russia is removing its ban on 29 New Zealand dairy companies, according to FC Stone dairy broker Dave Kurzawski in last Friday's DairyLine. Last week's cheese and powder price rally, skyrocketing butter and reversal in the GDT auction (up 14.8 percent) has made for a "wild dairy market," he said, calling it a "sentiment shift, courtesy of the global marketplace." He added that the "corrective bounce" (in the GDT), while expected, came on the heels of the removal of the Russian ban.

The government is likely not going to want them to renew trade with Russia because of all the political issues, Kurzawski said. He quickly added; "With prices where they are in New Zealand and globally, any buyer is going to be a good buyer," so he believes product will start moving to Russia as China is not buying much product currently. Kurzawski said the real question is, will last week's occurrences change sentiment or is it just a correction. He thinks it will be a little of both. He doesn't see EU or U.S. companies exporting to Russia any time soon, but "when these things start to open up, changes come a little quicker than you think."

Butter Prices Soar

The global/U.S. price separation was even more pronounced last week, especially in butter where the spot price closed last Friday at $2.37 per pound, highest level since Oct. 14, 2014, soaring 30½ cents on the week, up 38 cents since Aug. 1 but still 45¼ cents below a year ago, when it jumped 16¼ cents. Only five cars traded hands at the CME.

Central butter makers report active demand, according to Dairy Market News. Cream availability is tight. Some raw milk shipments are clearing into the southeast for Class I demand, taking potential cream from standardization out of the region. Butter production is active as producers try to rebuild inventories ahead of holiday orders.

Cash block Cheddar closed last Friday at $1.74 per pound, up 4¾ cents on the week but 52¼ cents below a year ago. The Cheddar barrels finished at $1.6950, down a quarter-cent on the week and 56½ cents below a year ago. Only three cars of block traded hands at the CME and 16 of barrel.

Milk volumes clearing into manufacturing are declining in the Midwest as most public schools are reopening, reports DMN. Some manufacturers are buying additional loads from other regions to meet production schedules. However, most producers are receiving adequate regional milk intakes.

Cash Grade nonfat dry milk closed last Friday 78½ cents per pound, up 9½ cents on the week but 54½ cents below a year ago. Twenty-one cars sold.

September Milk Price Announced

The Agriculture Department announced the September Federal Order Class I base milk price last Wednesday at $16.34 per hundredweight, up 6 cents from August, $7.29 below September 2014, and equates to about $1.40 per gallon, unchanged from August but 63 cents below September 2014. It is the lowest September Class I price since 2010. The nine-month Class I average is now at $16.33, down from $23.18 a year ago, and compares to $18.48 in 2013.

As it always does, USDA's monthly Livestock, Dairy, and Poultry Outlook, issued last Tuesday, mirrored dairy projections contained in the latest World Agricultural Supply and Demand Estimates report issued Aug. 12. Dairy export forecasts were lowered and import forecasts were raised based on higher expected competition globally.

Focusing on feed price forecasts, the outlook lowered its projections from last month due to higher forecast yields. The 2015-16 forecasts for corn and soybean meal are $3.35 to $3.95 per bushel and $310 to $350 per short ton, respectively. The alfalfa hay price fell from $192 to $178 per short ton from May to June.

With lower milk prices expected to more than offset lower feed prices in late 2015 and early 2016, the 2016 dairy herd is forecast to contract to 9.31 million head, a year-over-year decline of 5,000 and 20,000 less than forecast last month. The yield forecast was lowered to 22,880 pounds for the year, 10 pounds less than last month's forecast, according to USDA.

Marketing Orders in Spotlight

An association for cooperative businesses in Minnesota and Wisconsin, called the Cooperative Network, plans to hold a Federal Milk Marketing Orders Forum on Sept. 24 in Bloomington, Minn., according to a report on the International Dairy Foods Assn. website. The association believes that California's consideration of a federal market order could open the door for additional reforms to the national system.

"With California's petition and 2016 being an election year, we think there's a good chance the federal milk marketing orders could soon be open to broader reform," said David Ward, Cooperative Network director of government relations, who manages the association's dairy program.

"We want to be sure our milk producers and processors in the Upper Midwest proactively examine the current system and have the opportunity to offer their input to guide any future changes." Several national and regional dairy economists have been invited to discuss the federal milk marketing orders in the Upper Midwest, how the system works for other regions, what the addition of a California order could mean and the process for changing federal orders.

Return to Top of Page