Farmer Support for Trump in Doubt as Tariffs, Planting Delays Continue
Published: Friday, May 24, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
The talk of the week was China's retaliatory tariffs against the U.S. on $60 billion of goods in response to President Trump's upping the ante by raising tariffs on imports from China.
HighGround Dairy (HGD) stated that while the trade war with China is bearish to U.S. commodity prices, it believes African Swine Fever in China is "taking a much larger toll on U.S. dairy exports rather than the existing and potentially new tariffs that may take effect next month."
"The majority of U.S. dairy exports to China are in the form of sweet whey powder, whey permeate or lactose, with recent month volumes at multi-year lows," says HGD. "China's hog herd was reportedly down 10 percent into the first quarter of 2019 (or more) and the country has been unable to control the outbreak."
President Trump vowed to protect U.S. farmers from the lost sales to China by increasing government purchases of soybeans. Farmers have, for the most part, been supportive of the president's actions, but that support maybe waning. Weather issues are delaying planting and the trade issues have farmers in a conundrum whether to plant soybeans or corn.
As I reported last week, the Agriculture Department lowered its 2019 milk production estimate for the sixth time in the latest World Agricultural Supply and Demand Estimates (WASDE) report, blaming declining milk cow inventories and slow growth in milk per cow.
2019 production and marketings are now estimated at 218.7 and 217.7 billion pounds, respectively, down 800 million pounds on production from last month's estimate and 900 million pounds lower on marketings. If realized, 2019 production would be up just 1.1 billion pounds, or .5 percent, from 2018.
The report provided the first preview of what is expected for 2020, projecting milk output to hit 222.7 billion pounds, which would be up 4 billion pounds from 2019. Dairy herds are expected to expand as producers respond to higher milk prices and lower feed costs, according to the WASDE. Milk per cow is expected to continue increasing, plus the forecast reflects the one extra day due to leap year.
Cheese, butter and nonfat dry milk (NDM) prices were forecast higher than the previous year on robust demand expectations. However, the whey price forecast was slightly lower on continued softness in export demand.
The Class III milk price is forecast to increase as stronger cheese prices more than offset the weaker expected whey price. Look for a 2019 average at around $16.05 per hundredweight, up 70 cents from last month's estimate and compares to $14.61 in 2018 and $16.17 in 2017. The 2020 average is projected at $16.55.
The Class IV price is expected to increase due to higher NDM and butter prices. It's projected at $16.20, up 15 cents from last month's projection, and compares to $14.23 in 2018 and $15.16 in 2017. The 2020 projection is at $16.80.
Cheese prices slipped in the week following Mother's Day. CME block Cheddar fell to $1.6575 per pound last Wednesday but closed last Friday at $1.6725, down three-quarter cents on the week but 9 cents above a year ago. The barrels fell to $1.60 last Tuesday but closed last Friday at $1.6250, down 8½ cents and 9¼ cents above a year ago. Nineteen cars of block sold on the week and 43 of barrel, highest total since late October 2018.
FC Stone states in its May 17 Early Morning Update that "the cheese market has found some level of equilibrium in the mid/low-$1.60s for the time being." Traders await the May 20 April Milk Production report, which could show further decline in U.S. milk output and await the May 21 Global Dairy Trade auction.
Midwest cheese markets felt "slippery" last week, according to Dairy Market News. Recent demand reports have been mixed to bullish but more cheesemakers suggested lower sales numbers. Producers report expectations are generally being met, while some predict the slowdown to last upwards of a month. "The reported spot milk range was $2 under to $2 over. Comparing the week 20 averages to past years is telling of the current downtrend in milk supplies," said DMN. "Last year during week 20, the average was $3 under, while in 2017 spot milk prices averaged $4.50 under class, with discounts $6 under. All said, cheese plant schedules are steady with available milk supplies."
Cash butter climbed to $2.3850 last Thursday, highest CME price since Aug. 14, 2018, but it closed last Friday at $2.34, unchanged on the week and 4½ cents below a year ago, with 25 cars exchanging hands on the week.
Midwestern cream supplies have "slimmed down," says DMN, but some butter plant managers say they are surprised it is still as available as it is. Others report that cream purchases are becoming rare and are only looking locally. Butter market tones are bullish. Lower overall milk supplies and an increasing value on milkfat have contacts believing they could continue to push up this summer but others believe an increase in imports could rein in those bulls.
Western butter demand continues to give a "solid presence," according to DMN. Some participants forecast prices to move higher still as cream supplies tighten. Contacts say end users are anxious to assure coverage and possibly avoid the risk of higher butter prices later in the year.
Spot Grade A nonfat dry milk closed last Friday at $1.0475 per pound, down 2 cents on the week but 19½ cents above a year ago, with four cars sold on the week.
Dry whey inched down three-quarters last Monday and stayed there the rest of the week at 34 cents per pound, 3 cents below a year ago. Seven sales were reported.
Woes continue in U.S. fluid milk sales. The latest data report 3.9 billion pounds of packaged fluid sales in March, down 4.7 percent from March 2018. Conventional product sales totaled 3.7 billion pounds, down 4.5 percent. Organic products, at 202 million, were down 8.1 percent and represented 5.2 percent of total sales for the month.
Whole milk sales hit 1.2 billion pounds, down 3.6 percent from a year ago and made up 31.8 percent of total fluid sales in the month. Sales for the three-month period totaled 28.8 billion, virtually unchanged from a year ago. Skim milk sales, at 294 million pounds, were down 11.6 percent and made up just 7.5 percent of total milk sales.
Total packaged fluid milk sales for the three-month period totaled 11.8 billion pounds, down 2.4 percent from a year ago. Conventional products year-to-date totaled 11.1 billion pounds, down 2.2 percent. Organic products, at 631 million pounds, were down 4.5 percent and represented about 5.4 percent of total fluid milk sales for the period.
The continued falling fluid milk sales report comes as June Dairy Month approaches and prompted a discussion about it with Hoards Dairyman managing editor Corey Geiger in the May 20 Dairy Radio Now broadcast.
I will include most of those comments in my June Dairy Month tribute, however, as a hors d'oeuvre, I begin by stating that this is June DAIRY month, not fake milk month. A growing number of consumers, primarily millennials, believe that drinking a beverage from a plant is more beneficial than what comes from a cow.
Geiger countered, "There's a reason milk is called nature's most perfect food." He quoted Lloyd Metzger, of South Dakota State University, who recently spoke to a group of dairy economists and policy advisors in Grand Rapids, Mich.
Metzger credited the casein protein in milk as one of the best and most complete proteins known to man and great for growing muscle mass. But it does something that is perhaps even more important.
Metzger says casein protein lifts the calcium and phosphate in milk in suspension. "Calcium and phosphorus are minerals," Geiger charged. "The casein protein lifts them so that when you drink milk, you also consume the calcium and phosphorus." He quickly added, "If consumers really knew the whole story, they probably wouldn't be drinking plant-based beverages because they don't have the casein protein to lift these minerals, so vital to human health." Again, I'll have more in my upcoming June Dairy Month column.
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