U.S. Dairy Exports Up Nearly 8%, Thanks to Butter, Milk Powder
Published: Friday, November 15, 2019
The following is from Lee Mielke, author of a dairy market column known as "Mielke Market Weekly."
There was good news on the trade front for the U.S. HighGround Dairy (HGD) reports that September U.S. cheese exports totaled 61.2 million pounds, up 7.8 percent from August and 13.3 percent above September 2018. Mexico captured 28 percent market share, with South Korea and Japan following.
Butter exports totaled 4.5 million pounds, up 36.3 percent from August and 3.3 percent ahead of a year ago. Nonfat dry milk and skim milk powder combined totaled 144 million pounds, up 32.4 percent from August and 25.1 percent ahead of a year ago. This is the highest level so far this year, according to the Daily Dairy Report (DDR), and the largest volume for any September on record.
Butter imports totaled 10.6 million pounds, up 6.4 percent from August and 15.7 percent above a year ago, with year to date imports up 26.9 percent. Cheese imports amounted to 42.7 million pounds, up 23.9 percent from August and 34.5 percent above a year ago.
Part of the increases are due to the coming implementation of U.S. tariffs on EU-28 butter and cheese imports, says the DDR, as well as the large disparity between U.S. and world butter prices.
Dry whey exports, at 27.4 million pounds, were down 6 percent from August and 22.4 percent below a year ago. China continues to represent the majority of the decline, says HGD. Shipments to China fell 66 percent year-over-year even as it remained the top export destination for U.S. product in the month, with 16 percent market share.
Trade was a big topic of discussion at last week's joint annual meeting of the National Milk Producers Federation, United Dairy Industry Assn., and the National Dairy Promotion and Research Board in New Orleans.
Hoards Dairyman managing editor Corey Geiger reported in the Nov. 11 "Dairy Radio Now" broadcast that one of the takeaways was the frustration of dairy being a pawn in the ongoing trade wars. He said consumers think the government's mitigation payments have made dairy farmers whole, but they haven't.
He reported that attendees were told that U.S. consumers devour about $65 billion worth of dairy products a year and Chinese consumers about $62 billion, almost equal. But, if you look 10 years ago, Chinese consumption was at $20 billion, Geiger said, so consumption has grown threefold. He adds that China seeks to triple dairy consumption of its over 1 billion citizens over the next decade, growing it by $180-$200 billion, but the U.S. dairy industry is pretty much locked out of that market right now and that has led to a lot of frustration in the industry.
Dominos CEO, Richard Allison, pointed out that 25 percent of U.S. cheese goes on U.S. pizza and that Americans consume pizza every 12-13 days while Asians consume it once every 30-40 days. There's a lot of upside demand there, Geiger said, and Dominos seeks to meet that demand and is using U.S. cheese to do so. Countries like China, Japan and Vietnam hold great potential, he concluded.
Just as roller coasters are wanting to go up, they do have to come down and the first week of November saw that happen in cheese. The Cheddar blocks closed last Friday at $2.0150 per pound, down 14 cents on the week and the lowest since Oct. 18, but are still 63.5 cents above a year ago.
The barrels soared to $2.39 per pound last Wednesday, highest since Sept. 25, 2014 and a dime shy of the record set Sept. 22 of that year, but they fell to last Friday's close at $2.33, still a half-cent higher on the week, $1.0250 above a year ago, and an inverted 31.5 cents above the blocks. Sixteen cars of block traded hands on the week at the CME and eight barrel.
"Fresh spot selling sparked a futures market pummeling," explained FC Stone's Dave Kurzawski in his Nov. 8 Early Morning Update, and says that "fundamentally $1.90-$2 cheese seems to make more sense than $2.40, but we've had some special circumstances recently that have further tightened the fresh cheese market by upwards of 30 million pounds." He adds, "We need to figure out if all supply/demand imbalances are resolved or if this is a rather normal correction in a bull market. We think the latter."
Dairy Market News reports that cheese markets were the hot topic, not only in cheese production circles but in agricultural commodity circles nationwide, as prices have not been this bullish since third quarter 2014. For context, $2.49 was a market high in late September of that same year. Notably, by New Year's Eve, 2014 barrel prices were roughly $1 below their autumn acme. All that said, barrel producers continue to report being behind on orders. Milk production reports continue to show heavier component levels and spot milk prices saw a drop-off this week: $1.50 under class to $1 over by midweek, says DMN.
Consumer cheese demand is solid in the West, but buyers are hesitant to take extra loads at current prices. Seasonal sales were flowing steadily but manufacturers suggest the run-up in CME prices "squelched additional demand." Cheese production is steady and strong and ample milk is available. Inventory is adequate for block and aged cheese but tighter for fresh barrels.
Butter finished at $2.0375 per pound, down 4.25 cents on the week and 15.5 cents below a year ago when it fell 10.75 cents. Only four cars sold.
Cream offerings are plentiful and churning remains slightly more active than expected, according to Central plant managers. Cream is readily available from Western suppliers and plentiful enough to offset freight costs. Production and supplies are not alarmingly higher, says DMN, but "import and export figures do not bode well for long term strength." "Market tones still remain generally steady and contacts who view things with a bearish lens suggest first quarter 2020 prices could bridge the $1.80-$1.90 range." November 2016 was the last time butter prices fell below $2 per pound, according to DMN.
Western butter prices are weak and lower international prices could be one of the causes as buyers continue to seek the best deals possible, including ones offshore. Butter supplies are more prevalent than usual for this time of the year and orders for the holiday are reported as good, but not as good as expected.
Grade A nonfat dry milk closed last Friday at $1.2050 per pound, up 2.25 cents on the week, the highest it has been since Nov. 4, 2014, and 34.5 cents above a year ago. Nine cars exchanged hands.
CME dry whey saw a Friday finish at 27.5 cents per pound, down .75 cents on the week and 58.5 cents below a year ago. Lots of product continues to find its way to Chicago, with 58 cars trading on the week at the market of last resort.
China's African Swine Fever continues to be the primary driver of the whey market. China's Ag minister says its hog herd is 41 percent smaller than a year ago.
The Agriculture Department raised its milk production estimates in the latest World Agricultural Supply and Demand Estimates (WASDE) report issued last Friday morning, as "stronger growth in milk per cow more than offsets a slower expected recovery in the cow inventory."
2019 production and marketings were estimated at 218.6 and 217.5 billion pounds respectively, up 400 million pounds from last month's estimate on both. If realized, 2019 production would be up 1 billion pounds, or .5 percent, from 2018.
2020 production and marketings were estimated at 222.4 and 221.4 billion pounds respectively, up 800 million and 900 million pounds respectively, from last month's estimates. If realized, 2020 production would be up 3.8 billion pounds, or 1.7 percent, from 2019. I'll have more details, including milk price estimates, next week.
September U.S. cheese output slipped to 1.08 billion pounds, down 3.7 percent from August but 2.1 percent above September 2018, according to the latest Dairy Products report. Year-to-date output is at 9.77 billion pounds, up 1.1 percent from a year ago.
Wisconsin produced 281.3 million pounds of the September total, down 2.2 percent percent from August but .7 percent above a year ago. California output fell to 203.5 million pounds, down 4.5 percent from August and .9 percent below a year ago. Idaho contributed 83.7 million pounds, down 5.3 percent from August and 1.3 percent below a year ago. Minnesota output slipped to 59.8 million pounds, down 1.1 percent from August but .1 percent above a year ago. New Mexico, at 76.5 million, was down 15.5 percent from August but 6.4 percent above a year ago.
Italian cheese totaled 469 million pounds, up .4 percent from August and 4 percent above a year ago, and brought year-to-date output to 4.2 billion pounds, up 2.6 percent.
American type cheese totaled 418.1 million pounds, down 9 percent from August and 1.4 percent below a year ago. YTD American is at 3.89 billion pounds, down .7 percent.
Cheddar, the cheese traded at the CME, totaled 288.4 million pounds, down 36.7 million pounds, or 11.3 percent, from the revised August figure and 9.2 million pounds, or 3.1 percent, below a year ago. YTD Cheddar is at 2.77 billion pounds, down 2.3 percent.
Butter output, at 136.6 million pounds, was down .5 percent from August but was up 1.6 million pounds, or 1.2 percent, from a year ago. YTD butter is at 1.4 billion pounds, down .5 percent from 2018.
Yogurt output hit 357.2 million pounds, down 3.5 percent from a year ago, with YTD at 3.3 billion pounds, down 3.3 percent.
Dry whey totaled 92 million pounds, up 8.3 percent from August and 31.5 percent above a year ago, with YTD at 729.8 million pounds, down 5 percent. Stocks totaled 79.3 million pounds, up 9.8 percent from August and 14 percent above a year ago.
Nonfat dry milk production totaled 123 million pounds, up 7.9 percent from August but 8 percent below a year ago. YTD powder is at 1.4 billion pounds, up 2.3 percent from 2018. Stocks fell to 254.1 million pounds, down 15.6 million, or 5.8 percent, from August and 7.5 million pounds, or 2.9 percent, below the 2018 level.
Skim milk powder output slipped to 48.8 million pounds, down 2.6 million, or 4.9 percent, from August but was 2.1 million pounds, or 4.6 percent, above a year ago. YTD skim hit 373.6 million pounds, down 12.1 percent from a year ago.
The international market got a boost as the weighted average of products offered in last week's Global Dairy Trade auction (GDT) jumped 3.7 percent. That followed a .5 percent gain on Oct. 15, .2 percent Oct. 1 and 2 percent on Sept. 17.
Skim milk powder led the gains this time, up 6.7 percent, following a 2.4 percent jump last time. Buttermilk powder was up 5.4 percent and rennet casein was up 5.1 percent. Whole milk powder was up 3.6 percent, after holding steady last time, and anhydrous milkfat was up 2.6 percent, after inching up .8 percent. Butter was up .2 percent, after slipping .4 percent.
Lactose was down 1.9 percent. It was not traded last time and GDT Cheddar was off .6 percent, after a 2.2 percent descent last time.
FC Stone equated the GDT 80 percent butterfat butter price to $1.8221 per pound U.S. CME butter closed last Friday at $2.0375. GDT Cheddar cheese equated to $1.6371 per pound, down 1.2 cents, and compares to last Friday's CME block Cheddar at $2.0150. GDT skim milk powder averaged $1.3262 per pound and compares to $1.2441 last time. Whole milk powder averaged $1.4762, up from $1.4212. CME Grade A nonfat dry milk closed last Friday at $1.2050 per pound.
Return to Top of Page